Tag: finance

• Why did Yellen use criminals in her employment case studies? Hilsenrath explainz (Hilsenrath)
• GM avoided defective switch redesign in 2005 to save a dollar each (Reuters)
• Xuzhou Zhongsen Said to Avert Bond Default on Guarantor Aid  (BBG)
• France’s New Finance Minister Faces Fiscal Challenge (WSJ)
• The magic is gone: Draghi’s Attempt to Talk Down Euro Lost on Traders (BBG)
• Another John Kerry smashing success: U.S. Gambit on Mideast Peace Talks Falters (WSJ)
• Combat-Ready China Military Seen as Xi’s Goal in Graft Battle (BBG)
• Huge earthquake off Chile’s north coast triggers tsunami (Reuters)
• Pressure rises on Gross as investors pull $3.1 billion from Pimco’s flagship fund (Reuters)
• ‘Too Big to Fail’ still thriving (Reuters)
• Overdraft Fees at Banks Hit a High, Despite Curbs (WSJ)
• Windows XP: Old Platforms Die Hard, Security Risks Live On (WSJ)

 

Overnight Media Digest

WSJ

* Securities and Exchange Commission Chairman Mary Jo White said on Tuesday her agency has “a number” of investigations into potentially unlawful trading practices by high-frequency trading firms. (http://ift.tt/1jY6E6O)

* Amid a growing clamor over the role of high-frequency traders in the markets, Virtu Financial Inc has delayed the start of its pitch to investors on its initial public offering. (http://ift.tt/1jY6E6P)

* Samsung Electronics Co Ltd copied Apple Inc’s breakthrough iPhone to remain competitive, the U.S. company said as a new round opened in their long-running patent feud. Samsung, meanwhile, countered that it was being targeted as a proxy for Apple’s rivalry with Google Inc. (http://ift.tt/1jY6En2)

* Goldman Sachs Group Inc is close to selling a once-iconic trading business based on the floor of the New York Stock Exchange to Dutch firm IMC Financial Markets, according to people familiar with the matter. (http://ift.tt/1jY6En5)

* Wells Fargo & Co said Timothy Sloan will leave his current post as finance chief and take over the wholesale banking group, succeeding the retiring David Hoyt. (http://ift.tt/1jY6En6)

* Comcast Corp’s deal to buy Time Warner Cable Inc has run into an unexpected source of turbulence: a weak stock price. In the nearly seven weeks since the deal was announced, Comcast’s share price has dropped nearly 10 percent, reducing the value of its all-stock offer for Time Warner Cable to $143.55 a share from $158.82 per share when it was announced. (http://ift.tt/PghIxL)

* A U.S. judge on Tuesday ordered Mt. Gox founder and Chief Executive Mark Karpeles to come to Texas, where the Japanese exchange has filed for U.S. bankruptcy protection. At a hearing in U.S. Bankruptcy Court in Dallas, Judge Stacey Jernigan set an April 17 date for Mr. Karpeles to answer questions under oath from lawyers who represent customers with frozen bitcoin accounts. (http://ift.tt/1igi4gv)

* Two banks have dropped their lawsuit against Target Corp and its security assessor, Trustwave Holdings Inc, following the theft of 40 million credit and debit card numbers from the retailer last year, according to court documents. (http://ift.tt/1jY6Dzy)

* Federal prosecutors have brought a rare criminal case against PG&E Corp’s San Francisco utility over a 2010 fatal pipeline explosion in San Bruno, California, charging the company with knowingly breaking federal safety rules.(http://ift.tt/1igi4gx)

* Banks are turning to overdraft fees as revenue fall on deposit accounts, despite the Federal Reserve stopping them in 2010 from automatically charging customers overdraft fees on debit-card and automated-teller-machine transactions. (http://ift.tt/1jY6DzB)

* Investors pulled $3.1 billion from Bill Gross’s Pimco Total Return Fund in March, marking the 11th consecutive month of outflows at the marquee fund for Pacific Investment Management Co. The data, released late Tuesday by fund-research firm Morningstar Inc, underscores the challenges confronting the Newport Beach, California-based money manager following a year of record redemptions and a management shake-up. (http://ift.tt/1jY6DzC)

* BlackBerry Ltd said late Tuesday that it is ending its licensing agreement with T-Mobile Inc when it expires later this month, a surprise move that comes two months after the two companies’ chief executives sparred online. (http://ift.tt/1igi3cv)

* Executives of PricewaterhouseCoopers were put on the spot at a Senate subcommittee hearing on Tuesday by a public reading of their emails discussing how to preserve overseas tax benefits for client Caterpillar Inc. In one 2008 email, Thomas F. Quinn, a PwC tax partner, warned that the giant maker of construction and mining equipment might lose tax benefits if some Swiss-based product managers relocated to the U.S. (http://ift.tt/1igi3cw)

* The spring thaw helped push U.S. auto sales in March to one of the strongest rates in years, putting the industry back on track for growth this year after two months of winter doldrums. (http://ift.tt/1igi4gF)

 

FT

US law firm Schulte Roth & Zabel has expanded to open a new European practice in London to advice activist hedge funds as its U.S. clients are beginning to examine positions in UK-based companies.

In a move to expand its connected-car market, the Spanish telecom giant, Telefonica will provide Internet connectivity to all Tesla cars in Europe.

Royal Dutch Shell said it will lower its costs in its U.S. shale gas business by switching to cheaper Chinese machinery – a shift which could serve as a potential threat to western industrial equipment makers.

Private hospitals and politicians allege insurance companies such as Bupa “bribe” patients by offering cash payments to use NHS services for procedures such as angioplasty.

Hargreaves Services Plc is in talks to invest in UK Coal, Britain’s largest coal miner, which is seeking a 10-million pound government fund to close two of its three pits in Britain and sell-off of its surface mines if the bid by Hargreaves fails.

