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Monthly Archives: April 2013

Bayer to Buy $CPTS for $1.1 B

“FRANKFURT (Reuters) – Germany’s Bayer AG has agreed to buy U.S. contraceptive devices makerConceptus for $1.1 billion, aiming to underpin its position as the world’s largest women’s healthcare provider,

Bayer, whose shares were down 2.3 percent by 0823 GMT, will launch a public tender offer to acquire all Conceptus shares for $31.00 each in cash, in an offer agreed with Conceptus’s management, Bayer said on Monday.

That is a premium of 19.7 percent over the stock’s closing price on Friday and a multiple of about 30 times the adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) that Conceptus is targeting for this year.

Shares in global healthcare equipment and services companies on average trade at 9 times annual EBITDA, according to Thomson Reuters StarMine…..”

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Au Continues to Bounce Back

“Gold advanced in New York, trimming the worst monthly loss since December 2011, as demand for physical metal countered outflows from bullion-backed exchange- traded products and the dollar weakened. Silver also gained.

Gold climbed 4.2 percent last week, the best showing since January 2012, as coin and jewelry demand expanded from the U.S. to China and India. The volume for the benchmark contract on the Shanghai Gold Exchange surged to a record last week, while premiums to secure supplies in India jumped to five times the level before the slump. Coin sales by the U.S. Mint are set for the highest since December 2009, while inventories monitored by the Comex tumbled last week to the lowest level since July 2008.

“The key question in the near term is whether retail and jewellery demand can continue to counter ETP outflows and the rise in gross shorts,” Barclays Plc analysts Suki Cooper, Lynnden Branigan and Christoper Louney wrote in a note today. “In our view, the vulnerability of further ETP outflows subsides should prices recover to above the $1,500/ounce level or equity markets underperform, given the stronger correlation between the two.”

Gold for June delivery rose as much as 1.7 percent to $1,478.30 an ounce on the Comex in New York and traded at $1,476 by 7:35 a.m. The metal is heading for a 7.5 percent drop in April after the metal plunged into a bear market this month. Bullion for immediate delivery rose 0.9 percent to $1,475.68 an ounce in London.

Hong Kong Buying…”

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Italy Celebrates a New Government With a Rally and Successful Bond Auctions

“LONDON (AP) — Italy’s stock market was the big gainer Monday at the start of an action-packed week in financial markets, as investors cheered the news that a new government was ready to take the helm after two months of political deadlock.

Italy’s new coalition government led by Premier Enrico Letta brings together forces from both the left and the right and will begin its work after a confidence vote later Monday in Parliament.

As the third-biggest economy among the 17 European Union countries that use the euro, Italy is hugely important to the future of the single currency. It has the second-highest debt burden in the eurozone after Greece so remains under market pressure to keep a lid on its borrowings. Over the past couple of years, Italy has done a lot to bring its debt down but at a high cost, with the economy back in recession and unemployment on the rise.

“Given the fractious nature of Italian politics, the new government headed by Enrico Letta is indeed progress,” said Michael Hewson, senior markets analyst at CMC Markets.

“However it was done without any of the protagonists who had led Italy’s main political parties in the original election campaign, which could bring into question the democratic legitimacy of the entire process with technocrats in a number of key positions,” he added.

Despite those worries, Italy’s FTSE MIB index was outperforming all its peers, and some. It was trading 1.7 percent higher at 16,839. And in another sign of optimism, the yield on the country’s benchmark 10-year bond dropped around 0.10 percentage point to 3.93 percent. That’s the first time it has dropped below 4 percent since November, 2010.

The euro was also solid, trading 0.4 percent higher at $1.3078….”

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Personal Income and Spending Data

Personal Income: Prior 1.1%, Market expects 0.3%, Actual +0.2%

Spending: Prior 0.7%, Market Expects 0.1%, Actual 0.2%

PCE: -0.1%

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Bond Markets Beg for More Debt

“At a time when politicians are squeezing budgets to cut borrowing, the bond market is clamoring for more debt, pushing yields on almost $20 trillion of government securities to less than 1 percent.

The average yield to maturity for the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index fell to a record-low 1.34 percent last week from 3.28 percent five years ago. Even though the amount of bonds in the index has more than doubled to $23 trillion — bigger than the gross domestic product of the U.S. and China combined — countries from Germany to Rwanda sold debt in the past month at their lowest yields….”

