The Day Ahead news

1. THE DAY AHEAD
REUTERS NEWS North American Edition For Wednesday, June 18, 2014
Stocks ended higher as the Federal Reserve kicked off a
two-day policy meeting, though gains were capped by con-
cerns surrounding Iraq. Better-than-expected inflation data
supported the dollar and weighed on Treasuries. Crude fell
and gold dipped.
TODAY’S MARKET RECAP COMING UP
 The Federal Reserve is widely expected to push forward with a
further reduction in its monthly bond-buying, putting the main focus
of investors on the fresh
quarterly economic and
interest rate projections
the central bank will re-
lease. They could show
officials see faster pro-
gress toward the Fed's
goals of full employment
and 2 percent inflation
than they saw in March, the last time official forecasts were pub-
lished. But perhaps of most interest will be the matrix of dots that
represent individual policymakers views on when they will hike
rates and how high they will go. Fed Chair Janet Yellen will hold a
quarterly press conference, and any comments about slack in the
economy or the likely path of rate hikes will be closely parsed by
investors.
 General Motors CEO Mary Barra heads back to Capitol Hill to
face lawmakers irritated by her lack of answers during her previous
appearance about the deadly ignition switch flaw in millions of cars.
Barra will appear alongside Anton Valukas, the GM-hired investi-
gator who delivered a report earlier this month that cleared top ex-
ecutives in the scandal and instead pinned blame on lower engi-
neers and lawyers. Barra is expected to face tough questions about
whether the automaker is truly being transparent and holding peo-
ple accountable for the flaw, which is linked to at least 13 deaths.
 Parcel delivery company FedEx is likely to have benefited from a
rise in shipments, which are being boosted by a surge in online
retail sales. FedEx's investment in its Ex-press service is also ex-
pected to add to earnings this year. Investors will be looking for any
hit from higher fuel costs and one less operating day in the quarter.
FedEx's comments on how it expects the rest of the year to play
out will also be keenly watched.
 Amazon.com’s founder and CEO, Jeff Bezos, is expected to re-
veal a new product in Seattle. The company has not confirmed
what will be revealed, but analysts widely expect it to be a phone.
The company has been working on the device for many years and
it includes 3D features visible to the eye without special glasses,
according to two people familiar with the phone. Analysts expect
Amazon will set itself apart from competitors by offering a cheaper
model with a creative data plan. Prime is likely to be incorporated in
some way in keeping with Amazon’s push to boost the value of the
membership program.
 Linux operating system vendor Red Hat’s quarterly results will
likely be in line with analysts' estimates, according to StarMine.
Analysts expect the company to report a fall in first-quarter billings
due to the impact of strong billings growth in the fourth quarter.
KEY ECONOMICS EVENTS ET REUTERS POLL PRIOR SOURCE
Mortgage Market Index 0700 -- 387.1 Mortgage Bankers Association
Current account for Q1 0830 -96.9 bln -81.1 bln
STOCKS Close Change % Chng Yr-high Yr-low
DJIA 16809.20 28.19 0.17 16970.20 14551.27
Nasdaq 4337.23 16.13 0.37 4371.71 3294.95
S&P 500 1942.04 4.26 0.22 1955.55 1560.33
Toronto 15055.89 15.46 0.10 15075.70 11759.04
Russell 1162.04 3.63 0.31 1169.60 1043.17
FTSE 6766.77 12.13 0.18 6894.88 6416.72
Eurofirst 1387.75 3.80 0.27 1398.65 1263.36
Nikkei 14975.97 42.68 0.29 16164.01 13885.11
Hang Seng 23203.59 -97.08 -0.42 23469.33 21137.61
TREASURIES Yield Price
10-year 2.6550 -16 /32
2-year 0.4837 -1 /32
5-year 1.7531 -8 /32
30-year 3.4447 -29 /32
FOREX Last % Chng
Euro/Dollar 1.3542 -0.23
Dollar/Yen 102.12 0.28
Sterling/Dollar 1.6959 -0.14
Dollar/CAD 1.0863 0.19
COMMODITIES $ Price $ change % change
Front Month Crude /barrel 106.15 -0.75 -0.70
Spot gold (NY/oz) 1269.95 -1.34 -0.11
Copper U.S. (front month/lb) 0.0306 0.0001 0.34
Reuters/Jefferies CRB Index 309.75 -0.80 -0.26
BIG MOVERS $ Price $ change % change
Yingli Green Energy 3.95 0.43 12.22
AVEO Pharmaceuticals 1.56 0.16 11.43
Acorda Therapeutics 32.12 -3.16 -8.96
United Therapeutics 86.30 -4.15 -4.59
 For The Day Ahead - Canada, click here
 For U.S. - Top News, click here
 For World Cup Details, click here

2. 2
COMING UP (continued)
THE DAY AHEAD For June 18, 2014
 Contract electronics maker Jabil Circuit’s third-quarter results
are expected to be slightly above estimates, according to Star-
Mine, helped by higher sales of mobile phones and video
game consoles in the quarter. The company, which had issued
a conservative outlook in December due to the winding down
of its business with BlackBerry, expects to return its core oper-
ating income within its diversified manufacturing services busi-
ness to "more normalized levels" in fiscal year 2015.
