Tencent Q1 Results 2014 Press Release

Highlights of the First Quarter of 2014:

 Total revenues were RMB18,400 million (USD2,991 million2
), an increase of 8% over the
fourth quarter of 2013 (“QoQ”) or an increase of 36% over the first quarter of 2013 (“YoY”).
 Operating profit was RMB7,790 million (USD1,266 million), an increase of 64% QoQ or an
increase of 54% YoY. Operating margin increased to 42% from 28% last quarter.
Non-GAAP3
 operating profit was RMB6,477 million (USD1,053 million), an increase of 27%
QoQ or an increase of 28% YoY. Non-GAAP operating margin increased to 35% from 30%
last quarter.
 Profit attributable to equity holders of the Company for the quarter was RMB6,457 million
(USD1,050 million), an increase of 65% QoQ or an increase of 60% YoY.
Non-GAAP profit attributable to equity holders of the Company for the quarter was RMB5,194
million (USD844 million), an increase of 17% QoQ or an increase of 29% YoY.
 Basic earnings per share were RMB3.500. Diluted earnings per share were RMB3.449.

Mr. Ma Huateng, Chairman and CEO of Tencent, said, “During the first quarter of 2014, we
substantially expanded our mobile ecosystem, providing new services to users, generating value
for our business partners, and enhancing our own financial performance. Our smart phone
games business achieved clear market leadership, allowing us to achieve 29% year-on-year
growth in our non-GAAP net income while funding significant investments in various strategic
initiatives. We transformed our eCommerce strategy through our combination with JD.com,
China’s leading online retailer; deepened our mobile games pipeline via an in investment in CJ
Games; and broadened our O2O offerings through partnerships with category pioneers such as
Dianping and Leju. We look forward to continuing to balance our strategic investments in O2O
services, online payment and digital content with maintaining healthy financial returns, and to
developing new services for users as China’s internet evolves."

Financial Review for the First Quarter of 2014

- VAS. VAS revenues increased 21% QoQ to RMB14,413 million and represented 78% of our
total revenues for the first quarter of 2014. Online games revenues increased 23% QoQ to
RMB10,387 million. The growth was mainly driven by increased revenues from smart phone
games integrated with Mobile QQ and Weixin, increased revenues from major PC titles which
benefited from promotional activities and positive seasonality, as well as contributions from new PC
game titles such as Blade & Soul. Social networks revenues increased 16% QoQ to RMB4,026
million. This mainly reflected an increase in platform revenues from smart phone games
integrated with Mobile QQ and Weixin.

- Online advertising. Online advertising revenues decreased 21% QoQ to RMB1,177 million and
represented 6% of our total revenues. This mainly reflected the impact of weaker seasonality on
advertisers’ spending around the Chinese New Year holidays, together with the transition in our
eCommerce strategy which affected eCommerce-related advertising revenues.

- eCommerce transactions. eCommerce transactions revenues decreased 24% QoQ to
RMB2,524 million and represented 14% of our total revenues. This was mainly driven by weaker
seasonality in the eCommerce industry and the transition in our business strategy. Subsequent to
the completion of the transaction with JD.com in March 2014, we no longer recognise fee income
generated from physical goods transactions on our marketplaces.


Other Key Financial Information for the First Quarter of 2014

Share-based compensation was RMB568 million for the first quarter of 2014 as compared with
RMB463 million for the previous quarter.

Capital expenditure was RMB1,138 million for the first quarter of 2014 as compared with
RMB1,679 million for the previous quarter.

The Company didn’t repurchase any shares on the Stock Exchange during the first quarter of 2014
and the previous quarter.

As at March 31, 2014, net cash position totaled RMB34,245 million which excluded borrowings of
RMB9,035 million and long-term notes payable of RMB9,232 million.

As at March 31, 2014, the total number of shares of the Company in issue was 1.864 billion.


Strategic Highlights

In the first quarter of 2014, we conducted several transactions to complement our corporate
strategy, including: (1) our transaction with JD.com for further developing our eCommerce
business; (2) our investment in and partnership with CJ Games, which should bring more high
quality mobile game experiences to our users; and (3) our investment in and partnership with Leju,
to broaden our O2O offerings for real estate services.

On the financing side, we gained increased market recognition for our strong credit profile and
raised new funds. In March 2014, we received an upgrade from Moody’s on our issuer and senior
unsecured debt ratings from Baa1 to A3. In April 2014, we established a USD5 billion global
medium term note programme and completed the initial issuance of an aggregate principal amount
of USD2.5 billion under the programme, which comprised USD500 million 3-year senior notes at a
2.000% coupon and USD2 billion 5-year senior notes at a 3.375% coupon. We are pleased that
global institutional investors actively participated in the initial issuance, showing their recognition of
our market leading position, history of stable growth and record of good corporate governance.
With our healthy cash generation and substantial net cash balance, we are well-positioned to
maintain our strong credit profile and we remain committed to our prudent financial management
approach.

Divisional and Product Highlights

 Key platform statistics:
- Monthly active Instant Messaging (“IM”) user accounts were 848 million, an increase of
5% QoQ or an increase of 3% YoY.
- Peak simultaneous online IM user accounts were 199 million, an increase of 11% QoQ
or an increase of 15% YoY.
- Combined MAU of Weixin and WeChat were 396 million, an increase of 12% QoQ or
an increase of 87% YoY.
- Monthly active Qzone user accounts were 644 million, an increase of 3% QoQ or an
increase of 5% YoY.
- Fee-based VAS registered subscriptions were 88 million, a decrease of 1% QoQ or a
decrease of 16% YoY.

