>>> What to look at today - 17th of February 2015

US Market close yest for President Day.
European negotiators and the new Greek anti-austerity govt remain at odds on how to handle the expiring bailout program. The former insist that Athens request an extension under the previously agreed upon terms, the latter continue to push for a bridge loan while it evaluates its fiscal state. The meeting of the two sides ended abruptly on Monday when Greek officials said the opening EU offer demanding adherence to the existing bailout was "absurd" and "unacceptable". The draft called for a 6-month technical extension of current program, calling on Athens to continue to guarantee debt sustainability. In a NY Times Op/Ed, Fin Min Varoufakis said his govt is "determined not to be treated as a debt colony that should suffer what it must", refusing to accept VAT hikes or cuts in pensions in the coming months. The Fin Min later added he still believes a deal can be reached in as early as two days. Eurogroup's Dijsselbloem meanwhile said Greece has until the rest of the week to formally request extension to bailout program, adding its govt cannot attempt to roll back agreed upon measures unilaterally...China property prices fell m/m for the 9th consecutive decline, sliding -0.4% v -0.3% prior. Y/Y price decline also deteriorated to -5.1% v -4.3% prior. Note that after last month's rosier figures, some economists began to anticipate the end of the correction in China housing prices... As widely expected, Bank of Korea left rates on hold for the 4th straight meeting at 2%. In a unanimous decision, BOK noted inflation would remain low and economy would maintain negative output gap for considerable time, though conditions would likely begin to improve in the coming months. BOK said it would monitor oil prices, spare capacity, China slowdown, and monetary policy shifts of other nations in considering future actions. Gov Lee later added global easing is positive for Korea and that KRW is somewhat overvalued on REER (Real Effective Exchange Rate) basis.

Nikkei -0.10% Hang Seng +0.19% shanghai +0.79%

RUB $63.15 (-0.39) WTI $53.21 (+0.81%) EURCHF 1.0581 - RUB is back on its 50d MA, lower level in a month

Eur$ 1.1352 S&P -0.39% EuroStoxx Dax SMI


Macro :
- France’s Sapin Says Greek Program Extension Is Only Way Forward
- MAN May Curb Truck Output in Germany, Austria, Handelsblatt Says
- EU28 January Car Registrations Rise 6.7% Y/y to 0.999m Units

Keep an eye on :
- AI FP : Air Liquide 2014 Net Income Beats Estimates
- ALIV SS : Autoliv boosts Q div to 56c/sh from 54c, Est 54c
- BALSN SW : Basilea Posts FY Loss, Sees FDA Decision on Isavuconazole in 1Q
- BPI PL : CaixaBank to Make Bid for BPI at EU1.329/Shr in Cash
- BRIT LN : Fairfax Financial to Buy Brit for $1.88b
- CO FP : Casino 2014 Trading Profit In Line With Ests.
- CLN VX : Clariant Says Stockhausen to Retire From Board of Directors
- FRE GY : Fresenius Sells German Oncology Compounding Business
- FUM1V FH : Fortum Div. Will Support Shares, L/T Questions Remain, MS Says
- KER FP : Kering 4Q Overall, Luxury Comp Sales Beat Ests.
- MAN GY : MAN May Curb Truck Output in Germany, Austria, Handelsblatt Says
- MONI LN : Monitise attracts takeover interest from FIS, Oracle and IBM - Sky News
- MRK GY : Merck & Co. and Merck KGaA in Talks to Solve Name Confusion: FAZ
- ORA FP : Orange Sees 2015 Ebitda in Line With Ests. as 4Q Sales Beat, Orange 2015 Forecast Is ‘Cautious,’ CFO Says
- PUB FP : Publicis in Exclusive Talks to Buy Relaxnews for About EU15m
- RAL FP : Rallye 2014 Sales Up 1.3%, to Pay Div. EU1.83/Shr
- BIL BB : Rentabiliweb 2014 Rev. EU71.9 m; Est. EU72m
- RIO LN : Rio Could Raise Gearing for Right M&A, UBS Says, Citing CFO
- SIK VX : Sika management bolsters defence against Saint-Gobain's takeover bid
- TNTE NA : TNT 4Q Oper Loss EU53m; Sees 2015 Challenging
- UCG IM : UniCredit Offering Church Pawn Shop in $3 Billion Property Sale
- VATT SS : Vattenfall Mulls Adding Hydro Plant to German Coal Offer: WiWo
- WIE AV : Wienerberger Targets 2015 Ebitda EU350m vs Est. EU344m
-