 Thermal coal producer Foresight Energy Partners is ex-
pected to raise up to $367.5 million from its initial public offer-
ing of 17.5 million common units, representing limited partner
interests. Foresight is expected to be valued at about $1.36
billion at the high end of its estimated price range of $19-$21
per unit.
 Statistics Canada is scheduled to report wholesale trade data
for April. Analysts surveyed by Reuters expect a 0.6 percent
increase, after a 0.4 percent decline in March.
 Brazil’s 12-month inflation rate is expected to stay near the
6.5 percent central bank target ceiling. Stubbornly elevated
inflation is a headache for President Dilma Rousseff, who will
seek re-election in October. It has also undermined business
and consumer confidence, curbing investments and family
consumption over the past few months.
 The Bank of England publishes the minutes from its June
meeting, which will be closely watched for signs of further divi-
sion among policymakers on the outlook for interest rates.
MARKET MONITOR
Click on the chart for full-size imageStocks rose on Tuesday, with the S&P 500 ending near its re-
cord after three days of gains, as investors shrugged off the tur-
moil in Iraq and focused on data pointing to higher inflation,
which helped lift bank shares. Investors have been monitoring
the situation in Iraq, worried that it could lead to sharply higher
oil prices for an extended period. The spike in the CPI figures
helped to drive the S&P financial stocks index up 0.94 percent
to 305.41. E*Trade Financial rose 7.74 percent and shares of
Charles Schwab advanced 5.51 percent. Yingli Green Energy
shares soared 12.22 percent after the Chinese solar panel
maker reported a quarterly net loss that was nearly halved, citing
cost controls and a small rise in panel prices. The Dow rose
0.17 percent, the S&P 500 gained 0.22 percent and the Nasdaq
Composite added 0.37 percent.
Treasuries fell after consumer prices recorded their largest in-
crease in more than a year, which may give the Federal Reserve
more confidence in adopting a hawkish tone at it meets this
week. Benchmark 10-year notes fell 16/32 to yield 2.66 per-
cent. Thirty-year bonds dropped 29/32 to yield 3.44 percent.
The dollar rose as news of a stronger-than-expected pickup in
inflation supported the view the Federal Reserve might raise
interest rates sooner than some traders had thought. The green-
back gained 0.29 percent against the yen at 102.13 yen, while
the euro weakened 0.23 percent against the dollar at $1.3542.
The euro edged up 0.07 percent against the yen, at 138.30 yen.
The dollar index gained 0.19 percent to 80.62.
Crude weakened as fears over oil supply disruptions from Iraq
offset the possibility of increased supply due to a thawing of rela-
tions between Iran and the West. Crude was pressured by a
combination of high supply levels and lower refinery runs, said
Carl Larry, chief executive of consultancy Oil Outlooks in Hous-
ton. Oil fell 0.70 percent to $106.15 a barrel.
Gold fell, retreating from three-week highs as a stronger dollar
and possible thawing of tensions between the Middle East and
West quelled investors' appetite for safe-haven assets. Spot
gold was down 0.11 percent at $1,269.86. Gold futures for
July delivery fell 0.38 percent to $1,270.10 an ounce.

