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Commodities
Gol d Na tura l Ga s Crude Oi l 1,619.60 2.19 82.70 0.58% 0.09% 0.10%
Currencies
EUR/USD 1.2561 1.5481 0.8114 1.20135 79.4 0.22% -0.53% -0.75% -0.03% -0.38% GBP/USD EUR/GBP EUR/CHF USD/JPY
Market Overview
Good Morning, another roller coaster ride in yesterdays trading session which involved a lot of volatility with equities and other risk assets ended the day modestly lower. Despite the weakness in equities the USD was actually lower on the day & Commodities were mixed. The so called safe haven assets were also mixed with the German Bonds ending the day lower (higher yield) and US Treasuries mixed as the 2/10 yield curve continues to flatten (now at 131 b/p). The VIX Index was up 9.87% to close at 24.27. The European Auto sector was extremely volatile after a report suggested that France is working on a new aid plan for its Auto industry. News wise, the day started with news that Germany will seek to tie strings to the Spanish bank bailout package and then continued with a relative good German bond auction. On the macro side, European CPI met expectations, Euro Zone Industrial production was better than expected (-2.3% vs. -2.7% in April) and in the US Producer Prices were lower than expected (-1.0% vs. -0.6% in May) & Retail Sales declined by 0.4% in May - The lower inflation print along with the weak retail sales data fueled another round of speculations surrounding the odds that the Fed will maybe
1
US Rates
US 2Y US 10Y 0.29 1.60 0.01% -0.16%
0.26
PROBE: a proprietary index measuring the break-even probability of a given deal. 14 June 2012
finally change its language about the way he sees the chances for QE3 in its next meeting scheduled for Next week. Asian markets are mixed this morning, US Futures are higher and European markets are set for a slightly higher open on the day. Moodys cuts Spain Credit Rating 3 Steps to Baa3; the credit rating was cut from A3 to Baa3 and is followed by the warning from last week when it said that a bank bailout will likely be followed by a credit downgrade meaning this should be widely priced in already. Moodys cited the increasing debt burden, weakening economy & limited access to capital markets. US Treasury Geithner was the first to respond and said that the Spains bank bailout package is welcomed but also urged Europe to move closer to a fiscal Union. Merkel to address German Parliament on G20 Objective (7:00GMT); Merkel is likely to repeat her stance and the importance of creating a fiscal union that will transfer fiscal power from Countries to Europe in return of creating a European banking Union. The tone and language today is likely to be repeated in the G20 meeting next week in Mexico. Hollande warns Greek Voters Elections can Push them out of the Euro; While acknowledging the Greeks' right to determine their own future, Hollande said that if it appears from the vote that they doesn't want to respect the bailout deal "there will be countries in the Euro Zone which would prefer to end Greece's presence in the Euro Zone." Greece holds its second parliamentary election in six weeks this Sunday, after a May vote failed to produce any workable majority. The leftist Syriza party, which has pledged to tear up the bailout deal, stands a good chance of winning, and even parties which backed the rescue now favor renegotiating its terms. "I am in favor of Greece remaining in the Euro Zone, but Greeks should know that this requires there be a relationship of trust," Hollande said in a transcript of the interview provided by his office. Economic data today offers German Wholesale Price Index, Euro Zone CPI & Labor cost and US Current Account Balance, Consumer Price Index, Initial & Jobless Claims and Good luck!
Risk Arbitrage
Reuters: United Technologies Corp on Wednesday sold $1 billion of convertible notes, less than the $1.5 billion it had told investors in March it would need to sell to fund its largest-ever takeover. The diversified U.S. manufacturer said it had found additional sources of cash to fund the $16.5 billion purchase of aircraft components maker Goodrich Corp. "We've identified more cash available for the financing so we didn't need as much from the equity units," said spokesman John Moran.