 

NYT

* As families of crash victims lined the back of the House hearing room, displaying photos of their lost loved ones, General Motors Co’s Chief Executive Mary Barra told lawmakers that the company was considering paying damages to victims of accidents in the millions of cars recalled for defective ignition switches. (http://ift.tt/1h13op3)

* Officials of Caterpillar Inc sparred with members of a Senate panel on Tuesday, defending more than a decade’s worth of tax practices that put most of the company’s profits out of reach of United States tax authorities. (http://ift.tt/1h13pt3)

* A federal judge ordered the Marvell Technology Group Ltd to pay about $1.54 billion to Carnegie Mellon University for selling billions of semiconductors that infringed the school’s two hard disk drive patents. While that amount is 31 percent more than the $1.17 billion initially awarded by a jury in Dec. 2012, it was less than half the maximum $3.75 billion that Carnegie Mellon sought. (http://ift.tt/1h13oFn)

* Glen Taylor, the billionaire owner of the Minnesota Timberwolves basketball team, has signed a letter of intent to buy The Minneapolis Star Tribune, the newspaper announced on Tuesday. Details of the cash offer were not disclosed. (http://ift.tt/1h13pt5)

* Billionaire investor Steven A. Cohen is putting pressure on his traders to try to keep his investment firm SAC Capital Advisors together, as the once-powerful hedge fund awaits a judge’s decision next week on its guilty plea to securities fraud charges. (http://ift.tt/1h13pt7)

* As lawyers of Apple Inc and Samsung Electronics Co Ltd made their opening statements in their patent trial in a federal courthouse here, they could not even agree on what the fight was about. Apple said it was seeking money to stop Samsung from copying its products. But Samsung said the case at heart was about Apple’s attempt to stifle consumer choice by taking aim at its main competitor in the phone business. (http://ift.tt/1h13pt9)

 

Canada

THE GLOBE AND MAIL

* With only five days of campaigning left ahead of elections, Quebec party leaders are into their final blitz as the Liberals and the Parti Quebecois take aim at some of their traditional strongholds that swung over to the Coalition Avenir Quebec in the most recent election. (http://ift.tt/1pO3Y8T)

* In a sign of the feverish atmosphere leading up to next week’s provincial vote in Quebec, five McGill University students have hired a high-profile human-rights lawyer and filed an emergency court injunction in a bid to get on the Quebec voters’ list. (http://ift.tt/1jXEHvI)

Reports in the business section:

* After winning a $1 billion rail contract from a South African freight company, Bombardier Inc says it is confident of a bigger breakthrough in the emerging African market – but first it must weather a storm of controversy over its local partners in the deal. (http://ift.tt/1jXEHvK)

NATIONAL POST

* Quebec Premier Pauline Marois personally has had a catastrophic few weeks ahead of the provincial elections, from which she will find it difficult to recover. She needs to win a majority next Monday to avoid the guillotine that awaits all Parti Quebecois leaders who disappoint their brothers and sisters in the movement. Such a victory now seems unlikely. (http://ift.tt/1jXEHvN)

* Alberta’s long-ruling Progressive Conservative Party released another annual report showing it sliding ever further into the red this week, but the disclosure does not show the full picture, a National Post analysis has found. (http://ift.tt/1jXEFnM)

FINANCIAL POST

* Companies in Ontario and Quebec are among those on the forefront of modernizing the traditional way of harvesting maple syrup, by applying technology to monitor leaks in the long plastic tubes that draw sap from maple trees. (http://ift.tt/1jXEHvR)

* The Bank of Canada could lag the U.S. Federal Reserve in starting to raise rates, but it may also lag behind in terms of the pace of hikes during the upcoming cycle, says a Scotiabank outlook. (http://ift.tt/1pO3Ypu)

 

Hong Kong

 

SOUTH CHINA MORNING POST

 

— A scheme to build homes exclusively for Hong Kong people in an effort to provide middle-class buyers with affordable flats may be shelved. Chief Executive Leung Chun-ying suggested that the scheme could be suspended as the number of outside buyers in the market had dropped to a very low level. (http://ift.tt/1jY6End)

 

— Hongkong Land and Wharf Holdings will suffer the most should the Occupy Central movement carry out its threat to block streets in the heart of the city, a study by investment bank UBS says. Hongkong Land owns offices in the central business district, while Wharf owns shops in Tsim Sha Tsui and Causeway Bay. (http://ift.tt/1jY6Ene)

 

— Researchers at the University of Hong Kong have developed a vaccine that may be the first in the world to offer a shield against many influenza viruses – including the deadly H7N9 bird flu strain – in one simple shot. (http://ift.tt/1igi4wW)

  

THE STANDARD

 

— Apex Benchmark, the second-largest shareholder of Midland , urged the property agency to explain its poor financial performance last year. (http://ift.tt/1igi4wX)

 

— SmarTone has been fined HK$150,000 ($19,300) for breaching the Telecommunication Ordinance by making misleading and deceptive claims on its website. (http://ift.tt/1igi3sS)

 

— Japan’s first sales tax hike in 17 years is unlikely to affect Hong Kong holiday-makers, travel agencies say. EGL Tours executive director Steve Huen Kwok-chuen said Japan tours during the Easter holidays would not be affected as they were booked before the tax rise. (http://ift.tt/1igi4x0)

 

HONG KONG ECONOMIC JOURNAL

 

— China Vanke has bought a commercial and residential site in Hong Kong’s Wanchai district for HK$860 million ($110.87 million), its first purchase of a private land site in the city.

HONG KONG ECONOMIC TIMES

— The number of homes due to be completed this year is estimated at 17,600 units, double that in 2013, and is the highest in 10 years, according to Hong Kong government data. Industry experts expect the increased supply to put pressure on property prices.

APPLE DAILY

— University of Hong Kong students who join the movement Occupy Central can expect support from the university’s new and first expatriate chief, Peter Mathieson, who said he backs peaceful protests, free speech and academic freedom.

 

 

Britan

The Telegraph

BRITAIN CAN CUT GAS PRICES BY WORKING WITH EUROPE, SAYS MANDELSON

(http://ift.tt/1hy1VoM)

Lord Mandelson believes working with Europe can end Russia’s ‘divide and rule’ tactics on gas pricing as he warned Britain would be “bonkers” to quit the European Union.