3. 3
TOP NEWS
Click on the chart for full-size imageU.S. consumer prices show inflation ticking up
Consumer prices recorded their largest increase in more than a
year in May as costs for a range of goods and services rose,
likely easing the Federal Reserve's concerns that inflation was
running too low. The Labor Department said its Consumer
Price Index increased 0.4 percent last month. In the 12 months
through May, consumer prices increased 2.1 percent. Core CPI
rose 0.3 percent. In the 12 months through May, the core CPI
increased 2.0 percent. Groundbreaking for homes fell 6.5 per-
cent to a seasonally adjusted annual pace of 1 million units, the
Commerce Department said. Permits to build homes declined
6.4 percent to a 991,000-unit pace in May. For a related graphic
on housing starts and building permits, click here
BP to sign $20 billion LNG supply deal with China's CNOOC
BP will sign a deal worth around $20 billion to supply China
National Offshore Oil Corporation with liquefied natural gas,
Chief Executive Bob Dudley said at a conference in Moscow. "It
is a 20-year supply agreement on LNG. It is a fair price for them
and a fair price for us. It is a good bridge between the UK and
China in terms of trade," Dudley said. BP will likely source much
of the LNG from its U.S. export plant at Freeport, Texas, where it
owns 4.4 million tonnes per year of export capacity, having
started negotiations with CNOOC earlier this year. The deal,
expected to boost China's LNG intake by at least 1.5 million
tonnes per year cements China's role as a key buyer of U.S.
gas, industry sources said. "After missing out on a deal to sell
LNG to Taiwan last year, BP has now found a Chinese buyer for
its Freeport volumes, which in pricing terms will have elements
of U.S. as well as oil pricing," an industry source said.
Oracle may buy Micros Systems for more than $5 billion -
Bloomberg
Oracle is in talks to buy Micros Systems, which makes soft-
ware for retailers and hotel chains, for more than $5 billion,
Bloomberg reported citing people familiar with the matter. While
the companies are in exclusive talks, they could still fail to reach
an agreement, the report said. FBR Capital Markets analyst
Daniel Ives said Oracle's rivals could offer a higher bid to drive
up the price. "We believe the most likely candidates would be
SAP or IBM, which offers WebSphere, its own enterprise class e
-commerce platform," FBR Capital Markets analyst Daniel Ives
said. Four-decade-old Oracle's strategy is to integrate software
with its own high-end, expensive hardware for greater efficiency.
The deal, if confirmed, would be Oracle's largest acquisition
since it bought Sun Microsystems for $5.6 billion in 2009.
France tells GE and Siemens: Alstom proposals still not
good
The French government raised the stakes in the battle for engi-
neering group Alstom, telling rival suitors General Electric and
Siemens to come up with better offers. President Francois Hol-
lande's government has given itself the power to veto a deal on
the grounds it does not want Alstom, an innovator and big em-
ployer, to sell the bulk of its business to a foreign firm without the
state having a say. "The talks between the state and the differ-
ent companies are going to continue this week," a source in
Hollande's office said after the meeting with Siemens Chief Ex-
ecutive Joe Kaeser and Mitsubishi Heavy Industries CEO
Shunichi Miyanaga. "The offers must be improved," the source
said. Kaeser, outlining the Siemens-MHI offer to reporters
across town in Paris, said he saw no reason to discuss improv-
ing a proposal which was already the better one on the table.
Facebook challenges TV for brand dollars with smarter
campaigns
Lacking the millions of dollars it costs to broadcast a Super Bowl
ad, Britain's Newcastle Brown Ale gate-crashed the biggest
advertising event in the United States by creating an archetypal
big budget campaign that it never intended to run on television.
The Heineken-owned brand's beer commercials, which poked
fun at the marketing tactics of rivals advertising in the American
football championship game, ran on Facebook and Google's
YouTube instead. The average cost of a 30-second spot in the
Super Bowl was around $4 million. Newcastle said its campaign
cost "a fraction" of a Super Bowl ad, without specifying a num-
ber. It a message Facebook has taken to marketers at the
Cannes Lions international advertising festival this week. Face-
book launched a smartphone app, dubbed Slingshot, that will
allow consumers to exchange disappearing photos and videos
without requiring Facebook accounts.
