the day ahead - april 22nd 2013

7/28/2019 The Day Ahead - April 22nd 2013

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THE DAY AHEADREUTERS NEWS North American Edition For Monday, April 22, 2013

Strength in most tech shares helped Wall Street reboundon Friday even as IBM tumbled, while Treasuries weak-ened as investors sought riskier assets. The yen fell acrossthe board after industrialized nations said they supported

J apan's quantitative easing program. Oil rose and goldbounced above the key $1,400 mark.

MARKET RECAP COMING UP - NEXT WEEK

Apple earnings on Tuesday kick off the busiest week for quarterlyreports in the quarter. The iPhone maker continues to mull what todo with $117 billion in cash, a bankroll that its investors want moreof. Other companies expected to report results include Netflix, Cat-erpillar and Texas Instruments. (See "What to Watch on Monday").For a related Reuters Insider video,click here.

U.S. stock markets look to get back into an uptrend after a poor

week that saw disappointing results from blue-chip companies.With the G20 raising only mild concerns about the massive stimu-lus effort from the Bank of J apan and the discussions from EU offi-cials about liquidity reduction, recent trends toward the dollar andaway from the yen should remain in place. Treasuries remain nearthe lower end of their yield range but the recent meltdown in infla-tion-protected securities is perhaps a signal that bond yields won'trise all that much given the recent run of weak figures and declinesin commodity prices.

On Thursday, the world's largest publicly traded oil companyExxon Mobil and smaller U.S. rival ConocoPhillips report first-quarter results that each are likely to have benefited from a re-bound in North American and European natural gas prices. Rival

Chevron reports results on Friday.

It's a light week for economic figures, with the main focus on thefirst reading on first-quarter gross domestic product due on Friday.

The U.S. economy is expected to have grown at a 3 percent annu-alized rate in the first three months of the year, rebounding from thepaltry 0.4 percent pace seen in the fourth quarter. Still, analysts donot expect that rate of growth to be sustained into the rest of theyear, with recent data already suggesting the economy cooledheading into the second quarter.

A report on durable goods is likely to add to that evidence and isseen declining in March after a strong jump the month before. In-vestors will also get more data on the housing sector, with reports

on existing and new home sales due at the start of the week. Salesof both are expected to have risen in March, a fresh sign the recov-ery in the sector is on track.

DuPont posts quarterly results on Tuesday, its first since settling amultibillion-dollar lawsuit with rival Monsanto that eased share-holder concerns about the company's agricultural unit.

AT&T post results on Tuesday and the focus will be on wirelessmargins and subscriber numbers.

STOCKS Close Change % Chng Yr-high Yr-low

DJ IA 14547.51 10.37 0.07 14887.50 12035.10

Nasdaq 3206.06 39.69 1.25 3306.95 2726.68

S&P 500 1555.25 13.64 0.88 1597.35 1266.74

Toronto 12065.55 69.21 0.58 12904.71 11209.55

Russell 912.50 10.99 1.22 954.00 729.75

FTSE 6286.59 42.92 0.69 6533.99 5897.81

Eurofirst 1153.19 5.81 0.51 1209.05 1132.73

Nikkei 13316.48 96.41 0.73 13568.25 10398.61

Hang Seng 22013.57 501.05 2.33 23944.74 21423.25

TREASURIES Yield

10-year 1.7032 -5 /322-year 0.2338 0 /32

5-year 0.7032 -1 /32

30-year 2.8817 -13 /32

Price FOREX Last % Chng

Euro/Dollar 1.3054 0.03Dollar/Yen 99.55 1.45

Sterling/Dollar 1.5235 -0.29

Dollar/CAD 1.0258 0.00

COMMODITIES Price $ change % change

May crude $ 87.89 0.16 0.18

Spot gold (NY/oz) $ 1400.86 10.11 0.73

Copper U.S. (front month/lb) $ 3.1515 -0.0530 -1.65

Reuters/Jefferies CRB Index 283.69 0.29 0.10

BIG MOVERS Price $ change % change

Vertex Pharmaceuticals 85.60 32.73 61.91Celanese 47.10 4.87 11.53

Alkermes Plc 31.27 2.07 7.09

Capital One Financial 56.17 3.38 6.40

Rambus 6.06 -0.69 -10.22

International Business Ma-chine

190.00 -17.15 -8.28

Walter Energy 17.49 -1.51 -7.95

KEY ECONOMICS EVENTS ET/GMT REUTERS POLL PRIOR SOURCE

Chicago Fed Index for Mar 0830/1230 -- 0.44

Existing Home Sales for Mar 1000/1400 5.01 mln 4.98 mln

-- Existing Home Pct sales 0.6 pct 0.8 pct

For The Day Ahead - Canada, click here
http://reut.rs/YQC0jyhttp://reut.rs/YQC0jy


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COMING UP - NEXT WEEK(continued)

THE DAY AHEAD For April 22, 2013

Ford Motor is expected to report earnings Wednesday. Thesecond-largest U.S. automaker lost market share in Europeduring the quarter, which has sparked questions aboutwhether Ford will have to ratchet down its expectations for theregion. The company expects to lose $2 billion in Europe thisyear.

