WSJ: RWE SEES OPPORTUNITY TO SELL GAS TO UKRAINE

GLOBAL MARKETS-Share rally peters out, euro lifted by PMI boost

European shares edged down on Wednesday after three days of gains as signs of a slowing Chinese economy and rising worries about Ukraine offset reassuring European economic data.

After racing higher on Tuesday on a wave of takeover activity, European stocks fell 0.3 percent as investors locked in some of the gains and turned their attention to the region's broader economic outlook.

U.S. stock futures also pointed to a subdued start for Wall Street on a heavy day of company earnings as well as U.S. PMI readings. 

The PMI readings for Europe showed that France's economy was still lagging, but Germany continued to power the euro zone's recovery. [ID:nL9N0MI019] Europe's private sector has started the second quarter on its strongest footing in nearly three years, according to the PMIs, although new orders were again mainly buoyed by price cuts.

"It's pretty encouraging considering what we have seen for years. We are looking at 0.5 percent quarter-on-quarter GDP growth if we continue to see this level," said Chris Williamson, chief economist at Markit, which compiles the PMIs.

"Clearly we should see the pace of growth continue into May and possibly June as well. Companies are beginning to feel this is something sustainable."

The data lifted the euro and the region's government bonds [GVD/EUR], but after a 3 percent rise in the last two days some stock market investors decided to in their gains.

London's FTSE <.FTSE> dipped 0.1 percent, but a 0.4 percent drop by Paris's CAC 40 <.FCHI> and 0.3 percent declines in Frankfurt <.GDAXI> and Milan <.FTMIB> were the biggest drag on the pan-European FTSEurofirst 300. [.EU]

Mixed earnings were also a factor. Swedish mobile telecom equipment maker Ericsson fell almost 5 percent after it missed targets. So far this reporting season, 53 percent of companies have beaten or met expectations, compared with 58 percent in Q4 2013.

Source: Reuters

Silicon Valley a growing hotbed for Chinese investment

Chinese hi-tech investment continues to grow in the United States, with 148 deals in the last three years occurring in California. The number one destination for Chinese hi-tech money is the San Francisco Bay Area, which includes Silicon Valley. That’s why a group of mayors from the region is banding together for a special trip to China.

Inside these walls of Texas Instrument’s Silicon Valley Headquarters, lies a team that was practically saved by Chinese company TDG.

Jane Wu is on the TDG Board of Directors and knows the story well. She says TDG invested in American company ACT Solar. One year later ACT developed their technology, was acquired by National Semiconductor, which was then acquired by Texas Instruments.

"The company grew by three times after we invested," Wu said. "They got acquired. For national semiconductor it was later acquired by T.I., they get a good technology, and for TDG it’s a good investment because we exit in just 12 months."

TDG is hoping to find more deals like these as it helps sponsor a groundbreaking trip - one of the largest U.S. delegation of mayors to ever visit China. The non-profit group China-Silicon Valley plans to bring around 10 mayors and vice-mayors from California’s Silicon Valley area to Beijing, Shanghai, Wuhan and Shenzhen.

"Hi-tech deals represent 60 percent of Chinese investment in the U.S. About three-quarters of all the hi-tech deals coming into the U.S. from China are in the cities where the mayors will visit," said Tom Shoesmith, a board member of China-Silicon Valley.

Source: CCTV

Internet shapes a Chinese version of Silicon Valley

April the 20th marks the 20th anniversary of China’s first connection with the global Internet. In 20 years, Beijing’s Zhongguancun district has transformed itself from a market selling electronic parts to a breeding ground for high-tech companies. Zhongguancun is known as China’s silicon valley.

20 years ago, when today’s IT tycoon Feng Jun first arrived at Zhongguancun, he was a poor college graduate.

That year, China got itself connected with the global internet.

With just 200 yuan in his pocket, Feng Jun bought a second-hand tricycle, which he used to tow around keyboards he’d try to sell to big multinational companies.

But if it was only with that hard work, he might have never achieved his 16 billion yuan-worth Aigo brand today.

5 years after China got internet access, the IT business suddenly exploded. The Internet literally reshaped Zhongguancun from a low-end electronic goods market to a breeding ground for high-tech companies.

That year was also the time Baidu, Alibaba and Tencent, China’s top three IT companies, came into shape.

Even today, Zhongguancun’s charm is still apparent.

