>>> What to look at today - 3rd of June 2015

Dow-0.16% S&P-0.05% Nasdaq-0.08% Russell-0.65%
US Market closed slightly lower ahead of another greek week end, with sunday referendum. index slipped below its flat line after the International Monetary Fund admitted that Greece will need approximately EUR50 billion in funds over the next three years and that a 20-year grace period should take place before any repayment begins. The comments from the IMF are likely to galvanize the ‘no' camp ahead of Sunday's referendum in Greece. the energy sector was able to end in the green even as crude oil surrendered its intraday gain, ending the pit session unchanged at $56.93/bbl. For the week, WTI crude surrendered 4.5% while the energy sector lost 1.9%. volume were below average @ 700mil shares ahead of the 4th of July long week end. After Hours : HUM: Aetna said to be near deal to buy Humana for $230/shr [about 22% implied - premium in combined cash/stock deal valued around $34B...Shanghai Composite continued its string of particularly large Friday losses, falling by as much as 7% in the morning session before settling off by about 3% going into the break, -2% now...Policymakers are showing some desperation with chatter of market manipulation by shortsellers. The latest monetary easing measures are either falling on deaf ears or, as we mentioned yesterday in the critique of easing margin restrictions, actually being met with an adverse response. A report in today's Shanghai Daily suggested Beijing may have to tackle the issue with more aggressive regulator support - namely the reduction in securities stamp tax - known to have been effective in boosting prices in the past. A series of services/composite PMI reports were mixed, tracking manufacturing prints earlier this week. China HSBC services figure hit a 5-month low and resident economist said latest data signalled a further loss of growth momentum, with service sector, business activity, new orders and employment all expanded at slower rates. HSBC continues to anticipate further policy support in H2 in order for policymakers to achieve 7% growth target. Japan PMI hit a 9-month high rate, and here the economists noted business sentiment strengthening in spite of soft employment prints...With all eyes are on the Greek referendum on Sunday, Fin Min Varoufakis in an interview with BBC announced there is a "100% chance" of a Greek agreement with creditors after Sunday's referendum, regardless of YES or NO vote...US Market closed all day for 4th of July Week end....Don't forget that IRanian deal is very closed with all officials meeting this week end, could mean a big move on Crude next week...as move already started this week -4.95% on the Week...(Watch the $51.10 levels as a support...)

Nikkei +0.06% Hang Seng -0.03% Shanghai -1.81%

Eur$ 1.1094 JPY 123.09 GBP 1.5612 EURCHF 1.0454 RUB $55.42 WTI $56.60 (-0.60%)

S&P - EuroStoxx +0.35% DAx +0.25% SMI -0.15%

Macro :
- HSBC China June Services PMI 51.8 vs 53.5 in May
- Nikkei Japan June Composite PMI 51.5 vs 51.6 in May
- Varoufakis Says He’ll Quit If Greeks Back Austerity in Vote
- Iran’s Nod to IAEA Monitoring Rights Sets Path for Nuclear Deal
- Nikkei India June Composite PMI 49.2 vs 51.2 in May
- Dombrovskis: Wrong to Assume ‘No’ Bolsters Greece’s Hand: Welt

Keep an eye on :
- BP/ LN : Anadarko Says Not Part of BP’s 2010 Oil-Spill Settlement
- ENX FP : Euronext Reports Strongest Six Month Trading Since 2011
- FCA IM : Fiat Chrysler ‘Repeatedly’ Failed to Update NHTSA: Hearing
- GSZ FP : Engie Replaces Heads of Global Gas & LNG, Energy Europe Units
- GKP LN : Gulf Keystone City Investors to Vote Against 3 Directors: Sky
- HSBA LN : Citigroup Inc., Morgan Stanley, HSBC Holdings Plc and 12 other banks are being investigated for currency manipulation by Brazil’s antitrust agency after similar probes in the U.S. and Europe led to penalties of more than $10 billion.
- SDF GY : Potash Corp Says Can Address K+S Concerns on Takeover Proposal
- MKS LN : Marks & Spencer Workers in France to Strike Over Pay: Parisien
- MHG NO : Norway Seafood Exports Increased 5% to Record NOK34b in 1H
- RIO LN : Rio Tinto engages Deutsche Bank for possible coal deal - Australian Financial Review
- RSA LN : RSA shares gain on vague bid chatter
- UL FP : Paris Has ‘Very Few’ Empty Offices: Unibail Chairman Cuvillier
- UNA NA : Unilever to Acquire Murad Skincare Brand; No Terms
- VOW3 GY : VW Buys Remaining 9.9% Stake of Italdesign as Giugiaro Retires