Boeing posts results on Wednesday as well. For all of theattention focused on Boeing's 787 battery, the problems arenot expected to reduce the company's earnings by a largefactor, since the costs are relatively small and can be spreadout through special accounting.

United Parcel Service is expected to post strong results onThursday. UPS, the second-biggest courier company afterFedEx, is coming off a particularly difficult year, when custom-ers cut back on air courier use.

Herbalife, the nutritional products company at the heart of a

battle between hedge fund titans Bill Ackman and Carl Icahn,will host its annual meeting of shareholders on Thursday. Atthe meeting Icahn's two board nominees will stand for electionto the company's board.

Bristol-Myers Squibb, hurt by cheaper generic forms of itsPlavix blood clot preventer and Avapro blood pressure medi-cine, is expected to report sharply lower first-quarter sales andearnings. But shares of the U.S. drugmaker have jumped al-most 25 percent this year on enthusiasm over strong sales ofits newer drugs for melanoma, diabetes and rheumatoid arthri-tis. Investors will want reassurance on Thursday that thenewer drugs will continue to grow sharply and that the com-

pany's next generations of drugs are faring well in clinical tri-als.

WhenAmazon reports first-quarter results on Thursday, WallStreet will be looking for signs that a recent deceleration in unitgrowth is not a long-term trend. Analysts and investors also

hope that recent profitability gains, from lower shipping andfulfillment costs and the growth of higher-margin businesses,will continue.

Outgoing Bank of Canada Governor Mark Carney and topdeputy Tiff Macklem, widely seen as a potential successor,appear before Canadian parliamentary committees in Ottawaon Tuesday and Wednesday. The central bankers are likely toreiterate their reasons for maintaining a mild tightening biaseven as the economy slows and Group of Seven peers focuson boosting growth. Canadian retail data out on Tuesday isexpected to show the pace of sales growth slowed in Febru-ary, reinforcing the view Canadian interest rates are unlikely toincrease for a long time.

Corporate Canada looks set to post lackluster quarterly re-sults when some of its biggest companies start reporting nextweek. Wireless and cable provider Rogers CommunicationsInc and Canadian National Railway are among the first to re-port on Monday. Companies in the Toronto Stock Exchange'sbenchmark S&P/TSX composite index are expected to showonly a 0.2 percent rise in earnings from a year earlier, accord-ing to Thomson Reuters StarMine SmartEstimates. But strate-gists say lowered expectations and the Canadian market'srecent drop to a five-month low may set the stage for near-term share price gains, as any earnings beats or optimisticoutlooks are more likely to provide a boost.

COMING UP - MONDAY

Halliburton, the world's second-largest oilfield services com-pany, managed to top expectations last quarter thanks to itsgrowing reach into international markets, and will hope to re-peat the trick in its first-quarter results as the U.S. drilling mar-ket shows tentative signs of improvement. By comparison,rivals Schlumberger and Baker Hughes both recently postedresults that topped profit expectations.

Netflix shares skyrocketed 70 percent this year, with most ofthe gains coming just after the company reported a surpriseprofit for the last three months of 2012 as it added more sub-

scribers than the company or Wall Street projected. Now, thesubscription video service will reveal if it kept the momentumgoing in the first quarter. Analysts on average expect the com-pany to report a profit of 20 cents a share, reversing a loss of 8cents a share a year earlier when it began investing in newmarkets.

Look for results from Caterpillar, the world's largest maker ofconstruction and mining equipment, which warned in J anuarythat weak commodity prices were prompting miners to pushback orders. The question now is whether orders from thebooming energy sector and the rebounding home-buildingindustry will offset those declines and allow the Peoria-basedcompany to meet its 2013 earnings forecast of $7 to $9 ashare on sales of $60 billion to $68 billion.

In its quarterly report Texas Instruments should give an up-date on the state of chip demand and whether improvements itwas seeing mid-way though the quarter continued through theend of March. Since the company is winding down its wirelessbusiness the focus will be on its analog and embedded chips.

Shareholders in Latin America's biggest phone company,Ameri ca Movil, will vote on dividend proposals and raising thecompany's stock buyback fund, among other topics. Theworld's richest man, Carlos Slim, and his family control votingon the company's shares, so analysts expect the company will

proceed with dividend payments and a hike in its buybackfund.

Quarterly results are expected fromCanadian National Rail-way , the country's largest rail carrier, whose operations werehit by severe winter weather in the first quarter, slowing trainsand hurting profitability. Rail industry data indicate a big jumpin carloads hauling petroleum and chemicals along with inter-modal containers in the quarter, offset by declining coal andgrain volumes.

Citigroup CFO John Gerspach and Treasurer Eric Aboafare scheduled to hold a conference call with bond investors toprovide additional detail on the company's assets and liabilities

at the end of the first quarter. Such fixed-income calls are be-ing held more often by the biggest U.S. banks, which are get-ting more questions about their balance sheets.