20 years ago, Zhongguancun was all farmland dotted with shabby little houses. Today it’s becoming the Chinese version of the Silicon Valley. Every year, over 3,000 companies are being established in this high-tech area, and hundreds of thousands more youngsters, like Feng Jun, flood here, hoping to start their own businesses.

A small district embedded with dreams and entrepreneurship.Made reality by the Internet.

China's high-speed trains will use "Chinese chips"

China's first 8-inch IGBT (insulated gate bipolar transistor) chip production line, built by CSR (China South Locomotive & Rolling Stock Corporation Limited) Zhuzhou base, will be put in operation in June 2014.

This means that China has broken foreign monopoly on the core technology of high-speed trains, and China's high-speed trains will use the "Chinese chips."

The high-speed trains manufactured by CSR, with the domestic 8-inch IGBT chips installed, achieved a speed of over 600 kilometers per hour in the test run. CSR will become the only company in China which has comprehensively mastered IGBT chip technology R&D, module packaging & testing and system application.

Source: Xinhua

China's 2014 auto sales to surge

China's automobile sales will rise by 8 to 10 percent this year to a new high, a report forecast on Tuesday.

As many as 24.18 million vehicles may be sold in the country this year, according to a report released on Tuesday by the China Association of Automobile Manufacturers (CAAM).

Shi Jianhua, deputy secretary-general of the CAAM, said that demand will be boosted partly by China's urbanization push and upgrades in consumption patterns, though a number of big cities facing congestion and pollution problems have rolled out measures to restrict auto purchase.

China has been the world's largest auto market and producer for five consecutive years, with sales and production both exceeding 20 million units for the first time in 2013. Sales rose 13.9 percent to 21.98 million vehicles.

Source: Xinhua

Top Chinese banks' asset quality declining: PwC

The asset quality of China's top 10 listed banks has clearly declined, according to a report released by PricewaterhouseCoopers (PwC) on Tuesday.

PwC expects the non-performing loan (NPL) balance to rise in the near future as the gap between the average delinquency ratio and average NPL ratio had widened, as part of a continuing trend for divergence. The NPL ratio grew at a significantly slower pace than the delinquency ratio, the report said.

The top 10 listed banks had an NPL balance of 449.4 billion yuan at the end of 2013, up 19.47 percent from the end of 2012. The average NPL ratio increased 0.06 percentage points to 0.99 percent.

This across-the-board increase indicates that the slowdown in economic growth is impacting banks, according to PwC.

Its report noted a surge in NPLs in the Yangtze River Delta, where the NPL balance surged 30.90 percent over the pervious year.

In terms of industry, most corporate NPLs concentrated on manufacturing and retailing.

The NPL balance in the real estate fell, PwC analysis showed. But bank loans to the sector have been closely watched for several years and now shadow banking contributes considerably to property developers' financing.

"In 2014, the banking sector will continue to face a complex financial environment. Banks should focus on the impacts of interest rate liberalization, Internet finance, deposit insurance, and the entrance of privately owned banks," said Raymond Yung, PwC China financial services leader.

Source: Xinhua

China: VAT reform exemption exceeds 220 billion yuan

Chinese businesses saved 220.3 billion yuan (35.5 billion U.S. dollars) as of the end of March, due to a pilot scheme to replace turnover tax with value-added tax (VAT), an official said on Tuesday.

Yang Yimin, a department director of the State Administration of Taxation (SAT), said the VAT reform had covered nearly 3 million businesses so far.

VAT is levied on the margin between production cost and commodity price on the market. It is favored partly because it can reduce double taxation and lift burdens for Chinese firms, especially smaller ones.

Following regional experiments since the beginning of 2012, China began piloting the VAT reform in transportation and some modern service sectors throughout the country on Aug. 1.

The scope of the reform was then expanded to railway transportation and the postal service from Jan. 1.

From January to March, 18,648 businesses in the two sectors benefited from the preferential policy with tax exemption near 2.5 billion yuan, according to Yang.

Yang said the SAT is working with other authorities on plans to expand VAT reform to more sectors, including telecommunications, construction, real estate and living services.

Living services refer to services that meet people's daily needs, such as catering, accommodation, hairdressing and photography.

"China will strive to complete VAT reform covering all merchandise and services by 2015," said Yang.

Source: Xinhua

Novartis, Valeant bids herald new deal-making era for pharma

A series of agreed or proposed drug company deals may herald a new era of acquisitions not seen since last decade as pharmaceutical companies improve their best businesses and exit weaker ones.