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Confidence Falls More Than Expected in Europe

Economic confidence in the euro area decreased more than economists forecast in April as the 17- nation currency bloc struggled to emerge from a recession and the bailout of Cyprus renewed debt-crisis concerns.

An index of executive and consumer sentiment dropped to 88.6 from a revised 90.1 in March, the European Commission in Brussels said today. That’s the lowest since December. Economists had forecast a decline to 89.3, according to the median of 26 estimates in aBloomberg News survey.

Business confidence and investor sentiment in Germany, Europe’s largest economy, dropped more than expected in April. European Central Bank President Mario Draghi said on April 19 that the economic situation in the bloc hadn’t improved since the beginning of the month. At the same time, Draghi expects the economy to recover from a recession later this year and economists forecast growth in the second quarter, a separate Bloomberg survey shows.

Today’s survey “supports other evidence that the euro zone is experiencing its longest recession on record,” said Jennifer McKeown, senior European economist at Capital Economics in London….”

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$SOHU Beats Estimates

Sohu.com Inc. (SOHU), owner of China’s third-largest search engine, posted first-quarter profit that beat analyst estimates on higher online advertising sales.

Net income rose 14 percent to $23 million, the Beijing- based company said in a statement today. That beat the $18.8 million average of six analysts’ estimates compiled by Bloomberg. Sales rose 36 percent to $308 million, compared with the average of analysts’ estimate of $296 million.

Sohu has expanded into online videos and search in competition with Baidu Inc. (BIDU) to diversify its sales channels and depend less on its Web portal business in China, which has more Internet users than the population of any country except India. Revenue from online advertisements rose 41 percent from a year earlier to $116 million, it said.

“Online advertising was better than expected,” Eric Qiu, an analyst at Guosen Securities Co. in Hong Kong, said by telephone before the results. “Most of the ad growth is coming from its portal website and search business,” said Qiu, who recommends buying the stock….”

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Profits Fall for China’s Industrial Companies

“Growth in Chinese industrial companies’ profits slowed in March, adding to evidence the nation’s economic recovery is losing steam.

Net income increased 5.3 percent from a year earlier to 464.9 billion yuan ($75 billion), down from a 17.2 percent pace in the first two months, the National Bureau of Statistics said on itswebsite on April 27. Profit in the first quarter rose 12.1 percent to 1.17 trillion yuan, it said.

China’s stocks fell for a third straight month in April amid investor concern that the recovery in the country’s economic expansion is losing momentum and will hurt corporate earnings. The benchmark Shanghai Composite Index (SHCOMP) closed 1 percent lower on April 26, the last trading day before a three- day holiday ending May 1.

“Profits are only growing in line with sales and with problems of overcapacity and the sluggish global picture, it doesn’t bode well for a speedy return to higher profit margins,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. “Heavy industries especially still face destocking and higher costs, but if there is a silver lining, industries catering to the consumer, like textiles, food and beverages, seem to be doing much better.”

Inner Mongolia Yili Industrial Group Co., a producer of dairy products, reported an 18.6 percent rise in first-quarter net income, according to an April 26 statement to the Shanghai Stock Exchange.

Industrial companies’ revenue rose 11.9 percent in the first three months to 22.2 trillion yuan, according to the statistics bureau statement. That’s down from 13.1 percent in the first two months. The bureau doesn’t break down January and February data due to distortions caused by the timing of the Lunar New Year holiday. No figure was given for March sales.

Lower Estimates…”

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Capstone to Acquire $BHP’s Pinto Valley Mine

Capstone Mining Corp. (CS), the owner of copper mines in Mexico and Canada, agreed to buyBHP Billiton Ltd. (BHP)’s Pinto Valley mine and railroad in the U.S. for $650 million in cash, marking its biggest acquisition.

Vancouver-based Capstone is expected to complete the purchase of the Pinto Valley copper mine in Arizona and the related San Manuel Arizona Railroad Co. in the second half of 2013, Melbourne-based BHP said today in a statement.

The deal comes as Capstone scouts for producing copper mines in the Americas to add about 100 million pounds of copper. BHP and Rio Tinto Group are among mining companies selling assets to shore up earnings and cut costs after more than $60 billion of writedowns in the industry. The agreement takes BHP’s divestments to $5 billion over the last 12 months, according to the BHP statement today.

