Ukraine's Poroshenko urges more sanctions if Russia backs referendum

BERLIN Wed May 7, 2014 6:20am EDT

BERLIN May 7 (Reuters) - Ukrainian presidential candidate Petro Poroshenko urged Europe and the United States to agree on a third wave of sanctions against Russia if the Kremlin supports a referendum organised by separatists in eastern Ukraine on May 11.

"If Russia will support this referendum we need absolutely agreed action about the third wave of sanctions, well coordinated between the United States of America and the European Union," Poroshenko told reporters in Berlin shortly before meeting Chancellor Angela Merkel.

Separatists in the Donbass region say they will hold a referendum on secession on Sunday, similar to the one that preceded Russia's annexation of Crimea in March. (Reporting by Madeline Chambers and Stephen Brown)

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tp UPDATE 2-Repsol exits Argentina with $1.26 billion YPF stake sale

Wed May 7, 2014 7:05am EDT

(Refiles to remove extraneous characters from headline)

* Repsol sells 11.86 percent of YPF to Morgan Stanley

* Says to make $622 million pretax capital gain

* Sales follows Argentine compensation for 2012 YPF seizure

* Repsol shares flat

By Tracy Rucinski

MADRID, May 7 (Reuters) - Spanish oil major Repsol bid farewell to 15 years of business in Argentina with the sale of a stake in energy firm YPF to Morgan Stanley for $1.26 billion on Wednesday.

The sale, together with a $5 billion settlement with Argentina over its 2012 expropriation of a 51 percent stake in YPF from Repsol, opens a new chapter for the Spanish oil company that is likely to focus now on upstream investments.

Madrid-based Repsol is seeking acquisitions in exploration and production as it tries to increase hydrocarbons output. YPF had accounted for over half of Repsol's production.

"We see the (YPF) divestment as a sensible move ... and the realization of material cash will add to expectations that Repsol may be near to reinvesting proceeds in an acquisition opportunity," said Deutsche Bank analysts, who have a "hold" rating on Repsol shares.

In a regulatory filing on Wednesday, Repsol said it would make a $622 million pretax capital gain from the sale of the 11.86 percent stake, which leaves it with under 0.5 percent of YPF.

Repsol Chairman Antonio Brufau has said the company would look for growth in OECD countries, with analysts tipping the United States, Canada and Norway as possible target markets.

It will also seek out assets that offer instant cash flow to compensate for the loss of its cash generating liquefied natural gas (LNG) business, sold last year under pressure from credit rating agencies to shore up capital, analysts said.

The LNG division's absence from Repsol's profit and loss account as of Jan. 1 is expected to weigh on the company's first-quarter results, due to be released on Thursday.

Repsol had already removed YPF's contribution from its profit and loss calculations in 2012 and took a 1.3 billion euro ($1.81 billion) writedown on its stake in 2013.

The company still needs to monetize $5 billion in dollar-denominated Argentine bonds that it is soon set to receive for the YPF settlement.

Repsol is already in touch with UBS, JP Morgan, Goldman Sachs and Deutsche Bank over the imminent sale of a first tranche of the bonds worth $1.5 billion, newspaper Expansion reported on Wednesday, citing unnamed financial sources. Repsol declined to comment on the report.

Analysts had estimated in February that the Argentine settlement and potential sale of the 12 percent stake in YPF would add some 3.5 euros to Repsol's shares, which were trading around 18.60 euros at the time.

Repsol's shares had a muted reaction to news of the YPF stake sale on Wednesday, trading flat at 19.31 euros, with analysts saying the price may already have partially reflected hopes for closure in Argentina.

Morgan Stanley may now sell the 11.86 percent YPF stake on to other investors after paying Repsol $26.90 per share, a source with knowledge of the matter said.

YPF American Depositary Shares closed on Tuesday at $28.18, implying a discount of about 4.5 percent for Morgan Stanley on the deal. ($1 = 0.7177 Euros) (Additional reporting by Andres Gonzalez in Madrid and Freya Berry in London; editing by Richard Pullin and Tom Pfeiffer)

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Banco do Brasil misses profit estimates as fee income tumbles

SAO PAULO Wed May 7, 2014 6:25am EDT

SAO PAULO May 7 (Reuters) - State-run Banco do Brasil SA missed first-quarter profit estimates on Wednesday after fee income, which declined sharply in the period, fell short of expectations.