Greek Ruling Coalition Faces Survival Vote in EU Election. Greece politics make markets shiver.

Prime Minister Antonis Samaras has persuaded investors to buy the story of Greece’s recovery as manufacturing recovers and unemployment starts to fall. Now he has to win over voters.

The premier heads into elections for the European Parliament on May 25 on the back of Greece’s first bond auction in four years and with the economy poised to return to growth later this year. With more than half the country’s youth still without work, polls suggest voters aren’t ready to credit Samaras for the changes just yet.

While New Democracy trails Syriza, the opposition group that rejected the terms of the bailout packages, the bigger threat to the government may be the collapse in support for Samaras’s coalition partner Pasok. Papandreou’s Pasok plunged to sixth place with just 5.5 percent of the vote in a recent poll as voters blame the party for the country’s economic meltdown.

Samaras’s governing coalition has 152 lawmakers in the country’s 300-seat legislature. The prospect of the 27 Pasok lawmakers withdrawing their support could deter the foreign investors helping to fuel the recovery, according to Megan Greene, chief economist at Maverick Intelligence and a columnist with Bloomberg View.

“If there were snap elections and investors were spooked by the prospect of Syriza being the negotiator for Greece, it could really hurt the Greek recovery because it’s so fragile,” she said in a telephone interview.

Greek bonds fell, with the yield on 10-year debt rising 51 basis points to 6.81 percent while the Athens’ Stock Exchange benchmark index dropped 4.6 percent at 5:52 p.m. in Athens today, even as data showed the economy contracting at its slowest pace in four years in the first quarter. Gross domestic product fell 1.1 percent compared with a year earlier, exceeding economists expectations for a 1.3 percent decline.

The economy’s improvement in the first quarter comes after a string of good news for Samaras. The country returned to the bond market last month for the first time since 2010, stocks have risen 15 percent over the past 12 months and yesterday Standard & Poor’s raised its rating on four Greek lenders including the country’s biggest, National Bank of Greece.

Surveys of purchasing managers show that manufacturing returned to growth this year and the European Commission forecasts that the unemployment rate, which peaked at 27.3 percent in 2013, has turned a corner and will fall to 24 percent next year.

In the May 10 Kapa Research survey for To Vima newspaper that saw Pasok fall to sixth place, Syriza led New Democracy by 23 percent to 21.7 percent. The pollster questioned 1,149 people between May 6 and May 9.

Anther poll today by VPRC for Epikaira magazine gave Syriza a 3 percentage-point lead over New Democracy and placed Pasok seventh with just 3 percent. VPRC surveyed 1,003 people on May 9 and May 13 and gave a 3.1 percent margin of error.

Syriza is trying to consolidate its support after the 2012 general election propelled its leader Alexis Tsipras into the international spotlight. The party aims to use a victory in the European elections to try to reverse the budget cuts that were imposed as a condition of Greece’s two bailouts.

“Syriza wants a clean victory in order to put an end to the catastrophic path of one-sided austerity and great depression,” Dimitris Papadimoulis, a Syriza candidate, said in an interview. “If Syriza gets a comfortable victory, or, even better, more than the sum of votes of New Democracy and Pasok, then we will see positive political developments.”

Greece’s political geography still remains in flux after two general elections in six weeks in 2012 that threw the country’s membership of the single currency into doubt after it had completed the world’s biggest sovereign debt restructuring. Samaras emerged from those votes to lead a country that’s lost a quarter of its gross domestic product in six years of recession and where unemployment is at 26.5 percent.

Source: Bloomberg

Xiaomi Launches Tablet and the Second-gen Smart TV

Chinese smart device maker Xiaomi finally launches a tablet today. We heard of the existence of it last year and thought it would come out soon as the company began testing a custom Android system earlier this year.

Specs:

• Processor: TEGRA K1 (192-core GPU)
• Screen：7.9‑inch retina display (by Sharp/AUO)
• Cameras: 5MP front-facing camera (OmniVision) & 8MP rear-facing camera (Sony)  – Five-element lens, f/2.0 aperture
• WiFi: (802.11a/b/g/n)
• Size & Weight: 202.1mm * 135.4mm * 8.5mm, 360g

Xiaomi tablet will be produced by Foxconn. The 16G version is sold for RMB1499 (less than $250) and the 32G one for RMB 1699 (less than $280) — both are less expensive than a Xiaomi flagship smartphone.

The company said their goal is to make the best Android tablet. Lei Jun, CEO of Xiaomi, addressed gaming when explaining what they mean by a good Android tablet. It could be a good selling point as gaming is one of the most popular and profitable mobile app categories in China, and bigger screens with devices like tablets make gaming experience so much better.

The Second Generation of Xiaomi Smart TV

The company also launched today a second generation of Xiaomi smart TV today that supports 4K. Also a separate stereo box is introduced to accompany the Smart TV. It’s priced at RMB 3999 (less than $650).

Apparently Xiaomi’s direct competitor in Smart TV now is LeTV who launched a 4K Smart TV last month. The Xiaomi one is 1000 yuan more expensive than the LeTV one. But LeTV will charge annual fee for video streaming and other content.