>>> Brokers Upgrades & Downgrades - 17th of February 2015

>>> Up
*DS SMITH RAISED TO BUY AT JEFFERIES
*FORTUM RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT MORGAN STANLEY
*MOBISTAR RAISED TO BUY VS HOLD AT BERENBERG
*YARA RAISED TO NEUTRAL VS SELL AT UBS

>>> Down
*FIDESSA CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
*LANCASHIRE CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
*MEGAFON CUT TO SELL VS NEUTRAL AT GOLDMAN
*ROSTELECOM CUT TO NEUTRAL VS BUY AT GOLDMAN
*SORIN CUT TO NEUTRAL VS BUY AT CITI

*TELKOM SA CUT TO SELL VS NEUTRAL AT GOLDMAN

>>> PT Change
*SIPEF PT CUT TO EU53 FROM EU61 AT ING; HOLD MAINTAINED

>>> Initiation
*JUST EAT RATED NEW OVERWEIGHT AT BARCLAYS, PT 450P

>>> Call

>>> Michele Ferrero death sparks takeover chatter

Michele Ferrero death sparks takeover chatter 

The death of Michele Ferrero, the head of the Ferrero family and owner of the eponymous Italian confectionery group, has sparked market takeover chatter, Italian-language daily Milano Finanza reported.

The report said that listed Swiss food group Nestle and US-based food multinationals Mars and Mondelez are among the interested bidders.

The report said that Ferrero could also consider a listing.

The item reported that Ferrero was against attracting a financial or industrial partner, and listing the confectionery group. The item added that press reports claimed Ferrero blocked his children from making buys or overtures to attract partners.

The report said that the Ferrero family, which is now headed by Giovanni Ferrero, has no intention of selling at present.

The report disclosed that Ferrero posted EUR 8bn turnover and EUR 827m profit for FY13-14, adding that the company could be valued at EUR 20bn.

Milano Finanza daily edition

FT : High-frequency trading is the new invisible hand

What’s the difference between you and a very powerful computer? This is the question posed by artificial intelligence research, by Tom Stoppard’s new play The Hard Problem, and by Friedrich Hayek in a classic 1945 paper in The American Economic Review, The Use of Knowledge in Society. To many people, including Stoppard’s heroine, the differences are obvious: emotion, the capacity for moral reasoning, free will perhaps. These features make us human, and it is our human needs that markets and market information in principle serve.

In his paper, Hayek asks whether a central planner could organise the use of resources in society better than the disorganised, decentralised market system, which can be overwhelmed by emotion and irrationality. He argued that no planner could ever be intelligent and fast enough to use the vast array of changing and often contradictory pieces of information about society. “We must look at the price system as such a mechanism for communicating information,” he wrote. The economic (never mind political and moral) disaster of centrally planned economies vindicated his argument. As many people have since pointed out (like Paul Seabright in his wonderful book The Company of Strangers) there is something rather magical about how well markets co-ordinate the demand and supply of so many goods between so many millions of people, using the signals sent by prices.

Today’s information and communication technologies offer huge potential for making markets more efficient at this matchmaking process by quickly disseminating price signals. One now-classic study was Robert Jensen’s investigation of fish prices in Kerala, India before and after the introduction of mobile phones along the coast. The ability to access and convey information led to a dramatic convergence of fish prices between different markets. Fishermen’s incomes rose. Consumers gained (a little) too: not only did the fish go to the markets where it was most highly valued, but there was also less wastage. Other studies of mobiles and agricultural prices confirm that, where producers can act on the improved price information, the new technology improves economic efficiency.