Recurring net income, or a gauge of profit excluding one-time items, came in at 2.436 billion reais ($1.1 billion) in the quarter, according to a securities filing. The number came in below the 2.512 billion reais estimated in a Reuters poll of five analysts.

The bank's loan book reached 631.347 billion reais at the end of the quarter, below the poll's estimate of 634.428 billion reais.

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Egypt bond yields rise to eight month high in delayed announcement

Tue May 6, 2014 5:39am EDT

* C.bank delays announcing results until after banking hours

* High yields, low volume reflect declining demand

* Public deficit expected to widen absent subsidy reform

CAIRO, May 6 (Reuters) - Egypt treasury bond prices jumped to the highest levels in eight months at an auction late on Monday that was delayed amid speculation that bids had pushed yields too high for the government, which is facing a rising budget deficit.

The average yield on five-year bonds increased to 13.460 percent from 13.076 percent at the last auction on April 8, while the yield on 10-year bonds rose to 15.436 percent from 15.069 percent.

Rates have not been that high since Sept. 3, when the average yield on the five-year bond stood at 14.63 percent and the yield on 10-year bonds reached 15.96 percent.

Demand for government securities has declined amid expectations the central bank would cut interest rates next quarter, fixed-income traders have said.

Higher yields also reflect a declining willingness of the local money market to finance the public deficit, which the government has relied on since a popular uprising in early 2011 chased away most foreign investors and put pressure on the local currency.

The trigger for Monday's hike was the auction of 266-day treasury bills on Sunday at a yield slightly above the 357-day bills the previous week, a Cairo-based fixed-income trader told Reuters.

"That sent a message to the market that the government has to borrow the funds and the Ministry of Finance isn't too concerned with yields now," the trader said. "That makes the market more aggressive."

The central bank delayed announcing the results of the sale until after banking hours on Monday, which traders suspected was related to the government's concern over rising yields.

"Banks and traders submitted very high yields, so the Finance Ministry was probably checking whether they really do need the funds, because they want to cap interest rates," the same trader said.

The central bank said it accepted bids on Monday worth 1.006 billion Egyptian pounds ($143.41 million) for the five-year bonds and 1.036 billion Egyptian pounds for the 10-year bonds, about half the volume it had offered for each security.

The trader said the low volume of maturities sold probably reflected the government's attempt to reign in rising yields. Bond and treasury-bill auctions have been cancelled or capped occasionally in the past, most recently last month.

Egypt's budget deficit hit around 14 percent of gross domestic product in the last fiscal year ending on June 30. The government expects the deficit to reach around 12 percent this fiscal year and up to 14.5 percent in the coming fiscal year if it does not implement reforms.

Successive government have shied away from meaningful reforms, such as an overhaul of Egypt's bloated fuel and food subsidies system, to avoid setting off a social backlash. Officials have said that fuel subsidies alone could cost near $19 billion in the next fiscal year beginning in July absent immediate reforms.

Egyptian 91-day and 266-day T-bill yields jumped to their highest in more than four months on Sunday. Last week, yields for 182-day and 357-day T-bill yields jumped to their highest in more than three months.

Last week, the central bank kept its key interest rates on hold, seeking to find a balance between stimulating the economy and keeping inflationary pressures in check. ($1 = 7.0150 Egyptian Pounds) (Reporting By Stephen Kalin Editing by Jeremy Gaunt)

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Merck to sell consumer care business to Bayer for $14 bln

Tue May 6, 2014 6:11am EDT

May 6 (Reuters) - Merck & Co Inc said it would sell its consumer care business to Germany's Bayer AG for $14.2 billion.

Merck said it expects after-tax proceeds of between $8 billion and $9 billion from the sale.

The deal is expected to close in the second half of 2014.

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MOVES- Barclays, Morgan Stanley, HighTower Advisors, Towers Watson

Tue May 6, 2014 6:17am EDT

May 6 (Reuters) - The following financial services industry appointments were announced on Tuesday. To inform us of other job changes, email to moves@thomsonreuters.com.

