THE DAY AHEAD

REUTERS NEWS
KEY ECONOMICS EVENTS ICSC/GS report for w/e 03/23 Durable goods for Feb -- Ex-Transportation -- Ex-Defense Consumer confidence for Mar New home sales for Feb Rich Fed manufacturing for Mar Dallas Fed services act for Mar Dallas Fed services rev for Mar Building permits-R for Feb 1000/1400 1000/1400 1000/1400 1030/1430 1030/1430 TIME:TBA

North American Edition

ET/GMT 0745/1145 0830/1230 REUTERS POLL -3.8 pct 0.5 -68.0 0.422 mln ----PRIOR 1.4 pct -4.9 pct 2.3 -0.1 69.6 0.437 mln 6 5.2 14.2 0.946 mln Census Bureau Conference Board SOURCE

For Tuesday, March 26, 2013

International Council of Shopping Centers/Goldman Sachs Census Bureau (Dept. of Commerce)

U.S. Department of Commerce Federal Reserve Bank of Richmond Federal Reserve Bank of Dallas

MARKET RECAP
Stocks fell in a volatile trading session and Treasuries rose on Monday on Cyprus concerns. The euro fell in a see-saw session. Oil pared gains and the spread between Brent and WTI crude narrowed to less than $13 a barrel during the session. Gold closed lower in heavy trade.
STOCKS DJIA Nasdaq S&P 500 Toronto Russell FTSE Eurofirst Nikkei Hang Seng Close 14447.83 3235.30 1551.73 12680.71 945.94 6378.38 1186.45 12546.46 22251.15 Yield 1.9181 0.2459 0.7856 3.1451 Change -64.20 -9.70 -5.16 -76.64 -0.33 -14.38 -2.99 207.93 135.85 % Chng -0.44 -0.30 -0.33 -0.60 -0.04 -0.22 -0.25 1.69 0.61 Yr-high 14563.75 3260.62 1563.62 12904.71 954.00 6533.99 1209.05 12650.26 23944.74 Yr-low 12035.10 2726.68 1266.74 11209.55 729.75 5897.81 1132.73 10398.61 21975.90

COMING UP
Home price and sales data should confirm that the U.S. housing
recovery remains on track. The S&P CaseShiller report will likely show home prices rose again in January, while Commerce Department single-family home sales data should show only a modest pullback in February after a spike in sales the prior month. The Commerce Department will also issue revised February building permit data. For a related Reuters Insider video, click here

Leaders from Brazil, Russia, India, China and South Africa kick
off a two-day summit in Durban, South Africa to discuss measures to advance trade, investment and political cooperation between the major emerging economies. They are expected to endorse broad plans to set up a joint foreign exchange reserve pool and infrastructure development bank.

The U.S. government's durable goods report will likely show that
demand for aircraft boosted overall orders in February even as growth in non-transportation durable goods orders slowed.

TREASURIES 10-year 2-year 5-year 30-year COMMODITIES May crude $ Spot gold (NY/oz) $

Price FOREX 3 /32 Euro/Dollar 1 /32 Dollar/Yen 2 /32 Sterling/Dollar 3 /32 Dollar/CAD Price 94.55 1603.90 3.4370 295.22 Price 3.69 1.07 0.46 18.25

Last % Chng 1.2857 94.11 1.5179 1.0209 -0.97 -0.41 -0.35 -0.23

The Conference Board's consumer confidence index is forecast

to have declined slightly in March even after the sentiment gauge improved more than expected a month earlier.

Dallas Federal Reserve President Richard Fisher, one of the fiercest critics of the Fed's easy money policy, speaks at the GIC Central Banking Series Conference in Dubai. Meanwhile, the Dallas Fed issues a Texas service sector outlook and the Richmond Fed releases manufacturing and services data for March.

$ change 0.84 -4.05 -0.0170 0.01 $ change -0.91 -0.16 0.03 1.21

% change 0.90 -0.25 -0.49 0.00 % change -19.78 -13.01 8.17 7.10

Copper U.S. (front month/lb) $ Reuters/Jefferies CRB Index

Walmart hosts its first eCommerce-focused media day and will lay
out what the world's largest retailer is doing to improve its eCommerce business at home and abroad.

