>>> Asian Update

Asian Mid-session Update: China sees only modest rally on PBoC RRR cut

***Economic Data***
- (AU) AUSTRALIA DEC RETAIL SALES M/M: 0.2% V 0.3%E; Q4 Q/Q: 1.5% v 1.1%E
- (AU) AUSTRALIA DEC HIA NEW HOME SALES M/M: -1.9% V +2.2% PRIOR (1st decline in 5 months)
- (PH) PHILIPPINES JAN CPI M/M: 0.4% V 0.0%E; Y/Y: 2.4% V 2.3%E; CPI CORE Y/Y: 2.2% V 1.8%E
- (TW) TAIWAN JAN CPI Y/Y: -0.9% V +0.3%E; WPI Y/Y: -7.6% V -5.0%E

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -1.0%, S&P/ASX +0.4%, Kospi -0.8%, Shanghai Composite +1.0%, Hang Seng +0.4%, Mar S&P500 -0.2% at 2,026

***Commodities/Fixed Income***
- Apr gold +0.6% at $1,272, Mar crude oil +0.5% at $48.69/brl
- GLD: SPDR Gold Trust ETF daily holdings rise 3.0 tonnes to 767.9 tonnes; highest since Oct 1st
- JGB: (JP) Japan MoF sells ¥0.55B in 1.5% (1.5% prior) 30-yr notes; Avg yield: 1.464% v 1.123% prior; Bid to cover: 2.67x v 3.57x prior
- (CN) PBoC to inject CNY30B in 28-day reserve repos (5th consecutive injection); Injects net CNY90B this week v injected CNY55B prior (3rd week of injection)
- (JP) Japan investors net bought ¥675.2B in foreign bonds v bought ¥44.2B in prior week; Foreign investors sold net ¥104.8B in Japan stocks v bought ¥464.8B in prior week

***Market Focal Points/FX***
- The muted response in China markets following the overnight 50bp RRR cut by the PBoC speaks to the extent to which this easing has been anticipated in the recent run-up. Shanghai Composite opened up 2.4% but has entered its break up only 1%. In contrast, the rate cut in November sparked a 7% rally. In notable local press, China Daily said the cut is unlikely to reverse property market correction, CICC remarked financials would be the main beneficiaries of earlier than expected RRR move, and a separate report called for a more proactive fiscal policy to accompany monetary stimulus.

- Renewed concerns over the implications of political transition in Greece helped constrain a 2-day rally. ECB announced it will restrict Greek banks' access to cash by preventing use of junk-rated government debt as collateral for loans, citing uncertainty about a successful conclusion of Greek program review. Greece Finance Ministry response sought to restore confidence, stating the banking system remains fully protected through access to ELA funding. EUR/USD, which fell 130pips following the ECB report to $1.13 low, recovered to $1.1350 in the afternoon session.

- In Japan, shares of Sony were up as much as 15% after the company beat Q3 estimates and raised its FY projections. Toyota was down slightly despite a Q3 beat of its own, with much of the gains attributed to favorable FX rates, as the world's top automaker lowered its FY15 global sales outlook by 0.5% to 9M cars. Separately, Japan's 30-year JGB auction saw soft demand just as the 10-year did earlier in the week, and BOJ Gov Kuroda expressed some alarm over the impact of low oil prices on rapid decline in overall CPI. USD/JPY sold off as low as ¥117 before retracing to ¥117.40.