BRITAIN HOLDS LESS FOREIGN CURRENCY RESERVES THAN POLAND, SAYS DEUTSCHE BANK

(http://ift.tt/1hy1VoO)

Research from Deutsche Bank, titled “Mapping the World’s Financial Markets”, showed that the UK is ranked 24th in a list of the world’s largest holders of foreign currency reserves.

The Guardian

VINCE CABLE DEFENDS ROYAL MAIL SELL-OFF IN COMMONS DEBATE

(http://ift.tt/1hy1VoS)

The business secretary, Vince Cable, has refused to apologise over the government’s privatisation of Royal Mail , despite a scathing report from the National Audit Office, which said undervaluing the share sale had cost the taxpayer 750 million pounds in a single day.

AIR TRAFFIC CONTROLLERS BEGIN TRIAL AIMING TO REDUCE HEATHROW HOLDING STACKS

(http://ift.tt/1hy1U4c)

The time aeroplanes spend circling Heathrow before landing could be cut as air traffic controllers join forces internationally in a trial. The trial, which began on Tuesday and will last until the end of 2014, hopes to see the time planes spend in holding stacks around Heathrow reduced.

The Times

COMPETITION CLIMBDOWN OVER PRIVATE HOSPITAL SALES

(http://ift.tt/1pH2qzn)

The Competition and Markets Authority has dropped its demand that BMI Hospitals sell seven of its private medical centres.

UK COAL BACK ON CRITICAL LIST DESPITE BAILOUT

(http://ift.tt/1pH2oaR)

The last big coal miner in Britain is facing collapse, with the potential loss of 2,000 jobs, unless it receives an emergency cash injection of more than 10 million pounds.

Sky News

NEW CONSUMER WATCHDOG CMA GOES ON THE PROWL

(http://ift.tt/1pH2oaV)

The Competition and Markets Authority (CMA) has become the UK’s primary competition and consumer agency, bringing together the Competition Commission and the Office of Fair Trading.

NPOWER HATCHES NEST DEAL AS ENERGY ROW RAGES

(http://ift.tt/1pH2qzz)

Npower, which is owned by the German utility RWE, is expected to announce this week a partnership with Nest Labs, a connected devices-maker which was acquired by Google for more than 2 billion pounds.

 

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
ADP employment report for March at 8:15–consensus 193K
Factory orders for February at 10:00–consensus up 1.2%

ANALYST RESEARCH

Upgrades

Actuant (ATU) upgraded to Buy from Neutral at SunTrust
Ameriprise (AMP) upgraded to Overweight from Equal Weight at Morgan Stanley
Apollo Education (APOL) upgraded to Outperform from Market Perform at Wells Fargo
Arthur J. Gallagher (AJG) upgraded to Buy from Neutral at Compass Point
Carter’s (CRI) upgraded to Overweight from Neutral at Piper Jaffray
Cognizant (CTSH) upgraded to Buy from Neutral at UBS
Comerica (CMA) upgraded to Market Perform from Underperform at Wells Fargo
DSW (DSW) upgraded to Hold from Sell at Brean Capital
Dover (DOV) upgraded to Outperform from Neutral at Credit Suisse
Fortinet (FTNT) upgraded to Outperform from Market Perform at Wells Fargo
Laredo Petroleum (LPI) upgraded to Buy from Neutral at SunTrust
Penske Automotive (PAG) upgraded to Buy from Neutral at Sterne Agee
The Pantry (PTRY) upgraded to Buy from Hold at Benchmark Co.
Veeva (VEEV) upgraded to Overweight from Equal Weight at Morgan Stanley
Worthington (WOR) upgraded to Buy from Hold at KeyBanc

Downgrades

ArcelorMittal (MT) downgraded to Neutral from Outperform at Credit Suisse
Essex Property Trust (ESS) downgraded to Neutral from Buy at Goldman
Healthstream (HSTM) downgraded to Market Perform from Outperform at Northland
Imperial Oil (IMO) downgraded to Underperform from Neutral at BofA/Merrill
Nordion (NDZ) downgraded to Hold from Buy at Canaccord
The Medicines Co. (MDCO) downgraded to Neutral from Overweight at Piper Jaffray

Initiations

Alkermes (ALKS) initiated with an Outperform at Credit Suisse
E-House (EJ) initiated with a Buy at Brean Capital
Ford (F) initiated with a Neutral at Nomura
General Motors (GM) initiated with a Reduce at Nomura
MAG Silver (MVG) initiated with an Outperform at Scotia Capital
Mobile Mini (MINI) initiated with a Neutral at SunTrust
NRG Energy (NRG) reinstated with an Overweight at Barclays
NRG Yield (NYLD) reinstated with an Equalweight at Barclays
National Fuel (NFG) initiated with a Buy at Jefferies
NiSource (NI) initiated with a Hold at Jefferies
Questar (STR) initiated with a Hold at Jefferies
SouFun (SFUN) initiated with a Buy at Brean Capital
Southwest Gas (SWX) initiated with a Hold at Jefferies

COMPANY NEWS

GlaxoSmithKline (GSK) confirmed plans to stop MAGRIT Phase III trial
BlackBerry (BRRY) ended T-Mobile U.S. (TMUS) licensing agreement
PG&E (PCG) announced criminal charges filed regarding 2010 San Bruno pipeline accident
MannKind (MNKD) said an FDA advisory panel voted in favor of its Afrezza to treat type 1 and type 2 diabetes
Apollo Education (APOL) disclosed that its University of Phoenix subsidiary received a subpoena from the U.S. Department of Education seeking documents related to, among other things, marketing, recruitment, enrollment and financial aid processing
Myriad Genetics (MYGN) disclosed updated pricing from the Centers for Medicare & Medicaid Services for the sequencing of BRCA1 and BRCA2 genes
Envivio (ENVI) said that it is powering live HD sports channels for Apple TV (AAPL) for a “European Tier 1 service provider”

