Market Snapshot*
DJIA
17875.42
-5.42
4910.23
-7.07
S&P 500
2076.33
-4.28
10-Year
1.8936%
3/32
Nasdaq
30-Year
Euro
Tuesday, April 07, 2015
Nymex Crude
Source: SIX Telekurs, ICAP plc
Stocks
U.S. stocks declined, continuing a pattern of erratic behavior where gains and
losses fail to last more than one or two
sessions. Investors and traders say market attention has turned to corporate
results. First-quarter earnings are
expected to decline due to a stronger
dollar and its effect on profits at large
multinational companies, and weaker
commodity prices and their impact on
energy companies. In all, analysts expect
earnings at S&P 500 companies to fall
4.9% from a year earlier, according to
FactSet.
Treasurys
Long-dated U.S. Treasury bonds
strengthened on Tuesday as buyers
stepped in following a recent selloff.
Bond prices had fallen since the start of
Monday as higher stocks and new debt
supply sapped demand for haven assets.
Yet weaker prices--which sent yields
higher--attracted fresh buying interest.
Forex
The dollar rose against the euro and the
yen for a second straight day, undoing
the damage a weak U.S. jobs report
wrought, as investors returned to their
outlook for a stronger U.S. economy and
higher interest rates. The euro dropped
0.7% to $1.0851, falling 1.1% since
Friday. The dollar climbed 0.7% to
Y120.31, on pace for its highest close
since March 19.
23/32
-0.0124
$53.98
+1.84
*preliminary values subject to adjustments
Tomorrow’s Headlines
FedEx to Buy TNT Express for $4.8B
FedEx Corp. on Tuesday said it agreed to buy Dutch package-delivery company TNT Express NV for $4.8 billion in an all-cash deal, making an end run
around rival United Parcel Service Inc. and positioning itself for a big boost
from the booming European e-commerce business.
FedEx already has a sizable air-express delivery operation in Europe, but it
lags behind in the ground-delivery business. Acquiring TNT would give it an
established door-to-door rood network in Europe that connects more than 40
countries, saving the U.S.-based company the time and money required to
build one from scratch.
“The combination of FedEx’s existing network and TNT’s broad ground-based
network will offer tremendous opportunities for us as a result of enhanced
coverage, a broader portfolio, obviously, better pickup and delivery cost; and,
obviously we’re very excited about those opportunities,” said T. Michael
Glenn, FedEx’s executive vice president of market development, on a conference call with analysts.
But the FedEx-TNT deal is subject to approval by European Union regulators.
In January 2013, EU regulators quashed an effort by UPS to acquire TNT for
about $7 billion, unraveling an agreement that was about a year in the making. Then, as now, executives of both companies were sure that regulators
would green-light the deal.
FedEx officials said on Tuesday’s conference call that things are different this
time around. FedEx has a smaller footprint in Europe than UPS and overlaps
less with TNT’s existing business. They said their merger would create a
stronger competitor to UPS and Deutsche Post DHL Group’s DHL unit, the
market’s dominant players.
continued on page 2
Tomorrow’s Calendar
7:00 a.m.
Commodities
The benchmark U.S. oil price jumped to
a 2015 high on Tuesday on fresh signs
that the nation's production is on the
brink of a decline. The U.S. Energy
Information Administration said Tuesday
that U.S. crude-oil output, which hit a 42year high in March, would peak in April
and May before falling from June to
September. The forecast comes a day
after analysts at Goldman Sachs predicted peak production would come this
month.
2.53%
$1.08175
04/03 MBA Weekly Mortgage Applications Survey Market
Composite Index (previous 457), Cur Chg (previous +4.6%),
Purchase Index (S.A.) (previous 188.9), Cur Chg (previous +5.7%),
Refinance Index (previous 2008.7), Cur Chg (previous +3.9%)
9:30 a.m.
IMF Global Financial Stability Report analytical chapters
10:00 a.m.
Feb Metropolitan Area Employment & Unemployment
10:30 a.m.
04/03 EIA Weekly Petroleum Status Report Crude Oil Stocks
(previous 471.44M), (Net Change) (previous +4.77M), Gasoline
Stocks (previous 229.13M), (Net Change) (previous -4.26M), Distillate
Stocks (previous 127.17M), (Net Change) (previous +1.33M), Refinery
Usage (previous 89.4%), Total Products Supplied (previous 19.48M),
Total Products Supplied (Net Change) (previous +0.78M)
11:00 a.m.
IMF Fiscal Monitor analytical chapters
2:00 p.m.
Federal Open Market Committee meeting minutes and economic
forecast
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 1
Tuesday, April 07, 2015 4 p.m. ET
Tomorrow’s Headlines
Most Fed officials expect to begin raising interest rates in
2015 as the economy improves, though the precise timing
of the first increase remains uncertain.
continued
Informatica Taken Private in $5.3B Deal
Informatica Corp. agreed to be bought by Permira Advisers
LLC and the Canada Pension Plan Investment Board for
$5.3 billion in the largest leveraged buyout so far this year.