Shell to sell most of stake in Australia's Woodside for $5.7
billion
Royal Dutch Shell launched a long-anticipated sale of most of
its stake in Australia's Woodside Petroleum, looking to reap
about $5.7 billion as it moves to focus on developing its own gas
assets in Australia. The share disposal brings the Anglo-Dutch
oil major closer to its goal of shedding $15 billion of assets as
part of a drive to cut spending and streamline operations follow-
ing a profit warning in late 2013. The selldown, which reduces
Shell's holding to 4.5 percent from 23.1 percent, removes uncer-
tainty that has weighed on Woodside's share price since Shell
sold a third of its stake in 2010 and flagged it was not a long-
term holder. As part of the deal, Woodside will buy back and
cancel half the shares that Shell is selling, which Australia's top
petroleum producer said would effectively boost its earnings per
share by 6 percent.
Apple settles e-book antitrust case with US states, others
Apple reached an out-of-court settlement with U.S. states and
other complainants in an e-book price-fixing class action lawsuit
on Monday, effectively avoiding a trial in which the iPad maker
faced more than $800 million in claims. U.S. District Judge in
Manhattan Denise Cote ordered the parties to submit a filing to
seek approval of their settlement within 30 days. The publish-
ers - Hachette Book Group, HarperCollins Publishers, Penguin
Group, Macmillan and Simon & Schuster, previously agreed to
pay more than $166 million to settle related antitrust charges.
THE DAY AHEAD For June 18, 2014

4. 4
TOP NEWS (continued)
Jefferies profit rises on investment banking revenue
Investment bank Jefferies Group, owned by Leucadia Na-
tional, reported a 55 percent rise in quarterly profit on improved
investment banking revenue. Jefferies' investment banking reve-
nue grew 19.5 percent to $331.5 million in the second quarter.
Revenue from fixed income sources dropped 5 percent to
$217.7 million. Net earnings attributable to the company's share-
holders rose to $61.3 million from $39.5 million a year earlier.
GM to start compensating ignition switch victims -CEO
Barra
General Motors expects to begin processing victims' claims
related to faulty ignition switches by Aug. 1, CEO Mary Barra
will tell the U.S. Congress. In prepared testimony to be delivered
to the House of Representatives Energy and Commerce Com-
mittee, Barra also will say that Kenneth Feinberg, who is over-
seeing the creation of a compensation fund, will have "full au-
thority to establish eligibility criteria for victims and determine
compensation levels." Barra testified to the panel in early April
and was unable to answer many of the lawmakers' questions.
She promised to come back after the company's internal investi-
gation was completed. Anton Valukas, who headed GM's inter-
nal investigation, will also appear before the House panel.
UPS to charge by size for U.S. ground packages
United Parcel Service said it would start charging by size of
packages for all ground services in the United States as it looks
to offset rising fuel costs. The new pricing will add to shipping
costs for online retailers such as Amazon.com and eBay as they
will have to pay more to ship items that are bulky, but not neces-
sarily heavy, such as diapers and large soft toys. UPS's new
pricing, which will be implemented from Dec. 29, will also include
packages to Canada, the company said. UPS said the change in
pricing would reduce overall package sizes and the use of ex-
cess packaging materials, leading to lower fuel use, vehicle
emissions and transportation costs.
PIC OF THE DAY
A member of the Thunderbolt Craziness band wearing a metal suit bal-
ances a soccer ball on his head as electricity is discharged from Tesla
coils during a performance to celebrate the 2014 Brazil World Cup, in
Changle, China.
Company Name Action
Expedia
Susquehanna raised rating to positive from neutral and target price to $90 from $79, sees upward revisions,
execution, and faster growth driving outperformance.
Morgan Stanley
Barclays raised target price to $35 from $33 as it expects the company's retooled business to allow for a higher
ROE/multiple over time.
SanDisk Jefferies revised price target to $118 from $95 citing the company's acquisition of Fusion-IO.