In last month the company launched a pair of smart WiFi routers. Earlier than that it launched a budget phablet. Now it’s product line includes a flagship Android phone, a budget Android phone, set-top box, Smart TV,  smart WiFi routers,

Last month the company also announced it’s expansion plan for this year is ten more markets in in Asia, South America and Europe. It is reported that its budget smartphone RedMi sells well in markets such as Taiwan and Singapore.

Source: TechNode

Major Europe Stock Indexes. Deep Plunge in Greece,Ireland, Italy and Portugal.

Source:  WSJ

WSJ: S&P 500 Tests (and Bounces Off) Key Technical Level

       WSJ reports,"for the third time in three weeks, the broad stock index slipped below this key technical level, a gauge that chart watchers use to track the market’s short-term trend. In all three instances, stocks rebounded intraday and finished above the 50-day moving average".

In the final trading hour on Thursday, bulls are hoping the pattern will repeat itself again.

"The S&P 500 was recently down 1% to 1869, after earlier falling as low as 1862. The index’s 50-day moving average sits at about 1865, according to FactSet.

The S&P 500′s drop on Thursday is part of a broad-based selloff that also sent the small-cap Russell 2000 into correction territory, down more than 10% from the record high it hit two months ago.

To be sure, banking on the S&P 500 immediately bouncing off the 50-day average hasn’t always been a successful strategy.

Just this year, the S&P 500 fell below this line in late January and early April. In the first instance, the S&P 500 fell another 4.7% after breaching the technical indicator, a drop which lasted for about two weeks before the index bottomed. In April it fell another 1% after breaching the chart line, although it bottomed the next day".

 Latest  Economic Indicators have been bearish for the Chinese economy,Growth data have been poor for
the Euro Zone, and economic data have been mixed for the U.S. Economy. I wouldn't follow technical
criterion for investment purpose, with the present world scenario.

WSJ:Europe Stocks Slide as GDP Number Disappoints. Flight to safe heavens: bonds.

"Gross domestic product grew 0.2% in the euro zone as a whole during the first quarter compared with the final three months of 2013, the European Union's statistics agency Eurostat said, well short of the 0.4% quarterly gain expected by economists.

Overall growth, which was driven by Germany, masked sharp differences among euro-area nations. Italy and Portugal both saw their economies shrink slightly.

Stock indexes in Milan and Lisbon led markets lower, losing 3.6% and 2.8% respectively. The pan-European Stoxx Europe 600 closed down 1.0%, having traded at a fresh six-year high early in the session.

"The euro-zone growth number was shocking. We had a bit of complacency in the market for a while when it looked like things were getting back on the rails," said Patrick McCullagh, head of fixed income credit research at Schroders.

Investors have already been turning cautious on previously highflying markets like Italy in recent weeks. That process quickened on Thursday, according to Nick Nelson, head of European equity strategy at UBS.

"[The data] is giving a little bit more fuel to the rotation out of the last year's winners," he said.

The equity selloff accelerated in the afternoon amid a slump in euro-zone debt markets.

Traders said gains for Greek opposition parties in polls ahead of European parliamentary elections later this month soured the mood.

Greek 10-year yields climbed more than half a percentage point to 6.72%, their highest in two months. Yields rise as prices fall. Ten-year yields in Italy, Spain and Portugal all climbed more than 0.2 percentage point.

German government debt, seen as a safe harbor by investors, surged.

Gary Jenkins, credit strategist at LNG Capital said that investors are particularly sensitive to the risk of a break-up of the Greek coalition, which could lead to a greater risk of debt restructuring or even default.

"Of course that might not happen, but the market is taking a 'sell first and ask questions later' approach, when it comes to Greece," he said.

The Greek finance ministry denied Wednesday that it was imposing a retroactive tax on capital gains on Greek government bonds held by investors based outside the country. It was attempting to contain what it called "completely untrue" reports that it had announced such plans in a circular, which traders said had added fuel to the selloff.

The move was part of a broader retreat into safe-harbor assets".

Where do bonds yields head to?

"The prospect that central banks will continue to inject money into the world's bond markets, as well as enact policies to keep interest rates low, has acted as a green light for the world's bond buyers.

Investors came into this year anticipating rates would move higher as economies picked up steam and as the Fed pulled back stimulus efforts.

The yield on the 10-year U.S. Treasury was about 3% at the beginning of the year, and Wall Street strategists and economists were predicting rates would rise steadily beyond that.

This year through Tuesday, U.S. Treasury bonds have handed investors a total return of 2.18%, according to data from Barclays PLC. The S&P 500 has returned 3.4% in the same period, while the Dow Jones Industrial Average has returned 1.7%, according to FactSet and including price gains and dividend payments.

German government bonds have delivered investors a return of 3.5% so far this year and U.K. government bonds 3.17%. Total return includes price appreciation and interest payments and is calculated in local-currency terms.

By the end of the day Wednesday, the 10-year U.S. Treasury note was 21/32 higher in price, yielding 2.544%. In Europe, the yield on the 10-year German government bond fell to 1.37%, while the yield on the 10-year U.K. government bond dropped to 2.583%"

Source: WSJ.