BIG MOVERS
Idenix Pharmaceuticals Cell Therapeutics Suntech Power Apollo Group

Target Canada president Tony Fisher will be speak at the Canadian Club of Toronto to discuss the retailer's progress towards opening 124 stores across all 10 provinces by the end of the year.

The U.S. Supreme Court will consider two same-sex marriage

cases on Tuesday and Wednesday, one on a marriage ban in California and another on a federal law that restricts the definition of marriage to a man and a woman.

For The Day Ahead - Canada, click here

THE DAY AHEAD

For March 26, 2013

MARKET MONITOR
Stocks fell on Monday, but ended off their session lows after the president of the Eurogroup tried to clarify his comments on the Cyprus bailout. Banking shares were among the ones hurt most. Shares of Morgan Stanley fell 0.95 percent, while Bank of America dropped 1.27 percent. Red Hat fell 3.56 percent. United Therapeutics dropped 2.18 percent. Dell shares rose 2.62 percent and Apollo Group was up 7.10 percent. Best Buy rose 1.93 percent. The Dow was down 0.43 percent, the S&P 500 Index was down 0.33 percent and the Nasdaq was down 0.30 percent. Treasury prices rose on safety buying after the head of the Eurogroup of finance ministers said that Cyprus's bailout deal may be a template on how to resolve high bank debt in other countries in the region, raising concerns about potential bank runs. Benchmark 10-year Treasury notes traded up 3/32 in price for a yield of 1.92 percent. The 30-year bond rose 2/32 in price, yielding 3.15 percent. The week's $99 billion in longer-dated Treasury supply and any encouraging domestic economic data should exert some downward pressure on the bond prices with moves exaggerated by a shortened trading week ahead of the Easter holiday, analysts and traders said. The euro fell against the dollar and the yen as brief enthusiasm brought on by Cyprus' last-ditch deal with its international lenders swiftly segued into broader fears about the region's banking sector. The euro fell to a session low of $1.2829 against the dollar, extending its losses to a four-month low and it last traded at $1.2857, down 0.97 percent. The euro also fell against the yen and was last trading at 121.01 yen, down 1.39 percent and well below the Asian session high of 123.85 yen. The dollar was last down 0.4 percent at 94.12 yen. Crude futures rose in choppy trading after a bailout deal for Cyprus improved the outlook for fuel demand in the euro zone. May crude was up 0.91 percent at $94.56 a barrel, back below the 50-day moving average at $94.37 after rallying to $95.65. Middle East tensions, including the civil war in Syria and Iran's dispute with the West over Tehran's nuclear program, continue to support oil prices. "The relief at the fact that Cyprus will not suffer an uncontrolled bankruptcy and have to leave the euro zone may prompt financial investors to increase their long positions in crude oil," analysts at Commerzbank said in a note. Click on the chart for full-size image

Gold fell in heavy trade as a bailout deal to avert a collapse of Cyprus' banking system and possible economic chaos in the euro zone decreased the metal's safe-haven appeal. Spot gold hit its weakest since March 15 at $1,589.49 earlier. It was last seen down 0.25 percent to $1604 an ounce. April gold futures also dipped to a 10-day low of $1,588.40 and were later seen at $1,602.90, still down 0.19 percent. The metal broke strong technical support at $1,600 but managed to regain some lost ground, at least for now. Traders said that a sustained push below that level would see the metal enduring further losses. The next downside targets now stand between $1,550 and $1,560.