EARNINGS

Ceragon Networks (CRNT) lowers Q1 revenue guidance to $70M-$73M from $83M-$93M
Gold Resource (GORO) reports FY13 EPS 0c, one estimate 10c
Autobytel (ABTL) raises revenue guidance for Q1
Apollo Education (APOL) sees FY14 revenue $3B-$3.1B, consensus $3.06B

NEWSPAPERS/WEBSITES

Banks (C, GS, JPM, MS, DB) seek to cut derivatives exposure, WSJ says
Hulu, Comcast (CMCSA, CMCSK) expected to strike deal for past NBCU shows, WSJ reports
BHP (BHP) said it sees no near-term relief on coal prices, Reuters reports
Apple (AAPL) to act like Google (GOOG) in ad push, Business Insider reports
Russia says JP Morgan (JPM) ‘illegally’ blocked embassy money transfer, Bloomberg reports
Comcast (CMCSA, CMCSK) share price drop may be headwind to Time Warner Cable (TWC) deal, WSJ says 
Tesla (TSLA) pays Telefonica (TEF) ‘millions’ in wireless deal, TechCrunch says

SYNDICATE

Blackstone Mortgage (BXMT) files to sell 8M shares of common stock
Global Telecom & Technology (GTT) files to sell 1M common shares for holders
Gramercy Property Trust (GPT) files to sell 11.54M shares for holders
Intercept (ICPT) files to sell 1M common shares, including 400,000 for holders
McDermott (MDR) raises $242M in a tangible equity units offering
New York Mortgage (NYMT) files to sell 13M shares of common stock
Rubicon Project (RUBI) 6.771M share IPO priced at $15.00

via Zero Hedge http://ift.tt/1pK9ATx Tyler Durden

Nikkei 225 (+1.04%) outperformed overnight, buoyed by S&P 500 posting a new all-time high, a dovish BoJ’s Tankan inflation survey and reports that the GPIF is to invest in funds specializing in Japanese stocks with high returns. Overall, another quiet session this morning as market participants continued to position for the upcoming ECB meeting, with Bunds under pressure amid further unwind of expectation of more policy easing by the central bank. According to ECB sources, there is no clear consensus at present on policy action, intense debate seen on Thursday after March HICP data, adding that it fears “over-interpretation” by market of QE possibility.

And now on the real news: after turning its back on HFT (and fully endorsing IEX), the firm again shocked traders overnight when it announced it is selling its infamous Designated Market Maker Unit at the NYSE (the topic of many posts on Zero Hedge in the early days), confirming a major overhaul is currently in place regarding market structure. Because if Goldman has said enough to the current regime, its days are numbered. Guaranteed. And more importantly, as the crackdown on HFT accelerates, first it will be stocks that are impacted and then, finally, it will be FX – the locus of all the real market rigging. Bloomberg reported overnight that firms using the ultra-fast strategies getting scrutiny thanks to Michael Lewis’s book “Flash Boys” account for more than 35% of spot currency volume in October 2013, up from 9% in October 2008, according to consultant Aite Group; it’s the opposite of equities, where their proportion shrank to 50% in 2012 from 66% four years ago, according to Rosenblatt Securities.

Soon regulators will put two and two together, and if Goldman gives the go ahead the HFT scourge will be eliminated not only from stocks but from FX. Then things like the now daily Yen-carry driven overnight levitation will be a thing of the past. For now however, FX-Spoo correlation pair manipulation is all the rage.

In other news, early this morning as part of the Hollande’s ongoing overhaul of France’s cabient resulting from the socialist drubbing in this weekend’s municipal elections, Hollande appointed Michel Sapin finance minister Wednesday, a post he filled in the early 1990s, as the administration prepares a new drive against austerity policies in Europe. Mr. Sapin, who celebrates his 62nd birthday next week, inherits an economy that is struggling to pick up from a lengthy period of stagnation and is saddled with record high public debt.

Turning to the day ahead, there’s not a whole lot in the European calendar. Euroarea finance ministers continue their meeting in Athens where there could be further headlines around bank supervision and aid for Ukraine. The US ADP employment report will be released around 1:15 London time. Consensus expectations are for a headline gain of 195k, and we’ll probably see forecasters adjust their Friday payrolls estimates shortly after its release. US factory orders and mortgage applications round off the data docket.

Bulletin headline summary from Bloomberg and RanSquawk

• Treasuries decline, 5Y and 7Y lead, curve spreads flatten; first look at March employment comes today with ADP (est. 195k); trading may be cautious before ECB meeting tomorrow (preview here), payrolls on Friday.
• Russia pressed Ukraine to disarm nationalists it says are oppressing its compatriots there, while NATO looked to bolster European security as the alliance’s Cold-War foe massed troops on Ukraine’s border
• Europe may enter a new period of market volatility, former Bundesbank president Axel Weber said in an interview; European Parliament elections at the end of May could affect the decisiveness of European leaders
• The effort to keep Middle East peace talks alive has pushed the U.S. to consider doing what once was unthinkable: freeing convicted spy Jonathan Pollard
• Talks are foundering as Palestinian President Abbas  vowed to pursue bid for statehood at the U.N.
• A Chinese building materials producer will avert what would have been the second default in the nation’s onshore bond market as its guarantor said it would step in to help, two people familiar with the matter said
• China’s overnight money-market rate climbed for a seventh day, the longest stretch in five months, after the central bank drained cash from the financial system
• Northern Chile was shaken by an 8.2-magnitude earthquake that killed five people and forced the evacuation of coastal areas, prompting President Michelle Bachelet to order military leaders to the region to keep order
• Goldman is looking to sell its NYSE market-making unit to a Dutch investment firm, as computers replace traders who once dominated the business at the corner of Wall and Broad streets
• Sovereign yields higher. Asian stocks gain, with Nikkei +1%, Shanghai +0.6%. European equity markets, U.S. stocks futures gain. WTI crude lower, copper and gold gains

US Event Calendar

• 7:00am: MBA Mortgage Applications, March 28 (prior -3.5%)
• 8:15am: ADP Employment Change, March, est. 195k (prior 139k)
• 9:45am: ISM New York, March (prior 57.0)
• 10:00am: Factory Orders, Feb., est. 1.2% (prior -0.7%) Central Banks
• EU finance ministers, central bankers continue Athens meeting
• 12:30pm: Fed’s Lockhart speaks in Miami
• 4:00pm: Fed’s Bullard meets reporters in St. Louis
• POMO – 11:00am: Fed to purchase $2b-$2.5b notes in 2021-2024 sector

EU & UK Headlines

Despite the uptick in excess liquidity in Euro-area banking system, together with a fall in an overnight EONIA fix, funding markets remained volatile this morning, with shorter-dated EONIA trading higher. Nevertheless, further unwind of expectation of QE by the ECB meant that Bunds traded lower since the open, with concession related flow also weighing on the short-end amid supply from Buba (1% 2019 Bobl auction was subsequently successfully offered).