U.S. Market Brief

The U.S. equity markets are seeing some pressure in late-morning action with a plethora of data keeping conviction hamstrung. Globally, Japan's GDP growth easily exceeded expectations as consumers appeared to ramp up spending ahead of April's tax hike, while eurozone 1Q GDP growth missed forecasts as disappointing output from France and Italy more than offset favorable expansion out of German and Spain. In the U.S., upbeat reads on jobless claims and regional manufacturing activity, along with roughly inline consumer prices, are being met with unexpected drops in homebuilder sentiment and industrial production. Meanwhile, the earnings calendar is mixed, with Dow member Wal-Mart missing analysts' expectations, along with Kohl's, while Dow component Cisco Systems beat the Street's expectations. Following the data, Treasuries are continuing to rally, the U.S. dollar gave up an early gain and is flat, while crude oil and gold prices are lower. Overseas, Asian stocks finished mixed, with the Japanese GDP report being overshadowed by disappointing earnings and a stronger yen, while European equities are mostly lower.

Source: Schwab

Iran Oil Exports Fall in April, Says IEA

    The WSJ reports,"Iran’s oil exports fell in March having reached a 20-month peak two months earlier, a global energy watchdog said on Thursday, potentially easing concerns that Tehran could breach a six-month cap agreed with the West in a broader deal over its nuclear program.

In its monthly market report, the International Energy Agency said that “estimated April import volumes [by foreign buyers of Iranian oil] were down by about 180,000 barrels a day to 1.11 million barrels a day.”

The export numbers, which include condensates, compared with 1.29 million barrels a day in March and a 20-month peak of 1.58 million barrels a day in February, it said. Condensates exports stood at around 230,000 barrels a day in April compared with 150,000 barrels a day in March, the agency said.

The IEA’s data confirmed statements by Iran’s deputy oil minister for international affairs Ali Majedi made to The Wall Street Journal last week that crude exports—which exclude condensates—averaged 1.2 million barrels a day in the past three months. That number—which excludes condensates—suggested a reduction from February levels of 1.3 million barrels a day.

In November, Iran agreed to cap its crude exports—excluding condensates—to 1 million barrels a day on a six-month average. The commitment is part of a broader interim deal with six world powers over its nuclear program.

Some countries such as India have reduced their intake of oil from Iran as they seek to adjust to U.S. sanctions limiting their imports of Iranian oil.

On an average basis, Iran’s oil exports, however, have been higher this year. Iran’s Oil MinisterBijan Zanganeh said earlier Thursday that oil exports amounted to 1.5 million barrels a day on average. That contrasts with a low of about 700,000 barrels a day in October, according to IEA estimates".

IMF: France: 2014 Article IV Consultation—Concluding Statement

"Economic objectives are the right ones and policies to attain them have been correctly identified. Very substantial fiscal adjustment—3 percent of GDP in the past three years—has been achieved and the structural fiscal deficit has been halved since 2010. But the adjustment strategy followed until now—with an emphasis on raising revenue—has reached its limits. Against this backdrop, the Stability Program and the National Reform Program lay out a course for the next three years with expenditure reduction and measures to increase the supply response of the economy at its core.

In our view, the course for fiscal policy is appropriate. Over decades, a permanent structural fiscal deficit—driven by public spending that has outpaced GDP—has boosted public debt. The resulting erosion of fiscal space constrained the government’s ability to sustain demand as the economy slowed down in 2012-13. The concomitant rise in taxes has weighed on the capacity of the economy to grow. Recreating room for policy maneuver has become critical to enable the government to respond more flexibly in the face of possible future shocks. And cutting spending has become critical to help put social safety nets on a sound footing for future generations. For these reasons, we support continued adjustment as envisioned in the Stability Program.

However, the fiscal policy objectives are very challenging. First, the planned reductions in taxes mean that the cutbacks to spending relative to trend will need to be very large if public finances are to be brought back to balance over the medium term, as they should. The needed cuts have been put at euro 50 billion over the next three years. If achieved, these expenditure savings would be remarkable by historical standards. Second, the recovery of economic activity is likely to remain subdued. We project real GDP growth of 1 percent this year and 1.5 percent in 2015, as supply side measures will boost growth only gradually. Even so, risks of a weaker rebound persist. With the economy operating well below capacity, we also expect inflation to remain at around 1 percent. All of this will make the task of the authorities very difficult. More accommodative monetary conditions would help with the implementation of the fiscal program and bring forward the benefits of structural reforms.

Execution risks are sizeable. Achieving the deficit objectives while delivering on the tax cut commitments leaves no room to deviate from the announced expenditure reductions. The major risks are that the initial plans may be diluted in sequential annual budgets and that cuts in transfers to local governments may be compensated by unsustainable cuts in investment, higher taxes or higher debt. This would undermine the government’s fiscal rebalancing strategy. Also, if there is an overreliance on containment rather that structural measures, expenditure growth will bounce back once pressures subside".

IMF:  France: 2014 Article IV Consultation

U.S. Consumer prices rise sharply in April

 Consumer prices posted the biggest increase in April since last summer as the cost of many staples rose, making it harder for Americans to stretch their paychecks to pay for typical household expenses.

The consumer price index jumped a seasonally adjusted 0.3% last month to mark the largest gain since June, the Labor Department said . The increase matched the MarketWatch forecast.

Although most economists expect consumer prices to taper off later in the year, they have climbed sharply in the past few months. The pace of inflation rose to 2% from April 2013 to April 2014, up from 1.5% in the prior month.