***Equities***
US markets:
- SMRT: Announces $5.00/shr Special Dividend (35% indicated yield) and $275 Million Credit Facility; +20.1% afterhours
- GLUU: Reports Q4 $0.11 v $0.02e, R$72.9M v $63.5Me; +14.6% afterhours
- DATA: Reports Q4 $0.42 v $0.11e, R$142.9M v $122Me; +14.2% afterhours
- AGN: Reports Q4 $2.17 v $1.81e, R$1.91B v R$1.7B y/y; +3.0% afterhours
- BGC: Reports Q4 $0.15 v $0.20e, R$1.55B v $1.48Be; +2.4% afterhours
- YUM: Reports Q4 $0.61 v $0.65e, R$4.00B v $3.91Be; +1.0% afterhours
- ORLY: Reports Q4 $1.76 v $1.67e, R$1.76B v $1.74Be; Announces additional $500M (2.5% of market cap) share repurchase authorization; +0.2% afterhours
- NFLX: Confirms to launch in Japan this fall; flat afterhours
- UA: Reports Q4 $0.40 v $0.39e, R$895M v $848Me; Acquires Endomondo And MyFitnessPal; -1.5% afterhours
- ALL: Reports Q4 $1.72 v $1.67e, R$ v $7.64Be; Raises dividend 7.1% to $0.30/shr; Adds $3B to buyback plan (about 10% of market cap); -2.7% afterhours
- PRU: Reports Q4 $2.12 v $2.38e, R$15.8B v $12.4Be; -3.1% afterhours
- GIL: Reports Q1 -$0.31 (adj) v -$0.03e, R$390.6M v $401Me; Announces 2-for-1 stock split; Acquires all of the assets of Comfort Colors for $100M; -4.0% afterhours
- FOXA: Reports Q2 $0.53 v $0.44e, R$8.06B v $7.40Be; raises dividend 20%; -5.5% afterhours
- GMCR: Reports Q1 $0.88 v $0.89e, R$1.39B v $1.50Be; -7.5% afterhours

- NXPI: Reports Q4 $1.35 v $1.32e, R$1.54B v $1.52Be
- WFT: Reports Q4 $0.32 v $0.32e, R$3.73B v $3.91Be
- DLPH: Reports Q4 $1.32 ex item v $1.26e, R$4.15B v $4.22Be

Notable movers by sector:
- Consumer Discretionary: SEEK Ltd SEK.AU -1.7% (CFO to step down); Echo Entertainment Group EGP.AU +5.3% (H1 results); Kao Corp 4452.JP +3.0% (FY14 results)
- Consumer staples: Shenguan Holdings Group 829.HK -2.6% (profit warning)
- Financials: FlexiGroup FXL.AU +11.8% (H1 results); National Australia Bank NAB.AU +0.6% (Q1 update); China Merchants Properties 000024.CN +5.5%, China Vanke 000002.CN +2.8%, Poly Real Estate 600048.CN +3.6%, CITIC Securities 600030.CN +2.2% (PBoC cuts RRR rate)
- Materials: Ramelius Resources RMS.AU +3.9% (H1 results); Sojitz 2768.JP +1.3% (9-month results)
- Energy: China LNG Group 931.HK +3.1% (FY14 guidance)
- Industrials: Downer EDI DOW.AU -4.6% (H1 results); Mazda Motor Corp 7261.JP -2.0% (9-month results); Toyota Motor Corp 7203.JP -1.0% (Q3 results); Hitachi Ltd 6501.JP -10.0% (9-month results); Asahi Kasei Corp 3407.JP -1.5% (9-month results)
- Technology: Sony Corp 6758.JP +13.3% (Q3 results)

WSJ : Staples Deal Goes Straight to the Glut


Staples Deal Goes Straight to the Glut
Combination Makes It Tougher for Others to Close Stores

If Staples ’s planned purchase of Office Depot succeeds, one of the first things the combined office-supply giant likely will do is start closing stores. And that will only add to the glut of available floor space in areas where few retailers are interested in expanding.

Staples’s announcement Wednesday that it will buy Office Depot for $6.3 billion little more than a year after the latter merged with OfficeMax shows how much the retail sector has changed. So does the companies’ belief that regulators, which blocked the same merger 18 years ago, will bless one now.

Two big forces have hit retailers since then: First, the housing bust ended the migration toward newly built outer suburbs that drove many expansion plans. Second, the rise of e-commerce whittled away business from big boxes and superstores, just as the latter did to mom-and-pop retailers in the 1990s. The result: There is far more retail space than sales to sustain it.

There is 12.2 billion square feet of retail space in the 210 largest metro areas in the U.S., according to research firm CoStar Group, or about 50 square feet per capita. That compares with 47 square feet per capita in 2000, and 44 in 1990.

Meanwhile, sales growth away from the Internet has been less than tepid.

Available data suggest that retail sales excluding e-commerce came to $4.39 billion in 2014. Adjusting for the Federal Reserve’s preferred measure of consumer inflation, that is just 1.5% above 2007. And with e-commerce continuing to take away share, a revival doesn’t look likely.

So it is imperative for retailers to shed underperforming stores and focus efforts on smaller-format locations closer to urban centers which can generate strong sales despite the online threat.