The British bank's senior technology banker in the United States will become the fifth top investment banker to leave the bank ahead of a strategic overhaul due this week, the Financial Times reported, citing people familiar with the matter.

The independent adviser-owned firm, which has expanded by hiring away from top U.S. brokerages, said it hired a team of veteran advisers from the Guth Group at Morgan Stanley to expand its presence in Columbus, Ohio.

The bank's wealth management unit said on Monday that it hired veteran advisers from UBS AG for its Louisville office. The advisors, J. Stuart Mitchell and Robert Schenkenfelder, managed about $715 million in client assets and had fees and commissions in excess of about $1.8 million at UBS.

The employee benefits consultancy firm said it appointed Keith Goodby senior investment consultant in its Insurance Investment Advisory Group (IIAG), to focus on expanding the company's investment services to insurance companies. (Compiled by Avik Das in Bangalore)

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UPDATE 1-Slovenian PM Bratusek resigns, wants early election

Mon May 5, 2014 5:48am EDT

* Resignation follows PM's loss of her party's leadership

* Like Bratusek, president, parties favour early election

* Economists fear election will delay or halt reforms (Adds Bratusek, analyst quotes, details, background)

By Marja Novak

LJUBLJANA, May 5 (Reuters) - Slovenian Prime Minister Alenka Bratusek resigned on Monday after losing the leadership of her party 10 days ago, paving the way for an early election in the small euro zone member that narrowly avoided an international bailout last year.

In a tweet, Bratusek said she hoped an election could be held by the summer. Analysts said the political uncertainty may slow or even halt plans to sell off state assets, but said Slovenia was unlikely to need outside financial help for now.

Bratusek's centre-left coalition government managed to stave off a bailout in December by pumping some 3.3 billion euros of state funds into Slovenia's troubled banks.

"If all are true to their word, we will have an election before the summer," Bratusek wrote in her tweet. However the constitutional rules may make it hard to meet that timeframe.

Saso Stanovnik, chief economist of investment firm Alta Invest, said markets would want a "clear signal" from Bratusek's government, which will continue in a caretaker capacity until an election, that there would be no derailment of reform plans.

"We need the election as soon as possible so that a new government would come in and carry on with reforms," said Stanovnik, adding that a new bailout could not be ruled out in the longer term.

"If the new government is not sufficiently reform-oriented we could be facing bailout speculation again at the end of 2015," he said.

Following Bratusek's resignation on Monday, the yield on Slovenia's 10-year benchmark bond rose by 0.066 percent to 3,528 percent, Reuters data showed.

BUDGET DEFICIT

Slovenia has already covered its financial needs for 2014 by issuing four bonds with a total value of some 4.5 billion euros.

Bratusek's government planned to cut the budget deficit this year to 4.2 percent of GDP from 14.7 percent in 2013, when the deficit was boosted by the capital injections into local banks.

It has started to privatise the largest telecoms operator Telekom and planned to sell another 12 state firms by 2015, including Slovenia's second largest bank, Nova KBM.

President Borut Pahor and all the parliamentary parties have said they favour an election, even though the rules allow them to nominate candidates for prime minister from the existing legislature within 30 days without resorting to fresh polls.

"Parliament is expected to acknowledge the prime minister's resignation in the coming days and after that it is up to the parties to agree when the president should dissolve the parliament and determine the election date," parliamentary spokeswoman Gordana Vrabec told Reuters.

The president has to call an election 40 to 60 days after the parliament is dissolved, so it remains unclear whether the ballot could be held as early as June or July.

The political crisis erupted on April 26 when Bratusek's Positive Slovenia party elected her rival, Ljubljana Mayor Zoran Jankovic, as its new president.

Bratusek and a number of parliament members have since quit Positive Slovenia. ($1 = 0.7212 Euros) (Reporting By Marja Novak; editing by Zoran Radosavljevic and Gareth Jones)

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GLOBAL MARKETS-Ukraine tensions, Chinese data sour sentiment

By Catherine Evans

LONDON Mon May 5, 2014 5:35am EDT

LONDON May 5 (Reuters) - European stocks slipped in thin trade on Monday after soft Chinese manufacturing data, while simmering tensions in Ukraine underpinned safe-haven government bonds and gold.

