>>> What to look at this Week End 1st & 2nd of august 2015

Dow+0.69% S&P+1.16% Nasdaq+0.78% Nikkei+0.20% Hang Seng-1.96% Shanghai-10% EuroStoxx+0.02% FTSE+1.77% CAC+0.50% Dax-0.34% IBex-1.14% MIB+0.13% SMI+1.13%

US equity markets recovered some ground this week and the Shanghai Composite appeared to stabilize after another round of government pledges. The DJIA is looking a little shaky, weighed on by pain in the commodities related industrials, but the S&P500 is within sight of the recent all-time highs, notching a 1.2% gain on the week. Despite pledging hundreds of billions to prop up its market, China's stocks sunk another 8.5% on Monday - the biggest one-day drop since 2007 - drawing another promise from the China Securities Finance Corporation(CSFC) to boost its stock purchases. The FOMC statement kept expectations of a September rate hike alive without pre-committing, while Thursday's upward revisions to past core PCE readings and a hotter than expect initial Q2 core PCE print only supported that notion. Short term US Treasury yields backed up to levels not seen since early June as traders rotated into the US long bond, likely on the belief that rates can only rise very gradually under the current subdued growth outlook. The US Q2 employment cost index threw markets a bit of a curve ball on Friday, unwinding some of the week's earlier bets the Fed was on the precipice of raising rates for the first time since 2006. The prospect of a Puerto Rico bond default over the weekend also dampened sentiment.


Macro :
- Varoufakis Says Fear Can't Be Foundation for New Europe: Pais
- Italy’s Poletti Sees More Stable Job Contracts: Repubblica
- Fed’s Bullard: ‘We Are in Good Shape’ to Raise Rates in Sept:WSJ --> Link : http://on.wsj.com/1LWDHU0
- Greece may seek up to 24 billion euros in first new aid tranche: paper - Reuters --> Link : http://reut.rs/1fTAGYs
- Did We Just Hit The Threshold For Short Covering In Gold?--> Link : http://bit.ly/1KHkTJM
- Altmaier Says Merkel Re-Election Plan Report ‘Speculation’: Bild
- A banking scandal is set to bankrupt Europe’s poorest country- The Economist

Keep an eye on :
- AIR FP : Iran to Buy as Many as 90 Planes to Start Fleet Renewal: IRNA
- AREVA FP : Areva Needs Chinese Nuclear Investment, Chairman Tells JDD
- BMW GY : BMW ‘Frequently in Talks’ With IT Cos Including Apple: FAS
- BMW GY : BMW Considers New Electric Car Between i3, i8 Models: FAS
- CNA LN : Centrica CEO Signals Pull Back From Exploration Business: FT
- DAI GY : Mercedes to Halt Truck Production in Brazil for 20 Days: Estado
- DAI GY : Daimler Workers in Germany Seek New Labor Deal in 2015: DPA
- DB1 GY : Deutsche Boerse Plans ‘Small’ Stock Sale to Fund 360T Deal: FAS
- DGO LN : ENOC Increases Offer for Dragon Oil to 800 Pence a Share
- DGO LN : ENOC Wins Over Dragon Oil Minority Owners After Boosting Offer
- EI FP : Essilor Studying Potential Acquisitions, CEO Tells Investor
- EIT IM : Ei Towers CEO Looking at Mid-Sized European Acquisitions: Sole
- FCA IM : Chrysler Recalls 284,153 Dodge Chargers on Oversensitive Air Bag
- FPE3 GY : Fuchs Petrolub Buying SFR Lubricants to Expand in Scandinavia
- HSBA LN : HSBC Said to Increase Provisions for Misconduct Probes: Sky
- IHG LN : InterContinental Weighing Bids for Fairmont, Movenpick: Times
- ISP IM : Intesa CEO Says Italy Out of Record-Long Recession: Corriere
- RR/ LN : Rolls-Royce urged to accelerate cost cuts - FT --> Link : http://on.ft.com/1M5beNv
- RSA LN : RSA Will Seek Minimum 600p/Shr Bid From Zurich: S. Telegraph
- UBER IPO : Uber Valued at More Than $50 Billion --> Link : http://on.wsj.com/1N08EWf
- ZC FP : Zodiac Aerospace Says Restart of Damaged Plant on Schedule
- ZURN VX : Zurich Said in Talks to Raise More Than $4b for RSA Bid

FT : Rolls-Royce urged to accelerate cost cuts

Rolls-Royce urged to accelerate cost cuts

ValueAct, the US hedge fund that has become Rolls-Royce’s largest shareholder, is urging the engine manufacturer to accelerate cost cuts within its core aerospace business, according to people familiar with the fund’s thinking.
The San Francisco-based activist fund is also likely to encourage an eventual sale of Rolls-Royce’s non-aerospace divisions when the board conducts a strategic review, although this was not one of its immediate priorities. It is likely, too, that ValueAct, which is run by its founder Jeff Ubben, will push for a board seat for one of its representatives.

