>>> Asian Update

Asian Mid-session Update: Shanghai Composite makes fresh 7-year highs on CSRC vote of confidence


***Economic Data***
- (SG) SINGAPORE MAR ELECTRONIC EXPORTS Y/Y: 10.4% V 2.0%E; NON-OIL DOMESTIC EXPORTS M/M: 23.0% V 3.5%E; Y/Y: +18.5% V -1.1%E
- (CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.00%, AS EXPECTED
- NPD: Mar US total video game sales $963.7M, -6% y/y

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.5%, S&P/ASX -0.9%, Kospi +0.1%, Shanghai Composite +1.3%, Hang Seng +0.2%, Jun S&P500 -0.1% at 2,099

***Commodities/Fixed Income***
- Jun gold flat at $1,197/oz, May crude oil -1.2% at $56.04/brl, May copper +0.1% at $2.78/lb
- (JP) BOJ offers to buy ¥400B in 5-10yr JGBs, ¥240B in 10-25yr JGBs amd ¥140B in JGBs with maturity over 25-yr as well as ¥2.75T in T-bills
- (AU) Australia MoF (AOFM) sells A$700M in 2.75% 2019 Bonds; avg yield: 1.8806%; bid-to-cover: 5.78x
- (CN) China MoF sells 3-yr bonds at 3.21% yield
- USD/CNY: PBoC sets yuan mid point at 6.1267 v 6.1305 prior setting (strongest Yuan setting since Feb 6th)
- (US) Weekly Fed Balance Sheet Total Assets for week ending Apr 15th: $4.49T v $4.48T prior; M1 y/y change: 9.3% v 9.2% w/w; M2 y/y change: 6.2% (6-month high) v 6.1% w/w

***Market Focal Points/FX***
- Shanghai Composite was up over 2% in the morning session and headed for its 6th straight week of gains, rising to fresh 7-year highs just below 4,300. Economic calendar was sparse in both the Asia and US hours, with the focus turning to Friday's US CPI figures. In the mean time, investors on the mainland were enthused by more positive rhetoric from policymakers. China Securities Regulatory Commission (CSRC) Chairman Xiao noted the current bull market would last longer than the last upswing just before the GFC, though he did urge "rational" investing. Separately, the State Council promised to continue to promote steady trade growth, streamlining infrastructure construction at China's ports. Lastly, NDRC said new measures to stabilize growth and support employment, which has been slacking in recent datapoints, were in the pipeline. On the down note, S&P warned more China property developers, particularly in smaller cities, could default this year.

- Down under, Australia's 2nd largest energy producer Santos reported Q1 output growth of 15% and affirmed FY15 production and capex guidance in spite of the lower oil prices. Australia's top coal miner Whitehaven also reported y/y growth in coal sales of 3.7MT. Both STO and WHC moved slightly higher on those results despite a moderate decline in the broader index.

- Late in the US trading session, a report from Fed watcher Hilsenrath pointed to a spate of softer economic data creating some uncertainty among the FOMC members about the timing of the liftoff in rates. The report noted the general increase in economic data shortfalls have reduced expectations of a June liftoff significanly and Sept hike probability has also moved lower. Hilsenrath added that most Fed officials see Q1 slowdown as temporary, but would likely prefer more time to ensure a sustainable rebound is taking place.

***Equities***
US equities / ADRs:
- CE: Reports Q1 $1.72 v $1.32e, R$1.45B v $1.65Be; +15.6% afterhours
- MAT: Reports Q1 -$0.08 (adj) v -$0.09e, R$923M v $898Me; +6.5% afterhours
- SLB: Reports Q1 $1.06 v $0.97e, R$10.2B v $10.7Be; Lowers CAPEX guidance 17% to $2.5B; To cut 2K jobs (about 1.7% of workforce); +2.4% afterhours
- AXP: Reports Q1 $1.48 v $1.37e, R$7.95B v $8.21Be; -1.6% afterhours
- MTW: Guides FY15 foodservice segment revenues down to be approximately flat y/y (prior FY15 foodservice rev mid single-digit percentage growth); -4.6% afterhours
- NOW: Reports Q1 +$0.02 v -$0.00e, R$212M v $211Me; -8.6% afterhours
- AMD: Reports Q1 -$0.09 v -$0.06e, R$1.03B v $1.08Be; -11.2% afterhours