Permira and CPPIB will pay $48.75 a share for the
Redwood City, Calif., data-software company, according to
a statement confirming an earlier report in The Wall Street
Journal. The per-share price is about 6% above the company’s closing price Monday of $45.83.
Shares of Informatica had risen in anticipation of a possible
deal as private-equity groups vied in an auction of the company. The Journal reported in January that the company
was working with investment bankers and had made contact with potential buyers.
Informatica helps companies organize and analyze broad
swaths of information, tapping the growing demand for help
with managing what is known as big data. The company
had revenue of around $1 billion in 2014, up about 11%.
Also in January, Elliott Management Corp. revealed that it
owned about 8% of Informatica. The hedge fund said it saw
the company as “significantly undervalued” and that it had
initiated talks with Informatica’s management and board of
directors regarding “steps to maximize shareholder value.”
Elliott said in February that it had lifted its stake to 9.4%.
Obama To Present Climate Change as
Public-Health Hazard
President Barack Obama will make the case that climate
change is hazardous to public health as the White House
launches an initiative aimed at addressing its effects on
communities.
The president will highlight the link between climate change
and public health during a round-table discussion Tuesday
afternoon at Howard University. The event and the White
House’s rollout of several other actions are intended to convey the urgent need to prepare for and reduce the consequences of climate change, administration officials said.
Kocherlakota: Fed Should
Be ‘Extraordinarily Patient’
The Federal Reserve should be “extraordinarily patient” and
hold off on raising interest rates until the second half of
2016, Federal Reserve Bank of Minneapolis President
Narayana Kocherlakota said Tuesday.
The U.S. central bank “can only achieve its congressionally
mandated price and employment goals by being extraordinarily patient in reducing the level of monetary accommodation,” Mr. Kocherlakota said in remarks prepared for delivery
in Bismarck, N.D. “Under my current outlook, I continue to
believe that it would be a mistake to raise the target range
for the fed funds rate in 2015.”
But Mr. Kocherlakota, a vocal advocate for aggressive stimulus who is set to leave office in early 2016, has repeatedly
argued against raising interest rates this year.
In his remarks on Tuesday, he said it would be “appropriate”
for the Fed to “defer the initial interest-rate increase until the
second half of 2016,” and then raise the benchmark federal
funds rate to roughly 2% by the end of 2017. That is a more
gradual rise than most officials expect; in March, the median of policy makers’ projection for the fed-funds rate at the
end of 2017 was 3.125%.
Berkshire To Buy Stake
in Axalta Coating
Warren Buffett’s Berkshire Hathaway Inc. has agreed to buy
an 8.7% stake in paint maker Axalta Coating Systems Ltd.
from private-equity firm Carlyle Group LP.
Carlyle, which currently holds a 74.1% controlling stake in
the company, according to FactSet, recently announced
plans to pare back its stake in Axalta through a secondary
offering of 40 million shares.
Carlyle bought Axalta from DuPont Co. in 2013 in a $4.9 billion deal and took the company public in November in a $1
billion offering that priced at $19.50 a share.
Carlyle said it would sell 20 million shares to an affiliate of
Berkshire for $560 million through a private placement. The
price of $28 a share is just below Axalta’s closing price of
$28.33 a share on Monday.
Berkshire, which also owns paint company Benjamin Moore &
Co., will become Axalta’s largest shareholder behind Carlyle.
Steven Cohen’s Firm Appoints
New Advisory Board
Steven A. Cohen’s investment firm appointed a new external
advisory board, according to a person familiar with the matter,
the latest public attempt by the firm to demonstrate tighter
oversight after its predecessor admitted to insider trading.
The six-person board includes former New York City
schools chancellor Joel Klein, ex-Hearst Corp. Chief
Executive Victor Ganzi and Yale School of Management
lecturer Richard Foster, the person said.
Mr. Klein is now chief executive officer at Amplify, which, like
The Wall Street Journal, is owned by News Corp.
SEC Charges Former
Giants Player with Fraud
The Securities and Exchange Commission announced fraud
charges Tuesday against former New York Giants player
William “Will” D. Allen and his business partner for allegedly
operating a Ponzi scheme that raised more than $31 million
by claiming to make loans to professional athletes.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
continued on page 3
page 2
Tuesday, April 07, 2015 4 p.m. ET
Tomorrow’s Headlines
The recovery of remains has been slow, with workers able
to uncover only as many as two graves each day, said Mr.
Tamimi, head of the operations room for general security
for the Iraqi cabinet.
continued
According to the SEC’s complaint, which was unsealed late
Monday, Mr. Allen and his business partner Susan C.