In April, energy prices rose 0.3%, led by a 2.3% advance in the cost of gasoline.

Food prices rose 0.4%, spearheaded by a 2.9% spike in beef. That was the largest increase in beef prices since 2003.

Excluding the volatile food and energy categories, core consumer prices increased 0.2%. The cost of housing, medical care, airline tickets and new cars all rose.

The core rate has risen 1.8% in the past 12 months, and it’s been stuck between 1.6% and 1.8% for more than a year. That’s well below the level the Federal Reserve considers harmful to the economy, however.

Source: Marketwatch

The Euro Zone Grew 0.2% IN Q1 Q/Q . Expected Growth was 0.4%

 The euro zone economy grew much less than expected at the start of the year and inflation remained locked in the 'danger zone' below 1 percent, increasing pressure on the European Central Bank to ease monetary policy at its next meeting in June.

The 9.5 trillion euro economy expanded only 0.2 percent quarter-on-quarter in the first three months of 2014, the same as the downwardly revised rate in the last quarter of 2013, while economists had expected 0.4 percent growth.

The first quarter figure stayed positive mainly thanks to strong growth in the biggest economy Germany, which compensated for stagnation in France and shrinking output in Italy, the Netherlands, Portugal and Finland.

"Today’s figure is a major disappointment, as it suggests that the euro zone is still far away from reaching the escape velocity required for a sustainable recovery," said Peter Vanden Houte, chief euro zone economist with ING.

With growth so weak and consumer price growth well below the ECB target, the bank is preparing a package of measures for its June meeting, including cuts in all its interest rates and steps to fight the risks of deflation. 

"The package...the ECB appears to be preparing is welcome... but the overall steps are likely to be too small to make a real difference," said Nick Kounis, economist at ABN AMRO.

"More aggressive easing than the ECB currently seems to be considering would help from that perspective," he added.

German quarterly growth of 0.8 percent marginally exceeded forecasts and was double the pace at the end of 2013. The zero growth in France was a disappointment compared with expectations of 0.2 percent growth.

Inventory changes and public spending were the only factors which kept the French economy from contracting while Germany's performance was driven largely by domestic demand, French and German statistics office data showed.

France will now need 0.5 percent growth each quarter to meet a government forecast for 1 percent growth in 2014, Natixis Asset Management chief economist Philippe Waechter said.

"France's public finance plan has been built on the 1 percent growth forecast. If we don't achieve it, France will not meet its (debt and deficit) targets for 2014 and 2015," Waechter said. Missing the deficit targets again is likely to put Paris on a collision course with European Union rules under which it has to cut its deficit below 3 percent of GDP by 2015.

France is not the only euro zone member in the doldrums.

Italy defied growth expectations and contracted 0.1 percent, denting a fragile recovery begun at the end of last year when the country finally put an end to its longest recession since World War Two. [ID:nL6N0O12NT]

The euro zone growth outlook for the second quarter was poor too, which will not help reduce the risks of deflation.

"We believe GDP growth is unlikely to be stronger in Q2 than in Q1. This 'recovery' remains far too weak to halt deflationary pressures," said ING's Vanden Houte.

Germany expects domestic demand to drive growth of 1.8 percent this year and Finance Minister Wolfgang Schaeuble said that everything pointed to a broad economic pick-up.

Meanwhile France is facing a public sector strike by the hardline FO labour union over civil service pay freezes - a reminder of the difficulties of enacting reform and making the French economy more competitive.

Greece, after four years of tough reforms introduced in exchange for a 240 billion euro bailout, continued to shrink year-on-year in the first quarter, but at the slowest pace since early 2010, adding credibility to expectations that Athens will limp out of a six-year recession this year.

The silver lining is the absence of pressure from the markets, with borrowing costs for many euro zone countries at record lows.


DON'T BLAME THE EURO

The ECB has said a strong euro is one of its concerns, given the downward pressure it puts on import prices and exports.

France wants euro zone governments to take action on the currency and has called for negotiations to weaken it after EU parliament elections next week.

But the head of France's Medef national employers association said on Tuesday that Paris should not use its call for a weaker euro as a substitute for much-needed reforms.

Other euro zone countries which have taken strong medicine to improve competitiveness are starting to see the benefits.

Spain reported first quarter GDP growth of 0.4 percent two weeks ago, giving a year-on-year expansion of 0.6 percent, the strongest in three years. The Spanish government upped its 2014 growth forecast to 1.2 percent from a previous 0.7 percent.

In global terms, much depends on demand for European goods from China, but there are positive signs elsewhere.

Japan clocked its fastest pace of growth in more than two years in the first quarter, raising hopes the economy will have enough momentum to tide over an expected slump following an April 1 sales tax hike. 

And the United States is expected to bounce back from a weather-ravaged start to the year

Source:  Reuters

U.S. jobless claims sink 24,000 to 297,000

The number of people who applied for U.S. unemployment benefits fell by 24,000 last week to 297,000, marking the lowest level since May 2007, the government said Thursday. Economists polled by MarketWatch had expected initial claims to total 321,000. The second straight big drop in new claims is probably related, at least in part, to a late Easter holiday. Easter fell on April 20 this year compared to March 31 in 2013, a big gap that makes it harder for the government to seasonally adjust its numbers before and after the holiday. Still, claims have been hovering near post-recession lows for most of 2014 and the latest report is another sign that the pace of layoffs remains extremely low. The average of new claims over the past month fell by a smaller 2,000 to 323,250. The monthly figure smooths out the jumpiness in the weekly data and offers a better look at the underlying trend. Also, the government said continuing claims decreased by 9,000 to a seasonally adjusted 2.67 million in the week ended May 3. Continuing claims reflect the number of people already receiving benefits. Initial claims from two weeks ago, meanwhile, were revised up to 321,000 from 319,000. 