Notable movers by sector:
- Consumer Discretionary: Air China 601111.CN +3.1% (Q1 guidance)
- Financials: Bank of East Asia 23.HK +3.0% (cooperation with Tencent's WeBank)
- Materials: Base Resources BSE.AU +4.4% (Q4 production results); Whitehaven Coal WHC.AU +1.8% (Q3 op results)
- Energy: Santos Ltd STO.AU +0.9% (Q1 production results); JX Holdings 5020.JP +2.2% (speculation on FY15/16 results); Anton Oilfield Services 3337.HK -5.6% (Q1 new orders)
- Industrials: China Communications Construction 601800.CN +5.3%, China State Construction Engineering 601668.CN +6.9% (China to unveil infrastructure investment plan in Pakistan)
- Technology: Sharp Corp 6753.JP -4.3% (said to scale back LCD TV, solar business, cut staff)

>>> US Close Dow-0,04% S&P-0,08% Nasdaq-0,06% Russell-0,19%

Closing Market Summary: Stocks End Flat Amid Mixed Earnings

The major averages ended Thursday on a modestly lower note, but they were able to climb off their opening lows. The S&P 500 shed 0.1% after spending the day in a 12-point range.

Equity indices struggled in the early going after an overnight report from the Financial Times indicated that Greek officials have asked the International Monetary Fund to reschedule debt repayments that will be due in May. The report was denied by Greek Finance Minister Yanis Varoufakis, but European investors displayed caution, which contributed to the lower start in the U.S.

However, a batch of better than expected earnings offset the Greece-related news. The S&P 500 ranged near its low during the opening hour and climbed into the afternoon. The index spent about an hour in the green, but slipped back into the red before the close.

Only three sectors registered gains, but most of the decliners finished not far below their flat lines. The utilities (-0.6%) sector was the weakest performer, but that had little impact on the market since the sector makes up just 3.0% of the S&P 500.

Elsewhere among countercyclical groups, the consumer staples sector (+0.4%) spent the day atop the leaderboard thanks to better than expected earnings and upbeat guidance from Philip Morris (PM 84.96, +6.83).

Moving to the cyclical side, the consumer discretionary sector (+0.2%) outperformed with help from the shares of Netflix (NFLX 562.05, +86.59), which surged 18.2% to a new record high after the company beat bottom line estimates. The big spike in Netflix overshadowed losses among homebuilders brought on by a disappointing Housing Starts report. The iShares Dow Jones US Home Construction ETF (ITB 27.91, -0.53) lost 1.9%.

Similar to the discretionary sector, financials (+0.1%) held a slim gain throughout the day after two major components reported earnings. Citigroup (C 54.02, +0.81) gained 1.5% in reaction to its bottom-line beat while Dow component Goldman Sachs (GS 200.21, -0.89) shed 0.4% despite beating estimates and boosting its quarterly dividend to $0.65/share.

On the downside, the technology sector (-0.3%) could not make it out of the red as chipmakers weighed after SanDisk (SNDK 67.97, -3.15) missed earnings expectations and guided below consensus while Taiwan Semiconductor (TSM 23.24, -0.27) beat on the bottom line beat, but issued cautious revenue guidance for Q2. The two lost 4.4% and 1.2%, respectively while the PHLX Semiconductor Index fell 0.5%.

Treasuries spent some time on either side of their flat lines before ending just above the unchanged level. The 10-yr yield slipped one basis point to 1.89%.

Today's participation was in-line with recent averages as roughly 740 million shares changed hands at the NYSE floor.