14 June 2012
Bloomberg: Shell extended its 220p-shr bid for Cove to 1 pm London time on June 27, after expiry yesterday, without increasing the level of their offer. The bid was originally agreed on April 24. They said that 4.84% of the shares have been tendered to the offer so far. Cove closed 10% above PTTEP agreed 240p-shr offer yesterday. Reuters: Glencore International PLC's takeover of Viterra Inc may close in August, slightly later than expected, the chief executive of Agrium Inc said on Wednesday, but a source close to Glencore said the company is still working toward closing the deal in July. The C$6.1-billion ($5.9 billion) takeover requires the Canadian government's approval, and a competition review of Glencore's side deals to sell some assets to Agrium and Richardson International Limited will begin after Glencore's transaction closes, Agrium CEO Mike Wilson told the company's investors in Chicago. Financial Times: Cairn Energy has bid 414m in cash for North Sea explorer Nautical Petroleum in another move to establish itself in the oil province following the sale of assets in India and failure to strike oil off Greenland last year. The recommended offer of 450p a share for Nautical is pitched at 51.1 per cent premium to the closing price of 297.8p on Tuesday. The proposed deal would take Cairns investment in North Sea oil assets in recent months to more than $1bn and is the second attempt by the UK oil group to reorganise its assets since returning $3.5bn to shareholders in February. That cash return followed completion of the sale of its controlling stake in sister company Cairn India to metals and mining group Vedanta Resources at the end of last year and still left Cairn with $1.1bn in net cash. Reuters: U.S. drugmaker Upsher-Smith Laboratories is to buy British group Proximagen for 223 million pounds ($347 million) plus further payments potentially worth up to 134 million based on the success of two experimental drugs. Wednesday's deal is the latest in a wave of acquisitions in the sector as drug companies scour the biotech landscape for promising new medicines with which to replenish their product pipelines. Proximagen has drugs in early-stage development for central nervous system disorders, cancer and inflammation. It also has a treatment for obesity known as PRX00933, which got a boost in May when U.S. advisers backed a similar pill from Arena Pharmaceuticals Inc. Bloomberg: The ratio of shares in Glencore International Plc compared with acquisition target Xstrata Plc fell to the lowest since the all-stock deal was announced Feb. 7 as some investors saw heightened risks the offer may fail. Glencore traded at 2.59 shares for each one in Xstrata in London yesterday, data compiled by Bloomberg show. That compares with the offer of 2.8 and a high of 2.85 on March 2, the data show. The deal values the stock Glencore doesnt already own at about 19.4 billion pounds ($30.2 billion). Bloomberg: Johnson & Johnson said its $19.7 billion purchase of Synthes Inc., the largest acquisition in the companys 126year history, will add 3 cents to 5 cents a share to 2012 earnings as it gained U.S. clearance for the deal. J&J, the worlds biggest health-care products company, entered into accelerated buyback agreements for about $12.9 billion in shares with Goldman Sachs Group Inc. and JPMorgan Chase & Co. to help pay for the cash-and-stock acquisition, the New Brunswick, New Jersey-based company said yesterday in a statement. J&J previously said the deal would cut earnings by 22 cents a share. Bloomberg: Perpetual Ltd., an Australian fund manager, climbed by the most in 10 months after the Australian Financial Review reported a private equity firm is preparing to make a takeover proposal. Perpetual, based in Sydney, climbed as much as 9.8 percent, the biggest gain since Aug. 26. Australias S&P/ASX 200 Index today lost 0.3 percent to 4,051.60. The shares traded 8.8 percent higher at $23.55 at 10:56 a.m. in Sydney. 14 June 2012
Bloomberg: Etablissements Maurel & Prom surged 18 percent in Paris, its biggest rally in nine years, after the U.K.s Guardian newspaper reported that Royal Dutch Shell Plc may be interested in taking over the company. Maurel & Prom shares rose 1.85 euros to 12.31 euros. It was the biggest gain since April 2003. The Paris-based oil and gas company was the biggest gainer on the Stoxx Europe 600 index.
14 June 2012
Broker Recommendations
Positive Negative Merck KGaA Cut to Market Perform from Outperform at Bernstein BSkyB Cut to Add vs Buy at Numis BBVA Cut to Sell vs Neutral at UBS TSMC Cut to Hold at BNP Paribas Amazon Initiated to Sell at Makor Capital RBS Cut to Underperform at Credit Suisse Enel Green Power Upgraded to Outperform at Cheuvreux HSBC Raised to Outperform at Credit Suisse Nike Raised to Hold at McAdams Wright Autostrada Initiated to BUY at Makor Capital Vivendi upgraded to Buy from Hold at Jefferies LaFarge upgraded to Buy from Hold at Societe Generale Standard Chartered Raised to Neutral at Credit Suisse
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14 June 2012