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MARKET MONITOR

Click on the chart for full-size imageStocks rose on Friday as earnings from Google and other com-panies boosted technology shares, but it wasn't enough to pre-vent the S&P 500 from suffering its worst week since November.

The S&P 500's close below the 50-day moving average onThursday indicates the medium-term uptrend in the market couldbe in peril. The last time the index closed consecutive days un-der its 50-day average came in early December. Still, the S&Premains up nearly 9 percent for the year, and the pullback couldgive investors a chance to reevaluate their bets, said MichaelSheldon, chief market strategist at RDM Financial in Westport,Connecticut. Less than stellar earnings reports from McDonald'sand General Electric also weighed on the blue chips. But somemarquee tech names bolstered the broader market and drovethe Nasdaq up, a day after strong results from Google and Mi-crosoft. A more than 8 percent decline in International Busi-ness Machines led the Dow . GE shares fell 4.06 percent.McDonald's stock lost 1.95 percent. Dell shed 3.94 percentafter Blackstone Group said it has ended its pursuit of the com-pany. The Dow gained 0.07 percent, the S&P 500 gained 0.88percent and the Nasdaq rose 1.25 percent. For the week, theDow and the S&P 500 each fell 2.1 percent and the Nasdaq lost2.7 percent. It was the largest weekly percentage decline of theyear for all three indexes.

Prices for Treasuries slipped after a two-day rally left yieldsnear four-month lows, with investors turning to riskier assets onnews that major industrialized nations supported J apan's mas-sive stimulus program. Also helping riskier assets were reassur-ance from J apan's finance minister that other industrialized na-tions accepted that J apan's $1.4 trillion stimulus plan was de-signed to buoy a stagnating economy and thus was in line with aprevious G20 agreement. Prices for benchmark 10-year notesfell 5/32 to yield 1.70 percent. Thirty-year bonds fell 12/32 inprice to yield 2.88 percent.

The dollarextended its gains on the yen after J apanese officialsin Washington said the global community understands its mone-

tary policy is directed at domestic issues rather than currencymanipulation. The greenback was trading at 99.53 yen , up 1.43percent. The euro also rallied against the yen , rising to 129.94yen, up 1.43 percent. J apan's Finance Minister Taro Aso and

Bank of J apan Governor Haruhiko Kuroda said the interna-tional community has understood its aggressive monetary eas-ing policies are domestic focused and it remains committed tothe Group of 20's communique reiterating a refrain from com-petitive devaluation. Against the dollar, the euro rose 0.05 per-cent to $1.3056.

Crude prices gained modestly and recovered some groundafter declining in the previous sessions. Oil prices were techni-cally oversold so we are seeing some buyers coming in but theyare not great volumes," said Rob Montefusco, an oil broker atSucden Financial in London. "There is nothing to suggest wecan go up on a sustained basis - we were just overdone on thedownside."May crude rose 0.17 percent to $87.88 a barrel.

Gold rose on physical buying, failing to hold onto earlier sharpgains, as bullion posted heavy losses for a second consecutiveweek on investor liquidation driven by months of disappointmentover its performance. Analysts said more weakness could be onthe cards, including further outflows from exchange-traded funds

due to nagging worries about central bank sales and the possi-bility of economic recovery, which would reduce the need forfurther monetary stimulus. Spot gold rose 0.72 percent to$1,400.80 an ounce.


Business technology maker BMC Software is expected toreceive final takeover bids on Monday, with potential buyerspared down to two private equity groups.

German union Verdi has called on thousands of Lufthansaworkers to go on strike on Monday to increase the pressure onmanagement in pay negotiations. Lufthansa has said it wasconsidering legal action as the strike would likely cost the flag-ship carrier tens of millions of euros.

COMING UP - MONDAY (continued)
http://link.reuters.com/jyx65s


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TOP NEWS

Click on the chart for full-size imageBlackstone ends pursuit of DellBlackstone Group LP has ended its pursuit ofDell, easing theway for founder Michael Dell and his private equity partner SilverLake to go ahead with a $24.4 billion deal to acquire the world'sNo. 3 PC maker. Blackstone pulled out just a month after itlaunched a challenge to the billionaire's attempt to take Dell pri-

vate. In a letter published by a Dell board committee, Blackstonecited an unprecedented 14 percent drop in industry PC sales inthe first quarter of 2013 and a lower earnings forecast by Dellamong the reasons for its withdrawal. Carl Icahn's chances of asuccessful rival offer are viewed by analysts and investors asslimmer than Blackstone's, yet the deal with Silver Lake stillfaces significant opposition from some Dell shareholders, includ-ing Southeastern Asset Management, the activist investor thatowns 8.4 percent of the company.