Novartis  and GlaxoSmithKline  agreed to trade more than $20 billion (11 billion pounds) worth of assets, boosting Novartis' cancer-drug business and Glaxo's vaccines business. Valeant Pharmaceuticals made a $47 billion unsolicited offer for Allergan Inc , the maker of Botox, to boost its skin care business. Reports that Pfizer Inc  was rebuffed earlier this year in discussions to buy AstraZeneca Inc  for more than $100 billion only fed anticipation that more mergers are ahead.

Linking this activity together is a combination of economic conditions and industry- specific developments including low interest rates, a desire by U.S. firms to make overseas acquisitions to shield foreign profits from U.S. taxes, and the realization that deals can be made to focus on a drugmaker's specific strengths, investors, analysts and investment bankers said on Tuesday.

Large drug companies are focusing on a small number of leading businesses, while smaller specialty and generic producers seek greater scale. Deal values have almost doubled since the start of 2014 to $77.9 billion from a year earlier, according to Thomson Reuters data.

There is also the stock prices of big pharma compared with biotechnology companies to consider. The Nasdaq Biotechnology Index .NBI of more than 100 companies -- many with market values of less than $500 million -- has risen almost 126 percent since the beginning of 2012, even with this year's declines. By contrast, the Standard & Poor's 500 index of pharmaceutical stocks .SPLRCCARG, which contains just 12 members, is up 55 percent in that time.

Valeant's $47 billion bid for Allergan, in which it's being aided by Pershing Square Capital investor Bill Ackman, represents another strategy. Ackman had already acquired almost 10 percent of Allergan, and the Allergan board will consider the offer.

Valeant has been on a buying spree since 2010 and last year acquired contact lens maker Bausch & Lomb Holdings. Chief Executive Michael Pearson said in January the drugmaker wants to become one of the world's top five pharmaceutical companies by market capitalization by the end of 2016, largely through acquisitions.

Lilly's Elanco animal health unit will acquire about 600 animal health brands from Novartis, including vaccines and anti-parasite medicines that will allow it to enter the aquaculture, or fish farming, market.

Last year Elanco had sales of $2.15 billion, compared with $1.1 billion for Novartis Animal Health.

Source: Reuters

China manufacturing activity ticks up in April but still contracts - HSBC PMI

China's manufacturing downturn eased slightly in April as declines in new orders and output slowed, a preliminary survey showed on Wednesday, though factory activity showed an overall contraction for the fourth straight month.

The HSBC/Markit flash Purchasing Managers Index (PMI) for April rose to 48.3 from March's final reading of 48.0, still below the 50 line separating expansion from contraction.

The survey showed contractions in new orders and output moderated somewhat, though new export orders slipped back below the 50 line after a pickup in March, suggesting that the external environment remains difficult for Chinese firms.

"Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident as both new export orders and employment contracted," said Qu Hongbin, chief economist for China at HSBC, in a statement accompanying the PMI.

Signs of a slowdown in the first quarter had been evident in a series of economic indicators, prompting the government to unveil a series of measures to promote growth, although it has ruled out major stimulus.

It has also said that its main focus will be on job creation, and that it did not matter if growth in 2014 came in a little below the official target of 7.5 percent.

The final Markit/HSBC manufacturing PMI for April is due on May 5.

Source: Reuters

Jet Blue pilots elected ALPA as their representative

Lytro Illum changes focus even after you've taken the photo

There's nothing worse than taking what feels like a great photo, then opening it later to discover it's out of focus. The Lytro Illum solves that problem by taking photos that you can focus and re-focus even after you've taken them.

The Illum is a light-field camera, allowing you to adjust focus, perspective and depth of field in an image you've already snapped. It works by absorbing and recording all the information that comes through the lens, then creating pictures that can be altered later by simply tapping on the spot you want to be pin-sharp and in focus.

Although Lytro was first to make a camera that changes focus, you can now do it in phones such as theHTC One M8 -- check out our guide to the One M8's camera features -- which is a real blow to Lytro's prospects in the consumer market.

The first Lytro Light Field Camera was a small block-shaped thing that looked nothing like a camera as we know it. The Illum looks more like a traditional camera, complete with a much bigger screen and a more familiar grip.

The original Lytro had a fixed lens, while the Illum adds an 8x zoom. It has a fixed f/2.0 aperture.

Lytro's new Illum goes on sale in the US in July and costs $1,599 (£950). If you get in early and buy one before 15 July, you get $100 knocked off a special engraved version of the camera. The company hasn't yet announced pricing or availability in the rest of the world.