The fund, which disclosed a 5.4 per cent stake in the company on Friday, took the decision to invest after researching the career of new Rolls-Royce chief executive Warren East, who previously ran the chipmaker Arm Holdings.
In conversations between the two sides, the hedge fund has positioned itself as an ally for Mr East as he examines ways to improve margins and cash flows in the core aero-engines division, people familiar with those talks said. Mr East has said a strategic review of Rolls-Royce could come in the next 12-18 months.
ValueAct had traded in and out of Rolls-Royce for more than a year before a share price decline following profit warnings and the change of chief executive triggered its buying spree this summer.
Investors and analysts have expressed doubts about the value of Rolls-Royce’s diversification beyond civil aerospace into marine engines and other power systems, where results have been poor.
In its core aerospace division, Rolls-Royce is in the midst of a difficult transition from the Trent 700 engines that power Airbus’s A330 widebody aircraft to the Trent 7000 that will go on the remodelled version, the A330neo.
ValueAct believes that the market is undervaluing future maintenance contracts for the new engines, which deliver the bulk of profit.

The hedge fund has experience investing in the aerospace sector, having held a stake in Rockwell Collins, a supplier of aircraft electronics, since 2011. Mr Ubben, meanwhile, has connections to Rolls-Royce’s board: he and Rolls-Royce director John McAdam sat together on the board of Sara Lee for four years when ValueAct was pushing for a restructuring of that company.
Rolls-Royce said on Friday that it was familiar with ValueAct, having had “constructive conversations” with the fund last year when it first emerged as a shareholder. The fund is understood to have met last year with former chief executive John Rishton, who left at the start of July.

Mr Rishton came under fire from shareholders after presiding over several profit warnings. He struggled to impose his authority on the civil aerospace division, the biggest part of the group and a bastion of engineering expertise. Mr Rishton repeatedly expressed frustration at the division’s resistance to his cost-cutting measures.
Mr East has said he wanted to add “pace and simplicity” to the company and to the restructuring plan launched by Mr Rishton. He has begun an operational review aimed at delivering results “better and faster”, he said at the group’s interim results on Thursday.
In a sign that ValueAct’s support of Mr East could encounter difficulties, Mr East told the Financial Times last week that he believed the group’s diversification into marine and power systems was “broadly correct”. He also suggested that the marine division, which has been hard hit by the collapse in offshore oil and gas investment, could need more investment to be competitive.

(BFW) RSA Will Seek Minimum 600p/Shr Bid From Zurich: S. Telegraph

RSA Will Seek Minimum 600p/Shr Bid From Zurich: S. Telegraph
2015-08-02 13:33:09.655 GMT


By Kit Chellel
(Bloomberg) -- RSA Insurance Group pushing for higher price
than last week’s proposed 550p offer, the Telegraph says,
without saying where it got the information.

* Goldman Sachs, Robey Warshaw advising RSA on its options,
with Bank of America and JPMorgan also playing a role:
Telegraph
* Morgan Stanley working with Zurich: Telegraph
* NOTE: Zurich Said to Prepare Financing for Possible RSA
Offer NSN NSDAA26KLVRA <GO>


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Kit Chellel in London at +44-20-3525-0668 or
cchellel@bloomberg.net
To contact the editor responsible for this story:
Anthony Aarons at +44-20-3525-2227 or
aaarons@bloomberg.net

(Economist) banking scandal is set to bankrupt Europe’s poorest country


Gutted
A banking scandal is set to bankrupt Europe’s poorest country

WHEN Alina, a Moldovan student, had her bank card rejected by a cash machine last week, her first thought was to wonder whether the bank had quietly gone under. Happily, the cause was a fleeting technical glitch—but her reaction was not far-fetched. The country’s financial system is limping badly. In November, thieves stole $1 billion from Moldova’s three biggest banks through a series of fraudulent loans and transfers. Moldova, sandwiched between Romania and Ukraine, is the poorest country in Europe; the theft amounted to more than an eighth of GDP. It has set in train a series of events that will leave the government unable to pay salaries by the end of the summer, according to the recently departed finance minister.
The fraud left the three banks insolvent, so the National Bank of Moldova, the central bank, has taken them over, injecting 12.5 billion Moldovan lei ($660m) in new capital. It did not have such a sum to hand, however—it had to create it. The huge expansion of the money supply caused inflation to double to 8% and the currency to drop. It has fallen by 20% against the dollar this year.