But this process can be long and difficult. While closing a store in an undesired location can bring benefits, it also comes with a cost. If it is an owned store, the retailer will struggle to find a buyer. And if it is on a long lease, the retailer will be on the hook.

Staples and Office Depot, both of which have been closing stores recently, aren’t as challenged in this regard as many rivals.

Most of their stores are on leases, and their annual filings suggest many of those come due fairly soon. Moreover, a single company will be able to close stores in relatively desirable locations where their leases are valuable to shopping-center operators looking to bring in higher-volume retailers. According to UBS, which forecasts the combined company would reduce its U.S. store count to 2,728 in 2017 from an estimated 3,428 currently, 53% of Staples stores are within 5 miles of an Office Depot store.

But as those stores close, it will be that much harder for troubled retailers that have been working to cut their square footage, such as Sears Holdings and J.C. Penney , to sell stores and get out from under leases. For them, an already painful process just got a little more so.

>>> US Close Dow+0,04% S&P-0,42% Nasdaq-0,23% Russell-0,46%

Closing Market Summary: Stocks Slide With Greece in Headlines

The stock market ended the Wednesday session on a lower note. The S&P 500 lost 0.4% after tumbling from its high to a new low during the final 30 minutes of action.

Equity indices endured some choppy waters after the S&P 500 spiked nearly 3.0% during the first two sessions of the week. The market appeared to be out of the woods by the start of the final hour, but the benchmark index plunged through its 50-day moving average after it was reported that the European Central Bank has lifted its waiver that allowed for the acceptance of Greek debt as collateral.

The announcement came with a caveat that the counterparty status of Greek banks remains unchanged and they may satisfy their liquidity needs through Emergency Liquidity Assistance. However, the news showed that the negotiations are likely to be tumultuous, which contrasted with the rosy picture painted over the last two days.

Despite the closing slide, a handful of influential sectors like consumer discretionary (+0.7%), technology (+0.1%), and consumer staples (+0.1%) were able to finish in the green.

The consumer discretionary space received solid support from carmakers and media names. General Motors (GM 35.83, +1.85) surged 5.4% after beating estimates and announcing plans to boost its dividend by 20.0% to $0.36. Meanwhile, Dow component Disney (DIS 101.28, +7.18) spiked 7.6% in reaction to above-consensus earnings and revenue.

Elsewhere among Dow members, the top-weighted listing—Visa (V 264.89, +5.10)—soared 2.0% and helped underpin the price-weighted index, which ended flat. Furthermore, the stock contributed to the relative strength of the technology sector. Other large sector components were mixed with Apple (AAPL 119.56, +0.91) and Microsoft (MSFT 41.83, +0.23) posting gains while Google (GOOGL 526.10, -7.20), IBM (IBM 156.96, -1.51), and Oracle (ORCL 42.42, -0.62) registered losses.

In turn, the tech sector provided a boost to the Nasdaq Composite (-0.2%), helping the index finish ahead of the broader market. The Nasdaq overcame another decline in the biotechnology group as the iShares Nasdaq Biotechnology ETF (IBB 312.55, -5.24) lost 1.7% and widened its week-to-date decline to 2.8%. Conversely, the health care sector (-1.4%) settled near the bottom of the leaderboard.

Health care was not the only influential group that struggled today. The energy sector (-1.6%) finished at the bottom of the leaderboard due to a daylong slide in crude oil. The energy component plunged 9.3% and surrendered the bulk of its February gain. As for the energy sector, the cyclical group trimmed its week-to-date gain to 4.2%.

Treasuries spiked during afternoon action, sending the 10-yr yield lower by three basis points to 1.76%.

Today's participation was well above average with more than a billion shares changing hands at the NYSE floor.

Economic data included ADP Employment, ISM Services, and the MBA Mortgage Index:

* The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 213K in January while the consensus expected an increase of 230K 

* The December reading was revised up to 253,000 from 241,000 

* The ISM Non-Manufacturing Index increased to 56.7 in January from a previously revised 56.5 (from 56.2) in December while the consensus expected the index to remain at 56.5 

* Overall, the non-manufacturing sector remained strong in January, but future gains may be difficult as backlogs contracted for the second consecutive month, falling to 49.0 from 49.5  * Business activities in the non-manufacturing sector strengthened in January as the related index increased to 61.5 from 58.6 in December 

* The weekly MBA Mortgage Index rose 1.3% to follow last week's 3.2% decline 

Tomorrow, the Challenger Job Cuts report for January will be released at 7:30 ET while Initial Claims ( consensus 290K), December Trade Deficit (consensus $38.00 billion), and Q4 Productivity and Unit Labor Costs data will all be released at 8:30 ET.