So is it possible to imagine that a modern central planner, a sufficiently powerful computer with vast access to information at its disposal and rapid processing capacity, could achieve the same efficiency as the decentralised markets? High-frequency trading (HFT) in modern financial markets might be close to this information-rich, super-efficient state, trading on tiny titbits of information at nearly the speed of light. But it is hard to feel confident that this is improving efficiency in the same way as getting better crop price information to low-income farmers in India or Niger.

Roughly half of equity trades in the US and UK financial markets are now carried out by these ultra-fast thinking machines. HFT involves computers trading securities according to algorithms, with no additional human input, raising the tantalising thought that a network of computers transacting so fast could act as a virtual central planner. There is evidence though that the trading is characterised by many ‘flash crashes’, like that of May 2010, although most of them are over so quickly that nobody notices. A commonly shared suspicion of HFT was examined in Michael Lewis’s book Flash Boys: if it’s worth many hundreds of millions of dollars to invest in ever-faster communications networks for a few milliseconds’ worth of advantage, is that a measure of how well they are fleecing the everyday investor?

It is hard to resist the thought that high-frequency trading is the culmination of the ‘performativity’ some social scientists believe characterises finance. The linguistic philosopher J.L. Austin coined this word to refer to phrases such as “I name this ship the QEII”: to say the words is to perform the act. Donald Mackenzie has argued that the options pricing model of financial economics is performative because it brought into existence modern options markets. Before the model, nobody really knew how to price options, and the market was minuscule. With HFT, has economic theory – specifically the Efficient Markets Hypothesis – brought into existence the rational, calculating, well-informed agents it assumes? If so, why is it not obviously more efficient to have markets composed of algorithms rather than people?

Hayek would not have been surprised by the general suspicion. He wrote, ”To gain an advantage from better knowledge of facilities of communication or transport is sometimes regarded as almost dishonest, although it is quite as important that society make use of the best opportunities in this respect as in using the latest scientific discoveries.” In other words, arbitrage is a socially useful function even though people tend to believe it is a bit dodgy. So perhaps the algorithms are worhwhile despite our suspicion of HFT?

I’m not so sure. The greater and faster information accessible via mobile phones in agricultural production differs qualitatively as well as quantitatively from the greater and faster information the HFT algorithms are providing via computerised prices. Information is about something, a signal; in the case of food markets, it is about what foodstuffs people want to buy and what is available for sale. If anything, better information in these markets reduces the need for arbitrage and liquidity; the matching of supplies and demands is improved without intermediation.

It isn’t clear that there are human wants behind the nearly-light-speed financial trading of HFT. The defence of HFT is that computerised trading increases liquidity, but liquidity is only necessary when it is hard to match demand and supply. If the matching process works well, more liquidity might not be useful. And in any case, many humans are troubled by HFT’s disconnect from the human desires that financial markets should ultimately serve.

>>> Monitise attracts takeover interest from FIS, Oracle and IBM

Monitise attracts takeover interest from FIS, Oracle and IBM 

The US-based software and technology groups Fidelity National Information Services (FIS), Oracle and IBM are interested in buying the listed UK-based banking software developer Monitise, Sky News reported. The report noted talk that FIS, IBM and Oracle have indicated interest in Monitise, but did not cite a source for the claim. It is thought that the takeover talks are not far advanced, the item said.

Monitise began a sale process in January, the item said. It is believed that executives from Monitise visited US-based potential bidders last week, according to the report.

Monitise has a trading update scheduled for Tuesday, 17 February, the article noted. It is expected that the company will give investors some information regarding its discussions with potential bidders, the item added.

A spokesperson for Monitise refused to comment on Monday, the report said.

Monitise’s share price closed 0.5p up at 21.5p in London yesterday, valuing the company at GBP 459m.

Background:
Monitise on 22 January announced that it had hired Moelis & Company as financial adviser and Canaccord Genuity as nominated adviser (nomad) and broker to work on a strategic review.