In response to the jump in inflation, the central bank began raising its benchmark interest rate sharply. It has vaulted from 8.5% in January to 15.5% now. That, along with the addled state of the banks, is causing businesses to rein in their investments.
It does not help that Russia, one of Moldova’s biggest trading partners and source of almost $800m in remittances from Moldovan workers last year, is facing an economic crisis. Russia’s recession has caused Moldova’s GDP growth to fall by 4.6 percentage points, the World Bank reckons. That accounts for a big part of the economy’s reversal from growth of 5% in 2014 to a contraction projected at 2% this year.
In addition to all these disasters, the country is in the grip of political upheaval. The prime minister, Chiril Gaburici, resigned in June after state prosecutors and fellow politicians accused him of forging his high-school diploma. A replacement was only agreed this week.
Meanwhile, many of the foreign countries and international agencies that bankroll Moldova’s government say they are suspending assistance until it gets to grips with corruption and mismanagement in the financial sector. The European Union was the most recent donor to pull out, announcing on July 5th that it was freezing its €40m ($44m) aid programme. The World Bank has stipulated that it will resume lending only if the three stricken banks are closed, since it considers them open targets for future fraud, even in the hands of the central bank.
The government relies on concessionary loans and aid to plug its deficit, which is projected to be 7% of GDP this year. The loss of tax revenue caused by the recession will only make the shortfall grow. The government has slashed spending, disbursing 20% less than planned in the first five months of the year and freezing all investment projects from July. Two public hospitals in the capital, Chisinau, briefly closed all departments except emergency services and surgery earlier this year. Suspending basic services, however, will only exacerbate Moldova’s problems.
It is not clear that the country’s political elite has much interest in sorting out this mess. It was not until April that much information about the bank scandal became public, after the speaker of parliament leaked a report on the crime by Kroll, a security firm. The judiciary is not strong enough to clamp down on corruption. A week before Mr Gaburici stepped down, he called for the chief prosecutor to resign over his failure to act on the bank scandal.
“The heist was obviously covered up,” says Francis Malige of the European Bank of Reconstruction and Development (EBRD). The EBRD recently tried to buy a majority stake in Victoriabank, one of the largest remaining private banks, to try to ensure a continued flow of lending to local businesses; the parliament inexplicably blocked the acquisition.
Moldova’s fortunes do not need to be so grim, says Alex Kremer of the World Bank’s local office. It has a long border with the EU, and an extremely competitive average monthly wage of just over €200. “This should be a booming export economy,” he says. “If they sort out the governance and corruption, it will be.”

(ZeroHedge) Did We Just Hit The Threshold For Short Covering In Gold?

Did We Just Hit The Threshold For Short Covering In Gold?

Two weeks ago we noted something that has never happened before in gold - hedge funds, according to CFTC, had a net short position for the first in history. The past week saw a very surprising negligible shift of just 11 contracts as the short position shrank to 11,334 contracts. However, the aggregate net long position has dropped to a level that in the past has represented a threshold for signficant short-covering (21% and 17% rallies respectively). So with hedgies as short as they have ever been in history and aggregate positioning at a historically crucial level, one wonders if gold is due for a bounce...

 

Hedgies remain the most short they have ever been in gold...

 

 

This is what happened the last time gold saw a 'low' net long position...

 

and now, the aggregate net position in gold futures appears to have hit a threshold that in the past has created a significant short-covering rally...

 

The last 2 times aggregate net long positions were this low, gold rallied 21% and 17%...
Did we just reach that short-covering threshold once again?

(ZeroHedge) Greece May Miss ECB Payment As Germany Says Bailout Timeline Is Unre

Greece May Miss ECB Payment As Germany Says Bailout Timeline Is Unrealistic

Creditors European Central Bank Germany Google Greece International Monetary Fund

Greek PM Alexis Tsipras won a hard fought victory over party rivals on Thursday when Syriza’s central committee voted to postpone an emergency congress until after formal discussions on the country’s third bailout program are complete.

Syriza has been grappling with bitter infighting since more than 30 MPs in Tsipras’ parliamentary coalition defected during a vote on the first set of bailout prior actions, forcing the PM to rely on opposition votes to clear the way for formal discussions with creditors. The party dispute was exacerbated by reports that ex-Energy Minister and incorrigible Grexit proponent Panayiotis Lafazanis (along with several Left Platform co-conspirators) planned to storm the Greek mint and seize the country’s currency reserves.

Fed up, Tsipras told 200 members of Syriza’s central committee on Thursday that essentially, they could either hold a party referendum on the bailout on Sunday or wait until September to sort things out, leading us to note that "were Syriza to vote on whether or not Greece should follow through on the agreement with creditors, the market could be in for an event that is far more dramatic and important than the original referendum."

Lafazanis refused to go along with the idea. "How many referenda are we going to hold? We’ve already done one and we won with 62 per cent of the vote", he said. Ultimately, the party approved a September congress. This gives Tsipras some "breathing space," FT notes, "but Thursday’s highly charged debate signalled that the Left Platform, which supports an end to austerity and a 'Grexit' from the euro, would continue to oppose a fresh bailout."

