>>> Weekly Update

Weekly Market Update: Contrast Grows Sharper Between US and the Rest

Markets got off to a weak start on Monday, with fluky US Thanksgiving sales numbers and weak PMI data in Europe and China weighing on global stocks. The ECB intervened verbally again on Thursday indicating that it is very close to launching a full-fledged QE program, although the final details of the campaign appear to still be under discussion. The Yen kept sliding amid the Japanese Prime Minister's rush for a new mandate for Abenomics with elections scheduled for Dec 14th, and Moody's cut Japan's sovereign rating thanks to heightened uncertainty over the government's political objectives. US equity indices were once again testing all-time highs on Friday after a stunning November US jobs report helped close out a seventh straight week of gains. In China, the Shanghai Composite continued to mark 42-month highs. The blowout US jobs report cut both ways, with the Fed now facing another data point that suggests rates need to rise sooner rather than later, though markets showed little sign of panicking yet over the prospects of a Fed 'rate lift off.' Despite the blockbuster jobs data, the spread between the10-year TIPS and the 10-year Treasury remained at a three year low, indicating that markets are still more concerned about the disinflationary effects of falling oil prices and the global economic malaise. For the week, the DJIA rose 0.7% nearing the 18,000 milestone, while the S&P500 gained 0.4%, and the Nasdaq slipped 0.2%.

The November non-farm payrolls report delivered its highest reading in more than three years, while the October non-farm total was revised up by more than 10%. Along with big payrolls gains came a surprising m/m bump up in hourly earnings, which was twice the expected rate. Between the ECB statement and the US jobs report, the dollar saw another week of strong gains. EUR/USD briefly testing below 1.2280 and USD/JPY hit a fresh 7.5-year high near 121.70 on Friday.

At the post-decision press conference, ECB President Draghi outlined his thinking about the shape of a potential QE program and said the committee would not tolerate a prolonged period of low inflation. He indicated the ECB was mulling purchases of any class of asset except gold and foreign assets and a subsequent press report suggested the ECB would most likely buy bonds but not equities. As for the launch date, he suggested the program would start in early 2015, but not necessarily at the January meeting. Obliquely addressing German resistance to sovereign QE, Draghi reminded listeners that the ECB does not need unanimity to proceed on QE and has made decisions that were not unanimous in the past.

The five-month slide in oil prices moderated somewhat this week, although both Brent and WTI futures ended below $70. An unexpected drawdown in crude stocks seen in the weekly DoE inventories report briefly arrested the price drop mid-week, although shares of shale producers continued their steep declines. According some reports Saudi Arabia is eyeing $60/barrel Brent crude as a floor where oil prices could stabilize, while separate reports indiscated crude sold at the wellhead in the Bakken shale region in North Dakota was being discounted to under $50 a barrel in some cases.

Black Friday sales numbers revealed a stark and growing divide between brick-and-mortar sales and online sales. According to ShoppperTrak, Black Friday shopping at physical stores was down about 7%, while IBM data showed online Black Friday sales were up 9.5% y/y. A National Retail Federation survey covering Thanksgiving Day through Sunday showed total spending was down 11% y/y. One bright spot: auto sales. There were reports that Black Friday auto sales grew 10% y/y, helping to boost November SAAR to 17.2M, the strongest pace since 2003.

Thanks to that boost in holiday weekend sales, most of the major automakers beat expectations for November US car sales. Chrysler again led the pack with a 20% y/y increase, while GM saw a more modest 6% gain. Nissan's sales were down on a y/y basis but still better than expected, while Toyota eked out a slight gain. Ford was the laggard, with sales down 2%, right in line with consensus estimates, while truck sales flagged, mostly due to the changeover to the highly anticipated 2015 models.

Apple suffered a minor flash crash on Monday morning just after the open of cash trade. Shares of AAPL plummeted 6.4% in one minute as trading algorithms sold the name hard for no apparent reason. Post-hoc rationalizations of the sudden move included Morgan Stanley's downgrade of the tech sector from overweight to market weight, including a recommendation to trim positions in Apple, although the news had been out for hours by the time of the mini-crash.

A nearly 10% gain for the week in Shanghai Composite - it's best week in 5 years - has given the mainland index an almost 40% rise for the year, even though the manufacturing and services PMI figures out this week were not stellar. Official manufacturing and final HSBC prints hit 8-month and 6-month lows respectively, while Services PMIs edged slightly higher. Nevertheless, the early Santa Claus rally in the Far East is in full swing, as the tailwinds of the recent PBoC interest rate cuts and analyst expectations for even more easing are lifting the relatively undervalued A-shares. The Shanghai index could continue its roll on next week's data, beginning with the release of the November trade balance on Sunday night ET.