Source: CNET

WSJ: Russia Will Attempt to Lower Dependence on Imports, Medvedev Says

   The WSJ reports,"Russia won’t change its economic growth strategy because of Western sanctions but will try to lower its dependence on imports", Prime Minister Dmitry Medvedev said Tuesday.

Russia’s economy is in danger of sliding into recession this year for the first time since 2009, the peak of the global financial crisis, as the sanctions war between Moscow and the West has sent the ruble to all-time lows, fueled capital flight and evaporated investment activity.

Mr. Medvedev said Russia may post growth similar to that of the European Union. In early 2014, the International Monetary Fund predicted that the euro area would grow 1% this year, in line with the Russia’s economy ministry’s forecast. However, should net capital outflows remain as strong as in the first quarter and reach $150 billion in the whole of 2014, the economy may contract by 1.8%, the economy ministry said earlier in April.

Mr. Medvedev said that Moscow itself “won’t trigger a reduction of economic ties” with Europe. He said that Moscow actively trades with Europe but is considering widening its trading ties in the East, adding that Russia should aim to make the ruble a global reserve currency and switch its international trade to rubles, particularly commodities trade.

The Prime Minister vowed that despite any possible sanctions the government will fulfill its social obligations and won’t let Russian citizens become “hostages of political games.”

Mr. Medvedev said the government won’t let “unfriendly” actions from outside the country weaken Russia’s defense industry and will aim to bolster its position in the global defense market by increasing its military cooperation with Latin America and Africa.

WSJ: How Putin can Bypass Sanctions

     The Wall Street Journal reports,"one of the lessons Russian President Vladimir Putin is learning during the Ukraine crisis is that if you have oil and gas, you’ll never be lacking for friends and much will be forgiven and much will be forgotten. Although the United States is weighing heavier sanctions across the Russian economy, Mr. Putin has much control over the European energy market, and is a growing supplier with Asian countries, and many countries and companies are indicating they’re not ready to punish Russia".

Google To Offer Mobile App Install Ads In Search And YouTube; Expands App Deep Linking To AdWords

Google is announcing today its plans to offer app install ads on mobile search and YouTube, following moves made by other tech industry companies, including Facebook and more recently Yahoo and Twitter. Google says that businesses looking to promote these app installs across the AdMob network will be able to target consumers based on data Google already has on file, like what apps they use, how often they use them and what purchases they’ve made.

For example, says Google, someone who regularly uses an app to measure their runs and other exercises, might see an app that lets you track your diet.

Google will help marketers target users using insights from Google Play, offering tips as to what keywords worked best to convert searches to downloads.

In addition, Google is also expanding its mobile app deep linking initiative to integrate deep linking with AdWords. What that means is that businesses can buy advertisements that, when clicked, will redirect users directly inside their already-downloaded and installed mobile apps.

The company notes that there’s demand for ads that can get consumers to re-launch their apps because today over 80% of apps are only used once after being downloaded. Businesses are struggling to convert application installs into regular, engaged customers.

The app stores are also ever-expanding, which increases these challenges. For instance, as of May 2013, Google Play had seen 50 billion app downloads of over 1 million applications, the company said this morning, and every day users in 190 countries are downloading apps.

In AdWords, businesses will soon be able to measure conversions across the entire app lifecycle thanks to these changes, says Google, starting from app installation to re-enagement to in-app purchases.

App install ads and deep linking to apps go hand-in-hand, of course, as the former gets the app on consumers’ mobile devices, then the latter points consumers to the right information in their app when searching.

Source: TechCrunch

China's Xi purging corrupt officials to put own men in place-sources

Chinese President Xi Jinping plans to use a purge of senior officials suspected of corruption to put his own men and reform-minded bureaucrats into key positions across the Communist Party, the government and the military, sources said.

Xi hopes that removing corrupt officials and those resisting change will allow him to consolidate his grip on power and implement difficult economic, judicial and military reforms that he believes are vital to perpetuate one-party rule, said the sources, who have ties to the leadership.

In the most far-reaching example of his intentions, Xi plans to promote about 200 progressive officials from the eastern coastal province of Zhejiang, where he served as party boss from 2002 to 2007, to senior positions across the spectrum in the years ahead, two of them said.

"The anti-corruption (drive) is a means to an end. The goal is to promote his own men and like-minded officials to key positions to push through reforms," said one source.