Travelers Companies
BMO cut rating to market perform from outperform, said the stock is almost fully valued at current levels and
raised the target price to $98 from $96 based on valuation changes after lower catastrophe losses in the second
quarter.
TW Telecom RBC raised target price to $41 from $32 after the company said it would be acquired by Level 3.
ANALYSTS’ RECOMMENDATIONS
THE DAY AHEAD For June 18, 2014

5. 5
THE DAY AHEAD - CANADA For June 18, 2014
COMING UP MARKET MONITOR
 Statistics Canada is scheduled to report wholesale trade data
for April. Analysts surveyed by Reuters expect a 0.6 percent
increase, after a 0.4 percent decline in March.
Canada's main stock index rose on Tuesday as strength in the
financial sector helped offset worries about the volatile situation
in Iraq and nervousness about the outcome of a Federal Re-
serve policy meeting. Investors have been speculating whether
the Fed will accelerate the pace of withdrawal from its stimulus
program and when the U.S. central bank might increase interest
rates. The Toronto Stock Exchange's S&P/TSX composite
index was up 0.10 percent at 15,055.89. Financials climbed,
with Royal Bank of Canada adding 0.08 percent and Toronto
Dominion Bank advancing 0.48 percent. Shares of energy pro-
ducers dropped, reflecting weakness in the price of U.S. crude
oil. Suncor Energy lost 0.92 percent and Canadian Natural
Resources slipped 0.73 percent.
The dollar was up 0.19 percent to C$1.0863.
TOP NEWS
Valeant goes hostile, to launch Allergan exchange offer this
week
Valeant Pharmaceuticals said it will launch an exchange offer
for Allergan this week, allowing it to eventually take the unsolic-
ited bid directly to shareholders. Botox-maker Allergan has re-
jected Valeant’s offer of cash and shares, but Valeant CEO Mike
Pearson said he sees no reason to adjust the bid a third time.
Allergan's biggest shareholder, Pershing Square Capital Man-
agement, intends to mail proxy materials as early as this month
to seek a special meeting later this year to change most of Aller-
gan’s board, Valeant said. Valeant Chief Financial Officer How-
ard Schiller said the company is confident enough Allergan
shareholders will support calling the meeting, noting that more
than half of Allergan's shares have traded since word of
Valeant's initial offer leaked on April 21. Hedge funds and arbi-
trageurs who are interested in a deal now own a large percent-
age of Allergan, Schiller said.
First Quantum to acquire Lumina for about $420 million
First Quantum Minerals said it has agreed to acquire Lumina
Copper for about C$456 million, in a bid to win control of
Lumina's Taca Taca copper project in Argentina. The cash-and-
stock deal values Lumina at about C$9.71 a share, a premium of
nearly 25 percent to the mining company's closing price on the
TSX Venture Exchange on Monday. The Taca Taca asset, lo-
cated about 120 kilometers east of the world's largest copper
mine Escondida in Chile, has an indicated mineral resource esti-
mate of about 21.15 billion pounds of copper.
BIG MOVERS Price C$ % Change
Romarco Minerals 0.97 0.05 5.43
Centerra Gold 5.25 0.17 3.35
Westport Innovations 18.03 0.43 2.44
Pacific Rubiales 22.25 -1.55 -6.51
Migao Corp 1.38 -0.04 -2.82

6. 6

7. 7
ANALYSIS AND INSIGHT
REUTERS SUMMIT
Morgan Stanley's Fleming eyes fee-based account growth
By Svea Herbst-Bayliss and Lauren Tara LaCapra
Morgan Stanley Wealth Management, which is poised to be-
come the largest brokerage in the United States by assets, sees
fee-based accounts making up 40 percent of all the money it
invests for clients, its top executive said.
Gregory Fleming, who runs the bank's brokerage arm as presi-
dent of Morgan Stanley Wealth Management, said at the
Reuters Global Wealth Management Summit so-called advisory
assets are growing at a healthy pace and that they could make
up as much as 40 percent of overall assets in the future.
The number, which has not been made public before, under-
scores both the bank's growth in wealth management plus a
shift into fee-based accounts from accounts where clients pay
for every transaction.