US Headlines

USTs traded lower during the first half of the EU session, dragged lower by Bunds and also on the prospect of more corporate issuance, with 5y in particular focus ahead of the expected USD 1bln 5y deal launch by Nordic Investment Bank today which is excepted to be swapped to floating format.

Equities

Overall, relatively quiet trading session in Europe this morning as market participants positioned for the upcoming ECB governing council meeting, which as a result meant that peripheral equity indices underperformed. Also of note, companies trading ex-dividend in the UK resulted in the FTSE-100 underperforming relative to core equity indices (ex-dividend related stocks subtracted around 4 index points from the benchmark index).

FX

The release of weaker than expected macroeconomic data from the UK failed to weigh on GBP/USD and instead benefited from market participants positioning for the upcoming ECB meeting, which in turn weighed on EUR/GBP, albeit marginally. As a result, heading into the North American open, EUR/USD and GBP/USD are seen largely flat. Elsewhere, having benefited overnight following the release of the BoJ’s Tankan inflation survey, USD/JPY edged off the best levels of the session on touted profit taking related flow.

Commodities

Despite a fall in API inventories, WTI and Brent crude futures traded steady this morning, in minor negative territory, with Brent prices weighed on by further reports of blockade ending within days in Libya. Of note, NATO’s top military commander said that the situation with Russia’s forces on the Ukrainian border remains incredibly concerning. Going forward, market participants will get to digest the release of the latest ADP Employment Change, Factory Orders and the release of the weekly DoE reports.

US API Crude Oil Inventories (Mar 28) W/W -5800k vs. Prev. 6280k

– Cushing Crude Inventories (Mar 28) W/W -1520k vs. Prev. -1030k
– Gasoline Inventories (Mar 28) W/W 1800k vs. Prev. -2840k
– Distillate Inventories (Mar 28) W/W -1700k vs. Prev. 267k

Elsewhere, copper and iron ore prices saw volatility overnight, after mines in Chile were evacuated after an 8.2 magnitude earthquake, followed by sporadic  tsunami warnings.

 

* * *

We conclude with the overnight summary by DB’s Jim Reid

Markets were fortunate yesterday with the S&P 500 (+0.70%) closing at fresh record highs for the seventh time this year. Elsewhere EM and European equities were up for an eight and sixth day respectively. Markets are regaining some poise after the heightened geo-political tensions last month have eased. We now head for the business end of the week with ADP today, the ECB meeting and ISM non-manufacturing tomorrow and payrolls on Friday. Aside from the easing geopolitical tensions, markets also welcomed a number of encouraging data points both on a macro and micro level yesterday. Those hoping for a bottom in China’s economic picture looked to recent copper price moves, which are now about 5% off the recent lows, as fears of commodity financing unwinds fade. Indeed, Shanghai copper futures are up for the 10th time in the last 13 sessions. Over to the US, data yesterday was also heartening for those calling for a recovery in US activity after the weather induced slump lasting most of Q1. We wrote yesterday about market chatter suggesting that the US automakers would post surprisingly strong March sales numbers. Well they didn’t disappoint, posting overall sales growth of 5.7% well above Reuters consensus expectations for a circa 2% increase. Management commentary from Ford and Toyota suggested that customer traffic in dealer showroom improved in the second half of March as weather had kept consumers away in the earlier part of the month. According to data compiled by Reuters, GM sales rose 4%, Ford 3%, Toyota 5% and Chrysler up 13% from a year ago and all beat expectations by industry research firm Edmunds.com.

In terms of the market reaction, the S&P 500 auto sector (+2.5%) was the clear outperformer yesterday, underpinned by Ford who recorded a 4.6% gain on the day. Others had a more bearish interpretation of the data, saying that incentives rose by an average of 8% to around $2,800 per vehicle as dealers tried to clear excess stock.

While the auto sector shakes off the effects of the weather, the lingering impact of the recent cold snap is still being felt in other parts of the US economy. According to the International Council of Shopping Centers, the US saw its highest percentage over the last four years of consumers reporting that they didn’t shop through any channel over the last week. This coincided with cooler national temperatures last week which were on average 4 degrees Fahrenheit cooler than normal, marking the 4th coldest last week of March in more than 23 years. Nevertheless, ICSC retail store sales last week rose 3.6% week-on-week, compared to a decline of 1.5% prior.

Staying with the US, on the macro side, though the ISM manufacturing headline number came in below estimates (53.7 vs 54.0), it was a 0.5pt improvement on last month’s outcome and many pointed to the encouraging signs in the various subcomponents. Our US economists note that the most forward-looking component, new orders, was up 0.6 to 55.1, its highest reading since December (64.4). Production advanced the most among the subcomponents, up 7.7 points to 55.9, also the highest reading since December (61.7). For the quarter, the ISM averaged 52.7, which is consistent with Q1 real GDP growth around 2% in their view. There was a small pop in equities following the ISM but equities were already on their way to a solid day well before the release of the data.