GE trims profi t outlook on Europe weakness; stock slumpsGeneral Electric Co warned of slowing profit growth in its indus-trial businesses due to weakness in Europe and sliding turbinesales, unnerving Wall Street and pushing its stock down inmorning trading. Of concern to Wall Street: GE will try to boostearnings by slashing $1 billion in costs this year, rather thanrelying primarily on sales growth. GE said it earned $3.53 billion,or 34 cents per share, in the first quarter, compared with $3.03billion, or 29 cents per share, a year earlier. Excluding one-timeitems, profit was 35 cents per share, matching analysts' averageforecast. Revenue rose slightly to $35 billion, surpassing the$34.51 billion analysts had expected. GE sold its remaining 49percent stake in NBC Universal in February and then announcedit would use cash from the sale to fund $18 billion in buybacksand dividend payouts this year. The $18 billion figure includes$10 billion of shares the company plans to buy back and GE'sdividend, which the company hiked in December by 12 percentto 19 cents per share quarterly.

G20 agrees not to set hard targets on debt reductionFinance leaders of the G20 economies said they agreed theydid not need to set hard targets for reducing national debt levels,and said they would be watching for negative effects from mas-sive monetary stimulus efforts, such as J apan. Russian FinanceMinisterAnton Siluanov said at a news conference that financeofficials from the Group of 20 nations believed overall debt re-duction was more important than specific figures. In a commu-nique released after a two-day meeting, the G20 said it would be"mindful" of possible side effects of extended periods of mone-tary stimulus. Central banks have flooded their economies withcheap funds to try to boost borrowing and spending but that hasraised concerns about excessive capital flight, particularly todeveloping nations. Siluanov said the G20 agreed that greater

monitoring of the side effects of J apan's $1.4 trillion programannounced earlier this year was needed. In a separate report,Fed Board Governor Jeremy Stein said regulators should keepan "open mind" about making banks pay up front for access tocentral bank liquidity as part of new rules to ensure that big firmscan withstand severe financial stress.

U.S., beer giant InBev settle dispute over Modelo buyThe U.S. J ustice Department andAnheuser -Busch InBev haveagreed to conditions that will allow the beer giant to expand itsstake in Mexico's Grupo Modelo, according to court documentsand company statements. The department had filed a lawsuit on

J an. 31 aimed at stopping AB InBev from buying the 50 percentof Modelo it does not already own for $20.1 billion. The agree-

ment looks like a victory for AB InBev, which knew early on thatthe J ustice Department would balk at allowing it to expand its

already significant U.S. presence. Instead, AB InBev's goal indoing the deal was to expand the sales of Corona and otherModelo brand beers outside the U.S. The deal requires AB In-Bev to sell the Piedras Negras brewery in Mexico that makesCorona and other Modelo brand beers for the U.S. market. Italso requires the purchaser, Constellation Brands, to expandthe brewery so that it can make at least 20 million hectoliters ofbeer by Dec. 31, 2016. The other big winner is Constellation,which has been mostly a U.S. wine giant until now.

Baker sees U.S. drilling pickup; Schlumberger cautiousSigns of improvement in the depressed North American drillingmarket and steady growth elsewhere helped oilfield servicescompanies Schlumberger Ltd and Baker Hughes beat Wall

Street's profit expectations. Sector leader Schlumberger postedearnings above analysts' estimates for the sixth straight quarter,lifted by strong and consistent growth in countries includingSaudi Arabia, Iraq, China and Australia. Third-ranked BakerHughes' profit also topped estimates, and the company forecasta modest increase in U.S. rig counts for 2013. Schlumberger'sfirst-quarter net income fell 3 percent to $1.26 billion, or 94 centsper share. Excluding items, it was $1.01 per share, while reve-nue rose to $10.67 billion. As for Baker Hughes, its first-quarternet income fell to $267 million, or 60 cents per share, from $379million, or 86 cents per share.For a related graphic on the story, click here.

McDonald's sees no restaurant rebound in AprilAlmost a year after taking over at McDonald's Corp, CEO DonThompson is still looking for the right recipe to expand restau-rant sales, which are being pinched by the weak global economyand stronger competition from revived rivals. The fast-food chaindashed hopes that its restaurant sales would accelerate thisspring, warning that global sales at established restaurantswould be slightly lower in April. McDonald's reported a first-quarter profit that fell short of Wall Street expectations as globalcomparable sales fell 1 percent - slightly less than the 1.1 per-cent decline that was estimated. Net income inched up 0.3 per-cent to $1.27 billion, or $1.26 per share. Analysts, on average,were looking for $1.27 per share. First-quarter revenue rose 0.9percent to nearly $6.61 billion, higher than the $6.59 billion esti-mated by analysts.

http://link.reuters.com/jaj57thttp://link.reuters.com/jaj57thttp://link.reuters.com/juh57t


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TOP NEWS (continued)

FAA approves Boeing Dreamliner battery system designU.S. regulators approved a revamped battery system for Boe-ings 787 Dreamliner, a crucial step in returning the high-tech jetto service after it was grounded in J anuary because the plane'slithium-ion batteries overheated. The Federal Aviation Admini-stration said it had approved a package of detailed design

changes, a move that allows Boeing to issue a service bulletinand make repairs to the fleet of 50 planes owned by eight air-lines around the world. Other global regulators also must ap-prove Boeing's new design but were expected to act quicklyonce the FAA gave its blessing. The FAA said that next week itwill tell airlines what changes to make and will publish a directivethat "will allow the 787 to return to service with the battery sys-tem modifications."

