TheChek News Flow

Goldman Sachs analyst: Some evidence oil market is rebalancing but far from sufficient - Sees Venezuela helping rebalancing in 2015

OMV to squeeze out other shareholders in OMV Petrol Ofisi

EE eyed for takeover by former CEO Tom Alexander if BT opts against deal

Asian Mid-session Update: Abenomics mandate affirmed as ruling LDP retains supermajority; Australia widens budget deficit forecast

***Economic Data***

- (JP) JAPAN Q4 TANKAN MANUFACTURING INDEX: 12 V 13E; LARGE ALL INDUSTRIAL CAPEX Y/Y: 8.9% V 8.1%E; LARGE MANUFACTURING OUTLOOK: 9 V 13E

- (AU) AUSTRALIA NOV NEW MOTOR VEHICLE SALES M/M: -0.6% (2nd consecutive decline) V -1.8% PRIOR; Y/Y: -3.8% V -0.6% PRIOR

- (NZ) NEW ZEALAND OCT PERFORMANCE SERVICES INDEX: 54.8 V 57.0 PRIOR (9-month low)

- (UK) UK DEC RIGHTMOVE HOUSE PRICES M/M: -3.3% V -1.7% PRIOR; Y/Y: 7.0% V 8.5% PRIOR

***Index Snapshot (as of 03:30 GMT)***

- Nikkei225 -1.0%, S&P/ASX -0.5%, Kospi -0.4%, Shanghai Composite -0.8%, Hang Seng -1.1%, Mar S&P500 +0.4% at 1,998

***Commodities/Fixed Income***

- Feb gold -0.4% at $1,218, Jan crude oil +0.6% at $58.16/brl, Mar copper flat at $2.93/lb

- (AE) UAE Oil Min Suhail Al-Mazrouei: Will not change our mind on supply if prices go to $60 or to $40 - CNN interview

- (JP) BOJ offers to buy ¥110B in JGB with maturity less than 1-yr, ¥240B in 10-25yr JGB and ¥160B in JGB with maturity over 25-yr

- (KR) South Korea MoF sells 10-yr govt bond at 2.675%

- USD/CNY: (CN) PBoC sets yuan mid point 6.1152 v 6.1184 prior setting (strongest since Feb 20th)

***Market Focal Points/Key Themes/FX***

- Last week's volatility has carried over into the new Asian trading session, as regional indices track the slump in the US markets on Friday even as SP500 futures point to a higher open. USD/JPY reflects the swings in overall sentiment, initially falling about 100pips to 117.80 before rebounding toward 118.70 in early afternoon session. Japan's ruling LDP party passed the snap elections test with flying colors, retaining the 2/3 supermajority with about 326 seats in the 475-seat lower house of Parliament. Govt officials have indicated that all cabinet posts will be unchanged, while cabinet sec Suga noted economic revival remains the govt's top priority. Separately out of Japan, BOJ's Q4 Tankan survey saw Manufacturing slip by a point to +12 and Outlook miss consensus by 3pts at +9. Industrial CapEx growth was higher than expected however, and Non-Manufacturing sectors were slightly better than expected. BOJ noted the relative underperformance of smaller sector of the economy demonstrates the impact of weak Yen on business sentiment.

- Australia is dealing with a hostage situation in Sydney, as one suspected Islamist terrorist is allegedly holding hostages in a cafe. AUD/USD opened lower by about 50pips in the first two hours to test $0.82 handle before paring about half of those losses. Australia's Mid-Year Economic and Fiscal Outlook (MYEFO) contained few surprises in its gloomy assessment, widening its projections for FY14/15 budget deficit to A$40.4B v A$29.8B prior forecast and the following year to deficit A$31.2B v A$17.1B prior forecast. Australia govt also sees unemployment rising to 6.5% by middle of 2015 and staying there in FY15/16 before falling to 6% in FY16/17 and 5.75% in FY17/18. Earlier, Treasurer Hockey said the decline in iron ore prices has been much steeper than expected as the decline in terms of trade would be the highest on record. Australia based it forecasts on iron ore prices of $60/ton, down another 15% from current levels.