"If we continue to experience growth as we have seen, then we
could see advisory assets swell to $900 billion or $1 trillion over
time," Fleming said, adding that with overall wealth management
assets to top $2 trillion in the near future and set to keep rising,
advisory assets could be 40 percent.
In the first quarter, Morgan Stanley's fee-based accounts repre-
sented 37 percent of assets under management, up from 35
percent in the first quarter of 2013.
Fleming emphasized that 40 percent was their forecast, but the
level could end up being higher over time. He said the split be-
tween fee-based accounts and transaction-based accounts will
depend on what markets do and what clients want, and that he
was not expressing a preference for one over the other.
"A lot of our advisors do both," he said, adding that the bank will
provide services to dovetail with the client's needs.
At the end of the first quarter total client assets stood at $1.94
trillion with fee-based assets having grown 17 percent to $724
billion. During the quarter Fleming said the bank saw $19 billion
in inflows into fee-based accounts.
The numbers put Morgan Stanley very close to overtaking
Merrill Lynch, which oversees $1.95 trillion in client assets.
Passing the rival could be an especially sweet moment for Flem-
ing who had been president at Merrill Lynch but left in 2009 after
the bank was acquired by Bank of America Corp. He joined Mor-
gan Stanley in 2010.
Morgan Stanley already employs more financial advisers, count-
ing 16,400 compared with Merrill Lynch which had 13,700.
But Merrill Lynch's wealth management group already earns
41.7 percent of revenue from fee-based accounts.
In the interview Fleming said Morgan Stanley's financial advisers
are now significantly happier than they were two years ago when
the company last conducted its employee survey. He said far
fewer financial advisers are leaving for other firms and that im-
proved technology helped boost morale.
"You can now send pictures of the front and back of a check on
your iPhone," he said, allowing clients to deposit checks by
phone.
For other news from the Reuters Global Wealth Management
Summit, click here
US banks seen falling short of new debt funding rule
By Douwe Miedema
Wells Fargo, State Street and JPMorgan Chase & Co are below
or almost at minimum capital thresholds expected to be in-
cluded in a rule still being hammered out by U.S. regulators
that's meant to mitigate taxpayer losses in another financial cri-
sis, according to a Reuters analysis.
U.S. banks are already required to hold equity equal to about 10
percent of their balance sheet to serve as a shock absorber to
cover the risk of a sharp drop in the value of loans, investments
and other assets on their books. Banks expect U.S. regulators to
require them to hold another 10 percent in bonds with maturities
of more than a year and other instruments, as part of the forth-
coming rule.
Wells Fargo's loss-absorbing capital stood at 17 percent at the
end of last year, State Street's was 18.2 percent and JPMorgan
stood at 19.1 percent, according to a Reuters analysis of eight
banks, based on regulatory filings and methodology recently
presented by Citigroup.
"These are figures which have been circulating," said Bernard
De Longevialle, a credit analyst at Standard & Poor's. "The mar-
ket tends to view these three (banks) as those who would poten-
tially be the most stretched."
Analysts and officials at banks are basing their estimates for the
benchmarks partially on discussions with regulators and on
wider market assumptions for what would be a reasonable level.
The Federal Reserve has typically taken a tougher stance than
its counterparts in the European Union.
The Fed and the Federal Deposit Insurance Corporation
(FDIC), who are jointly working on the rule, declined to com-
ment.
Regulators want creditors - and not just shareholders - to take a
hit if a bank lands in trouble, to prevent a repeat of the panic that
spread when Lehman Brothers collapsed in 2008.
The equity requirements that U.S. banks already conform to are
in line with recommendations made in the global Basel III ac-
cord. The Fed has said it is planning similar requirements for
long-term debt instruments that investors buy knowing they
might lose all or part of their money. This would double the loss-
absorbing capacity of a bank's capital to about 20 percent.
Regulators from across the world are also working on such
plans, but they still disagree about the details of a common ap-
proach they want to present when the G20 largest countries of
the world meet at a summit in Brisbane, Australia, in November.