Court backs AIG bid for new venue in $10 bln BofA caseAmerican International Group Inc won a legal victory overwhere its $10 billion mortgage fraud lawsuit against Bank of

America Corp should be heard, a two-year-old case that haslargely been on hold because of the dispute over venue. The2nd U.S. Circuit Court of Appeals on Friday agreed with AIG thatthe case belongs in state court, not federal court as Bank ofAmerica preferred. It threw out an October 2011 lower courtruling that had denied AIG's bid to move the case back to theNew York state court where it had begun two months earlier.Writing for a three-judge appeals court panel, U.S. Circuit J udgePierre Leval rejected Bank of America's argument that the casebelonged in federal court under the Edge Act, a 1919 law gov-erning international banking.

Kimberly-Clark benefits fr om ri val's problems, severe fluKimberly-Clark posted a bigger-than-expected jump in first-quarter earnings and raised its forecast for the year as themaker of Kleenex tissues got a boost from a severe flu seasonand a toilet paper rival's supply problems. Kimberly-Clark said it

expected to post 2013 earnings per share of $5.60 to $5.75,excluding items, versus its prior target of $5.50 to $5.65. Theanalysts' average forecast is $5.59 per share. Excluding itemssuch as restructuring costs, the company earned $1.48 pershare, well ahead of the analysts' average forecast of $1.34 pershare. Sales rose 1.5 percent to $5.32 billion, topping the ana-lysts' forecast of $5.28 billion.

Cost cuts help Honeywell beat slow economyHoneywell International posted a bigger-than-expected rise inquarterly profit on cost cuts and raised the lower end of its 2013earnings forecast, putting its stock on pace for its biggest single-day rise in nine months. The company reported a 17 percent risein profit as cost cuts more than made up for flat revenue. Whilesales in Europe and the United States remain subdued, Honey-well expects its business in China to pick up after a weak start tothe year. The company said it expected to earn at least $4.80per share in 2013, above its prior forecast of at least $4.75. Itmaintained the top end of its forecast at $4.95 per share. Net

income for the first-quarter rose to $966 million, or $1.21 pershare, in the quarter from $823 million, or $1.04 per share, ayear earlier. Revenue was flat at $9.33 billion.


PIC OF THE DAY

A law enforcement bomb technician is helped to put on his protectivesuit, before he set off a controlled detonation of a suspicious object

during a search for a suspect in the Boston Marathon bombing, in Wa-tertown, Massachusetts.

Company Name Action

GoogleNeedham raised price target to $900 from $850 after the company reported better-than-expected first-quarterresults, expects continued strength in Google standalone driven by improved mobile monetization.

IBMJ P Morgan cut target price to $196 from $198 after the company reported disappointing first-quarter results, citingslowdown in software and mainframe business.

MicrosoftEvercore raised target price to $32 from $30 following third-quarter results, expects Microsoft to remain a safe havenin a tough environment.

SymantecJ P Morgan raised price target to $30 from $27 on valuation saying that Symantec will increasingly integrate itsproducts and additionally provide for the integration of third party products.

Verizon CommunicationsNomura raised price target to $55 from $49, pointing the companys first-quarter results demonstrate the benefit ofinvesting in best-in-class networks.

ANALYSTS RECOMMENDATIONS


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THE DAY AHEAD - CANADA For April 22, 2013

COMING UP MARKET MONITOR

Canadian National Railway is scheduled to report its first-quarter results. In J anuary, the company said it expectedearnings per share growth in the high single digits in 2013, on

a percentage basis, a big slowdown from a 16 percent jumplast year. Analysts expect a profit of C$1.24 per share,compared to a profit of C$1.75 a share in the year-ago quarter.

Canada's main stock index climbed on Friday, as improvedinvestor sentiment and a rise in some commodity prices fueledgains in financial and material shares, offsetting a decline inenergy companies. Suncor Energy led the decliners, with a0.71 percent retreat. Enbridge was off 0.45 percent. BarrickGold shares climbed 1.14 percent. "Investor sentiment isn'tbuoyant, but it isn't defeatist either," said Fred Ketchen, directorof equity trading at ScotiaMcLeod, adding that investors werebargain-hunting gold shares after the selloff. "We're going tohave to live with a gold price that continues to flounder." The

Toronto Stock Exchange's S&P/TSX composite index wastrading up 0.58 at 12,065.55. Investor attention is turning to theGroup of 20 meeting where policy makers are debating mone-tary policies and debt levels around the world.

TheCanadian dollarwas up 0.04 percent 1.0262.