>>> RSA shares gain on vague bid chatter

RSA shares gain on vague bid chatter
RSA Insurance Group’s share price gained 2.04% yesterday, 2 July on vague bid chatter, according to a market report in The Daily Mail. The newspaper did not cite a source for the speculation and did not name any potential bidders.

RSA shares closed 8.2p up at 411.0p in London yesterday, valuing the UK-based insurer at GBP 4.17bn (EUR 5.87bn).

Daily Mail

>>> Europe : Brokers Upgrades & Downgrades - 3rd of July 2015

>>> Up
*BAE SYSTEMS RAISED TO BUY VS NEUTRAL AT UBS
*BP RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
*COBHAM RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
*RECTICEL RAISED TO BUY FROM HOLD AT ING; PT EU5.80

>>> Down
*FIRSTGROUP CUT TO SELL VS NEUTRAL AT UBS
*SPEEDY HIRE CUT TO SECTOR PERFORM AT RBC CAPITAL

>>> PT Change


>>> Initiation


>>> Call
>> Sector
*CONTINENTAL EU SMALL CAPS RAISED TO OVERWEIGHT: CREDIT SUISSE

>>> Asian Update

Asian Mid-session Update: AUD falls on lower than expected retail sales; Shanghai plummets again 

***Economic Data***
- (CN) CHINA JUN HSBC SERVICES PMI: 51.8 V 53.5 PRIOR (5 month low); COMPOSITE PMI: 50.6 V 51.2 PRIOR 
- (JP) JAPAN MAY MARKIT SERVICES PMI: 51.8 (9 month high) V 51.5 PRIOR; COMPOSITE PMI 51.5: V 51.6 PRIOR 
- (AU) AUSTRALIA MAY RETAIL SALES M/M: 0.3% V 0.5%E 
- (AU) AUSTRALIA JUN AIG PERF OF SERVICES INDEX: 51.2 V 49.6 PRIOR (1st expansion in 3 months) 

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.4%, S&P/ASX -1.8%, Kospi -0.6%, Shanghai Composite -5.0%, Hang Seng -0.4%, Sept S&P500 flat at 2,068

***Commodities/Fixed Income***
- Aug gold +0.2% at $1,165/oz, Aug crude oil -0.5% at $56.67/brl, Sept copper -0.2% at $2.63/lb- GLD: SPDR Gold Trust ETF daily holdings fall 1.7 tonnes to 709.7 tonnes 
- (JP) BOJ offers to buy ¥400B in 5-10 yr JGBs, ¥240B in 10-25 JGBs, ¥140B in JGBs with maturity over 25-yr, as well as ¥1.75T in T-bills 
- (AU) Australia MoF (AOFM) sells A$800M in 2020 Bonds; avg yield: 2.3140%; bid-to-cover: 3.89x 

***Market Focal Points/FX***
- Shanghai Composite continued its string of particularly large Friday losses, falling by as much as 7% in the morning session before settling off by about 3% going into the break. Policymakers are showing some desperation with chatter of market manipulation by shortsellers. The latest monetary easing measures are either falling on deaf ears or, as we mentioned yesterday in the critique of easing margin restrictions, actually being met with an adverse response. A report in today's Shanghai Daily suggested Beijing may have to tackle the issue with more aggressive regulator support - namely the reduction in securities stamp tax - known to have been effective in boosting prices in the past.