Portuguese bond yields edged to eight-year lows after Lisbon said on Sunday the country would make a clean exit from its bailout later this month.

Volumes were thinned by the closure of markets in London and Tokyo for public holidays.

At 0848 GMT, the euro zone's blue-chip Euro STOXX 50 index was down 1.36 percent at 3,134.55 points, after a survey showed activity in China's manufacturing sector contracted for a fourth consecutive month in April.

That added to signs the world's second-largest economy is still losing momentum and knocked Asian shares overnight.

"The crisis between Russia and Ukraine and the sluggish Chinese data which confirm a slowdown in growth are the two big negative catalysts for markets," said Lionel Jardin, head of institutional sales at Assya Capital in Paris.

"The only thing that prevents stocks from a bigger drop is this week's European Central Bank meeting and the hope that new measures could be unveiled."

MSCI's world equity index, which tracks shares in 45 countries, was 0.21 percent lower at 413.86.

Brent crude slipped in Singapore following the Chinese PMI, but later recovered as the rising tensions in Ukraine added to concerns about supplies. Brent for June delivery was 22 cents higher at $108.81 a barrel by 0843 GMT, after settling 83 cents higher on Friday.

Pro-Russian militants stormed a Ukrainian police station in Odessa on Sunday and freed nearly 70 fellow activists, two days after over 40 died in a blaze at a building they had occupied after clashes with pro-Kiev groups.

The events in Ukraine also helped gold jump although investors said gains might not be sustained as outflows from the top gold fund continued to indicate bearish sentiment.

Gold was $13 higher at $1,313 an ounce, its highest since April 15, after gaining over $14 on Friday.

The safe-haven yen rose to a two-week high of 101.86 yen against the dollar, while the euro was steady at $1.3875 .

"There is risk aversion that is keeping the yen supported," said Niels Christensen, FX strategist at Nordea in Copenhagen.

"Also the dollar has been weighed down by the U.S. data (from Friday) which shows wages are not growing fast enough to trigger worries about inflation. As a result, tightening by the Fed is a some way off and that is not helping U.S. yields."

A sharp rally in longer-dated Treasuries in recent weeks has led to a marked flattening of the curve, with yields on 30-year paper diving to 10-month lows on Friday.

The skimpy yields have undermined support for the dollar, which failed to sustain a post-payrolls rally on Friday.

German 10-year yields have also fallen and were steady around 11-month lows of 1.45 percent as markets eyed the European Central Bank's policy meeting on Thursday. The Bund future was 4 ticks higher on the day at 144.84.

The ECB is widely expected to keep monetary policy on hold after a tick-up in euro zone inflation last month but could adopt new stimulus measures later this year to support fragile growth in the 18-country currency bloc.

Portugal's 10-year bond yield fell to 3.62 percent, its lowest since 2006, after the government said it would exit its bailout this month without a back-up loan.

The yield had neared 17 percent at the height of the debt crisis in 2012, and the country was seen at high risk of default as recently as two years ago.

"It's a bold move by Portugal to move out without asking for a precautionary credit line but the government is confident that it can get funding from the market," said ING strategist Alessandro Giansanti.

Lisbon's PSI 20 stock index was 0.79 percent lower by 0845 GMT, after surging 15 percent year to date. (Editing by John Stonestreet)

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Portuguese yields dip as Lisbon pledges "clean" bailout exit

Mon May 5, 2014 6:25am EDT

* Portugal says to exit bailout without back-up loan

* Portuguese 10-year yields pinned at 8-year lows

* Slovenia yields rise after prime minister resigns (Updates prices, adds developments in Slovenia)

By Emelia Sithole-Matarise

LONDON, May 5 (Reuters) - Portuguese bond yields fell on Monday after Lisbon said it would exit its international bailout programme later this month without a back-up loan, a bold step for a country that two years ago was thought to be at risk of defaulting on its debts.

Like Ireland, which in December became the first euro zone country to exit a bailout, Portugal aims to make a clean break from its financial support.

Lisbon has been helped by an easing of the wider euro zone debt crisis, which has spurred yield-hungry investors' appetite for the region's lower-rated government bonds.