BIG MOVERS Price C$ % Change

Alamos Gold 11.85 0.69 6.18

J ean Coutu Group 16.65 0.64 4.00

Centerra Gold 3.65 -0.17 -4.45

Transcontinental 12.01 -0.50 -4.00

TOP NEWS

Drop in gasoli ne prices help keep Canada inflation benignCanada's annual inflation rate in March slowed to 1.0 percentfrom 1.2 percent in February, further underlining how little pres-sure there is on the Bank of Canada to raise rates any timesoon. The main reason for the drop in the annual rate was lowergas prices, Statistics Canada said. The March rate was slightlyless than the 1.1 percent predicted by economists. The Bank ofCanada - which has kept its overnight lending rate at a nearrecord low since September 2010 - this week said it did not ex-pect inflation to hit its 2 percent target until mid-2015. The cen-tral bank is not expected to raise rates until the second half of2014. Separately, Canadian wholesale trade unexpectedly re-

mained flat in February from January, held back by lower salesof machinery, equipment and supplies.

Barrick faces heat from top Canadian pension fundsA group of Canada's largest pension funds said it will voteagainst Barrick Gold Corp's planned signing bonus for the mantipped as its next chairman and against the election of the goldminer's compensation committee. In the latest blow to theworld's largest gold producer, the funds said the award of an$11.9 million bonus payment to Co-Chairman J ohn Thorntonwas "unprecedented" in Canada. The group of funds comprisesCanada Pension Plan Investment Board, the Ontario Teachers'

Pension Plan and Caisse de dpt et placement du Qubec, aswell as Alberta Investment Management Corp; British ColumbiaInvestment Management Corp; Hermes Equity Ownership Ser-vices; Ontario Municipal Employees Retirement System; andPublic Sector Pension Investment Board.

Click on the chart for full-size image
http://link.reuters.com/cut67s


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ANALYSIS AND INSIGHT

COLUMN - Americas relative riseBy Ian BremmerSince midway through George W. Bushs tenure, theres been asteady hum from the pundit class that Americas best days arebehind it. An overreaching foreign policy, rising public debt, anda growing wave of outsourced jobs means that America will

soon lose its status as the worlds preeminent power. Americawas quickly on its way to becoming Rome.But the American Decline is now over (if it ever really began inthe first place).Compared with other major powers, Americas future is lookingbrighter than before the financial crisis. The U.S. dollar remainsremarkably attractive relative to other currencies. This resilienceextends to American companies. In a March report, GoldmanSachs found that foreign investors owned a larger percentage ofthe U.S. equity market than at any time in the 68-year history ofthe study. The housing market is picking up, and dependence onforeign energy is falling.Gridlock remains the order of the day in Washington, and Con-gress still has record-low approval ratings. But there are policybright spots. Congress and the administration are not standing inthe way of Americas energy revolution. The Keystone XL pipe-line will likely be approved. The pipeline, along with the Obamaadministrations emphasis on energy independence, helpsstrengthen the domestic economy.On trade, the administration has managed to convince J apan to

join Trans-Pacific Partnership talks. Should the trade consortiumof countries ranging from the United States and Chile to Canadaand Mexico to Singapore and Vietnam get off the ground, it willliberalize trade between members that represent nearly 40 per-cent of global GDP and boost American trade and manufac-turing. Then there is the nascent transatlantic equivalent thatObama mentioned in this years State of the Union.

The third major policy positive: the forward movement in Wash-ington on immigration reform. If that effort is successful, it could

entice millions of illegal immigrants to pay U.S. taxes for the firsttime and it could provide the labor force, skilled and unskilled,that many companies desperately need to ensure growth. Arecent study by the Center for American Progress found thatimmigration reform could inject more than a trillion dollars intothe U.S. economy.So at a time when recession-riddled Europe is muddlingthrough, and major developing economies like China have hugelooming question marks, the United States is looking pretty goodfrom the top down.Now for the bad news: Things dont look as good from the bot-tom up, because an empowered minority at the top of Americansociety will reap most of the benefits of this resurgence. Thenumber of Americans who have participated in the rebound is

smaller than in the past. Corporate profits remain high, but sodoes unemployment. According to a new study by a pair ofeconomists at Northeastern University, those unemployed formore than six months have an especially tough time returning tothe workforce.Its not easy for a country with such disparities to maintain pros-perity and domestic tranquility, but there is no guarantee that thebenefits of even an extended rebound will narrow the growingwealth gap.Americas decline is a myth. The United States relative positionin the world is improving, and Washington wont stand in theway. Some of the gains we see will improve the U.S. standard ofliving at every level: Cheaper energy means less pressure at thepump, and a comprehensive immigration reform bill could em-power many yet-to-be Americans who deserve a voice. But forstill-jobless and underemployed Americans, its the recoverythats a fiction.