To be sure, Xi is also tackling endemic corruption to try to restore public faith in the party, other sources said.

The seven sources interviewed for this article sought anonymity to avoid repercussions for discussing secretive elite politics.

The biggest investigation Xi has ordered so far revolves around retired domestic security tsar Zhou Yongkang, who is under virtual house arrest. 

Reuters reported on March 30 that more than 300 of Zhou's allies, proteges, staff and relatives had been taken into custody or questioned since late last year as part of China's biggest graft scandal in six decades. 

The government has yet to make any statement about Zhou, who retired in late 2012 from the Politburo Standing Committee, the apex of power in China, or the case against him. It has also not been possible to contact Zhou, his family, associates or staff for comment. It is not clear if any of them have lawyers.

Another source who met Xi in private this year quoted him as saying implementing reforms had been "very difficult" due to opposition from state-owned enterprises along with influential party elders and their children, known as "princelings".

State-owned firms and princelings in business enjoy many privileges and virtually monopolise certain sectors, something at odds with China's efforts to steer its economy away from a reliance on heavy industry and investment to one driven more by consumption and innovation. 

On the judicial front, Xi has overseen reforms that limit the ability of the party to interfere in most court cases - apart from politically sensitive ones - but more still needs to be done to deal with frequent miscarriages of justice that outrage the public, legal experts said. 

While Xi appears set on driving reform on many fronts, human rights activists have said major political change was not on his agenda. For example, authorities have increased controls over the local media and prominent bloggers in the past year. 


RECRUITING FROM ZHEJIANG

In looking for people he can trust, Xi, 60, will also tap reform-minded officials from his alma mater Tsinghua University in Beijing and other provinces, one source said.

But his key recruiting ground will be Zhejiang, south of Shanghai. The province is seen as ideologically progressive and has long been at the forefront of economic reforms thanks to the concentration of private firms there that helped make China the world's factory.

Besides promoting officials from Zhejiang to the party, the central government and the military, Xi would send them to other provinces, said the first two sources. Xi himself comes from northwest Shaanxi province.

Zhejiang party chief Xia Baolong, a Xi ally, is the leading candidate to take the challenging job of running the restive region of Xinjiang this year or next and then possibly becoming a member of the decision-making Politburo in 2017, sources said.

In addition, one of Xi's closest aides, Zhong Shaojun, a native of Zhejiang, was likely to be further promoted in the People's Liberation Army following a late start to his military career, said two sources who have ties to the military.

In an unusual move, Xi made Zhong, a civilian for most of his career, a PLA senior colonel last year when he appointed him deputy director of the General Office of the Central Military Commission.

Source: Reuters

Novartis to Buy Glaxo Cancer Drugs, Sell Animal Health

Novartis AG (NOVN) will focus more on cancer, GlaxoSmithKline Plc (GSK) on vaccines and Eli Lilly & Co. (LLY) on animal health as the drugmakers announced a series of deals for a total of as much as $28.5 billion today.

The transactions, as well as a plan to form a consumer-health joint venture with Glaxo, are part of an overhaul of the pharmaceutical industry spurred by the loss of sales as best-selling medicines lose patent protection. Pfizer Inc., the world’s biggest drugmaker, sold its infant-nutrition business to Nestle SA for $11.9 billion in 2012, and then last year spun off its animal-health unit.

Novartis agreed to buy cancer drugs for as much as $16 billion while selling most of the company’s vaccines division to Glaxo for $7.1 billion and its animal-health unit to Lilly for $5.4 billion.

For Glaxo, the deals shift the company away from prescription drugs and toward consumer products and vaccines, which are less vulnerable to the patent life cycle. The new joint venture with Novartis will be the second-largest consumer health care company by revenue, trailing only Johnson & Johnson, and it will control 29 percent of the global vaccine market. It also signals a willingness to sell off promising drugs that other companies may be better positioned to market.

Glaxo and Novartis’s consumer-health venture will have about 6.5 billion pounds ($10.9 billion) in revenue, Glaxo said. The U.K. company will have majority control, with an equity interest of 63.5 percent.

“What this transaction does for GSK is it takes one of the leading position in consumer health care and truly elevates us to a global leadership position,” Witty said on a conference call. “It gives us a very rare, extremely rare opportunity to substantially strengthen our vaccine business. And it finds a home for our nascent oncology business.”