On Monday, Moody's registered a vote of no confidence in Abenomics, cutting Japan's sovereign rating one notch, citing heightened uncertainty over the achievability of fiscal deficit reduction targets after a sales tax hike was delayed. A brief market reaction to the Moody's action was quickly absorbed and then the yen and Nikkei Index resumed their relentless rise. The Nikkei225 ended the week up 2.6% above 17,900, and will likely test the 14-year high around 18,300 early next week given continued sharp gains in the USD/JPY pair after the US jobs data. Japan's focus now turns to Sunday's release of the final Q3 GDP data which is likely to get a lift from much stronger than expected CapEx figures out this week, as well as the final stretch of political campaigning ahead of the December 14th parliamentary elections.

(BN) Time Is on AT&T’s Side in Wait for Slim’s Assets: Real M&A

Time Is on AT&T’s Side in Wait for Slim’s Assets: Real M&A
2014-12-05 21:44:41.156 GMT


(For a Real M&A column news alert: SALT REALMNA <GO>.)

By Scott Moritz and Patricia Laya
Dec. 5 (Bloomberg) -- AT&T Inc. has no reason to hurry into
any more deals in Mexico. In fact, the more patiently the U.S.
phone company waits, the better.
AT&T has made two acquisitions this year in its expansion
into Mexico -- neither with billionaire Carlos Slim, who
dominates the country’s communications industry. Instead, AT&T
has committed more than $50 billion to buying Mexican wireless
carrier Grupo Iusacell SA and DirecTV, which has a stake in
satellite-TV service Sky Mexico.
That’s left Slim, a former ally of AT&T, in limbo because
he needs to divest a large portion of America Movil SAB’s assets
in Mexico to reduce its market share below 50 percent and avoid
profit-reducing penalties. AT&T may be Slim’s best hope for a
buyer as the Dallas-based company is trying to bundle wireless,
TV and broadband services south of the U.S. border. The catch is
that the Iusacell business AT&T is buying benefits as long as
America Movil faces penalties. Dragging out that punishment also
may make for a tougher -- and maybe cheaper -- sale for Slim.
“AT&T is in no rush to buy America Movil’s assets in the
short term,” Gregorio Tomassi, an analyst at Banco Itau BBA,
said in a phone interview from Mexico City. “America Movil is
seeing the situation is becoming more difficult than they had
initially thought.”

SoftBank Out

America Movil originally contacted potential suitors
including AT&T, SoftBank Corp. and China Mobile Ltd. as it
prepared to sell landline and wireless assets worth about $17.5
billion, people with knowledge of the matter said in September.
Since then, Tokyo-based SoftBank has dropped out of the process,
according to other people familiar with the matter, who asked
not to be named because the decision was private.
Mariko Osada, a spokeswoman for SoftBank, declined to
comment, as did a press official for America Movil, which has a
market value of $77 billion. Fletcher Cook, an AT&T spokesman,
declined to comment on the company’s expansion strategy in
Mexico.
Today, AT&T shares rose less than 1 percent to $33.94.
AT&T’s presence in Mexico since announcing the purchase of
Iusacell on Nov. 7 reduces the appetite of other foreign buyers
to enter the market and improves AT&T’s negotiating power with
America Movil, Tomassi said.
“AT&T has the clearest way to create synergies,” Tomassi
said. “No other operator interested in coming has the level of
synergies, cross-border or inside of Mexico, as AT&T.”

AT&T Expansion

The $176 billion U.S. phone giant had been searching for
new businesses and new regions for expansion amid increased
competition and slowing wireless growth at home. Chief Executive
Officer Randall Stephenson initially set his sights on Europe
but shifted back to the Americas after Comcast Corp. announced
plans to buy Time Warner Cable Inc.
AT&T agreed to pay $48.5 billion for DirecTV, including its
Latin American business, expanding outside the U.S. for the
first time in a decade. It then agreed to buy Iusacell, Mexico’s
third-largest wireless carrier, for an equity value of $1.8
billion.
Mexico helped open the door to competitors earlier this
year when it signed a telecommunications overhaul into law. The
new rules force America Movil, which controls seven out of 10
mobile-phone users in the country, to cut its fees and share
infrastructure with its competitors.
Even without the legislation, Mexico’s proximity, economic
growth potential and increasing population make it a prime
market for AT&T to expand its TV, wireless and Internet service
business.