Welcome to Americas relative rise: Wall Street is back. MainStreet? Maybe not.(This column is based on a transcribed interview with Bremmer.Ian Bremmer is the president of Eurasia Group, the leadingglobal political risk research and consulting firm. )

Gold slide flashes warning signs for global economyBy Ryan Vlastelica and Richard LeongThe plunge in the gold price in the past week may have raiseda big red flag over the global economy.Some top investors say the gold sell-off, and the broader de-clines in oil and metals prices, reflect the failure of the FederalReserve and other central banks to create robust demand evenas they inject massive amounts of money into the world financialsystem. The slide, which took gold to its biggest one-day lossever in dollar terms on Monday, unnerved investors who sawbillions of dollars in gains wiped out in a few days, and it mayportend declines in other asset prices ahead. That may havebegun this week with several days of big stock price drops.Some see the move in gold as a possible flashpoint for abroader economic and markets shock comparable to the col-lapse of hedge fund Long-Term Capital Management in 1998and even the financial crisis a decade later. Both events werepreceded by sharp drops in gold. The gold and commoditiesweakness is "signaling concerns about global growth, said Mo-hamed El-Erian, the co-chief investment officer of PIMCO,which oversees $2 trillion in assets. Commodities have beensending the signal on growth for a while, and now even louder."And after the stampede out of gold earlier this week, investorson Thursday dumped their holdings of U.S. inflation bonds aftera lousy auction. This kind of debt is seen as a way to protectagainst any rise in the inflation rate that might materialize in amore buoyant economy.

The post-crisis run-up in gold prices resulted in part from specu-lation triggered by the massive amounts of cash created by ag-

gressive monetary policy. It had been thought that the massivecreation of credit would support a "re-inflation" of the world econ-omy - but the recent pullback in gold, oil and copper - the lattertwo assets linked closely with global industrial growth - suggeststhat this may just not be happening. The recent rush into thesafety of U.S. Treasuries - which has pushed yields close tofour-month lows - is another sign that the global economy is farfrom humming. Treasuries are often seen as a shelter when theeconomy is weak or unstable. The PIMCO Total Return Fund,which holds $289 billion in assets and overseen by Bill Gross,increased its exposure to Treasuries and Treasury-related secu-rities to 33 percent in March from 28 percent the previousmonth. Gross said on Twitter on Wednesday that gold hasstarted a levered market sell-off. Buy Treasuries. Some are

even talking about the possibility the United States could headback into recession, though this is a minority view. "It's notnoise. There are fundamental consequences," said Komal Sri-Kumar, president of Sri-Kumar Global Strategies and and a port-folio manager of the TCW Comprehensive Asset AllocationStrategy fund.

The International Monetary Fund on Tuesday dialed back itsforecast on global economic growth in 2013 to 3.3 percent fromits earlier projection of 3.5 percent. That is little changed fromthe 3.2 percent in 2012. Concerns about slowing growth are alsoresonating within the Federal Reserve. Several Fed officialsexpressed worry about disinflation, including the more centristJames Bullard, St. Louis Fed president, who said on Wednes-day that "if inflation continues to go down, I would be willing toincrease the pace" of stimulus."The stars are lining up" for a significant dip in U.S. growth in thesecond half of the year, possibly even a double-dip recession by



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ANALYSIS AND INSIGHT (continued)

2014, Sri-Kumar said. It all raises questions about the effective-ness of the huge cash stimulus pumped into the world economyby the Fed, the Bank of J apan, and other major central banks.With governments strapped for cash, the central banks havetaken on a lot of the burden of getting the world economy backon a growth path after the devastation inflicted by the financial

crisis. If the impact of those measures, such as the Fed buyingmassive amounts of government and mortgage debt, starts toshow diminishing returns it could be a huge concern for inves-tors in any riskier assets.GOLD LOSING SHINE

The downdraft in gold prices coincided with mounting evidenceof a slowing of the rate of price increases. On Tuesday, the U.S.Labor Department said U.S. consumer prices have increased by1.5 percent over the past 12 months, the slowest rate of in-crease since July 2012.Bank of America-Merrill Lynch recently warned that gold - whichwas trading at $1,392 an ounce late on Thursday - could fall to$1,200 before stabilizing, citing "fears of disinflation combinedwith news of potential central bank gold selling."

The sell-off in gold, together with weak economic data, knockedinvestors' long-term inflation expectations to their lowest levelssince late last summer.

The yield gap between 10-year Treasury Inflation-Protected Se-curities and regular 10-year Treasury notes - used to gauge in-vestors' outlook on inflation - 2.27 percentage points on Thurs-day, the lowest since early September prior to the Fed's an-nouncement of its third round of large-scale bond purchases,known as QE3.