Portugal's brighter prospects contrast with smaller euro zone member Slovenia which has been thrown into political uncertainty after Prime Minister Alenka Bratusek resigned after losing her party's leadership 10 days ago.

Portuguese 10-year bond yields fell 2 basis points to 3.61 percent, their lowest since 2006, according to Reuters data, outperforming other euro zone bonds in thin trade due to a holiday in Britain - Europe's busiest financial centre.

Its yields are now down to just a fraction of the near 17-percent peak they hit at the height of the debt crisis in 2012.

"It's a bold move by Portugal to move out without asking for a precautionary credit line, but the government is confident that it can get funding from the market," ING strategist Alessandro Giansanti said.

"They are already funded for this year and doing pre-funding for next. That goes alongside an improvement in periphery (euro zone states) which is helping the smaller countries, and as long as the mood from investors remains positive for risky assets, that's helping Portuguese government bonds," he said.

The country held its first bond auction in three years successfully last month, paying a record low yield that was seen as a vote of market confidence and a boost for its chances of cleanly exiting its bailout on May 17.

The government has won back confidence by sticking to the austerity policies and reforms required as part of the bailout it took in 2011, investors say.

The drop in its borrowing costs to multi-year lows continues a trend of sharp declines since 2012 driven by signs the euro zone crisis is abating as well as by the prospect of European Central Bank asset purchases and by Portugal's own return to economic growth and lower deficits after a brutal recession.

RATING REVIEWS EYED

Some in the market, such as Commerzbank strategists, said these improvements might prompt upgrades to the country's credit rating. All three major rating agencies - Moody's, Standard & Poor's and Fitch - have junk ratings on Portugal.

Moody's, which assigns the country its lowest rating of Ba3, and S&P are due to announce the results of their reviews of Portugal's creditworthiness on Friday.

"Reading what it would take to upgrade Portugal, we expect a one-notch upgrade with a positive outlook in our base case scenario. At the very least, Moody's should lift the outlook to positive," Commmerzbank strategists said in a note.

Fitch already has a positive outlook on Portugal and S&P is expected to follow suit.

"The prospect of Portugal at least carrying three positive outlooks by the end of the week should not just help defending current PGB (Portuguese Government Bond) yield levels but should also open the door for another leg lower," Commerzbank said.

Slovenian 10-year bond yields rose 7 bps to 3.53 percent after Bratusek's resignation as premier, paving the way for early elections. Bratusek, under whose government the country narrowly avoided an international bailout last year, said she hoped the elections would be held by the summer.

Analysts said the political uncertainty may slow or even halt plans to sell off state assets but said Slovenia was unlikely to need outside financial help for now. (Editing by Louise Ireland)

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UPDATE 1-Russia calls on U.S. to help stop Kiev's military drive

Sat May 3, 2014 2:21pm EDT

(Adds details about Lavrov conversation with German minister)

MOSCOW May 3 (Reuters) - Russian Foreign Minister Sergei Lavrov has told his U.S. counterpart John Kerry that the U.S. should use its influence to make Ukraine's government immediately stop military operations in south-east Ukraine, the Russian foreign ministry said on Saturday.

Lavrov also said that it was important that the mediating role of the Organization for Security and Cooperation in Europe (OSCE) was increased to secure Kiev's fulfilment of the Geneva declaration on de-escalating tensions in Ukraine.

"Chances of this still exist," the ministry said in a statement, as long as all Ukrainian regions are represented in a national dialogue on constitutional reform, and "terrorists" from the Right Sector - a Ukrainian nationalist group in western Ukraine - group are curbed.

Lavrov, in a phone conversation with German Foreign Minister Frank-Walter Steinmeier, also said he was concerned about reports that Ukraine's army was preparing to storm cities in south-east Ukraine including Slaviansk, according to a statement from the foreign ministry.

The town of Slaviansk in eastern Ukraine has been turned into heavily fortified redoubt by pro-Russian separatists.

On Saturday Ukraine said it was pressing on with an offensive in the area for a second day, and had recaptured a television tower and a security services building from rebels in Kramatorsk, a town near the rebel stronghold of Slaviansk.

Steinmeier agreed that violence should halt, the statement said.

(Reporting by Jason Bush and Megan Davies; Editing by Stephen Powell)

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