Balance Sheet

AT&T has the means to buy America Movil’s assets and extend
its reach further in Mexico. Holding off on another deal, for
now at least, might be better for its balance sheet.
Its shopping cart is already filling fast. On top of
DirecTV and Iusacell, AT&T is one of the top bidders in the
Federal Communications Commission’s airwave auction, which has
already surpassed $41 billion. Meantime, its A credit rating has
been in jeopardy since May when Fitch Ratings put it under
review for downgrade after the DirecTV deal was announced.
AT&T had about $2.5 billion in cash and cash equivalents as
of September and has been trimming costs and selling assets this
year. Last month, the phone company said it was cutting its
projected 2015 capital spending budget by 14 percent to $18
billion.
For AT&T to keep up with its network expansion in the U.S.,
continue paying shareholders the 10th highest dividend yield in
the Standard & Poor’s 500 Index and build businesses in growth
markets, it will need more money. While borrowing is an option,
another deal would only exacerbate the situation, putting
further pressure on its credit standing.

No Need

AT&T’s Stephenson has said that the timing and structure of
America Movil’s breakup isn’t clear yet and that his phone
company would be just fine without Slim’s assets.
“We believe we have found a path here that gets us a very
nice, scalable growth platform without the America Movil
assets,” Stephenson said at an investor conference last month.
“If things materialize over time and those look attractive,
you’d obviously have to look at them. But we really don’t need
the America Movil assets to be successful.”
A deal to hive off some of America Movil’s assets was
always going to be a long, complicated process, according to Jim
Kahan, a former AT&T strategy chief.
“Divestitures like this aren’t a simple thing to do,”
said Kahan, a senior adviser with TAP Advisors LLC, a boutique
investment-banking firm. “My guess is once the Iusacell deal
closes, AT&T is going to to want to start building that
business. My gut reaction is that they can start even without
America Movil.”

Breathing Room

AT&T has some breathing room. It’s under no great pressure
to purchase America Movil’s assets, said Dave Novosel, an
analyst at Gimme Credit LLC.
“I don’t think there are a lot of players that are in a
position to buy the America Movil assets, so I don’t think AT&T
has much competition,” Novosel said in a phone interview.
“Meanwhile, AT&T already has two acquisitions going at the same
time, so there’s reason to think they have the flexibility to
wait.”

For Related News and Information:
AT&T CEO Says Doesn’t Need America Movil’s Assets in Mexico
America Movil Falls as AT&T’s Mexican Deal Spurs Competition
AT&T Faces Off Against Former Ally Slim With Second Mexico Deal
Bloomberg Intelligence, North American telecom: BI TELCN <GO>
Real M&A stories: NI REALMNA <GO>
Top deal stories: DTOP <GO>

America Movil is up 4.9 percent this year as of yesterday.

--With assistance from Carlos Manuel Rodriguez in Mexico City,
Jeffrey McCracken in New York and Grace Huang in Tokyo.

To contact the reporters on this story:
Scott Moritz in New York at +1-212-617-5460 or
smoritz6@bloomberg.net;
Patricia Laya in Mexico City at +52-55-5242-9262 or
playa2@bloomberg.net
To contact the editors responsible for this story:
Sarah Rabil at +1-212-617-5992 or
srabil@bloomberg.net;
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Beth Williams

>>> US Close Dow +0,33% S&P +0,17% Nasdaq +0,24% Russell +0,80%

Closing Market Summary: Stocks End Slightly Higher After Strong Jobs Report Rekindles Rate Hike Concerns

The Dow (+0.3%), Nasdaq (+0.2%), and S&P 500 (+0.2%) ended the Friday session near their flat lines, allowing the benchmark index to register its seventh consecutive weekly advance. The S&P 500 added 0.4% for the week, while the Russell 2000 (+0.8%) outperformed to extend its weekly gain to 0.7%. Also of note, the tech-heavy Nasdaq outperformed slightly today, but still ended the week in the red (-0.2%).

Prior to the open, the Nonfarm Payrolls report revealed the addition of 321,000 jobs in November while the Briefing.com consensus expected a reading of 230,000. Although the data point came in well ahead of estimates, the stock market struggled for direction before following the financial sector (+1.0%) higher. Outside of financials, only the health care sector (+0.8%) was able to add more than 0.3%. As for the broader market, the S&P 500 notched its high just ahead of noon ET and slipped from that level into the close.