And the party’s radical leftists aren’t alone in their opposition to the third program for Athens. On Thursday, FT reported that according to "strictly confidential" minutes from the IMF’s Wednesday board meeting, the Fund will not support the new bailout until the debt relief issue is decided and until it’s clear that Greece "has the institutional and political capacity to implement economic reforms."

Somehow, all of this must be worked out in the next three weeks. Greece must make a €3.2 billion payment to the ECB on August 20 and if the bailout isn’t in place by then, it's either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the Greek economy but the banking sector and then, in short order, the government. The question is whether Germany can be reasonably expected to take it on faith that i) the Greek political situation will not eventually result in Athens walking back its austerity promises, and ii) that the IMF will eventually hold up its end of the deal once Berlin approves some manner of debt re-profiling for the Greeks.

Now, according to Focus magazine, there are questions as to whether the timetable for cementing the bailout agreement is realistic. German lawmakers may now have to postpone a Bundestag vote and Athens has already discussed the possibility of taking a second bridge loan from the EFSM, Focus says. Here’s more (Google translated):

The timetable for the negotiations on a third aid package in favor of Greece is to look for an internal assessment of the federal government any more. According to the already contemplated for mid-August special session of the German Bundestag must be moved, according to government sources in Berlin.
The objective pursued by the EU Commission scheduling is too closely knit, criticize experts.This was reported in its latest issue of FOCUS.
Accordingly, the negotiations should be completed before August 10.On August 11, the euro zone finance ministers would approve the results before the agreement of other euro countries ratified and approved by the Parliament in Athens.Also, the Bundestag must still approve.
Due to delay Greece threatens a serious cash problem.The government in Athens must, at the latest on August 20, 3.2 billion euros, the European Central Bank to transfer (ECB), which should be possible without new loans from the third aid package barely.
Therefore already searched in circles of the EU Commission for ways to temporarily raise money from another pot. Speaking here a renewed bailout from the European Financial Stabilisation Mechanism is (EFSM)
This is difficult, however, because the EU states will again require an indemnity outside the euro-zone in this case. As early as September Greece must further loans operate: The International Monetary Fund (IMF) then expected repayments totaling € 1.56 billion in four tranches.In addition, running on 4 September from short-term government bonds in the amount of 1.4 billion euros, which Greece must also refinance.
And here’s the summary from Bloomberg:

German parliament meeting that was considered for mid-August might have to be postponed as European Commission’s schedule for aid talks is "much too tight," Focus magazine reports, citing unidentified people in German govt.
Greece has to pay EU3.2b to the ECB by Aug. 20, which it may not be able to do without third aid package.
In other words, Greece will likely need yet another bridge loan from the EFSM and that will once again require the approval of non-euro countries that will, for the second time in a month, be asked to put their taxpayers at risk in order to keep the ill-fated EMU project alive and preserve the now thoroughly discredited notion that the currency union is "indissoluble."

And make no mistake, Greece and its EMU "partners" had better hope things go smoothly after August because one more bridge loan and the EFSM is tapped out, which means Brussels will have to devise some other circular funding mechanism in the event the third program (which is itself nothing more than a dressed up ponzi scheme) isn't in place by September.

Reuters : Greece may seek up to 24 billion euros in first new aid tranche: paper

Greece may seek up to 24 billion euros in first new aid tranche: paper

Greece may seek 24 billion euros in a first tranche of bailout aid from international lenders in August to prop up its banks and repay debts falling due at the ECB, a pro-government Greek newspaper said in its early Sunday editions.

Athens is now in talks with the European Commission and the International Monetary Fund to secure up to 86 billion euros ($94.48 billion) in bailout aid. It will be its third bailout since 2010.

Avgi newspaper, which is close to the leftist Syriza government, said Greek authorities expected to conclude talks with lenders by mid-August.

The first tranche of 24.36 billion would be used to channel 10 billion euros as an initial recapitalization to Greek banks, 7.16 billion euros to repay an emergency bridge loan, 3.2 billion euros toward Greek bonds held by the European Central Bank and other payments, Avgi said.

It has been estimated that Greek banks may require up to 25 billion euros to be recapitalized, a shortfall exacerbated by an outflow of deposits when a stalemate with lenders threatened Athens' place in the euro zone.

The flood of money leaving the country culminated in authorities imposing capital controls on June 29 to prevent a financial meltdown.

In exchange for funding Greece has accepted reforms including making significant pension adjustments, increasing value added taxes, overhauling its collective bargaining system, and measures to liberalize its economy and limit public spending.

If the talks are not completed in time, European authorities may have to provide further temporary financing as they did with a July bridge loan, though Avgi said that possibility had not been discussed with lenders.