Daub, a financial professional, claimed to make loans to
professional athletes who were short of cash.
Boeing Edges Out Airbus
for New Plane Orders
Boeing Co. edged out rival Airbus Group NV in first quarter
jetliner net order bookings, with the U.S. plane maker also
delivering more aircraft.
Airbus booked 84 new orders in March to bring its first
quarter gross deals for 2015 to 121 aircraft, the Toulousebased company on Tuesday said in a statement. That was
ahead of Boeing, though the European manufacturer also
suffered 20 jet cancellations in the three months leaving its
net bookings nine aircraft behind Boeing’s 110 net order
intake over the same period.
Volkswagen To Expand Tennesee Plant
Volkswagen AG intends to increase the size of its
Chattanooga, Tenn., assembly plant despite slumping sales.
The company has won approval from local government
authorities to increase the expansion of its body shop by
130,153-square feet to accommodate current and future
production needs, factory spokesman Scott Wilson confirmed by email Tuesday.
“Taking this action now saves money while giving us flexibility,” Mr. Wilson said. “This decision extends the already
under construction building a bit further out.”
The expansion will boost the original body-shop size by
another 25%. Construction on the shop began in January.
Orange in Talks to Sell
80% In Dailymotion
Orange SA on Tuesday agreed to enter into exclusive talks
to sell a majority stake in video-streaming site Dailymotion
to Vivendi SA, a deal that looks set to end the telecommunications operator’s protracted and politically sensitive hunt
for a partner to develop the site.
In a joint statement, the companies said Vivendi has
offered to buy 80% in Dailymotion for EUR217 million ($235
million). Orange will keep the remaining 20% stake if the
companies reach a deal at the end of the exclusive talks,
the groups said.
The deal with Vivendi would assure that French companies
retain control of Dailymotion after the French government
twice prevented Orange from selling a stake in the site to a
foreign company.
Ball: US Seeks More Information
On Rexam Deal
Ball Corp. said the U.S. Federal Trade Commission has
requested additional information regarding Ball’s GBP4.4
billion ($6.7 billion) deal to buy Rexam PLC.
Ball said this second request is a standard part of the regulatory process. Broomfield, Colorado-based Ball is a 135year-old company famous for its glass canning jars. Canmaker Rexam is based in the U.K.
Shares, which have been up about 5% this year through
Monday’s close, fell 0.8% in morning trading.
The move comes as VW struggles with declining U.S. vehicles sales because of a lack of crossovers and sport-utility
vehicles in its American portfolio. VW’s March sales
dropped 18% to 30,025 vehicles from the same period a
year earlier. Sales have fallen 9.3% year to date through
the end of March.
The deal announced in February, if approved, would create
one of the world’s biggest consumer-packaging suppliers.
Ball’s purchase would combine two of the world’s largest
can makers, which together with Philadelphia-based Crown
Holdings Inc. account for more than 60% of global beverage-can volumes and close to 90% in Europe and the
Americas, according to Rexam’s website. Rexam’s customers include Coca-Cola Co. and PepsiCo Inc.
Iraqi Teams Exhume Dozens Of
Bodies From Tikrit Graves
Hedge-Fund Manager Challenges
Jazz Pharma Patent
Iraqi forensics teams on Tuesday exhumed from mass
graves the remains of dozens of men thought to be among
the estimated 1,700 Iraqi air force cadets massacred by
Islamic State forces last year, in yet another grisly reminder
of the atrocities committed by the extremist group.
Hedge-fund manager Kyle Bass filed a patent challenge
late Monday against Jazz Pharmaceuticals PLC and its
narcolepsy drug Xyrem.
Thirty-seven bodies were recovered from 11 graves in
Tikrit, said Mohammed al-Tamimi, who is helping lead the
investigation. The exhumations come just days after government forces recaptured the city from Islamic State fighters following a month-long battle.
The challenge was the latest salvo in Mr. Bass’s new battle
against pharmaceutical companies that he believes host spurious patents to keep drug prices artificially high. The challenge was filed in the name of the Coalition for Affordable
Drugs, an organization partly controlled by Mr. Bass.
Xyrem had sales of $778.58 million last year, which represented 66.4% of the company’s total revenues.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 3
Tuesday, April 07, 2015 4 p.m. ET
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Talking Points
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Bankers Strike Out On Their Own
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A veteran Wall Street banker, Guy Phillips never gave much thought to how
companies paid employees until he left his senior position at UBS AG to start his
own wealth-advisory firm.
Setting up a payroll system was just part of a steep learning curve for the 48year-old Mr. Phillips, who since he launched NuOrion Partners in 2013 has had to
educate himself on everything from health insurance to the optimal color palettes
for business cards. He spent part of a family vacation in Beverly Hills, Calif.,
browsing shops on Rodeo Drive for inspiration on designing a “luxe” website.