The lack of broad strength following a solid jobs report was a reflection of concerns that the Fed may be inclined to hike the fed funds rate sooner than the market expected. These concerns showed up in the Dollar Index (89.34, +0.64) and the Treasury market with the 10-yr note diving to send the benchmark yield higher by seven basis points to 2.31%. At the front of the curve, the 2-yr yield climbed nine basis points to 0.64%.

Conversely, higher Treasury yields contributed to the strength in the financial sector, which is poised to benefit from improved net interest margins of banks. If rates rise at the short end of the Treasury yield curve that would allow banks to charge higher interest on loans while deposit rates would likely remain close to where they are now. Top-weighted sector members rallied across the board with Dow components JPMorgan Chase (JPM 62.70, +1.32) and Goldman Sachs (GS 195.45, +3.50) spiking 2.2% and 1.8%, respectively, while the sector ended the week ahead of the remaining nine groups (+1.8%).

Meanwhile, the remaining cyclical sectors settled closer to their flat lines. Consumer discretionary (+0.3%) and industrials (+0.2%) registered modest gains while energy (-1.2%), materials (-0.1%), and technology (-0.2%) ended in the red.

The industrial sector was underpinned by defense and transport stocks. The PHLX Defense Index rose 0.6% while the Dow Jones Transportation Average gained 0.4%.

Elsewhere, the discretionary sector received support from restaurants, homebuilders, and media names while retailers underperformed after American Eagle Outfitters (AEO 11.91, -1.90), Big Lots (BIG 40.00, -7.95), and Five Below (FIVE 37.61, -5.24) disappointed with their results or guidance. Gap (GPS 40.74, +0.18) bucked the trend, climbing 0.4%, after reporting better than expected same store sales for November, but the SPDR S&P Retail ETF (XRT 92.43, -0.30) shed 0.3%.

Also of note, the top-weighted technology sector spun its wheels throughout the day as large cap components weighed while chipmakers rallied after Freescale Semiconductor (FSL 24.79, +1.36) was upgraded to ‘Buy' from ‘Hold' at Evercore ISI. Shares of FSL jumped 5.8% while the PHLX Semiconductor Index settled higher by 1.0%.

Chipmakers helped the Nasdaq Composite finish a little ahead of the broader market while biotechnology also chipped in with the iShares Nasdaq Biotechnology ETF (IBB 308.81, +2.61) climbing 0.9%. In turn, the strength helped the health care sector (+0.8%) register a solid gain.

On the downside, the energy sector (-1.2%) was pressured by a 1.8% decline in crude oil ($66.75/bbl) while the rate-sensitive utilities sector (-0.8%) lagged as Treasury yields climbed.

Today's participation was a bit below average with 738 million shares changing hands at the NYSE floor.

Economic data included non farm payrolls, trade balance, factory orders, and consumer credit:
  • Non farm payrolls increased by 321,000 in November, up from an upwardly revised 243,000 (from 214,000), while the consensus expected non farm payrolls to add 230,000 new jobs 
    • That was the biggest increase in payrolls since 360,000 jobs were added in January 2012 
    • Private payrolls increased by 314,000 in November after adding an upwardly revised 236,000 (from 209,000) in October. The consensus expected 228,000 new private jobs 
    • Obviously, a three-handle jobs gain is impressive, which tells us that there was still a considerable amount of people unemployed who were looking for jobs 
      • However, those who already had jobs were able to demand a 0.4% increase in average hourly earnings, which suggests that the number of available qualified workers is diminishing, thus forcing employers to pay their workers more money to keep them at their current job 
      • Gains in hourly earnings and the average work week led to a 0.9% increase in aggregate wages, which was the largest increase since 2006 
    • The unemployment rate held at 5.8%, as expected 
  • The U.S. trade deficit narrowed slightly in October, falling from an upwardly revised $43.60 billion (from $43.00 billion) in September to $43.40 billion while the consensus expected a decline to $42.00 billion 
    • The goods deficit was virtually unchanged at $62.70 billion while the services surplus increased to $19.20 billion from $19.10 billion 
  • Factory orders declined 0.7% in October after declining an upwardly revised 0.5% (from -0.6%) while the consensus expected an increase of 0.3% 
    • The large downside surprise resulted from weaker oil prices, which caused a 6.5% decline in petroleum refinery orders. This led to a 1.5% decline in non durable goods orders after those orders declined only 0.2% in September 
  • The Consumer Credit report for October showed an increase of $13.20 billion, which was lower than the consensus estimate of $16.50 billion 
Monday's session will be free of economic data.
  • Nasdaq Composite +14.5% YTD 
  • S&P 500 +12.3% YTD 
  • Dow Jones Industrial Average +8.3% YTD 
  • Russell 2000 +1.5% YTD 