Sky News, previously reported intelligence

(BFW) *CAIXABANK TO MAKE BID FOR BANCO BPI AT EU1.329/SHR IN CASH

BN 02/17 06:21 *CAIXABANK TO MAKE BID FOR BANCO BPI AT EU1.329/SHR IN CASH
BFW 02/17 06:19 *CAIXABANK TO MAKE BID FOR BPI AT EU1.329/SHR IN CASH
BN 02/17 06:18 *CAIXABANK TO MAKE BID FOR BPI AT EU1.329/SHR IN CASH
BN 02/17 06:17 *CAIXABANK TO MAKE OFFER FOR BPI
*CAIXABANK TO MAKE BID FOR BANCO BPI AT EU1.329/SHR IN CASH
2015-02-17 06:21:40.475 GMT

--MARGO TOWIE

-0- Feb/17/2015 06:21 GMT

>>> Asian Update

Asian Mid-session Update: Vast divide on Greek debt ends the Eurogroup meeting with no deal; China property prices fall again; RBA minutes reveal rate cut was close call

***Economic Data***
- (CN) CHINA JAN NEW HOME PRICES M/M: FALL IN 64 OUT OF 70 CITIES VS 66 PRIOR; Y/Y: FALL IN 69 CITIES V 68 PRIOR
- (SG) SINGAPORE Q4 FINAL GDP Q/Q: 4.9% V 2.2%E; Y/Y: 2.1% V 1.7%E
- (SG) SINGAPORE JAN ELECTRONIC EXPORTS Y/Y: 5.0% V 0.1%E; NON-OIL DOMESTIC EXPORTS M/M: 1.6% V -0.3%E; Y/Y: 4.3% V 2.0%E
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 109.8 v 111.7 prior
- (KR) South Korea Jan PPI Y/Y: -3.6% v -2.0% prior; 6th month of decline, 4-year low

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.2%, S&P/ASX -0.6%, Kospi +0.2%, Shanghai Composite +0.8%, Hang Seng +0.3%, Mar S&P500 -0.4% at 2,086

***Commodities/Fixed Income***
- Apr gold +0.1% at $1,228, Mar crude oil -0.1% at $56.17/brl
- JGB: (JP) Japan's MoF sells ¥1.10T in 1.2% (1.2% prior) 20-year JGBs; Avg yield: 1.274% v 0.905% prior; bid-to-cover: 3.51x v 3.26x prior
- (CN) PBoC won't conduct open market operations (OMO) in today's session (1st halt after 7 consecutive injections)

***Market Focal Points/FX***
- European negotiators and the new Greek anti-austerity govt remain at odds on how to handle the expiring bailout program. The former insist that Athens request an extension under the previously agreed upon terms, the latter continue to push for a bridge loan while it evaluates its fiscal state. The meeting of the two sides ended abruptly on Monday when Greek officials said the opening EU offer demanding adherence to the existing bailout was "absurd" and "unacceptable". The draft called for a 6-month technical extension of current program, calling on Athens to continue to guarantee debt sustainability. In a NY Times Op/Ed, Fin Min Varoufakis said his govt is "determined not to be treated as a debt colony that should suffer what it must", refusing to accept VAT hikes or cuts in pensions in the coming months. The Fin Min later added he still believes a deal can be reached in as early as two days. Eurogroup's Dijsselbloem meanwhile said Greece has until the rest of the week to formally request extension to bailout program, adding its govt cannot attempt to roll back agreed upon measures unilaterally. EUR/USD fell as low as 1.1320 in the holiday-thinned New York session before a bounce to 1.1360 during Asian hours.

- China property prices fell m/m for the 9th consecutive decline, sliding -0.4% v -0.3% prior. Y/Y price decline also deteriorated to -5.1% v -4.3% prior. Note that after last month's rosier figures, some economists began to anticipate the end of the correction in China housing prices. Separately, official with China FX regulator SAFE noted today's environment is reminiscent of the Asian financial crisis coming closer amid expected US policy tightening and global disinflationary pressure. Shanghai Composite is in its final trading session before the week-long departure for the Lunar New Year holidays.