Overnight markets are trading with a positive tone led by the strong finish to the S&P 500 yesterday. There was a bit of market volatility after news that a magnitude 8.2 earthquake struck off the coast of Chile overnight at 9pm local time. Already there are reports of 1.5m to 2m waves hitting the Chilean coastline and coastal areas are currently being evacuated. The extent of damage is so far unclear but there have been reports of power outages in a number of Chilean towns. Japan’s meteorological bureau said that a tsunami may reach the coast of Japan over the next 24 hours. COMEX copper futures traded as high as +1.3%, on fears of supply disruptions from Chile, but they have given up most of those gains to trade +0.4% as we type. In Asia, the Nikkei (+1.8%) is outperforming the rest of the region after getting a boost from an article in the Nikkei saying that Japan’s Government Pension Investment Fund will be targeting high yield stocks as part of an overhaul of its investment strategy. Indeed, a number of the yield sensitive sectors such as banks (+2.3%) and real estate (+3.8%) have been beneficiaries today. The BoJ said today that latest inflation expectations from Japanese enterprises point to a pickup in prices to 1.7% over three years, and price rises of 1.5% over the next twelve months – though this is somewhat lower than the central bank’s own inflation targets. Elsewhere Chinese stocks are posting modest gains (Shanghai Comp +0.4%) led by property developers with domestic newswires saying that a number of large cities are considering easing property market purchase restrictions.

Returning to yesterday, in addition to the theme of higher equities we saw curve steepening in USTs and a continued bid for yield and duration in credit. The USTs 2s/30s curve added 4bp, led mostly by the long end as the treasury curve partially retraces its post FOMC bearish flattening. The 30year yield increased for the third straight session. The tightening in credit spreads that we saw into quarter end extended into Q2, with the European Crossover index tightening for the sixth straight session while in the US, the CDX IG index closed firmer for the fourth straight day. The strong sentiment allowed EM to have one of its busiest days in term of new issuance with billions in corporate and sovereign deals being priced. On a similar vein, the WSJ noted yesterday that US investment grade market just capped off its the second busiest quarter ever for new issuance in Q1.

Turning to the day ahead, there’s not a whole lot in the European calendar. Euroarea finance ministers continue their meeting in Athens where there could be further headlines around bank supervision and aid for Ukraine. The US ADP employment report will be released around 1:15 London time. Consensus expectations are for a headline gain of 195k, and we’ll probably see forecasters adjust their Friday payrolls estimates shortly after its release. US factory orders
and mortgage applications round off the data docket.

via Zero Hedge http://ift.tt/1ops4eP Tyler Durden

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Nothing like being close allies with one of the most despotic, Medieval and backwards societies on planet earth.

Never forget, the USA brings democracy to the world!

With the exception of puppet governments sitting on billions of barrels of oil reserves and disturbing ties to the 9/11 attacks. Those governments we love.

From the UK Independent:

Saudi Arabia has introduced a series of new laws which define atheists as terrorists, according to a report from Human Rights Watch.

 

In a string of royal decrees and an overarching new piece of legislation to deal with terrorism generally, the Saudi King Abdullah has clamped down on all forms of political dissent and protests that could “harm public order”.

 

Article one of the new provisions defines terrorism as “calling for atheist thought in any form, or calling into question the fundamentals of the Islamic religion on which this country is based”.

 

Joe Stork, deputy Middle East and North Africa director of Human Rights Watch, said: “Saudi authorities have never tolerated criticism of their policies, but these recent laws and regulations turn almost any critical expression or independent association into crimes of terrorism.

 

The organization said the new “terrorism” provisions contain language that prosecutors and judges are already using to prosecute and convict independent activists and peaceful dissidents.

Let’s not forget that just last week Obama was over in the Kingdom cuddling up to these creepy authoritarians.

Our foreign policy is a joke.

Full article here.

via Zero Hedge http://ift.tt/1oo8cc4 Tyler Durden

Five years ago, we were the first to bring the world's attention to the staggering profitability of several firms that engaged in 'high frequency' trading that presented themselves as 'liquidity providers' and suggested (in our ever so humble way) that mark liquidity was in fact shrinking and this could lead to a 'black swan of black swans' long before the flash crash was even dreamed of. Fast forwarding to today, after hundreds of articles, not only is the mainstream "getting it" but such behemoths as Cliff Asness – who happens to run one of the world's biggest HFT funds – are forced to pen a WSJ op-ed to explain it's all a fallacy and blame a lowly blogger (or digital dickweed) for starting all this naysaying five years ago.

Asness explains in the WSJ Op-Ed…

A few nights ago, CBS's "60 Minutes" provided a forum for author Michael Lewis to announce that Wall Street is "rigged" and for the sponsors of a new trading venue called IEX to promise to unrig it. The focus of the TV segment was high-frequency trading, or HFT, an innovation now over 20 years old.

 

The stock market isn't rigged and IEX hasn't yet generated a lot of interest. In our profession, what we saw on "60 Minutes" is called "talking your book"—in Mr. Lewis's case, literally.

Forgive us for a moment as we note, in passing, that for someone to accuse a person of talking their book, when that someone has a more than vested interest in running one of the world's biggest HFT hedge funds and stands to lose billions if the special sauce is revealed is moronic.

A gentle reminder of what the HFT firms do here

But Asness puts the blame for this tornado of trading tumult squarely at the feet of…

The onslaught against high-frequency trading seems to have started about five years ago when a blogger made a wildly exaggerated claim about one firm's HFT profits.

So there it is, thanks to a blogger (Zero Hedge) five years ago, the reality of the US equity market's 'rigged' nature has been dragged kicking-and-screaming into Joe "I'm long TWTR" Sixpack's living room by Michael Lewis, Brad Katsuyama, Nanex, Themis and a host of other reality-seekers.

Of course, we'll give the last word to Mr. Asness to bury himself in hypocrisy (must. change. the. narrative…):

Our bet is that high-frequency trading comes out on top as it offers more investors better execution. But we have zero problem being proven wrong by the marketplace.

 

How HFT has changed the allocation of the pie between various market professionals is hard to say. But there has been one unambiguous winner, the retail investors who trade for themselves. Their small orders are a perfect match for today's narrow bid-offer spread, small average-trade-size market. For the first time in history, Main Street might have it rigged against Wall Street.