Source: marketwatch

NBG share offering oversubscribed

  The share offering was substantially oversubscribed, confirming a strong interest by institutional investors in National Bank,” announced NBG. NBG officials stated that major foreign investors such as Fidelity, Pacific Investment Management Co.(PIMCO), and York Capital, were among the buyers of the stock.

Source: Emerging Markets

VimpelCom Rout Seen Extending as Ukraine Saps Currencies

VimpelCom Ltd. (VIP), the worst performer among the most-traded Russian shares in the U.S. this year, will probably keep falling as weakening currencies in two of its biggest markets erode earnings, according to IFC Metropol.

Ukraine’s hryvnia has sunk 31 percent since the nation’s bloody standoff with Russia began in November, while the ruble is down 4.6 percent. Those losses, the worst among major eastern European countries, are cutting into the wireless phone company’s dollar-based financial results.

The company yesterday lowered its 2014 sales and earnings targets after trailing analysts’ estimates in the first quarter, citing increased competition and currency declines. VimpelCom, which is listed on the Nasdaq Stock Market, fell 5.4 percent to $7.81 in New York. It was the worst performance on the Bloomberg gauge of the most-traded Russian shares in the U.S, which rose 0.2 percent. The wireless provider has plunged 40 percent this year, compared with the index’s 17 percent decline.

Revenue and earnings before interest, taxes, depreciation and amortization will drop by a “low to mid-single digit” percentage this year, the company said. It had previously predicted both would be “stable.”

The ruble has gained 5.8 percent from this year’s low on March 14 and traded yesterday at 34.618 per dollar. The hryvnia fell 19 percent during the period to 11.93.

The company, which is controlled by the Russian billionaire Mikhail Fridman, operates in more than a dozen countries. About 39 percent of its 2013 revenue came from Russia, its largest market, data compiled by Bloomberg show. Ukraine was the fourth-largest, accounting for 7 percent of sales.

VimpelCom sank to the lowest since July 2012 on trading volume about 2.9 times the average of the past three months. OAO Mobile TeleSystems (MBT), Russia’s biggest mobile phone company, gained 1.5 percent to $17.61 in New York. OAO MegaFon (MFON), the second-biggest, increased 2 percent to $27.35 in London.

VimpelCom’s revenue is expected to decline for third consecutive year in 2014, falling 6.6 percent to $21.1 billion, before resuming growth in 2015, according to the average estimate of 11 analysts surveyed by Bloomberg.

Source: Bloomberg

China to boost production-oriented service industries

China will accelerate the development of production-oriented service industries in a bid to step up industrial restructuring and prop up economic growth.

Priorities will be given to the development of research and design, commercial services, marketing and after-sales services, and will be driven by the market and innovation, according to an executive meeting of the State Council chaired by Premier Li Keqiang on Wednesday.

The move is expected to stimulate domestic demand, boost social employment and improve people's livelihoods, as well as stabilize economic growth, according to the meeting.

Wang Jun, deputy director of the China Center For International Economic Exchanges' consultancy department, said the move indicated the country has started to tap the potential of industrial restructuring to maintain economic growth, rather than direct stimulus to investment and industry.

It will help improve growth quality and efficiency in the long run, he said.

Zhang Zhiqian, researcher with the Investment Research Institute under China Jianyin Investment, also endorsed the move that seeks impetus from structural adjustment, as the dependency on expanding investment would lead to serious side effects including overcapacity and environmental issues.

China's economic growth continued to shrink in the first quarter, as downward pressure still existed. However, the country's rapidly-growing service industry has been emerging as a new engine for its slowing economy.

In the January-March period, China's tertiary sector increased 7.8 percent year on year to 6.29 trillion yuan (1.02 trillion U.S. dollars), making up 49 percent of the country's GDP in the first quarter. Its growth pace was also faster than the 3.5 percent of agriculture and 7.3 percent of the industry sector.

According to the meeting, design and application of new materials, products and techniques will be strengthened. Improvements will be made in information technology and energy saving services, as well as logistics services for manufacturers.

The move will help the sector to move up the value chain, and prompt integrative development of the country's tertiary, agriculture and industry sectors, the meeting said.

"The high-tech production-oriented service industries will accelerate the country's industrial upgrade and prompt 'Made in China' to evolve to 'Created in China'," Zhang said.

In addition, financial services for the manufacturing of construction equipment, delivery vehicles and production line will be promoted, while the country will encourage service outsourcing and the nurturing of high-end talents.

The central government will ease market access to attract social capital to the industries, encouraging Chinese enterprises of the sectors to invest overseas and lifting access restrictions gradually for foreign companies on architectural design, accounting audit and commercial logistics.

Enterprises of research and design, inspection and certification, and energy saving will be allowed tax breaks that have been enjoyed by high-tech companies.

According to the meeting, value-added tax will be promoted to the entire tertiary sector and favorable policies will be introduced to build a sound environment for companies in production-oriented service industries.