“I know more now about fonts than I ever have in my life,” he said.
The financial crisis rocked and reshaped Wall Street, forcing many people to
reassess their careers. Since then, a steady stream of executives has left Wall
Street firms and multimillion-dollar salaries to hang out their own shingles. But
for many, the allure of autonomy quickly gives way to everyday realities that can
be jarring.
Some begin to wrestle with existential questions, weighing the value of financial
security against professional fulfillment. Others simply struggle to transition from
a relatively coddled life of chauffeured town cars and teams of junior staffers to
days filled managing the books and picking the office furniture.
Gerry Cardinale, former co-head of Goldman Sachs Group Inc.’s Americas private-equity investing business who started RedBird Capital Partners in 2013,
compared the experience to bungee-jumping off a bridge. “After 20 years of
being at Goldman, I was scared,” he said.
The securities industry cut 28,000 jobs in New York alone during the financial crisis in 2008-2009, according to a March report by the state comptroller. Even
after an uptick last year, employment is 11% lower than before the crisis as a
wobbly economy and new regulations aimed at reducing risk hobbled big global
banks, forcing them to cut jobs and pay.
Some senior bankers who decided to go it alone said they were driven to their
decisions in an atmosphere of uncertainty and low morale.
Mr. Phillips said he left because he saw an opportunity in the wealth-advisory
industry that he felt large banks couldn’t seize because they were hamstrung by
bigger problems. “Banks used to be pretty entrepreneurial,” said Mr. Phillips,
whose NuOrion Partners caters to rich families looking to make direct investments. “But now, banks don’t value an entrepreneurial approach. So anyone
who is that wants to get out.”
Many bankers who leave Wall Street do so with significant resources. They often
have assets and savings squirreled away from years of working at high-paying jobs.
Still, the jump from Wall Street to entrepreneurship, and any potential fall, can be
steep. Unlike in Silicon Valley, where entrepreneurs benefit from an ingrained
startup culture and network of venture-capital backers, Wall Street exiles often
launch startups midcareer and without an equivalent institutional framework.
Blackstone Group LP co-founder Stephen Schwarzman recently told students at
a Harvard Business School event that entrepreneurship in finance is an apprenticeship, and it takes years to get the skills required to start a new firm. Only
those with something unique to offer should go solo, he said, according to a person who heard him speak.
Many Wall Street exiles end up dipping into their savings to fund ventures.
Recruiters said the average initial investment for finance-industry startups is at
least $2 million, before employee costs. As a result, bankers’ second starts are
rarely splashy affairs. Some call on past connections and seek out freebies
where they can, borrowing executive assistants from investors, working out of a
coffee shop or a friend’s office.
continued on page 5
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 4
Tuesday, April 07, 2015 4 p.m. ET
Talking Points
continued
Milton Berlinski, a founding member of Goldman Sachs’s
financial institutions investment-banking group, hopped
from one work location to another as he figured out what
he wanted to do after he left the bank in 2012.
IMF: Labor Force Getting
Too Old In West
Time is running out for policy makers in the world’s largest
economies to return to a healthier growth path.
That is the latest warning from the International Monetary
Fund, which said in a new report Tuesday that aging populations and sluggish advances in worker productivity are quickly binding the global economy to a bleaker, low-growth fate.
Potential growth—the ability of economies to expand based
on the available labor supply, know-how and capital—fell in
the wake of the 2008 financial crisis. While central banks
offered years of cheap money, many governments failed to
use the easier financial conditions to restructure their
economies. As a result, the IMF said it sees stagnating
growth potential in the next five years.
“Increasing potential output will need to be a policy priority
in major advanced and emerging market economies,” the
IMF said in an analytical chapter of the fund’s latest World
Economic Outlook. The report, due to be published in full
on April 14, sets a gloomy tone for the annual meetings of
the world’s finance ministers and central bankers in
Washington later in the week.
Potential output in advanced economies largely led by the
U.S. should increase marginally to an average of 1.6%
through the remainder of the decade as some of the effects
of the crisis wear off, the fund said. That is up 0.3 percentage point from the six years after the crisis but well below
the 2.2% recorded before the financial meltdown.
The IMF calculates the growth capacity of major emergingmarket economies will shrink by nearly two percentage points
from precrisis levels to an average of 5.2% through 2020,
with a hefty portion of that write-down coming from China.
Shrinking labor pools are a major culprit, the fund said. In
Germany and Japan, for example, the working-age population is expected to shrivel by around 0.2% a year over the
next five years. That problem is compounded by a labor
pool that is aging faster than the number of youth entering
the workforce.
It is a similar problem in the world’s largest emerging-market economies. Over the past 25 years, Brazil’s fertility rate
has fallen from an average of nearly three children per
woman to fewer than two. China’s government has long
enforced a one-child policy for much of the population. In
Russia, the working-age population is contracting.
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page 5