- A series of services/composite PMI reports were mixed, tracking manufacturing prints earlier this week. China HSBC services figure hit a 5-month low and resident economist said latest data signalled a further loss of growth momentum, with service sector, business activity, new orders and employment all expanded at slower rates. HSBC continues to anticipate further policy support in H2 in order for policymakers to achieve 7% growth target. Japan PMI hit a 9-month high rate, and here the economists noted business sentiment strengthening in spite of soft employment prints.
- Australia's retail sales recovered from 1-year low flat rate on the month but at a slower than expected pace, sending AUD/USD to 2 1/2 month lows below 0.7580.
- South Korea formally unveiled a stimulus package in the amount of $14.3B to help deal with MERS and slowing exports. The spending would raise 2015 fiscal deficit to 3.0% from 2.1% prior forecast and add 0.3pts to this year's GDP. Package includes KRW6.2T of new spending and KRW5.6T to cover tax cut related revenue loss.
- With all eyes are on the Greek referendum on Sunday, Fin Min Varoufakis in an interview with BBC announced there is a "100% chance" of a Greek agreement with creditors after Sunday's referendum, regardless of YES or NO vote. 
- In key M&A, financial press reported Aetna is close to a near to purchase Humana for $230/shr [about 22% implied premium] in combined cash/stock deal valued around $34B, and the deal could be formalized before the weekend. The two names have been speculated in merger discussion in the past, though it appears the talks have progressed.

***Equities***US equities / ADRs:
- HUM: Aetna said to be near deal to buy Humana for $230/shr [about 22% implied - premium in combined cash/stock deal valued around $34B - financial press
- KYO: Kyocera, Microsoft Expand Technology Sharing Agreement

Notable movers by sector:
- Consumer discretionary: G8 Education Ltd GEM.AU -2.8% (makes a takeover offer); Asahi Group Holdings 2502.JP +0.2% (H1 result speculation); Fast retailing 9983.JP -4.0% (Uniqlo SSS decline)- Financials: Shimao Property 813.HK +0.8% (June result) 
- Industrials: James Hardie Industries JHX.AU +1.4% (FY16 outlook)
- Technology: Konica Minolta Holdings Inc 4902.JP +0.4% (acquisition); Samsung Electronics 005930.KR -2.1% (Q2 result speculation)
- Materials: Anhui Conch Cement 914.HK -3.4% (China to limit certain cement production)
- Healthcare: Askul Corp 2678.JP +14.3% (FY14/15 result)

(BN) Aetna Said to Near $34 Billion Cash, Stock Deal for Humana (2)


Aetna Said to Near $34 Billion Cash and Stock Humana Acquisition
2015-07-03 00:47:26.391 GMT


By Ed Hammond
(Bloomberg) -- Aetna Inc., the U.S. health insurer, is
nearing an agreement to acquire Humana Inc. for about $34
billion in cash and stock, people with knowledge of the matter
said.
Aetna is close to a deal that would value its smaller rival
at about $230 per share, the people said, asking not to be
identified as the information is private. The companies have
been locked in intense negotiations for two weeks and could
announce a transaction as soon as this weekend, according to the
people.
Representatives for Aetna and Humana declined to comment.


For Related News and Information:
Top Stories:TOP<GO>

To contact the reporter on this story:
Ed Hammond in New York at +1-212-617-1963 or
ehammond12@bloomberg.net
To contact the editors responsible for this story:
Jeffrey McCracken at +1-212-617-8517 or
jmccracken3@bloomberg.net
Ben Scent, Elizabeth Wollman

>>> US Close Dow-0.16% S&P-0.05% Nasdaq-0.08% Russell-0.65%

Closing Market Summary: Stocks End Flat Ahead of Greek Referendum

The major averages ended an abbreviated trading week on a cautious note, which wasn't all that surprising since the weekend will feature a Sunday referendum in Greece. The S&P 500 shed 0.1%, widening its weekly decline to 1.2%, while small cap stocks endured more aggressive selling with the Russell 2000 losing 0.7% to end the week lower by 2.5%.

Equity indices held modest gains at the start after the Nonfarm Payrolls report for June missed estimates (223,000; consensus 230,000) with the wage component showing no monthly growth. The lack of wage growth was viewed as an argument in favor of the Federal Reserve delaying its first rate hike, evidenced by a surge in the Treasury market. The 10-yr note backed away from its high ahead of the close, but still ended firmly in the green with the benchmark yield slipping four basis points to 2.38%.