THE DAY AHEAD

For March 26, 2013

TOP NEWS
Cyprus reaches last-minute deal on 10 billion euro bailout Cyprus reached a last-ditch deal with international lenders on a 10 billion euro rescue plan to avoid economic meltdown, agreeing to close down its second-largest bank and inflict heavy losses on big depositors. The agreement came hours before a deadline to avert a collapse of the banking system in fraught negotiations between President Nicos Anastasiades and heads of the European Union, the European Central Bank and the International Monetary Fund. Backed by euro zone finance ministers, the plan will spare the Mediterranean island a financial catastrophe by winding down the largely state-owned Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a "good bank". The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros, Eurogroup chairman Jeroen Dijssebloem said. Dell says Blackstone, Icahn offers may be superior Dell said it received alternative proposals from Blackstone Group and Carl Icahn that could be superior to the $24.4 billion takeover offer from founder Michael Dell and private equity fund Silver Lake Partners. Michael Dell is willing to explore the possibility of working with third parties regarding alternative offers, the company said. However, it said the special board committee considering a sale continues to support the company's pending sale to Michael Dell and Silver Lake. The special committee was evaluating the new takeover proposals to decide whether either or both were likely to trump the existing take-private deal, Reuters reported on Sunday, quoting a source familiar with the discussions. Icahn Enterprises raised the prospect of working with Blackstone, saying the two groups had held preliminary talks. Dollar General profit tops expectations, shares up Dollar General said sales growth this year could surpass the strength it saw in 2012 as demand for food and other goods, including cigarettes, helps drive gains despite consumers' concerns about the economy. The company's fourth-quarter profit came in well ahead of analysts' expectations despite lighter-than -anticipated sales growth. Dollar General earned $317.4 million, or 97 cents per share, in the fourth quarter ended on Feb. 1, up from $292.5 million, or 85 cents per share, a year earlier. Sales rose 0.5 percent to $4.21 billion. Analysts, on average, expected 90 cents per share on sales of $4.26 billion. Apollo Group seeks to attract new students as enrollments fall University of Phoenix owner Apollo Group plans to offer more non-degree courses in a bid to attract students after enrollments to the biggest for-profit college in the United States fell the most in four quarters. Apollo's shares rose after the company reported a better-than-expected profit for the second quarter, but analysts said the rally was likely to be short-lived as new student numbers lagged. Apollo said student sign-ups fell 20 percent in the second quarter ended Feb. 28. The decline was bigger than the 13 percent fall that Wall Street had expected, Robert W. Baird analyst Jeffrey Mueler said in a note. Excluding one-time items, Apollo posted net earnings of 34 cents per share for the second quarter, beating Wall Street estimates of 18 cents. Secondquarter revenue fell 13 percent to $834.4 million, but were ahead of the $822.8 million analysts had expected. Click on the chart for full-size image

Bernanke says Fed's easy policy benefits world economy Federal Reserve Chairman Ben Bernanke defended the central bank's aggressive easing of monetary policy, saying while it was aimed at bolstering the U.S. economic recovery, it was helping other countries as well. But the Fed chief countered the rhetoric about "currency wars," though he did not use the term specifically. Bernanke said the integrated nature of the global economy meant the whole world benefits from a sturdier U.S. outlook. Meanwhile, though the Federal Reserve may revise its two yearold plan for eventually reducing assets on its balance sheet, it continues to expect to raise rates before possibly selling off some of the assets, New York Fed President William Dudley said. Boeing sets initial 787 check flight, NTSB plans forum Boeing said it plans a two-hour flight of a company-owned 787 airliner on Monday, to be followed by ground and flight certification tests of proposed changes to the 787's lithium ion batteries in coming days. Monday's flight would be used to validate that all systems on the new airliner are working as designed, said Boeing spokesman Marc Birtel. Once data from the flight had been analyzed, Boeing said it would prepare for a ground and flight demonstration aimed at certifying the company's proposed changes to the battery system, a key step toward getting permission from the Federal Aviation Best Buy founder Schulze rejoins as chairman emeritus Best Buy founder Richard Schulze, who left the board last year and later failed in his effort to take the company private, will rejoin the retailer as chairman emeritus and add two of his former colleagues to the board. "We view today's announcement as a clear positive for Best Buy, as it suggests that Mr. Schulze is unlikely to sell his 20 percent stake in the company at any point in the near future," Barclays analyst Alan Rifkin said. Rifkin said Schulze's return was likely to be "a huge morale boost," citing his popularity among the company's employees.