Indeed… or perhaps, just perhaps, Asness realizes that Goldman is on to something and his 'firm' and its kind are about to scapegoated out of existence.

via Zero Hedge http://ift.tt/1s5yqQ3 Tyler Durden

By: Chris Tell at http://ift.tt/146186R

The world’s gone “tech crazy” once again. ZeroHedge.com recently ran a great article showing the buying spree in the new “Dotcoms.”

I’ve nicked the graphic they used in the article, which so eloquently shows the timeline in the current round of acquisitions:

In the spirit of educating myself about the apparent bubble in the social media and app spaces, I figured I’d take a closer look at Whatsapp. My first impressions seemed to indicate that Facebook’s Zuckerberg must have been dropped on his head as a child, and the rest of the Facebook management team is just fast asleep or partaking in some very good drugs.

Let’s first revisit the sale. $4B in cash, $12B in Facebook shares and $3B more in restricted shares. I’ve been involved in dozens of private equity transactions, reviewed hundreds, perhaps thousands more. You stop counting at some point. Some things just jump out at you after a while, and looking at this closer some things are clearly evident.

First up, $4B cash and effectively $15B in stock…

1. Facebook must believe their stock is overvalued. You use stock to purchase when your stock is pricey. You use cash to purchase when your stock is cheap. What we have here is the flipside of buying back stock.
2. The $3B in restricted stock. This is smart because once again the valuation is pretty rich at a P/E of 103.
3. The low cash payment. This too makes sense when you realise that earnings are not stellar, certainly compared to valuation. It’s like having a $2M pool of assets which throw off such a tiny yield that you’re actually struggling to make ends meet, but your balance sheet says you’re wealthy. I know quite a few guys like this in the real estate space.

Digging a little further than just the headline, let’s try figure out whether Whatsapp is actually a good business.

They have 450 million users and they add a whopping 1 million new users every day. Impressive! At this rate it’s not hard to imagine them reaching a billion.

OK, so user growth is rampant, next let’s see what sort of OPEX is required to support, or “onboard” these users.  They have just 32 engineers for the 450 million current users. That’s over 14 million users per engineer. Yikes. Once again, very impressive.

The business model is to charge $1 annually. From a user’s perspective this is a bargain, as it will save them a ton of money on texting.  I don’t know what the average user currently spends annually with his phone provider’s text plan, but I’ll take a guess it’s closer to $100 than $1. In fact, Mark was recently in a mobile providers store in Auckland and the sales guy was telling a new customer to forget texting, “just use Whatsapp.”

OK, I get the value proposition. Their marketing seems very simple. I like simple. There are no ads, no popups, no games. Very clean. What you see is what you get. Great, love it. As a user I don’t get annoying advertising interrupting my experience.

So what are the user acquisition costs? Apparently their user growth has been all by referral. Zero, zilch zippo money spent on user acquisition. This epitomizes viral. On this front they’ve clearly nailed it.

But what hits the bottom line is what matters right? Net profit margin is currently 50%. This is very, very competitive. Google and Facebook for example run about 20% net. We can see that this is because they are sticking to one solid business line and their cost of maintaining their clients is fractional.

The Valuation Metrics

Lets try and value this business on a Price to Earnings basis.

• Current P/E  = $19B/225m (450m x 0.5) = 84x
• If they hit 1 billion users and suffer no substantial changes to their profit margins, then a forward P/E would be $19B/500m = 38x

That doesn’t seem too bad a multiple compared to Facebooks PE of 103x, but then given that Facebook is far from cheap I’m not too excited.

How about their price per user acquisition/client.

• At $19B for 450 million users we get to $42 per user
• On a forward basis assuming they get to 1 billion users we get $19B/1B which of course is $19 per user.

One way to look at this is to say, “OK, how long for me to recoup my capital from each user?” Well, it’s either 42 or 19 years. What pray tell does the tech industry look like in 42 or even 19 years? I don’t pretend to know, but the odds are Whatsapp won’t even be around. Sorry, it makes no sense to me.

What about the Price to Sales Ratio?

• This of course mimics the above calculation simply because revenue per client is $1.
• Price to sales of 42x or even 19x is just loopy in my opinion. Where is the upside?

In this insane world of QE and rate suppression revenues and profits no longer seem to matter. I see it in the real estate markets all around the world and in many public equity markets.

Asset valuations should always be a reflection of revenues in the same way that a person’s income should be the driver behind the price of their home. This is no longer the case. Thank you “Uncle Ben” (and now Janet Yellen), thank you Mario Draghi, thank you Haruhiko Koruda and all those who follow in your paths.

The photo above was taken two weeks ago at the Colombo Stock Exchange in Sri Lanka, where the total market cap of all listed companies is a mere $20 billion USD. Now I ask you, which would you rather own? One of the fastest growing countries in the world with one of the best-performing stock markets on the planet over the last decade? Or, an overvalued (by its own actions) social media company investing in an “App” that is likely to become obsolete overnight?

Short Facebook, long Sri Lanka? I could think of worse trades.

– Chris

“Can we go back to using Facebook for what it was originally for – looking up exes to see how fat they got?”  – Bill Maher

via Zero Hedge http://ift.tt/1s5uPBu Capitalist Exploits

Earlier today we reported that the nearly two year long scramble by Wall Street asset managers to gobble up distressed and other properties, most often subsidized by the government using various REO-to-Rental funding structures, with the intention of renting them out and in the process generating a 15%+ annual ROI, is now officially dead in such former hotspots as California where America’s biggest landlord, private equity firm Blackstone, reported that its purchases in California are down a staggering 90%.

RealtyTrac admits as much when in a report released overnight showcasing the Top and Bottom 20 markets for rent-to-reo “flipping”, it shows that the annual gross yield on most California (and Colorado, and Virginia, And Montana) cities is now at most 5% – something no self-respecting market rigging institution would bend over for. Of note, the worst market by far when it comes to rental yield is none other than New York City, where one can get a better return investing in Treasurys than buying real estate with the intention of renting out.

Then again, we are talking about institutional investors, filled to the gill with both Other People’s Money and the Fed’s Zero Cost debt. The same “investors” who, having run out of prime markets in the US are now scrambling to buy up real estate in Europe (although how the local dynamics of 25% in youth unemployment will translate into rental cash flow is one of those great mysteries of life).