Despite opening on a higher note, stocks retreated from their early levels, turning negative during late morning action. Interestingly, the benchmark index slipped below its flat line after the International Monetary Fund admitted that Greece will need approximately EUR50 billion in funds over the next three years and that a 20-year grace period should take place before any repayment begins. The comments from the IMF are likely to galvanize the ‘no' camp ahead of Sunday's referendum in Greece.

Six sectors ended the day in negative territory while energy (+0.4%), technology (+0.2%), telecom services (+0.3%), and utilities (+1.4%) posted gains. The utilities sector held the lead throughout the session thanks to the morning drop in Treasury yields. The rate-sensitive sector was the only group that ended the week in the green, adding 1.1% since last Friday.

For its part, the energy sector was able to end in the green even as crude oil surrendered its intraday gain, ending the pit session unchanged at $56.93/bbl. For the week, WTI crude surrendered 4.5% while the energy sector lost 1.9%.

Elsewhere among cyclical groups, the technology sector (+0.2%) struggled early on, but the group rallied into the close, lifting the benchmark index off its session low. Chipmakers led the afternoon rebound with the PHLX Semiconductor Index adding 0.5%.

There wasn't much in the way of corporate news today, but Health Net (HNT 71.57, +6.51) jumped 10.0% after agreeing to be acquired by Centene (CNC 74.44, -6.46) for roughly $78.57/share in cash and stock, which represents a 21.0% premium to Wednesday's closing price. Meanwhile, the broader health care sector (-0.3%) ended among the laggards while biotech names finished little changed with iShares Nasdaq Biotechnology ETF (IBB 370.17, +0.27) adding 0.1%.

Today's trading volume was well below average with roughly 700 million shares changing hands at the NYSE floor.

Economic data included Nonfarm Payrolls, Initial Claims, and Factory Orders:
  • Nonfarm payrolls added 223,000 jobs in June after adding a downwardly revised 254,000 (from 280,000) in May while the consensus expected an increase of 230,000 
    • Government payrolls were flat, and the entire increase in payrolls came from the private sector as private payrolls increased by 223,000 while the consensus expected an increase of 225,000 
    • Although the payroll data was not far from expectations, the details of the report highlight extreme weaknesses as average workweek and hourly earnings were both flat in June 
      • Total aggregate earnings increased a minuscule 0.1% in June, down from a 0.5% gain in May 
      • The unemployment rate fell to 5.3% in June from 5.5% while the consensus expected a decline to 5.4%; however, the entire decrease was due to a decline in labor force participation as opposed to employment growth 
  • The initial claims level increased to 281,000 for the week ending June 27 from an unrevised 271,000 while the consensus expected an increase to 271,000 
    • Despite the big increase, the four-week moving average increased by only 1,000 to 275,000, leaving the overall trend near a 15-year low 
  • Factory orders declined 1.0% in May following a downwardly revised -0.7% (from -0.4%) decline in April while the consensus expected a decline of 0.5% 
    • Durable goods orders declined 2.2% in May, which was revised down from a 1.8% decline in the advance report 
      • The entire decline resulted from continued weakness in the transportation sector with those orders declining 6.5% in May after falling 4.0% in April 
Monday's data will be limited to the 10:00 ET release of the ISM Services Index for June.
  • Nasdaq Composite +5.8% YTD 
  • Russell 2000 +3.6% YTD 
  • S&P 500 +0.8% YTD 
  • Dow Jones Industrial Average -0.5% YTD 

FT : Puerto Rico crisis in America’s back yard

Puerto Rico crisis in America’s back yard

There is never a perfect time to announce you are virtually bankrupt. For Puerto Rico, however, this week was a better moment than most. On Sunday, the island’s government released a long-planned economic report written by Anne Krueger, a former World Bank chief economist, which declared that the territory was in fiscal crisis. As governor Alejandro García Padilla put it, the island’s $72bn debts are now “not payable”.
But instead of sowing widespread fear, debt prices only wobbled. For with Greece in full-blown financial crisis, and the Chinese markets tumbling, Puerto Rico’s revelation seems almost a sideshow. Nevertheless, it would be a mistake to ignore what is happening in Puerto Rico. For Professor Krueger’s report highlights two important points. First, Greece is not the only place grappling with excess debt, poor governance and opaque finances. Second, America, like Europe, badly needs to become more imaginative — and practical — in dealing with excess public sector debt.