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For March 26, 2013

TOP NEWS (continued)

U.S. regulators OK Nasdaq compensation for Facebook IPO U.S. regulators approved Nasdaq OMX Group's $62 million compensation plan for firms that lost money in Facebook's glitch-ridden market debut, a victory for the exchange operator that also set the stage for potential lawsuits from firms seeking more. Nasdaq said in a note to traders that the U.S. Securities and Exchange Commission approved the plan, and that firms harmed in Facebook's initial public offering had one week to submit requests for compensation. Nasdaq spokesman Joe Christinat said now that the SEC has approved the plan, the Financial Industry Regulatory Authority can promptly begin processing claims for restitution. J&J recalling more than 2 mln blood glucose meters worldwide Johnson & Johnson is recalling and replacing more than 2 million meters used to measure blood glucose levels in diabetics due to a failure to operate properly at extremely high glucose readings, the company's LifeScan unit said. In the United States, about 90,000 OneTouch Verio IQ meters are affected out of some 1.2 million units of that model being recalled worldwide, the company said. At extremely high glucose readings of 1024 mg/dl and above, the units have failed to provide a warning of dangerously high blood sugar and will shut off, potentially delaying proper treatment, the company said.
PIC OF THE DAY

Women wearing traditional mantilla dresses smoke outside a church before taking part in the Brotherhood procession of "Los Estudiantes" (The Students) at the start of Holy Week in Oviedo, northern Spain.

FDA rejects United Therapeutics' oral hypertension drug again United Therapeutics said the oral version of its drug to treat hypertension was rejected for the second time by U.S. health regulators, sending its shares down. The company would now probably conduct another late-stage trial for the drug as it had originally planned, Wedbush analyst Liana Moussatos told Reuters. After the first rejection, the company had said that it could take four years to conduct a new trial and make a new application, she said. However, "they did some additional analysis and brought in some historical data and thought they would give it another shot," she added.

ANALYSTS RECOMMENDATIONS
Company Name Allstate Action Goldman Sachs raised rating to buy from neutral and raised price target to $58 from $50, says the companys homeowners segment will drive margin improvement in 2013 that will lead to ROEs in excess of 12 percent. Raymond James raised target to $100 from $92 to reflect the Heidelberg cash and carry deal, which Raymond James values at approximately $3 billion, and the recent Shenandoah oil discovery. RBC raised target price to $23 from $21 to reflect the companys Project Moonshot initiative that should enable the company to better participate in the growing hyperscale segment of the server market. BMO cut rating to underperform from market perform citing significant underperformance in 2012 and early 2013 and the companys poor fundamentals and execution. KBW raised price target to $19 from $16 after the companys first-quarter results exceeded KBWs expectations on higher revenues and operating margin.

Anadarko Petroleum Hewlett-Packard JC Penney

KB Home

THE DAY AHEAD - CANADA

COMING UP
No major events are scheduled.
BIG MOVERS Aquila Resources Winstar Resources B2Gold Sandvine TMX Group Iamgold Price 0.13 2.15 3.04 1.95 56.50 7.53 C$ -0.01 -0.10 -0.12 0.05 1.27 0.14 % Change -7.14 -4.44 -3.80 2.63 2.30 1.89

For March 26, 2013

MARKET MONITOR
The Toronto Stock Exchange's main index fell to its lowest level in nearly a month on Monday as investors pared their initial enthusiasm over a euro zone bailout deal for Cyprus. The Toronto Stock Exchange's S&P/TSX composite index was down 0.60 percent to 12,680.71. Goldcorp lost 1.92 percent and Barrick Gold fell 1.33 percent. BlackBerry dropped 4.48 percent, while the Toronto-Dominion Bank climbed 0.31 percent. The Canadian dollar was down 0.21 percent at $1.0211.