Well, not so fast. Because as the following table also by RealtyTrac confirms, the US still has an abundance of “own-to-rent” cities, where one can generate a return as high as 30% in one year, if one is willing to drive through the downtown area at 65 mph. Places like bankrupt Detroit, where the median sales price is $45K, and somehow the average market rent is $1.1K, meaning one can recoup their investment in just over 3 years! (how Detroit’s residents can afford $1K on rent is another of those great mysteries of life)

In other words, the housing bubble will still be raging in these 20 cities, at least until such time as the yield drops sufficiently due to soaring prices that the Blackstones of the world are forced to dump other people’s money in such undervalued places as Ulan Bator and Almaty.

Finally, a heatmap summarizing the few remaining places where the second US housing bubble in under a decade can still flourish is shown below.

via Zero Hedge http://ift.tt/1pH5882 Tyler Durden

If bad news is good news; then devastating earthquakes are awesome… Copper prices popped and dropped on the new of the Chile quake (as it is near a mining region) but it is the price action in JPY (and therefore implicitly US equities) that is just farcical – and no, there’s no news, no China stimulus, no Japan stimulus, no data… just this utter insanity…

Makes perfect fun-durr-mental sense…

 

And copper has retraced its gains…

 

Following reassurances:

• *TECK SAYS QUEBRADA BLANCA COPPER MINE UNAFFECTED BY QUAKE
• *PAN PACIFIC SAYS NO DAMAGE AT CASERONES COPPER MINE AFTER QUAKE

Charts: Bloomberg

via Zero Hedge http://ift.tt/1icNrIY Tyler Durden

Men like Putin understand the ruthlessness required to keep an iron grip on power, and the press is largely an irrelevance to them, while those in the West prefer the velvet glove approach — writing checks to their electorate, taking the softly, softly approach with their foreign policy, and constantly courting the press — desperate for approval (echoes of Sally Field once again).

Russia’s temporary exclusion from the G-8/G-7 and the accompanying sanctions are designed to send a message to Vladimir Putin and force him to the negotiating table over Crimea; but though the sanctions imposed will certainly cause some discomfort in Russia, the Western press is already questioning the validity of moves which impact individual companies such as Rossiya Bank and Rusal (the world’s largest aluminium company, which teeters on the brink of insolvency in the wake of the recently imposed sanctions):

(FT): Rusal warned of “material uncertainty” over its future as the world’s largest aluminium producer reported a $3.2bn loss in its worst annual performance since 2008.

 

The Russian aluminium group, controlled by Oleg Deripaska and listed in Hong Kong, confirmed that it had asked lenders to delay a repayment due next month on part of its $10bn net debt pile.

 

It said that it expected to complete long-running negotiations with its banks to amend the terms of its debt, but warned that there could be no certainty it would succeed.

 

“Management acknowledge that these conditions result in the existence of a material uncertainty with respect to the group’s ability to continue as a going concern,” the company said. Rusal’s auditor, KPMG, included an “emphasis of matter” paragraph in its report on the company’s earnings statement to draw attention to the issue.

Expect no such compassion from Putin. Instead, Russia’s leader is already working to tighten his alliances and broaden his power base amongst the GoP.

Many commentators point to the potentially devastating effect on Russia’s economy that the sanctions put in place by the EU and the US might have, whilst others emphasise Russia’s moves to strengthen their ties to the East and reduce reliance upon their Western trading partners.

One thing is certain: the combination of Putin’s hardline approach and refusal to play by Western rules, along with the West’s desperation not to take any action without the explicit backing of their electorates, means that, for now at least, Putin’s path through what could have been a tricky bracket has been very smooth indeed.

 

 

 

How this plays out is anybody’s guess right now, but this much I know: one should NEVER underestimate the ability of the average Russian to bear hardship, nor should one ever underestimate the West’s lack of fortitude once any situation becomes politically unpalatable.

I also know that everywhere you look around the world, electorates are just itching to vote for change and to hand power to new parties and new leaders, many of which are extreme in nature and possess the ability to seriously upset the status quo.

What else do I know? Well, I know that neither Russia nor China feels the US’s place at the top of the food chain is either justified or indefinitely sustainable, and they both smell weakness.

Ukraine is just one in a series of situations which will shape and reshape the geopolitical sandscape in coming decades, and the squabbles amongst the G-8/G-7 threaten to strengthen existing alliances and forge new ones in the crucible of conflict.

Pay very close attention to the sand beneath your feet, folks. It is unstable and unpredictable, and that is the most dangerous combination of all — ask Vlad.

 

Full Grant Williams letter below…

TTMYGH_Apr_01_2014

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What has worked for much of the last two years, and judging by today's epic squeeze in stocks, is still working… is to bet against the most extreme positioning. So, on that basis, the following rather contrarian pairs trade should be ripe for major convergence…

 

Today saw yet another major short squeeze of stocks (tripling the broad market's performance and flushing yet another set of weak hands into covering higher into new record highs for stocks)…

 

This comes a week after the biggest negative swing in S&P 500 futures net total positioning in over 10 years…

 

But it is in commodity-land that we find our illustrious pair tonight…

The short leg will be… WTI Crude oil…

As BofA notes, Large speculators increased WTI crude oil longs to $38.8bn from $38.3bn notional.

Looking for a top. The gains of last week and closing break of the 21d avg (100.08) was unexpected. However, absent a break of the 104.48 Mar-03 high the larger trend remains bearish towards the Jan-09 lows at 91.35

And the long leg will be… Copper

Large speculators increase net short to -$2.5n notional from -$2.1bn last week.

So if you are truly a contrarian, being short oil (into potential minefields of energy-related sanctioning and retaliation) and long copper (into potential mass inventory dumping and liquification from a ultra-hypothecated deleveraging Chinese shadow banking system) is your trade du jour…

(or perhaps it was a premonition of tonight's earthquake in Chile's mining region)?

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via Zero Hedge http://ift.tt/1onGBI7 williambanzai7