- Out of China, the 2015 macroeconomic forecast issued by the PBoC saw 2015 GDP potentially slowing to 7.1% and CPI to 2.2% vs their 2014-end estimates of 7.4% and 2.0% respectively. Export growth was raised to 6.9% vs 6.1% prior target, but also warned on 2015 macro risks including geopolitical effect on European economy, possible faster than expected rate hikes in US, significant decline in China property prices. Property developer giant Vanke president said the impact of the recent PBoC rate cut was limited, with many 2nd and 3rd tier cities still facing downward price pressure due to inventory oversupply. Meanwhile China Securities Regulatory Commission (CSRC) chairman noted the govt will promote IPO reforms and appropriately add more IPOs every month, presumably in response to the recent outsized rally in the A-shares.

- Over the weekend, US Senate passed the $1.1T spending bill by a 56-40 vote, effectively ending the threat of a govt shutdown. President Obama was expected to sign legislation into law before federal spending authority expires at midnight on Wednesday.

***Equities***

US markets/ADRs:

- PETM: Consortium led by BC Partners to Acquire PetSmart for $83.00/Share in Cash or about $8.7B

- PBR: Reports Q3 Rev BRL88.4B v BRL77.7B y/y; delays release of full unaudited Q3 results because of new facts in corruption investigation

Notable movers by sector:

- Consumer Discretionary: Sichuan Chengfei Integration Technology 002190.CN -10.0% (suspends major restructure plan); Midea Group 000333.CN +6.3% (Xiaomi to subscribe stake); Skilled Group SKE.AU -4.1% (appoints new CEO); STW Communications Group SGN.AU -9.7% (FY14 guidance); Recall Holdings REC.AU +17.1% (rejects acquisition proposal)

- Materials: MTS.AU -1.3% (UBS cuts stake); Tokyo Steel Mfg 5423.JP +7.1% (exit production at Okayama; maintains product prices)

- Energy: APA Group APA.AU -4.2% (FY15 guidance)

Sydney Cafe Siege Sparks Terror Fears

SYDNEY—Large parts of central Sydney were in lockdown Monday after at least one gunman took hostages in a cafe and placed an Islamic flag in the window, sparking concerns a terrorist attack was under way.

Authorities sealed off surrounding streets, evacuated people from buildings, and suspended several rail routes into and out of the city after the incident began around 9:45 a.m. at the Lindt Chocolate Café in Martin Place in the heart of the business district.

New South Wales Police Commissioner Andrew Scipione confirmed that an armed offender was holding an undisclosed number of hostages in a building in the Martin Place area. Police hadn’t had contact with the offender and were still determining his motivation, but a terrorist attack couldn’t be ruled out, the commissioner said.

As many as 40 people were thought to be held in the cafe, a popular stop for shoppers seeking Christmas gifts. Photographs broadcast on television showed people inside with their hands pressed against the window.

It wasn’t clear if anyone inside was linked to hard-line Islamic groups, such as Islamic State, which have been the focus of a crackdown by authorities in recent weeks.

Police declined to say how many people are thought to be in the store, but local media quoted the head of Lindt & Sprungli in Australia, the owner of the cafe, as saying there may have been up to 10 staff and 30 customers inside when the armed man entered. Company officials couldn’t be reached for comment.

Martin Place is a pedestrian area that connects some of the city’s main shopping areas—and isn’t far from big attractions such as the Sydney Opera House and the city’s main ferry terminal. The incident comes days before the Christmas holiday, when the area gets especially busy.

“We don’t yet know the motivation of the perpetrator,” Prime Minister Tony Abbott said in Canberra. “We don’t know whether this is politically motivated, though obviously there are some indications that it could be.” The prime minister said New South Wales state police were responding to the incident with strong support from federal agencies.