TOP NEWS
BlackBerry shares slide on Goldman downgrade BlackBerry stock fell on Monday after Goldman Sachs cut its rating, citing a disappointing U.S. launch for the smartphone maker's new touchscreen device that went on sale in the U.S. on Friday. "Our retail checks at over 20 store locations since March 22, including at AT&T, Best Buy, and RadioShack, revealed a surprising lack of marketing support and poor positioning of the product," Goldman Sachs analyst Simona Jankowski said in a note. The brokerage firm cut its rating on shares of BlackBerry to "neutral" from "buy." AltaGas to buy California-based Blythe Energy for $515 million The energy infrastructure company AltaGas said it will buy U.S. power company Blythe Energy for $515 million to take control of a power plant that runs on cheaper and cleaner natural gas. AltaGas said the acquisition will help it meet increasing demand for power generated from cleaner sources. AltaGas added the acquisition is likely to be accretive to its earnings and cash flow per share in 2014. The deal is expected to close in the second quarter. Mongolia mine closure wipes out SouthGobi revenue SouthGobi's revenue plunged 98 percent and the coal miner reported a bigger fourth-quarter loss as its only producing mine remained shut after the Mongolian government suspended its licenses. The company's net loss widened to $51.8 million, or 28 cents per share, from $18.9 million, or 14 cents per share, a year earlier. Revenue fell to $1.2 million from $51.1 million a year earlier. Plazacorp agrees to acquire Keyreit, trumps Huntingdon bid Plazacorp Retail Properties said it has agreed to acquire Keyreit for roughly C$119 million, a move that trumps an unsolicited bid from Huntingdon Capital and allows Plazacorp to expand its retail property footprint. Marking a new round of consolidation among Canada's real estate investment trusts this year, Plazacorp said its cash and unit deal is worth C$8 per unit and has the backing of Keyreit's board of directors, which has been attempting to fend-off Huntingdon's unsolicited approach for the last two months.