This 10-year inflation "break-even" rate, which the Fed monitors,was as high as 2.61 points in late J anuary.Meanwhile, three-month copper futures are down 12 percent thisyear, falling below $7,000 per tonne on the London Metal Ex-change for the first time since October 2011. Copper's impor-tance as a use in industrial and housing applications - from

autos to water pipes - has made it a key barometer of demand.Some, however, believe the dramatic wind-down of the severeinflation of assets in the previous decade remains incomplete -making the declines in gold and other metals less disconcerting."Because the global economy is on the downside of a globalcredit bubble, it seems unreasonable to expect abnormal infla-

tion," said Richard Bernstein, a long-time strategist who headshis own namesake investment advisory firm in New York.In addition, gold has arguably been in line for a correction. Itsprice had risen for 12 straight years, and had gained 52 percentin the last three years, the kind of gains seen notably in technol-ogy stocks in the late 1990s. "Even at these levels, gold is stillnot attractive. The odds favor the bull market being over," said

J im McDonald, chief investment strategist at Chicago-basedNorthern Trust Global Investments, which in early March toldclients to stop allocating a position to gold.As the outlook on inflation has diminished, investors have cutback on their gold exposure.U.S. funds that invest in precious metals suffered a record one-week outflow of $2.7 billion in the week ended April 17, accord-ing to Lipper, a unit of Thomson Reuters, of which $2.2 billioncame from the SPDRs Gold Shares ETF. The GLD is one of thelargest exchange-traded funds with $50.8 billion in assets, but ithas seen its assets dwindle by one-third since October 2012,Lipper said.

The stampede out of gold has tapered off, and it has pulled backmore than 5 percent from a two-year low of $1,321 an ounce hitearlier this week, leading to some hopes the declines are theresult of a much-needed correction in the metal.Still, investors are very wary of another plunge.If we see this kind of liquidation again, the equity market willfollow. Then well have a real problem, said Frank Cholly, J r.,senior commodities broker at R.J . OBrien and Associates inChicago.


KEY RESULTS vs. THOMSON REUTERS I/B/E/S ESTIMATES

Company Name Quarter EPS Estimates Year Ago Rev Estimates (mln)

Ameriprise Financial Q1 $1.57 $1.45 $2,722

Caterpillar Q1 $1.40 $2.37 $13,705

Halliburton Company Q1 $0.57 $0.89 $6,880

Hasbro Q1 $0.04 $0.04 $639

Netflix Q1 $0.18 $0.08 $1,017

Texas Instruments Q1 $0.30 $0.32 $2,852

Zions Bancorp Q1 $0.39 $0.14 $553

** Includes companies on S&P 500 index. Estimates may be updated or revised.


9/9

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The Day Ahead - North American Edition is compiled by Karan Khemani, Benny Thomas and Chandrashekhar Modi in Bangalore; Franklin Paul and Meredith Mazzilli inNew York.

THE DAY AHEAD - North American Edition is produced by Reuters News

For questions or comments about this report, email us at: [email protected] call us at +91 80 4135 5929

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ON THE RADAR

ECON INDICATOR ET/GMT REUTERS POLL PRIOR SOURCE

TUE: ICSC/GS Report ww for w/e 04/20 0745/1145 -- -1.1 pct International Council of Shopping Centers/Goldman Sachs

Redbook mm for w/e 04/20 0855/1255 -- -2.7 pct Redbook Research

Markit manufacturing PMI for Apr-Flash 0858/1258 54.0 54.6

FHFA home price mm for Feb 0900/1300 -- 0.6 pct

New Home Sales for Mar 1000/1400 0.420 mln 0.411 mln U.S. Bureau of the Census, U.S. Commerce Department and theRich Fed manufacturing for Apr 1000/1400 -- 3 Federal Reserve Bank of Richmond

Richmond manufacturing shipments 1000/1400 -- 8

Richmond Services revenue 1000/1400 -- 4

WED: Mortgage Index for w/e 04/19 0700/1100 -- 866.1 Mortgage Bankers Association

Refinancing Index 0700/1100 -- 4,685.1

Durable Goods for Mar 0830/1230 -2.8 pct 5.6 pct Census Bureau (Department of Commerce)

Ex-Transportation 0830/1230 0.5 pct -0.7 pct

Ex-Defense 0830/1230 -- 4.4 pct

Non-Defense ex-air 0830/1230 0.5 pct -3.2 pct

Building Permits for Mar-Rev TIME:TBA -- 0.902 mln Census Bureau

THU: Initial Claims for w/e 04/20 0830/1230 351,000 352,000 Labor Department

4 Week Average 0830/1230 -- 361,250

Continuing Claims for w/e 04/13 0830/1230 3.060 3.068 mln

K.C. Fed Comp Index for Apr 1100/1500 -- -5

FRI: Real GDP qq SAAR for Q1-Adv 0830/1230 3.0 pct 0.4 pct Bureau of Economic Analysis (Department of Commerce)

Final sales 0830/1230 2.3 pct 1.9 pct

Implicit Deflator 0830/1230 1.3 pct 1.0 pct

Core PCE Price 0830/1230 1.2 pct 1.0 pct

PCE Price Index 0830/1230 1.0 pct 1.6 pct

Reuters/UMich for Apr-Fin 0955/1355 73.0 72.3 Reuters/University of Michigan. Part of the Surveys of Consumers

Current Conditions 0955/1355 85.0 84.8

Expectations 0955/1355 64.6 64.2ECRI Weekly Index for w/e 04/19 1030/1430 -- 130.6 Economic Cycle Research Institute

the day ahead - april 22nd 2013

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