(BFW) Oi Board Is Said to Approve Altice Offer for Portugal Assets

BN 12/05 21:27 Oi Board Is Said to Approve Altice Offer for Portugal Assets
Oi Board Is Said to Approve Altice Offer for Portugal Assets
2014-12-05 21:31:52.112 GMT


By Cristiane Lucchesi, Christiana Sciaudone and Matthew
Campbell
Dec. 5 (Bloomberg) -- Oi approved EU7.4b offer for its
Portuguese assets from Altice at board meeting yesterday, people
familiar said.
* Decision may be announced soon: people familiar
* Oi representative couldn’t be reached to comment on the
decision; co. yesterday confirmed board meeting was being
held
Story Link

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

--With assistance from Daniele Lepido in Milan and Anabela Reis
in lisbon.

To contact the reporter on this story:
Andrea Snyder in Washington at +1-202-624-1831 or
asnyder5@bloomberg.net
To contact the editors responsible for this story:
Andrea Snyder at +1-202-624-1831 or
asnyder5@bloomberg.net

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: SYNA +7.2%, ( CFO retires; raises Q2 FY15 revenue guidance t), ULTA +6.2%, FRAN +4.8%, (guided Q3, named new CEO) VTSS +4.2%, GPS +2.7%, (reports Nov same store sales +6.0% vs -1.6% Retail Metrics consensus)

Select Brazil related names showing strength: VALE +1.7%, BUD +1.5%, BAK +1.3%, BBD +0.7%

Select EU names trading higher: ORAN +2%, DB +1.9%, BCS +1.9%, DEO +1.4%, TEF +1.2%

Other news: ALSK +47.6% (Alaska Comms sells remaining wireless assets to GCI Communications (GNCMA) for $300 mln), TLOG +15.1% (CEO purchaed 10K shares at 4.99), SIMG +7.7% (announced the launch of a new subsidiary to focus on 'Internet of Everything' services; Qualcomm (QCOM) participates with strategic investment), DLIA +6.9% (announces it will liquidate and file Chapter 11 bankruptcy protection in the very near term - stock is halted), ARIA +3.5% (presenting at ASH conf; also may be cont spec on M&A interest), FEYE +2.8% (cont cyber security volatility, particularly surrounding Sony), GERN +2.6% (announced publication of preclinical data demonstrating activity of imetelstat on leukemic stem cells from acute myelogenous leukemia),WTW +2.4% (engaged in a partnership with Humana (HUM) to offer its weight management services as a part of coverage under certain employer-sponsored health plans), FCAU +2.3% (announced launch of offering of 87 mln common shares and offering of $2.5 bln of mandatory convertible securities due 2016), CLDX +1.9% (initiated a Phase 2 study of Glembatumumab Vedotin in patients with advanced melanoma), HCI +1.7% (subsidiary approved to assume 50K policies from Citizens Property Insurance Corporation), BCEI +1.6% (Millennium International Management disclosed 6.4% passive stake in 13G filing), GPRO +1.6% (favorable commentary on Thursday's Mad Money), CCE +1.4% (still checking), GNCMA +1.3% (Alaska Comms sells remaining wireless assets to GCI Communications (GNCMA) for $300 mln), KMI +1.3% (favorable commentary on Thursday's Mad Money), ALV +1.3% (cont strength), NOC +1.2% (announced a new $3 bln share repurchase authorization, and added to Conviction Buy List at Goldman), BKW +1.2% (seeing reports co received Canadian approval for takeover of Tim Hortons (THI) provided certain conditions are met), ICPT +1% (announces publication of meta-analysis from the global PBC study group in gastroenterology), AA +1% (unveiled a new manufacturing technology)

Analyst comments: VOD +3% (upgraded to Buy from Neutral at Goldman), STRZA +2.2% (upgraded to Outperform from Neutral at Macquarie), POT +2.1% (upgraded to Overweight from Neutral at JP Morgan), YHOO +1.6% (upgraded to Buy from Neutral at BofA/Merrill), TNK +1.5% (upgraded to Equal-Weight from Underweight at Morgan Stanley), TSN +1.1% (added to Conviction Buy List at Goldman), SBUX +0.9% (target raised to $89 from $82, maintain Overweight at JP Morgan)