THE DAY AHEAD

For March 26, 2013

ANALYSIS AND INSIGHT

DEALTALK Deutsche Telekom steps up battle to secure U.S. merger By Harro Ten Wolde and Leila Abboud Deutsche Telekom is on a final charm offensive to win over MetroPCS shareholders to a merger with its U.S. business, which it needs to close the gap with bigger U.S. rivals and free up resources to invest in Germany. While MetroPCS agreed the deal in October, activist shareholders holding about 12 percent of its stock contest the terms and are campaigning for others to help vote it down. Failure for Deutsche Telekom, which has already had an attempt to sell its T-Mobile US arm to AT&T knocked back by competition regulators, could have big repercussions. At the least, the German group could have to sweeten its proposal for MetroPCS. At worst it could be left a distant fourth in the U.S. mobile market, pumping in money it needs in Germany to reverse losses in broadband customers to cable firms. "There are no other options left other than trying it on their own in the U.S. They will be set back two years in time (if the deal fails)," said a Deutsche Telekom shareholder who met with the Bonn-based company last week. Having won regulatory approval, the MetroPCS merger now needs support from a majority of the U.S. firm's shareholders in a vote on April 12. In a bid to secure this, Deutsche Telekom, MetroPCS and T-Mobile US executives began meetings with MetroPCS investors on Wednesday that continue this week. But they face opposition led by investment firm P. Schoenfeld Asset Management, which has called the deal "irresponsibly and inefficiently structured," arguing the terms undervalue MetroPCS and saddle it with debt at high rates. Critical to the outcome could be shareholder advisory firm ISS, which Deutsche Telekom met last Thursday and which may publish its recommendation on how MetroPCS investors should vote as early as Tuesday or Wednesday. Advisory firm Glass Lewis will also weigh in later this week. "If the ISS recommends shareholders vote against the deal in its current form, it will put a lot of pressure on Deutsche Telekom to revise the terms," wrote Nick Brown, analyst at Espirito Santo investment bank in a research note. The Deutsche Telekom shareholder, who spoke anonymously because his discussions with the company were private, said the German group was "pretty convinced" it would get enough votes but was checking with big MetroPCS shareholders to be sure. "It all depends on the feedback they will get in the coming days, whether they will consider a deal with better terms." THE BATTLEGROUND Deutsche Telekom has long searched for a solution to help TMobile US compete with bigger rivals Verizon, AT&T and Sprint. In 2011, antitrust regulators blocked a bid from AT&T to buy TMobile US. That $39 billion deal would have left Deutsche Telekom holding 8 percent of the larger company. Deutsche Telekom talked to other operators including Sprint in a bid to gain critical mass in the United States - which is nearly 70 percent controlled by the top two players - and settled on MetroPCS. Under the October deal, MetroPCS shareholders will get $4.06 per share in cash plus stock equivalent to 26 percent of the combined company. Deutsche Telekom will own the rest. The new company will have almost $19 billion in net debt, including a $15 billion loan from Deutsche Telekom, which rebel MetroPCS shareholders say is unfairly priced. MetroPCS says the loan's interest rate will be about 7 percent but activist Schoenfeld, which owns 2.5 percent of the company, puts it at 7.72 percent, and says the loan is effectively a transfer of value to Deutsche Telekom. MetroPCS' largest shareholder Paulson & Co, which owns 36.3 million shares or 9.9 percent, has come out against the deal. On Monday, MetroPCS wrote to shareholders urging them to vote in favour, arguing the deal would boost growth and insisting the debt was well-priced for MetroPCS. A Deutsche Telekom spokesman declined to comment on whether the group would consider improving its offer and reiterated the current proposal was the best for shareholders of both firms. If Deutsche Telekom fears the deal is at risk, it could alter the loan terms or accept a smaller proportion of the new company's shares. It could also extend the 6-month lockup period for it to keep shares in the combined company. PLAN C Without MetroPCS, which focuses on the pre-paid segment, TMobile US may need a revamped strategy. A tie-up with another rival such as Sprint is seen by bankers and investors as unlikely for now given that Japan's Softbank is buying a 70 percent stake in the third-place mobile player. T-Mobile US lost 515,000 contract customers in the fourth quarter although total customers rose by 61,000. It holds an event in New York on Tuesday at which it is expected to announce new value plans and potentially the launch of Apple's iPhone. A collapse of the MetroPCS deal would also have consequences for Deutsche Telekom in Europe, if it then needs to plough money into the United States to operate T-Mobile US on its own. Deutsche Telekom has long said its priorities are Germany and the United States. It plans to invest almost 30 billion euros ($39 billion) over three years on upgrading its broadband in Germany and on faster mobile technology in the United States. Adrian Pehl, analyst at German broker Equinet, said Deutsche Telekom might have to consider asset sales in Europe if the MetroPCS deal fell through, such its 50 percent stake in EE, Britain's largest mobile operator, or its Dutch mobile unit. Deutsche Telekom and France Telecom, its partner in EE, have said that listing part of British operator this year was their preferred option. Analysts value DT's stake in EE at 5.76 billion euros, and the Dutch unit at 2.57 billion. Moody's credit analyst Carlos Winzer said Deutsche Telekom would have options to step up investment in its U.S. business without MetroPCS. "If it fell through completely it would be (credit) neutral for DT. For other scenarios we would need to see terms," he said. In Ohio, the fog begins to lift over the Utica shale By Edward McAllister Shares of Gulfport Energy were in free fall last spring, dropping 55 percent in four months, until the oil and gas producer announced it had drilled its first three wells in the Utica shale formation in Ohio. The Oklahoma-based company's value has since more than doubled, bolstered by a series of company production updates on those and a handful of other new wells located in what many believe to be the next frontier in America's oil and gas revolution. The share price gain represents perhaps the clearest example of how investors, giddy about an expected boom in Ohio's energy production, have been betting on companies based on some optimistic, but preliminary, production data. But next month a more comprehensive state report will publish new data from Ohio's oil and gas wells that will offer the most insight yet about whether the Utica is the next big thing or a potentially fizzling bust for companies operating there. Energy producers in the Buckeye State have compared the Utica to the giant Eagle Ford shale play in Texas and declared it a boon for a state still weathering an economic downturn. However, enthusiasm has cooled somewhat since drilling began in 2011, after wells produced more cheap natural gas than the