- Reserve Bank of Australia policy meeting minutes from this month revealed that the surprise rate cut was in fact a very close call, and that policymakers considered waiting until March. RBA also offered no forward guidance and expressed some concern over the risk of housing inflation given the rise in mortgage lending. AUD/USD initially fell as low at 0.7740 on minutes release, but has since retested a 1-week high above 0.78 as traders increasingly tempered expectations for further RBA easing in spite of the disappointing employment figures. S&P/ASX is leading regional indices to the downside. In an active earnings session, Macquarie is up on expectation of FY15 net profit rising significantly, but ANZ is down nearly 3% as net profit was up just 3.6% and net interest margins fell 6bps. Fortescue Metals is also down on a near 20% decline in H1 Revenue and reduction of interim dividend to 3c from 10c per share.

- As widely expected, Bank of Korea left rates on hold for the 4th straight meeting at 2%. In a unanimous decision, BOK noted inflation would remain low and economy would maintain negative output gap for considerable time, though conditions would likely begin to improve in the coming months. BOK said it would monitor oil prices, spare capacity, China slowdown, and monetary policy shifts of other nations in considering future actions. Gov Lee later added global easing is positive for Korea and that KRW is somewhat overvalued on REER (Real Effective Exchange Rate) basis.


***Equities***
Market Snapshot (as of 03:30 GMT):
US markets:
- GLF: Reports Q4 $0.17 v $0.10e, R$116.1M v $115Me
- CSX: Train carrying Bakken crude reportedly derails in West Virginia; 12-15 cars involved in the incident
- PSXP: To Acquire Equity Interests in 3 Pipeline Systems for Approximately $1B
- VIPS: Reports Q4 $0.09 v $0.10e, R$1.36B v $1.23Be
- RIG: Lowers annual dividend from $3.00/shr to $0.60/shr; implied yield 3.1%

Notable movers by sector:
- Consumer Discretionary: Panasonic Corporation 6752.JP +1.2% (to reorganize home appliance business); SEEK Ltd SEK.AU -9.2% (H1 results); Coca-Cola Amatil CCL.AU +5.0% (FY14 results); Dick Smith Holdings DSH.AU -7.3% (H1 results)
- Financials: Macquarie Group MQG.AU +3.2% (FY15 guidance); NZX Ltd NZX.NZ -4.1% (FY14 results); Challenger Financial Services Group CGF.AU -2.7% (H1 results); ANZ Bank ANZ.AU -2.6% (Q1 results)
- Materials: Iluka Resources ILU.AU +6.0% (FY14 results); Fortescue Metals Group FMG.AU -1.5% (H1 results)
- Industrials: Asciano Limited AIO.AU -2.2% (H1 results); Amcor Ltd AMC.AU +2.4% (H1 results; proposes shar buyback); Cardno Ltd CDD.AU +4.6% (H1 results); GWA Group GWA.AU -14.8% (H1 results)

WSJ Oil’s Black Swans on the Horizon


Oil’s Black Swans on the Horizon
Saudi Arabia may be targeting oil consumers, not just rival producers

Next week sees the one-year anniversary of Uber’s ride-sharing service arriving in Riyadh.

Disruption is creeping up on Saudi Arabia and the global oil market on which it relies. So far, this has centered on supply: North America’s shale boom has upended expectations of ever-increasing dependence on Middle Eastern crude.

But Saudi Arabia’s oil minister, Ali al-Naimi, is also worried about the other side of the equation. At a conference last month, he asked: “Is there a black swan that we don’t know about which will come by 2050 and we will have no demand?”

Against the backdrop of oil’s recent plunge, Mr. al-Naimi was thinking of potentially disruptive trends including new technology and efforts to cut carbon emissions.

This might seem overdone. Last week, the International Energy Agency released medium-term forecasts showing global oil consumption rising by 6.6 million barrels a day by 2020.