BHP shareholders are likely to respond well to the company disposing of smaller assets like Pinto Valley, which have been taking up “too much management time and too much peripheral capital,” said Vincent Pisani, an analyst at Shaw Stockbroking Ltd. “It’s taken some time, but I think BHP are finally getting it,” he said.

BHP suspended mining operations at Pinto Valley in Feb. 2009 and said mining began again during the last quarter of 2012. Capstone said BHP had spent $194 million on equipment and infrastructure to enable operations to resume.

Cash Cost…”

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The Kiwi Continues on it’s Longest Bull Run in Two Years

New Zealand’s dollar climbed versus most of its major peers before data forecast to show building permits rose to a five-year high, after the central bank said a housing boom could force it to raise interest rates.

The nation’s currency, nicknamed the kiwi, held its longest stretch of weekly gains in two years against the so-called Aussie dollar on bets the spread to the Reserve Bank of Australia’s benchmark rate will narrow. New Zealand’s currency extended a weekly advance against the greenback after data showed the U.S. economy grew less than expected. Australian bond yields fell to the lowest since November….”

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South Africa’s Middle Class Doubles Since 2004

“The black middle class in South Africa, which held its first all-race elections in 1994, has more than doubled in size over the past eight years, exceeding the number of white people in the same bracket and the amount of money they spend.

The number of black South Africans classified as middle class rose to 4.2 million people last year from 1.7 million in 2004, the University of Cape Town’s Unilever Institute of Strategic Marketing said in a statement. South Africa has a population of 51.8 million people.

“South Africa’s black middle class continues to rapidly expand and is more influential and powerful than ever before,” John Simpson, a director at the Unilever Institute, said in the statement, which was e-mailed yesterday. “The black middle class is helping create a vibrant and stable society by increasing South Africa’s skills base, deepening employment, and widening the tax net.”

South Africans in this group now spend 400 billion rand ($44 billion) annually, more than the 323 billion rand spent by 3 million white people classified as middle class, according to the study. The number of white South African in the group rose from 2.8 million in 2004.

High Unemployment

South Africa’s unemployment rate of 24.9 percent is the highest of more than 30 emerging-market nations tracked by Bloomberg. Retail sales advanced 3.8 percent in February from a year earlier, with South Africa’s Reserve Bank keeping its benchmark interest rate at the lowest level in more than 30 years to spur spending….”

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The Philippines Joins Thailand and S.K. in Tempering Currency Appreciation

“The Philippine central bank is considering adjustments to its so-called special deposit accounts, signaling it may limit access to the facility to cut costs and enhance its scope to cool currency gains.

“We would like to consider ways to make the SDA function more as a monetary instrument rather than an investment vehicle,” Governor Amando Tetangco said on April 27 in an e- mail response to questions. “The exact form of these refinements will be made known in time, but as in our practice, any adjustments we will make will be gradual and phased in.”

The possible change in the SDA, which hold about $46 billion, comes after Bangko Sentral ng Pilipinas on April 25 cut the rate it pays on the deposit facility for a third time this year. The monetary authority has lowered borrowing costs, banned foreign funds from the special accounts and revised rules to spur outflows, joining South Korea and Thailand in stepping up efforts to temper currency appreciation.

“The central bank is trying to manage its costs so it will have greater flexibility to intervene in the currency market,” said Ricky Cebrero, executive vice president and head of treasury at Manila-based Philippine National Bank. (PNB) “If the BSP limits SDA access through trust accounts in the near future, some funds may shift to bank deposits subject to an 18 percent reserve requirement. That will further reduce BSP’s costs.”…”

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Pensando en Ti

[youtube://http://www.youtube.com/watch?v=8UcHZ4Swu64 450 300]

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Revenue Rollover is a Worrisome Sign

The company’s stock had climbed 22 percent since the start of the year as the maker of Tide detergent and Crest toothpaste turned in better profits for two quarters in a row. Last Thursday, P&G reported even higher earnings. And its stock immediately dropped 6 percent.

What happened? Like so many other big companies reporting results recently, P&G hit its target for earnings but missed on revenue. Nearly halfway through the first-quarter earnings season, Corporate America is still reporting solid profits, with seven of every ten big companies hurdling over Wall Street’s expectations. Sales, however, are another story.