* Nasdaq Composite -0.4% YTD  * S&P 500 -0.8% YTD  * Dow Jones Industrial Average -0.8% YTD  * Russell 2000 -1.0% YTD

>>> Lavazza discloses amended stake at 6.6%; sold 2M shares between Jan 26th-Feb

Lavazza discloses amended stake at 6.6%; sold 2M shares between Jan 26th-Feb 3rd - 13D/A filing 

From January 26, 2015 through February 3, 2015, Lavazza sold an aggregate of 1,991,379 shares of Common Stock for an aggregate price of $251,205,430.70 in open market transactions on Nasdaq. Attached as Annex A to this Amendment is a table setting forth certain information with respect to the sales effected during this period. As a result of such sales, as of the date hereof, Lavazza directly holds, and has beneficial ownership of, 10,705,583 shares of Common Stock. As a result of their collective control of Lavazza, the Lavazza Shareholders may be deemed to share beneficial ownership of the shares held by Lavazza. The 10,705,583 shares of Common Stock so beneficially owned represent approximately 6.6% of the currently outstanding Common Stock (based on the 162,061,810 shares of Common Stock reported by the Issuer to be outstanding as of December 1, 2014 in its Schedule 14A filed on December 12, 2014).-

(Recode) Apple Taps Samsung to Manufacture Next iPhone Chip


Apple is discovering it’s harder to split from Samsung than it would like.

The company has used Samsung for all manner of components, though it has been working to reduce reliance on its chief rival. With the iPhone 6, Apple found an alternative supplier for many of the A8 chips that lend the smarts to its smartphones.

While Apple had hoped to rely more heavily on Taiwan Semiconductor Manufacturing Co. to fabricate the Ax family of processors used in its iOS devices, the company has turned to Samsung for its next-generation A9 chip, according to people with knowledge of the situation.

That’s because Samsung holds a technological edge over TSMC when it comes to the latest manufacturing process. Samsung has managed to shrink the size of the transistors on its chips to 14 nanometers — effectively packing more processing power into a smaller space and consuming less power. TSMC is still at 20 nanometers.

Neither Samsung nor Apple would comment. The arrangement between the two companies was first reported by South Korea’s Maeil Business Newspaper.

Apple had used Samsung Semiconductor to fabricate its main processor on earlier generations of phones. The Cupertino technology giant designs the chip, but it relies on partners for production.

The relationship between the two companies became increasingly fraught after Apple sued its component supplier in 2011, alleging Samsung’s mobile electronics unit had copied its phones and tablets. Apple has been awarded more than $1 billion in damages from juries in a pair of related cases.

With the iPhone 6’s processor — the A8 — Apple split the work between TSMC and Samsung. TSMC, which is a pure foundry and the world’s largest contract chip-maker, received the bulk of the business, analysts say.

Now, the balance of power has shifted back to Samsung, thanks to its advanced fabrication technology. That same advantage is said to be putting pressure on Qualcomm, which has been the biggest maker of chips in high-end phones. Owing in part to its own manufacturing edge, Samsung is expected to use its Exynos processors in forthcoming handsets instead of Qualcomm’s Snapdragon 810, which is made in TSMC’s factories.

Samsung has invested a staggering sum — $21.4 billion — to ramp up capacity in its semiconductor and display businesses over the last year, and plans to spend even more in 2015. The company has foundries in South Korea and in Austin, Texas. Samsung also partnered last year with GlobalFoundries to bring its 14-nanometer process to its facility in Saratoga Springs, N.Y.

Though Samsung refuses to identify chip customers, sources say the company is working to ensure an adequate supply of application processors for the next-generation iPhone.

In October, Dr. Kinam Kim, president and general manager of the semiconductor business of Samsung, told reporters that he expects Samsung’s profits to improve as it starts supplying Apple with chips that come from its 14 nanometer line.