In addition, the country will continue to develop service industries concerning daily life, such as health, elderly care and information consumption, in a bid to improve people's well-being and build a new engine for healthy economic and social development.

A draft of the Food Safety Law was approved at the meeting, which requires full supervision, stricter punishment, accountability, increased risk monitoring and improved food safety standards.

The draft is still subject to deliberation of the Standing Committee of the National People's Congress, according to the meeting.

Source: Xinhua

Japan Inc. poised to rake in record profits this fiscal year

Japanese listed companies this fiscal year will likely match or surpass their record total profits from fiscal 2007, underscoring their recovery from the financial crisis and the March 2011 earthquake and tsunami.

The Nikkei tallied pretax profits for companies that have released results for the year ended March 31 as of Wednesday, excluding financial and power companies. Total profits swelled 36% last fiscal year and are seen climbing 2% this fiscal year.Combined fiscal 2014 pretax profits at 1,258 companies are projected at around 29 trillion yen ($281 billion), or 98% of fiscal 2007's figure. Although Toyota Motor and NTT expect profit declines, 62% of businesses are forecasting growth.
Companies that have boosted earnings globally are drawing particular attention. Mitsubishi Heavy Industries is focusing on areas where it can compete worldwide, and it expects its first record profit in 18 years this fiscal year on the back of its strong energy and aviation-related businesses.

Source: NewsOnJapan

WSJ: Interest Rates Sink Globally in Expectation of Stimulus

        The WSJ reports,"global bond rates dropped to their lowest levels of the year Wednesday, as central bankers signaled their determination to jolt the world's largest economies out of their malaise.

Investors piled into U.S., German and British government bonds—used to price everything from mortgages to car loans—driving down their yields. The yield on the 10-year U.S. Treasury dropped to as low as 2.523%, its lowest level in more than six months. In Germany, 10-year bund yields fell to their lowest point in a year.

The persistently sluggish economies in Europe and the U.S. have confounded central bankers and surprised investors, many of whom anticipated that this year would see relatively strong economic growth after years of monetary stimulus. In the U.S., despite rock-bottom interest rates, housing activity remains relatively depressed, companies have yet to pick up hiring and inflation has remained worryingly low.

"The global economy hasn't fired up despite all the heavy monetary stimulus,'' said Mary Ann Hurley, vice president of trading at D.A. Davidson & Co. in Seattle.

The prospect that central banks will continue to inject money into the world's bond markets, as well as enact policies to keep interest rates low, has acted as a green light for the world's bond buyers".

Bank of England Gov. Mark Carney on Wednesday said the U.K. central bank is in no rush to raise interest rates even though some U.K. economic data on manufacturing and employment have been stronger lately.

Mr. Carney's comments came a day after The Wall Street Journal reported that Germany's central bank, which has resisted the idea of further stimulus, is now willing to back an array of measures by the European Central Bank to fight stubbornly low inflation. Ten-year U.K. government bonds fell to their lowest yields since the end of October.

U.S. Federal Reserve Chairwoman Janet Yellen said last week that the U.S. central bank would continue to keep interest rates near zero for a considerable period.

Central banks have spent trillions of dollars buttressing financial markets and the global economy since the 2008 financial crisis. While the Fed has begun tapering its monetary stimulus, it is still buying $45 billion of Treasurys and mortgage bonds each month.

Investors came into this year anticipating rates would move higher as economies picked up steam and as the Fed pulled back stimulus efforts.

The yield on the 10-year U.S. Treasury was about 3% at the beginning of the year, and Wall Street strategists and economists were predicting rates would rise steadily beyond that.

"Bond bears have eggs on their faces this year," said Gary Pollack, who helps oversee $12 billion assets as head of fixed-income trading in New York at Deutsche Bank AG's private wealth management unit.

This year through Tuesday, U.S. Treasury bonds have handed investors a total return of 2.18%, according to data from Barclays PLC. The S&P 500 has returned 3.4% in the same period, while the Dow Jones Industrial Average has returned 1.7%, according to FactSet and including price gains and dividend payments.

German government bonds have delivered investors a return of 3.5% so far this year and U.K. government bonds 3.17%. Total return includes price appreciation and interest payments and is calculated in local-currency terms.

By the end of the day Wednesday, the 10-year U.S. Treasury note was 21/32 higher in price, yielding 2.544%. In Europe, the yield on the 10-year German government bond fell to 1.37%, while the yield on the 10-year U.K. government bond dropped to 2.583%.

Analysts say "Everybody at the start of the year bet on higher yields," 

S&P not very optimistic on Greek Banks

WSJ: Tencent Mints Money From Mobile

         The WSJ reports,"Tencent's first-quarter earnings were complicated by this year's deal-making frenzy, but underlying trends were promising. Net profit surged by 60% from a year earlier. This was partly due to one-time gains from the disposal of various investments, including two e-commerce units that Tencent traded to online shopping site JD.com as part of a complex deal where it took a 15% stake in JD. Revenue rose a healthy 36% from a year ago.

Crucially, Tencent's mobile strategy is paying off. Its flagship WeChat mobile-messaging service, similar to Facebook's  WhatsApp, and a second messaging app QQ Mobile, were major drivers of top-line growth. Revenue from games on the two platforms tripled from the previous quarter to more than 1.8 billion yuan ($288.9 million), or nearly 10% of total revenue. Analysts had expected a figure of just around 800 million yuan.