Economic data included Initial Claims, Housing Starts, and Philadelphia Fed Survey:
  • The initial claims level increased to 294,000 for the week ending April 11 from an upwardly revised 282,000 (from 281,000) while the consensus expected a decline to 280,000 
    • Despite the increase, the four-week moving average was virtually unchanged at 283,000, a level last seen in 2000 
    • Continuing claims fell to 2.268 million from an upwardly revised 2.308 million (from 2.304 million) while the consensus expected an increase to 2.325 million 
  • Housing starts increased 2.0% in March to 926,000 from an upwardly revised 908,000 (from 897,000) in February while the consensus expected an increase to 1.045 million 
    • In February, housing starts dropped 15.3%, which was blamed on adverse weather, meaning starts should have rebounded in the hardest hit areas of the country 
      • The Northeast did return to January levels, as expected, but the rebound in the Midwest was poor and remained well below previous trends 
      • Furthermore, starts in the unaffected West (-19.3%) and South (-3.5%) fell to levels not seen since the first half of 2014, suggesting economic reasons and not weather bear responsibility for the lackluster start to the year 
  • The Philadelphia Fed's Business Outlook Survey increased to 7.5 in April from 5.0 in March while the consensus expected an increase to 7.2 
Tomorrow, March CPI (consensus 0.3%) will be reported at 8:30 ET while March Leading Indicators (expected 0.3%) and the preliminary reading of the Michigan Sentiment Index for April (expected 94.0) will be released at 10:00 ET.
  • Russell 2000 +5.8% YTD 
  • Nasdaq Composite +5.7% YTD 
  • S&P 500 +2.2% YTD 
  • Dow Jones Industrial Average +1.6% YTD

WSJ : Fed’s Fischer: U.S. Economy Should Rebound After ‘Poor’ First Quarter

The U.S. economy had a weak start to 2015 but growth should rebound going forward, Federal Reserve Vice Chairman Stanley Fischer said Thursday.

“There’s definitely a rebound on the way already, and we’ll see at what speed it proceeds,” Mr. Fischer said during an interview on CNBC. “The first quarter was poor. That seems to be a new seasonal pattern. It’s been that way for about four of the last five years.”

The effect on the Fed’s policy decisions, he said, depends on “how quickly we come out. If you look at last year, we had negative growth in the first quarter and then spectacular growth which made up for that. We don’t know what’s going to happen in the second quarter here yet.”

Mr. Fischer said he expects “a recovery” but “whether it will be spectacular or just moderate is hard to say now.”

Most officials at the U.S. central bank expect to begin raising short-term interest rates this year, but the precise timing of the first rate increase remains uncertain.

Richmond Fed President Jeffrey Lacker said Wednesday that he thinks a “strong case” can be made to raise rates at the Fed’s June policy meeting, and suggested the economy’s recent performance may have been weighed down by temporary factors.

But New York Fed President William Dudley said last week that the recent stretch of weak economic data means “it’d be reasonable to think that the timing of the Fed’s first rate hike might be a little further off in time. I can imagine a situation where a June rate hike could still be in play…but obviously it’s a bigger hurdle because we’ve had a lot of weak data. Now you have to see sufficient data on the other side. Now the bar is a little higher.”

Mr. Fischer said on Thursday that the Fed will try to raise rates “at the best possible time. We’d like to see the economy beginning to grow again and grow at a decent rate, and we’d like to see unemployment continue to come down and some signs that inflation is…heading toward the 2% target.”

U.S. wage growth has been stagnant for years, but many economists expect pay raises will accelerate as the labor market continues to tighten. “There are more signs every day, and lots of papers come through my computer explaining that this is the turning point, right now,” Mr. Fischer said. “But they’ve been coming for a while.”

He also commented on overseas growth, saying the eurozone’s outlook has improved in part thanks to the European Central Bank‘s bond-buying program, sometimes called quantitative easing or QE.

“First of all, like us, they have the impact of the lower price of energy and of gasoline,” Mr. Fischer said. “And now they have done what everybody told them to do for a very long time. They’re doing QE and it’s far more successful, at this point, than the general view had been before this started. So yeah, they’ve got some wind in their sails.”

(BFW) ECB May Decide in Months on QE-Eligible Corporate Debt: Hansson

ECB May Decide in Months on QE-Eligible Corporate Debt: Hansson
2015-04-16 14:50:37.451 GMT


By Ott Ummelas
(Bloomberg) -- ECB Governing Council member and Estonian
central bank Governor Ardo Hansson speaks in interview w/ Kuku
Raadio.
* Decision by ECB on Wednesday concerning institutional debt
purchases represents “first stage”of discussion over what
debt can be purchased aside from govt bonds as part of QE
* “In the second stage it will be discussed -- we hope during
the coming months -- how much real-sector corporate debt
should be bought. As there has been talk of state-owned
Eesti Energia and Elering in our case, they would be part of
that group. No decisions have been made yet”
* Bonds issued by Estonian electricity, gas grid operator
Elering are more likely to get approval because “this is
clearly a monopoly and no questions about distorting
competition can be raised”
* NOTE: Estonia’s central bank bought EU117m worth of
institutional debt as part of QE in March as Estonia has no
government bonds
* NOTE: Estonian Central Bank May Buy State Utilities’ Bonds:
Postimees