Beneath the headline, though, the story is changing. Compared with 2014’s forecast, the agency cut one million barrels a day on average from estimates for the next five years. That may not sound like much, but consider that excess supply weighing heavily on prices now is estimated to be only around 1.5 million barrels a day.

Perhaps more importantly, the mix of demand is changing, too.

Three years ago, the IEA projected global demand would grow by 3.86 million barrels a day between 2015 and 2017. Of that, 79% came from so-called BRIC countries—Brazil, Russia, India and China—and the Middle East. The latest forecast cut that growth estimate and now only 63% is set to come from those regions.

The IEA sees the U.S. playing a bigger role. From 2008 through 2014, its annual medium-term forecasts always projected a five-year decline in U.S. oil consumption. Now, U.S. demand is seen rising by 380,000 barrels a day by 2019.

This makes sense given a recovering U.S. economy and Americans’ predilection for bigger vehicles when gas is cheaper. Meanwhile, a cooling Chinese economy and the impact of lower oil prices on the economies of oil-producing countries eats into growth from emerging markets.

The shift should worry oil producers. The U.S. response to lower gas prices won’t match that of the late 1980s and 1990s. Then, the prime working- and driving-age population was still growing strongly and hybrid and electric vehicles were largely unavailable.

The IEA still expects U.S. demand to peak in 2019. Oil intensity in terms of barrels per dollar of gross domestic product is set to continue falling in the U.S., and at an even faster pace in China. At 1.16%, compound annual growth of global demand in the IEA’s latest medium-term forecast is the weakest since 2009.

Big Oil struggles to conceive of a world where demand growth slows to a trickle or stops. Exxon Mobil sees global demand hitting about 117 million barrels a day in 2040. Yet back in 2007 it saw that level being reached in 2030. And even Exxon can be blindsided. Its strategy in this century’s first decade implicitly assumed relatively cheap oil and the U.S. needing ever-rising imports of oil and natural gas. That turned out to be utterly wrong.

Similarly, prevailing assumptions such as improvements in batteries for electric vehicles advancing very slowly or that everyone in emerging markets will own a gas guzzler (rather than, say, using something like Uber) may prove myopic. New technologies, whether mobile phones, flat-screen televisions, or even shale fracking, are nascent until, suddenly, they aren’t and rapidly replace what came before. Multidecade oil projects requiring high break-even prices—such as Canada’s oil sands—look especially vulnerable if demand patterns change.

Oil’s sheer volatility, along with its geopolitical and environmental baggage, provides powerful incentives to use less of it. Saudi Arabia’s current strategy appears aimed at making rival producers sweat. Equally, it may represent a concerted effort to court consumers faced with a small but rapidly growing set of alternative choices.

>>> Greece govt officials considered the opening EU bailout offer as "absurd" an

Greece govt officials considered the opening EU bailout offer as "absurd" and "unacceptable"; Meeting said to have ended abruptly - press 
- Greece negotiator says: "in these circumstances there cannot be a deal today."- Report noting Greece was offered to respect the conditions of the existing bailout.
- European negotiator: "The meeting is over."
- Eurogroup's Dijsselbloem: Greece has until the rest of the week to formally request extention to bailout program.- Says: "Given the timelines we have... we can use this week but that is about it... There has to be a commitment from the Greek government that they accept the main features of the program... The best way forward is to get a request from the Greeks for changes within the programme, that is our preferred option." 
- France Fin Min Sapin: "There's only one reasonable path, that of a technical extension with flexibilty... to take the Greek people into account."
- EU's Moscovici: "It is very important that the Greek government ask for an extension. It includes the legal basis on which we can work." 
- Greece Defense Min / Head of coalition Independent Greeks party: "We will not request any extension, we have a public mandate to go to the end. The Greeks together say no, we will not be blackmailed." 
- Greece Fin Min Varoufakis: "We are determined to clash with mighty vested interests in order to reboot Greece and gain our partners trust... We are also determined not to be treated as a debt colony that should suffer what it must... Confident a deal can be reached in two days."