Tencent shares soared early this year on excitement over WeChat, as analysts theorized it alone could be worth more than $30 billion, or around a quarter of Tencent's market capitalization. Expectations that Tencent's mobile-payments platform would take a big slice of all of China's retail transactions was another justification for its lofty valuations.

The stock is now down over 18% from its high in March. New regulations on mobile payments snuffed out some of the excitement, as did the generalized pullback in global tech stocks. China's regulatory framework for Internet finance still hasn't been settled. And now that Tencent has outsourced much of its e-commerce operations to JD, the two companies need to show they can grow margins and take on the leading player in that space, rival Alibaba.

But with some froth taken out of Tencent's shares, investors can concentrate less on far-flung scenarios and take solace that mobile monetization has begun. That's a message worth receiving".

EUROZONE INDUSTRIAL PRODUCTION CONTRACTED BY 0.3 PER CENT IN MARCH

The Eurozone's industrial production contracted at a 0.3 per cent month-on-month pace in March, according to Eurostat.

Versus a year ago output was 0.1% lower. 

Economists had been expecting a fall of 0.3% on the month and of 0.9% in comparison with a year ago.

In terms of monthly rates of change production was lower across all sub-sectors, led by a 0.4% decline in energy and another 0.8% decrease, the largest one, in the production of intermediate goods.

In terms of quarterly rates of change industrial output was 0.2% higher after having expanded by 0.5% over the previous three months. 

Production levels diminished in all the main countries within the single currency area: Germany, France, Italy and Spain. 

Source: LiveCharts

WSJ: China Gets Upper Hand in Russia Gas Deal

            The WSJ reports,"Vladimir Putin is due in Beijing this month, and the conversation between the ex-superpower and the budding one is sure to involve energy. The Ukrainian crisis has Europe, which buys 75% of Russia's gas exports, talking loudly about finding new sources. That means Moscow needs to court new buyers. It also needs to find new avenues of capital, considering a net $51 billion—equivalent to 2.5% of GDP—flowed out of the country in the first quarter.

On both counts, China is Russia's best bet. With a goal of doubling its gas market by 2020, China is one of the fastest-growing energy markets in the world. Plus, Beijing offers an alternative to Western funding. It has already struck financing deals worth more than $300 billion for long-term oil supply with Rosneft, says Citigroup.That should convince Russia's state-controlled Gazprom  that it needs China National Petroleum Corp. more urgently than the other way around.

The two sides have been negotiating a 30-year gas-supply deal for about a decade, but have been stuck over the price. Gazprom wants something linked to the price of oil, the way it sells in Europe. Yet that rests on the premise that gas and oil compete as fuels. China has likely resisted the idea since in its critical power-generation sector, the alternative to gas isn't oil, but ultra-cheap coal.

The problem is the coal market is nowhere near as liquid as oil, so another option is to link to prices at gas hubs. CNPC had previously wanted to base its price off U.S. benchmark prices. But that is unrealistic given the U.S. gas market's relative isolation from the rest of the world. Gazprom said both sides agreed not to use that benchmark.

Until recently, market prices weren't conducive to a deal. Russia charged its European customers about $12.5 per million British thermal units two years ago. China paid about $10 per mmBtu for Central Asian gas. Russia could afford to say no to matching the lower price, perhaps because it thought China needed gas badly, partly to combat pollution.

In the past year, though, CNPC has gained the upper hand. Gazprom's European price has fallen to about $10.8 per mmBtu as of April, as it offers discounts to compete against Norwegian and African supplies. Meanwhile, U.S. gas exports are set to grow on the back of its shale revolution, possible given added impetus by a desire to reduce Russia's market power amid the Ukraine crisis. This gives China more options down the road. And as for China's desperation to tackle pollution, a gas deal wouldn't clear the skies overnight anyway.

Gazprom may also need to tap Chinese financing. It has to spend $80 billion to build the China pipeline and associated projects, according to James Henderson at the Oxford Institute of Energy Studies. That gives CNPC another bargaining chip".

Fitch Ratings: OAO Lukoil currency outlook at "BBB" with negative outlook

U.S. wholesale prices surge in April to 0.6%

U.S. wholesale costs posted the biggest increase in April since the fall of 2012 as they rose sharply for the second straight month, suggesting that price pressures might be building a bit after an extended period of extremely low inflation.

The producer price index jumped a seasonally adjusted 0.6% last month following a revised 0.5% increase in March, the Labor Department said Wednesday. Economists polled by MarketWatch had expected a 0.2% increase.

The index also showed wholesale costs appear to be accelerating. Producer prices have risen 2.1% in the past 12 months, up from 1.4% in March and just 0.9% in February.

Yet economists caution against reading too much into the PPI because the index underwent its first major makeover in years at the start of 2014. The index has been quite volatile in its new incarnation.

Excluding the volatile categories of food, energy and trade, core wholesale prices rose a smaller 0.3% last month, the Labor Department said Wednesday.

The price of goods jumped 0.6% in April as the wholesale cost of food and gasoline rose.

The price of services also increased 0.6%, led by higher costs for airline tickets. Grocery and liquor-store costs advanced as well.

Personal consumption, a new index designed to foreshadow changes in the consumer price index, surged 0.7% in April.

Source: marketwatch