For Related News and Information:
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To contact the reporter on this story:
Ott Ummelas in Tallinn at +372-663-1128 or
oummelas@bloomberg.net
To contact the editors responsible for this story:
Balazs Penz at +36-1-881-0227 or
bpenz@bloomberg.net

FT : Blackstone breaks through $300bn barrier


Blackstone has become the first alternative investment manager to surpass $300bn in assets, underlining the scale of its fundraising activity just days after it announced a $14bn deal to buy real estate from GE Capital.
The US firm founded by Steve Schwarzman, and once known primarily for its private equity deals, reported $310bn in total assets under management in its first-quarter results on Thursday, up from $272bn in the same period last year.

Blackstone also reported that its economic net income — a measure of its profit — doubled to $1.6bn, compared with a year ago, after it sold assets in a buoyant market.
It will now pay a record dividend of $0.89 a share, leading to payout of more than $200m for Mr Schwarzman, the group’s chairman and chief executive.
These figures confirm Blackstone as the largest of a select group of US private equity firms that have accumulated assets since listing on public markets.
Carlyle, Blackstone’s next biggest rival, managed just under $200bn in assets at the end of last year.
In a sign of its prowess at raising funds from institutions, Blackstone’s so called ‘dry powder’ — the money it holds but has yet to invest — rose to a record $64.5bn during the quarter.
“Our limited partners entrusted us with $30bn of new capital in the quarter and $77bn over the last 12 months, shattering our own record for the alternative asset management industry,” Mr Schwarzman said.
In addition, the group’s fee-paying assets under management rose 10 per cent year on year to exceed $223bn — another record. At the same time, its performance fees, earned from its share of proceeds from deals, more than doubled to $1.67bn compared with the same period last year, reflecting the strong pace of sales of investments.

Shares in Blackstone and its peers are valued by analysts on the basis of the fees they charge for accumulating and managing assets.
Blackstone’s dominance has been driven by its specialisation in real estate, a sector in which its profits doubled to $638m during the quarter.

Its real estate assets rose in value by nearly 15 per cent year on year to $93bn versus a year ago.
Blackstone has $76bn invested in private equity but half of the nearly $27bn it invested over the first quarter was in asset classes that the group was not involved in when it went public in 2007.
It secured $16.5bn in funds for investment in real estate during the first quarter, a record amount and over half the amount raised in total.

>>> Pirelli minorities still eyeing higher offer

DEAL REPORTER

Pirelli minorities still eyeing higher offer

• Long investor placing cheap bets on rival bid
• Tyre division spin-off could entail extra value - minorities


Pirelli’s [BIT:PC] minorities are holding on to their positions with a view that China Chemical Corporation’s (ChemChina) EUR 15 bid leaves room for a higher price, according to a fund manager at a top ten shareholder and two minority investors.

There is trapped value in Pirelli that could be released by spinning-off its industrial tyre division, the shareholders said. Rival bidders could be enticed by this opportunity, they added.

A long-term shareholder said he was still buying shares slightly above the offer price to take advantage of any rival bid boost, knowing that he would suffer only a modest loss if one does not emerge. “It is like holding a very cheap call option”, he added.

Pirelli shares are trading at EUR 15.35 in Thursday’s morning session but were hovering around EUR 15.39 yesterday. The EUR 15 offer does not include a 0.367 dividend set to be paid on 20 May.

Another shareholder said he had reduced his holding after the offer was announced but was still maintaining some exposure as he thought a higher price was still possible.

Pirelli’s largest competitors Bridgestone [TYO:5108], Michelin [SCA:EPA] and Continental [FRA:CON] have all been rumoured as potential rival bidders for the Italian tyre manufacturer.

Meanwhile, the top ten shareholder noted there was some frustration among minorities because they believe Pirelli is worth more if the benefits of a reorganisational plan are taken into account.

Pirelli had acknowledged to its shareholders that it was evaluating strategic options for its industrial unit before ChemChina’s offer emerged, but minorities will not be able to share its benefits if the takeover is successful, he noted.