DOUBLE THE BUFFERS
The European Union wants banks' loss-absorbing capital to
stand at about 18 percent of the balance sheet, and analysts
believe that the Fed will come up with a similar number, some-
where between 18 percent and 25 percent.
JPMorgan declined to comment. State Street said it had "an
ongoing dialogue with industry participants and regulators over a
wide variety of issues", and that it remained one of the most well
-capitalized banks in the United States.
Wells Fargo pointed to a May investor day, during which its
Treasurer Paul Ackerman said he expected the bank's long-
term debt "to grow a little bit" to fill any gap. Since the beginning
THE DAY AHEAD For June 18, 2014

8. 8
ANALYSIS AND INSIGHT (continued)
of last year, Wells Fargo has issued more than $11 billion in
debt with maturities greater than 10 years.
Bank of New York Mellon stood at 23.4 percent, Citigroup at
22.8 percent and Bank of America at 23.2 percent. All num-
bers are based on regulatory filings as of Dec. 31, 2013.
The rule is intended to make sure that governments can wind
down a failing bank that is considered to pose too much risk to
the financial system to go through ordinary bankruptcy, while not
burdening the taxpayer.
In the U.S., for example, the FDIC has explained how it would
go about the exercise, but the plan won't work without the extra
buffers.
"Banks are more or less asked to keep a capital base ... of 9 to
10 percent of risk-weighted assets, and it's just a simple rule of
thumb to say you would have ... debt that would allow to double
this amount," De Longevialle said.
FitchRatings in a recent presentation also assumed a total loss-
absorbing capacity of 20 percent.
MORE RULES
Banks may not have too much trouble in raising more long-term
debt depending on the exact details of the Fed's requirement,
analysts said, particularly if there is a long transition period.
Questions about the levels and about what instruments would
count towards the total add to banks' anticipation about a long
list of new rules that haven’t been fully implemented, or that
regulators are still writing.
The Fed alone is working on four more rules: to raise more capi-
tal for systemically important banks, to require banks to invest in
assets they can easily sell, to balance the maturities of assets
and liabilities, and to make the short-term funding market less
susceptible to panics.
One of the reasons that Wells Fargo is behind some of the other
banks is that it has traditionally relied on client deposits for fund-
ing, and simply did not need to borrow money from other banks
or from investors.
While clients can quickly withdraw deposits, they are still consid-
ered "sticky" – meaning banks don't anticipate that depositors
will withdraw their funds all at once-- and the Fed may take that
into account by granting banks such as Wells Fargo more lee-
way when setting its long-term debt requirement.
"We would not be surprised if there are some differentiations
between the banks based on their business models. But that's
an assumption, that's not an information," De Longevialle said.
Morgan Stanley and Goldman Sachs have far fewer deposits to
fund their business, and they are also the two banks that far
exceed the 25 percent thought to be the upper boundary for loss
-absorbing capital level.
A senior Fed staffer working on the rule said at a conference last
week he would prefer consensus among the world's regulators
grouped together in the G20's Financial Stability Board before
the Fed put out its own rule.
Banks in Europe often have a different legal structure than those
in the United States, which group all their operating subsidiaries
under one holding company, and this may make it hard to agree
on a common approach soon.
THE DAY AHEAD For June 18, 2014
Yellen, future tightening in spotlight as U.S. Fed meets
The U.S. Federal Reserve is widely expected to chop another $10 billion from its monthly bond purchases at a meeting on Tuesday
and Wednesday but make few, if any, other concrete policy moves. To read more, click here
FACTBOX

9. 9
The Day Ahead - North American Edition is compiled by Shashwat Sharma, Sourav Bose, Nandi Kaul and Ayesha Sruti Ahmed in Bangalore; Franklin Paul and Meredith
Mazzilli in New York.
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KEY RESULTS vs. THOMSON REUTERS I/B/E/S ESTIMATES
Company Name Quarter EPS Estimates Year Ago Rev Estimates (mln)
FedEx Q4 $2.36 $2.13 $11,659
Jabil Circuit Q3 $-0.09 $0.56 $3,599
Red Hat Q1 $0.33 $0.32 $414
** Includes companies on S&P 500 index. Estimates may be updated or revised.
THE DAY AHEAD For June 18, 2014