Nearly the same proportion of big companies — six out of ten — have fallen short of revenue targets, according to S&P Capital IQ. The tally so far looks grim: Revenue has shrunk 2.4 percent compared with last year.

“The norm is becoming, beat your earnings, but miss on revenue,” says Scott Freeze, president of Street One Financial.

“Two problems persist: Europe’s ongoing recession and slower economic growth in China. Because nearly half of revenue for Standard & Poor’s 500 companies comes from abroad, it would seem logical to think the problem is just overseas. But many companies with a U.S. focus have also reported disappointing revenue.

Freeze says that revenue presents a more accurate picture of Corporate America’s health. “You can play with the earnings numbers and have them skewed,” he says. “But you can’t mess with the revenue numbers — they are what they are. If people are not coming in droves to buy your products, your revenue’s going to miss even if your earnings beat.”

Aside from Apple’s falling profit and some other high-profile flops, the headline numbers for first-quarter earnings appear solid. So far, 271 companies in the S&P 500 have said earnings are up 5 percent over the year before. And 189 of them have cleared Wall Street’s estimates.

Investors say that’s no surprise. They believe companies set the bar so low that it’s easy to jump over it. The 3.6 percent earnings growth analysts expect to see after all the results are tallied works out to $26.36. That’s just $1 more than the same period last year.

As one company after another turned in weak revenue results last week, analysts, investors and economists started raising concerns about the prospect for future profits….”

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Former White House Budget Director David Stockman: The Fed is Wrecking the Free Enterprise Sytsem

“Federal Reserve Chairman Ben Bernanke and his allies at the central bank haven’t merely
embarked on a misguided policy — they’re a threat to U.S.-style capitalism, says former White House Budget Director David Stockman.

The Fed now determines the level of short-, medium- and long-term interest rates, he told
Newsmax TV in an exclusive interview. “It’s all rigged. This is administered price-setting by 12 people who are not even elected.”

Financial markets now determine prices and “drive the entire capitalist system,” says Stockman, author of the new book, “The Great Deformation: The Corruption of Capitalism in America.”

And it’s the Fed that sets prices in financial markets. “All of the trading today is not based on price discovery as we talk about in free markets or discounting cash flows and earnings in the future,” Stockman says, who headed the Office of Management and Budget from 1981 to 1985 under President Ronald Reagan.

“They’re all trading against what they think the overlords at the Fed are doing.”

Bernanke is “a Keynesian money printer who believes that debt, debt and more debt is the elixir that helps economies grow and people become wealthier,” Stockman says.

“That is utterly wrong doctrine, and it’s nevertheless in the mind of the guy who’s running a system. And he has four or five colleagues who believe the same, and they are dangerous, and they are wrecking our free enterprise system.”

The notion that we don’t have inflation now is off base, Stockman says. “The issue isn’t inflation of goods and services,” he says. “There is another inflation called asset inflation.” And that’s running rampant, Stockman says….”

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Old Man Buffett’s Favorite Indicator Has Ground to a Near Halt

“After a big first quarter rail traffic has come out of the gate extremely soft in Q2.  The average pace of year over year expansion in intermodal traffic was a very healthy 5.3% in Q1, but has averaged just 0.08% so far in the first 4 weeks of the second quarter.  This is a trend that has been developing since early March as the pace of expansion has averaged just 2.11% since the first week of March.  Overall, that brings the 12 week moving average to 4.01%.  That’s still a healthy pace, but the recent slowing is a trend worth keeping a close eye on.  If rail traffic is any indicator it’s possible that economic growth peaked in Q1.

Here’s more from AAR…”

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Lotz of Data to Chew On This Week

Data for the week

“….The first week of any month is always big, and so this Wednesday (May 1) through Friday will be jam packed with fresh ISM reports (for Korea, China, Europe, and the US), initial jobless claims, and of course the big Non-Farm Payrolls report on Friday.

Monday and Tuesday will also be big, as we get Personal Income and Spending, Chicago PMICase-Shiller, and Consumer Confidence.

Other big events this week include auto sales, the ADP jobs report, and FOMC decision, productivity, the trade balance, and construction spending.

By the end of Friday we should know a lot more about the economy.”

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