Pirelli could unlock EUR 3 to EUR 5 worth of value if it turns into a pure-play premium tyre manufacturer by spinning off its industrial business, the top ten shareholder believed. The first shareholder reckoned ChemChina was not paying a full price for Pirelli considering the upside potential coming from the spin-off.

But, ChemChina’s bid looks fair after considering the execution risk and time required to put in place the company’s reorganisation, the second shareholder argued.

The Chinese company has indicated it will take a few years to spin off the division and merge it with its existing industrial tyre unit Aeolus Tyre [SHA:600469]. In this timeframe the positive outlook on the European automotive sector could change, as the favourable EUR/USD exchange rate that supports the bullish sentiment will not last indefinitely, the third shareholder added. This means that giving Pirelli a fair value of EUR 20 could be an overstatement, he also noted.

The offer values the company at a premium to the sector average despite the stock posting double-digit gains since the start of the year, and the company tripling its value from 2011, this shareholder pointed out. The offer values Pirelli at 6.94x EV/EBITDA while its peers trade at an EV/EBITDA average of 6.8x, according to Dealreporter analytics.

Pirelli’s industrial business posted revenues of EUR 1.55bn in 2014, down 1.5% on the previous year excluding the impact of forex fluctuations.

Meanwhile, Pirelli’s controlling shareholder Camfin will take part in the reorganisational plan by reinvesting part of the proceeds coming from the sale of its 26.2% stake in the company.

Hopes for a ChemChina’s bump are frustrated by the bidder’s offer not being conditional to a Pirelli delisting, as the reorganisational plan can be executed also with the company still on the market, although at a slower pace, a source close to the controlling shareholder Camfin noted.

If ChemChina realises that placing a bump significantly outstrips the costs of slowing down Pirelli’s reorganisation and having lower access to its cash, the prospect of an increased offer becomes more concrete, he noted.

Potentially minorities could get a bump if the offer completes without ChemChina being able to reach a delisting threshold but chances that the bidder would improve its offer at this stage are low, the first shareholder believed.

ChemChina needs 66.7% of Pirelli’s share capital to be in the position of merging the company with one of its holding vehicles and delist it. The bidder has already secured around 30% of votes, after Edizione signed a binding agreement to tender its stake in the mandatory offer. Edizione can terminate the agreement in the event of a rival bid.

The offer values Pirelli at around EUR 7.3bn based on the outstanding number of ordinary and saving shares, and will be financed by a jumbo loan guaranteed by JPMorgan.

>>> The Kooples receives unsolicited offers but has no plans to appoint adviser

The Kooples receives unsolicited offers but has no plans to appoint adviser yet - CEO

The Kooples, the privately owned retail company has received many unsolicited offers but is not currently for sale, co-chief executive officer and co-founder Emmanuel Stern said.

The company has been approached by European, US and Asian private equity funds and strategic players but it has not hired any advisers and does not plan to do so at the moment, the CEO said.

“We met several funds but nothing has been decided now. We remained focused this year on our US expansion and on the wholesale and ecommerce development,” Stern said.

No binding offers has been made yet at this stage, he added.

LBO France, owner of a 20% stake in the company, is believed to have been approached by several parties including Permira and General Atlantic, according to an earlier report.

LBO France has not put its stake on sale but could welcome a sale if a generous offer came along, especially from an investor that would be able to double or triple the revenues worldwide, a source said.

Meanwhile, LBO France has reportedly entered into exclusive talks with Zannier for the acquisition of IKKS, the France-based international fashion retailer.

The report cited several sources as saying that the deal could value the target at nine times EBITDA or between EUR 500m and EUR 600m. IKKS generates an EBITDA of EUR 60m on annual revenues of EUR 310m.

Zannier will retain a minority stake in IKKS, the source said. Rothschild is advising Zannier and LBO France does not use any financial advisors but uses KEA Consultants for strategic advisory and Eight Advisory for the Audit. Deal should close end of June, another source said.

The Kooples reported sales of EUR 100m when LBO France acquire its 20% stake in 2011. The company now generates an EBITDA of EUR 38m on annual revenues of EUR 220m, it was earlier reported.

The company’s majority owners are co-CEOs Emmanuel Stern and Nicolas Dreyfus, co-founder and Chairman Laurent Elicha, and co-founder Alexandre and Raphael Elicha. This news service previously reported that The Kooples will seek a new investor by 2016 to accelerate its Asian expansion.