The black flag placed in the cafe window was inscribed with the shahadah, a profession of Muslim faith, which is spoken in mosques daily. That flag has been used previously by al Qaeda and by Jabhat al Nusra in Syria. The flag isn’t banned in Australia.

Mr. Abbott earlier said he’d convened a meeting of the security inner circle in his cabinet to discuss the response to the incident. Australian police haven’t confirmed they are involved in an antiterror operation.

Martin Place is the location of restaurants, the central bank and offices of companies including Commonwealth Bank of Australia and the Channel 7 television station. A spokeswoman for Macquarie Group Ltd. said the investment bank was relocating some staff from its building at 50 Martin Place to other premises in the city, while other employees would work from home for the day. Several other companies also closed their offices and told staff to go home, or made the decision to remain behind locked doors.

Sydney’s Opera House was among the buildings evacuated as part of the police response to the siege, as police boats patrolled the nearby harbor. The country’s share market fell on the uncertainty, as did the Australian dollar.

“I have lived in Sydney my whole life and I’ve never seen anything like this,” said Liz Riley, an 18-year-old hospitality worker, who worked nearby. “You don’t think this is the type of thing that would happen here.”

At a cafe opposite Sydney’s busy ferry terminal, Circular Quay, manager Michael Salvartzis appeared upset. The CQ Cafe is normally open 365 days a year, and this is the first time in the five years he has been running it that he’s had to close down.

“Lock up, guys, we have to lock up,” he yelled at his staff, who were still serving cappuccinos and fruit smoothies to tourists sitting on tables in the sun. “Last orders, this is it. The whole CBD is locking up. We have to do it. It’s an order.”

Islamic community leaders expressed shock and anger at the siege. Australia has experienced sweeping terrorism raids recently, in addition to the police shooting of an 18 year-old Islamic State sympathizer in September. Muslim leaders fear the latest development risks igniting community tension, and may lead to acts of random retaliation.

Earlier Monday, the Federal Police arrested a 25-year-old man from a northern Sydney suburb on suspicion of financing terrorism, but police later said there was no link to the current siege.

Around 70 men have had their passports confiscated in recent months due to suspicions they planned to leave the country to fight for Islamic State in Syria and Iraq, authorities say.

“The most important thing is the safety and well-being of the hostages,” said Nail Aykan, General Manager of the Islamic Council of Victoria. “But there are also repercussions for prejudice-motivated crime—we don’t want a domino effect into wider society,” he said.

Australia is home to about 476,000 Muslims, many of whom fled violence in Lebanon in the 1970s and ’80s. Many built prosperous lives and worked to promote assimilation in mosques and community centers, inviting politicians to speak and holding open houses for people of other faiths.

An ambulance enters the cordoned off area on Elizabeth Street. Groups of firefighters and police officers wait near the edge of the perimeter. ENLARGE

An ambulance enters the cordoned off area on Elizabeth Street. Groups of firefighters and police officers wait near the edge of the perimeter. THE WALL STREET JOURNAL

Many Muslim leaders trace today’s extremism in part to December 2005, when a fight between young Muslim men and two white lifeguards on a suburban beach near Sydney led to a demonstration that drew some 5,000 whites, some of whom chanted racist slogans and viciously attacked dark-skinned beachgoers.

In the days that followed, gangs of youths, mainly of Arab descent, rampaged across Sydney’s predominantly white suburbs, smashing windows with machetes, baseball bats and other weapons.

Mr. Abbott urged people to remain calm. “The whole point of politically motivated violence is to scare people out of being themselves,” he said. “We have to appreciate that even in a society such as ours, that there are people who would wish to do us harm. That’s why we have police and security organizations of the utmost professionalism that are ready and able to respond to a whole range of situations.”

PetSmart Inc. agreed to be bought by a group led by BC Partners Inc. for about $8.25 billion, in the largest private-equity buyout of the year.