“Samsung LSI hasn’t directly confirmed Apple as its 14nm customer. But the company sounded confident about 14nm FinFET ramp in the second half of this year during its Q4 2014 earnings call,” said Strategy Analytics analyst Sravan Kundojjala. “Samsung LSI is looking to regain share in applications processors with the help of 14nm FinFET chips after seeing a steady share decline in its AP shipments over the past few years.”

(BFW) UBS Places 5.008% of Cie Automotive at EU12/Shr

UBS Places 5.008% of Cie Automotive at EU12/Shr
2015-02-04 19:17:56.804 GMT


By Esteban Duarte
(Bloomberg) -- Seller of the 6.46m-shr stake is La Fuente
Salada SL, a vehicle owned by Jose Ignacio Comenge Sanchez-Real,
UBS says in a regulatory filing.


Link to Company News:CIE SM <Equity> CN <GO>

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

To contact the editor responsible for this story:
Esteban Duarte at +34-91-700-9606 or
eduarterubia@bloomberg.net

(MS) UBS to deliver on Dividend; Credit Suisse likely to miss

UBS to deliver on Dividend; Credit Suisse likely to miss


Capital return beats and misses, we think, will drive much of relative bank performance in 2015 (our “the good, the bad and the challenged” thesis). We continue to think UBS can hit and beat expectations, and CS likely miss. We update PTs and EPS for Sfr move.
The need for CS to increase its equity leverage ratio by ~30% (2.3% to 3.0%+) to hit our base case of new equity leverage ratio within a revised 'going concern' leverage ratio remains a constraint on divis & capital plan, we think. We expect to get more clarity on new Swiss standards for equity and “going concern” leverage ratio in Q1. Whilst CS targets a 3% equity leverage ratio by end 2015e, our base case is that this is more likely in 2016e, and the recent Swiss franc move also may make the target more challenging. Given all the uncertainties of running a capital markets business and litigation uncertainty, we continue to think CS could clear the air by scripping or cutting the 2014 divi and accelerating meeting the new realities. Our recent meeting with CS's CFO underscored that the bank is keen to show consistent improvement in the leverage ratio. After 3 quarters of no improvement, it seems plausible it will rise somewhat in Q4 - in part through the sale of a flagship high value Zurich property to Swatch before Christmas and some deleveraging. But we also see another Sfr1bn+ litigation around US mortgage issues as likely.

With this note we update our EPS, PT (to SFr 25) and capital ratios for the Swiss franc move to 11.7% CET1 and 3.1% equity leverage ratio in 16e. We have assumed a degree of additional cost cutting, as we saw at Baer, to offset NIM headwinds and Swiss franc appreciation. The key catalyst for a re-rating would be if CS not only announced extra cost cutting but rebalanced the group to lower capital allocated to the investment bank over time. The stock trades at 0.8x TNAV for MSe ~12% ROTE in 16e.

At UBS, on the other hand, we see a meaningful chance of a higher dividend for 2014e, notwithstanding the headwinds from unresolved litigation, Swiss franc move and low yields. A large uncertainty for UBS remains litigation, but we see progress being made as FX is being addressed at levels below consensus' fears. Our thesis has been “that bid/ask on FX & other litigation would narrow substantially in Q4 2014 and so open the door to greater clarity on divis and capital planning into 2015.” We have SFr0.75bn and SFr1bn in our litigation costs for Q42014e and 2015e respectively. UBS reserved SFr1.7bn in the i-bank for Q3, we deduce from disclosure for FX, although clearly we need to wait until it's finalised. We continue to think divis are key to unlocking value and that UBS could have one of the highest dividend yields in the banks sector in 2015/16 as it works through its issues. In part this is driven by a booster as capital tied up in non-core is freed-up (of ~SFr4.6bn), FINMA add-on reversal (currently implied~SFr2.5bn) alongside DTA recognition. We've argued capital will be supported by FINMA add-on being reversed as litigation is settled. Our recent meeting with the CFO also gave us confidence on more cost cutting from rethinking the operating model likely, although this may only offset recent Swiss franc moves in the near term.

We also update our UBS estimates (please see exhibits in the next section) . The stock trades on ~1.3x our TNAV for a ~14% ROTE in 16e. We continue to rate UBS Overweight with a new PT of SFr20, with the biggest risk being litigation.