Glaxo said the transaction will probably be completed during the first half of 2015 subject to approvals. The company said it expects to return 4 billion pounds to shareholders after the completion of the deal and will maintain its commitment to increasing dividends.

Source: Bloomberg

U.S. Existing-home sales decline 0.2% in March

Sales of existing homes ticked down 0.2% in March to a seasonally adjusted annual rate of 4.59 million, the slowest pace since July 2012, theNational Association of Realtors reported Tuesday. Sales rates have trended down since the summer on falling affordability as inventory remained low. Unusually rough weather in recent months likely also curbed demand, NAR said. Economists polled by MarketWatch had expected a March sales rate of 4.55 million, compared with a February rate of 4.6 million. Recent drops in the sales pace of existing homes have been relatively small, signaling that the market may be stabilizing and sales could bounce higher in coming months, said Lawrence Yun, NAR's chief economist. The median sales price of used homes hit $198,500 in March, up 7.9% from the year-earlier period, supported by low inventory. March's inventory was 1.99 million existing homes for sale, a 5.2-month supply at the current sales pace. 

Source: Marketwatch

WSJ:Price of Gas in U.S. Rises as Refiners Export More to Other Countries Nation's Gasoline Stockpiles Are at Lowest Point This Time of Year Since 2011

A new pipeline, built to release a glut of crude oil that was stuck in the middle of the country, is now feeding oil to refineries on the Gulf Coast that churn out gasoline and diesel. While these fuels still make their way to the Southeast and the East Coast, growing amounts are being sold to Mexico, the Netherlands, Brazil and other countries.

The push into these markets has been spurred by the U.S. oil boom. Rising oil output had been flooding the nation's oil market in recent years, keeping U.S. crude prices low relative to world prices. Facing tepid fuel demand in the U.S., refiners have been ramping up exports, creating more global competition for U.S.-produced fuel.

While the construction of pipelines and other transportation infrastructure allows other countries to benefit from the oil boom, it also means the market for motor fuels has become more competitive. The gasoline market now has to reckon with demand from other countries—and the potential impact on prices—during a U.S. economic recovery many economists see as fragile.

"Quite frankly, this is not just a U.S.-centric topic anymore," said Nancy White, a spokeswoman for motor club AAA. "Production is going overseas, so that impacts the supply here, and that will drive prices up."

Gasoline stockpiles nationwide are at their lowest point for this time of year since 2011, according to the U.S. Energy Information Administration. Meantime, the retail price for a gallon of regular gasoline averaged $3.68 on Monday, up 4.2% from a year ago, according to the EIA. That is the highest price since March 2013. AAA had the average price on Monday at $3.67.

Gasoline futures climbed 1.1% to $3.0869 a gallon Monday on the New York Mercantile Exchange and are up 11% for the year. Prices for the futures, which are contracts to buy or sell at a specified price and time, are a leading indicator for prices at the pump and don't reflect the impact of taxes and other components of retail prices.

Total petroleum exports, mostly gasoline and diesel, averaged about 3.6 million barrels a day last week, according to the EIA, up 25% from the same period last year. The figure includes a small amount of oil exports that are allowed by the U.S. government, which effectively banned them in 1975.

"Export demand is still growing," said Jan Stuart, head of energy research at Credit Suisse. And as the U.S. economy improves, "slowly but surely, vehicle miles traveled has begun to rise again," he said. Mr. Stuart expects gasoline-futures prices to be 10 cents higher, on average, in the third quarter compared with the second quarter.

The potentially bad news for consumers is good news for oil bulls, who have been struggling against the rising tide of U.S. oil output since the start of 2011. Citing low levels of gasoline supplies, some fund managers say pump prices are unlikely to weaken until after the summer vacation season.

As a group, hedge funds and other money managers held $9.3 billion of bullish bets on Nymex gasoline prices, the most in a year, according to the U.S. Commodity Futures Trading Commission.

Weak China shares depress Asia, Ukraine also a risk

 Extended weakness in Chinese shares, driven by worries over liquidity and earnings, put a brake on other Asian stock markets on Tuesday despite Wall Street stocks rallying into a fifth session.

Although Japan's Nikkei share average held onto marginal gains and was up 0.3 percent, MSCI's broadest index of Asia-Pacific shares outside Japan was almost flat, while trading not far from a six-month high hit earlier this month.

The China Enterprises Index of the leading offshore Chinese listings in Hong Kong fell 1 percent to its lowest in nearly four weeks. That subdued other Asian markets, forcing investors to look past the longest winning streak since October in the S&P 500 index.