For the problem bedevilling Puerto Rico is not simply its $72bn debt pile, but the fact that it lacks any obvious mechanism to restructure it. The island could be in for a choppy time in the municipal debt markets. Other debt-laden entities, such as the state of Illinois, might soon be caught in the storm.
To understand this, look at Puerto Rico’s numbers. A couple of decades ago, this US territory of 3.5m people enjoyed a healthy rate of growth, driven by a large American military presence and tax breaks that attracted mainland businesses. But since then, tax breaks have ended and military budgets have been cut. Output has shrunk by around 10 per cent in real terms since 2005.
Normally, this might cause creditors to panic. But since global markets have been flush with liquidity, and municipal bonds offer tax breaks for American investors, money has instead flooded in. That has enabled the government to maintain a generous welfare state, and a governance culture that is (at best) inefficient and (at worst) rife with cronyism. Meanwhile, the debt-to-output ratio has surged above 100 per cent — or 150 per cent if unfunded liabilities, such as pensions, are included.
This pattern is unsustainable. So Prof Krueger — entirely sensibly — proposes two initiatives: Puerto Rico must implement structural reforms, such as cutting welfare payments and labour costs; but it also needs to restructure the debt to a more sustainable level.

But, as in Greece, it is unclear whether Puerto Rico’s government has the stomach for austerity. Worse still, the island’s debt structure is staggeringly complex, since the bonds have been issued by numerous different entities, with varying types of guarantees. These creditors show no desire to co-ordinate; instead, they are threatening to sue each other and the island. Thus the nightmare scenario that now haunts Puerto Rico is not so much that of Greece but Argentina: years of legal limbo, shut out of the capital markets.
Is there a solution? In theory, as Lawrence Summers, a former Treasury secretary says, one resolution would be for the International Monetary Fund to intervene. But it will not, since Puerto Rico is not a sovereign state. Washington could play an IMF-style role if it chose, since Puerto Rico, as a territory, is part of the federal system. But the Obama administration has made it clear it does not wish to intervene.
That suggests that the least bad remaining option is to find a third party legal referee to oversee an economic plan that forces the creditors into a compromise. America does have one existing model for this: a Chapter 9 framework that offers bankruptcy protection for public entities.
This was used to restructure Detroit’s $18bn debt pile. That worked because it focused on restoring city services, says Kenneth Buckfire, a restructuring expert. Creditor haircuts were the result of this analysis; they were not imposed to support a failed system.
But since Puerto Rico is a territory, not a city, it is not allowed to use Chapter 9 without a change in US law. This seems unlikely to occur soon, since parts of the Republican party fear that letting Puerto Rico use Chapter 9 would prompt other American entities, such as Illinois, to default too.
The result, then, is stalemate. Thankfully, the situation is not (yet) bad enough to spark a full-blown crisis; but piles of “unpayable” debt have a nasty way of sapping confidence and growth. Or to put it another way, the next time that US officials lecture eurozone leaders on their failure to sort out Greece, they should glance at their own backyard first; or better still, take resolute action — say, by reforming that Chapter 9 code.

>>> Rio Tinto engages Deutsche Bank for possible coal deal

Rio Tinto engages Deutsche Bank for possible coal deal
Rio Tinto [ASX: RIO, LON: RIO] has engaged Deutsche Bank to advise on the potential sale of its coal business, The Australian’s Dataroom reported, without citing sources. According to the report the appointment is likely to add strength to rumours that Rio is working on a deal with X2 Resources.

The paper noted that Rio and X2 were reported earlier this week to be involved in relatively serious talks over Rio’s coalmines in NSW and Queensland.

The paper said, citing unnamed sources, that bankers are also seeking roles with Glencore [LON: GLEN], which has shown interest previously in buying Rio’s thermal coal business. Glencore is considered by many to be the logical owner of Rio’s coal assets.

The article noted that, despite the Deutsche appointment, significant skepticism remains over the possibility of a deal.

Link to original source

Australian Financial Review