"Today is going to be a bit weak," said Du Changchun, an analyst at Northeast Securities in Shanghai. "I'm not so optimistic, I don't think there's much space for any increases as we're still in a period of adjustment."

The Shanghai Composite Index was almost flat around 2,063.5 points on Tuesday, after having shed 1.5 percent the previous day.

Chinese stocks have been hit by concerns about a potential share oversupply after the securities regulator released draft prospectuses for 28 new firms planning to list, marking the resumption of IPOs after a two-month hiatus.

Chinese companies such as Great Wall Motor Co Ltd, carmaker BYD and Air China have all posted weak earnings numbers or expected earnings numbers over the past week, leading to further concerns over the slowing economy.

Source: Reuters

JJL: The Highlights of 2013

It’s been another interesting year in Asia Pacific. We’ve seen quite a bit of change in economic dynamics across the region, while in the real estate sector it’s been a time of cautious corporates and busy investors. The 2013 highlights:

• China and Japan dominated the headlines. The region’s number 1 and 2 economies made good strides in addressing their challenges. China averted a hard landing and its government has pushed hard on a range of “austerity” measures. The Japanese government launched a massive stimulus program to reignite economic growth and we’ll get a better idea over the next 12 months as to the success of Abenomics.

• The leasing and investment disconnect widened. Ongoing global uncertainties have seen corporates remain cautious in their hiring and space requirements, and 2013 is likely to be the weakest year for AP office leasing activity since 2009. At the same time, QE and ultra-low borrowing costs have driven strong commercial real estate investment activity – so strong, in fact, that 2013 is likely to equal the previous record back in 2007. We’re forecasting leasing activity to pick up next year and investment volumes to strengthen further, so it will be interesting to see when the disconnect starts to narrow.

• Chinese outbound investment is set for a record year, with commercial volumes up 25% y-o-y as at the end of Q3. The major destinations for this capital have been Europe, the US, Australia and Singapore. Chinese buyers and developers have also been very active in overseas residential markets.

• e-commerce accelerated across the region, a trend which is sure to drive major change in the retail and logistics sectors in the years ahead. At the same time, international retailers have continued to set up shop in Asia Pacific, attracted by our region’s high economic growth and increasing wealth levels.

• The residential sector saw strong demand in many markets including China and South East Asia. Interest rate cuts also stimulated sales activity in Australia. Meanwhile in Hong Kong and Singapore, transaction levels have fallen following a series of cooling measures aimed at keeping a lid on home prices.

Source: JJL   Jane Murray is the Head of Research, Jones Lang LaSalle Asia Pacific.

Has the importance of physical retail space been vindicated by Alibaba?

Alibaba’s decision to significantly invest into Intime Retail, which operates 36 department stores throughout China provides an interesting insight into how internet retailers might be viewing the importance of multi-channel retailing and the role of physical retail stores.

China’s Alibaba Group, one of the world’s largest internet retailers, globally has agreed to invest US$ 692 million to acquire a 26% stake in Intime Retail (Group) Co., the Hong Kong listed operator of predominantly luxury orientated department stores, throughout mainland China.

While this news should not be read as a reversal of the significant global trend of retail spending switching from some physical retail stores to the internet, it is in our opinion a vindication from one of the strongest internet retailers as to the ongoing importance of physical retail space.

We anticipate that the most successful retailers in the future are going to be those with a complete multi-channel offering. Those providing efficient and convenient methods of sales, deliveries and returns through both a physical store portfolio and a strong internet platform will likely be the best performers.

In addition to retailing, the ownership and management of retail places is becoming increasingly specialized and challenging. Shopping mall owners need to ensure that their retail assets remain relevant in the rapidly evolving retail landscape. Nowhere is this more prevalent than in China, which has the world’s largest supply pipeline of shopping malls under development. As luxury brands and first mover fast fashion retailers look carefully at and rationalise their own expansion plans, developers might look to attract internet based operators as one way to ensure that their malls remain competitive. Don’t be surprised to see landlords chasing the signatures of internet retailers with as much vigor as they once did with global luxury brands and international department stores.

JLL global retail research team has completed a fascinating piece of research called Redefining Retail Places. While it can be read as presenting a daunting future for shopping malls, its themes should certainly be used to form part of the picture when owners are making: buy; sell; hold; joint venture and strategic management decisions.

Our most recent outlook to retail real estate investment in Asia Pacific also highlights an expected trend of specialist retail asset managers and co-investors playing a growing role alongside the investment capital and developers, in ensuring assets are built and managed to their best advantage.

Source: JLL.  David Raven lead director for retail investment for Asia

Rental Growth,Occupational fundamentals supporting higher investment volumes

Another year and another quarter of investment volume growth around the world. Investment markets which have grown consistently over the last four years have started 2014 brightly with 23% growth compared to this time last year.

Much of the growth over the last four years has been associated with a hunt for yield globally, not just within the property sector but across the global capital markets. With government bond yields at historic lows in many countries commercial property has provided an attractive source of risk adjusted investment returns, with many groups investing in the sector for the first time.

However, while investment volumes have continued to improve, occupational fundamentals have struggled post the financial crisis. The structural changes happening in the financial services industry have forced occupiers to consider their longer term space needs, in terms of quality, quantity and location. This has made for a depressed and stagnant leasing environment in many cities. This now seems to be changing with many more cities seeing an improvement in take up fundamentals and a return of rental growth across many of the office markets JLL covers globally. The improvement is not uniform, with many cities still providing plentiful options for occupiers it will be a long process, but we certainly seem to be seeing the first signs that the corner has been turned.

This should give renewed impetus to investment markets, stronger corporate demand coupled with financing markets returning to normality in most countries will provide an additional level of enthusiasm for investors to proceed with purchases. In addition the rise in values is encouraging vendors to place more stock into the market place, particularly in 2014 portfolios and larger lot sizes.

With US$130 billion transacted in the first quarter of 2014, we are confident that we shall see another year of investment growth. At this stage we are estimating US$650 billion for the full year, 10% higher than we recorded in 2013.

Source:  JLL, David Green-Morgan is Global Capital Markets Research Director, based in Singapore.

Commercial Real Estate Investment The Smaller the Safer?

When planning a successful shopping centre, location is always a top priority. If a retail project sits in the middle of a busy commercial district, or a densely populated residential area, the starting point is a catchment with lots of potential customers. But in an era with oversupply looming in many cities in China, and landlords having a harder and harder time pre-leasing space, do smaller shopping malls have less execution risk?

During a recent field trip to Zhabei district, a densely populated and mature residential part of northern Shanghai, we found three cases of low occupancy, community-oriented shopping centres that from a location perspective can be considered “good” sites. The three projects have been operating for more than one year, but average occupancy is still less than 50%. After going through Shanghai’s retail supply list, we found a significant number of smaller projects (20,000 – 50,000 sqm) in residential areas that are struggling to find tenants throughout a long period of time to reach stabilisation.

What are the reasons behind these projects’ struggles? Inexperience on the part of the landlord can lead to a lack of understanding of the catchment area and poor planning of the project positioning, including:

A mismatch between the types of tenants and income level of the neighbourhood;

Ineffective or inexperienced leasing teams for finding non-anchor tenants, especially after a supermarket, cinema or KTV have been secured;

Rental expectations that are too high.

If the average housing price near a community mall is low, residents in the neighbourhood tend to spend most of their time and money in the anchor supermarket rather than the other stores. If the catchment area has many high-end residential projects, but the mall doesn’t offer interesting lifestyle tenants, consumers may instead drive to a destination shopping mall further away for more options. Another execution risk is when anchor tenants “steal away” consumers rather than securing foot traffic for the whole property. Supermarkets or cinemas will often have their own direct access points and consumers can easily bypass the rest of the property if there isn’t a sound conversion strategy to lure them in. In conclusion, while these malls will probably stabilsze eventually, once the landlord gets the positioning right, ‘going small’ is not a panacea – there is still plenty of execution risk. Careful planning and a strong retail asset management team are critical to ensure a successful shopping centre.

Source: Jones Lang LaSalle(JLL) by Chen Lou

Lukoil launches giant West Qurna 2 oilfield in Iraq

• Russia's Lukoil (LUKOY, LUKOF) finally launches commercial production from the giant West Qurna 2 oilfield in Iraq in a move expected to lift the country’s output to record levels of ~4M bbl/day this year.
• Production from one of the world’s largest untapped oilfields, with recoverable reserves estimated at ~14B barrels, is set to rise to 400K bbl/day by year-end from an initial rate of 120K.
• The launch of the field after lengthy delays also will allow Lukoil, which holds a 75% stake as operator, to more than double its overseas output.Source: 
• Source:Seeking Alpha   March 31, 2014