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For March 26, 2013

ANALYSIS AND INSIGHT (continued)

more lucrative oil. On March 31 this year, data from between 50 and 60 wells drilled in 2012 will be given to the state. It will then be made available on the Ohio Department of Natural Resources' website in April, the department said. It did not give a specific date but last year the report came on the second of the month. While around 500 drilling permits have been issued in the state since 2011, only those wells that have actually produced will be covered in the report. It will show output over the lifetime of every new well, its location, and its owner, providing some proof of which acreage, and which companies, are performing best. "It is a meaningful sample of wells that will go a long way toward giving investors a sense of whether the Utica is the next big thing," said Morningstar analyst Mark Hanson, who covers companies operating in the state. UTICA SILENCE Ohio publishes well data only once a year, making it one of the least transparent states in reporting energy output. Most states publish every quarter. On April 2 last year, production was published from just five wells. That is the only official state record on the play two years after drilling began there. Results from the five wells drilled by Chesapeake Energy in Carroll and Harrison counties showed lower than expected oil production, and stronger natural gas output, the state report said. Since then, a long list of companies, including Britain's BP, Anadarko Petroleum and Hess Corp, have acquired acreage in Ohio. Most remain quiet about their progress for fear that it will push lease prices higher. "It has to do with the competitive nature of things," said Mark Houser, chief executive officer of EV Energy Partners which, together with its parent company Enervest Ltd, owns more than 800,000 acres in the Utica. "If you have a good acreage position, you still may want to buy the acre next door. You don't want to have everything public." BP, Anadarko and Hess did not respond to request for comment for this story. Devon Energy is in the process of selling more than 200,000 acres in the Utica after drilling a series of what a company spokesman described as "disappointing" wells in what it expected to be oil-producing acreage. Chesapeake Energy, which did not immediately respond to calls for comment, has also sold off a portion of its more than 1 million acres there. "The little I have seen from the Utica shows it has been a bit disappointing given the expectations," said Phil Weiss, an analyst with Argus Research who covers companies drilling there. "Given that the amount of information is relatively sparse, people will be paying attention." PEAK RATE, SHAKE AND BAKE Meanwhile, smaller companies such as Gulfport, Rex Energy and Magnum Hunter Resources, with a proportionately bigger stake in the Utica, have more to lose if the play turns out to be a dud. Rex Energy and Magnum Hunter did not immediately respond to requests for comment. Of the smaller companies, Gulfport's share price has shown the most remarkable rise since the first half of last year and the company in many ways encapsulates both the hype about the Utica and the difficulty in deciphering its true potential. Since June, 2012, when it announced it had drilled its first three Utica wells, Gulfport's share price has risen 156 percent, from below $17 to more than $43 on March 18, as the company began reporting initial flow rates from the new wells. But as the April deadline for reporting well production looms, experts will be watching closely for whether Gulfport's preliminary data holds up to further scrutiny. "Ultimately, the production and estimated ultimate recovery of our wells and those of our peers will provide definitive answers," said Paul Heerwagen, Gulfport's director of investor relations. The company, which owns 128,000 net acres in the Utica, published impressive "peak rates" of gas and condensates from its Utica wells, a measurement of initial flows taken over a limited time period, usually no longer than 24 hours. A peak rate is typically much higher than eventual longer term output that declines over time. "The peak rate is more a bragging type thing," said Randall Collum, a natural gas production analyst at data provider Genscape. "It is nice to know and gives some indication of potential production, but I would rather get a longer term outlook." During a quarterly conference call with analysts on Feb 27, Gulfport chief executive James Palm revealed longer term rates for two wells, which had fallen off significantly from the first flows. Natural gas output from the Wagner 1-28H well fell from a peak rate of 17.1 million cubic feet per day reported on August 7 to an average of 5.2 million cubic feet per day after 129 days of production. Output of gas condensates fell from 432 barrels per day to 94 bpd. Decline rates are normal, and Gulfport executives said on Feb. 27 that output from the Wagner well has increased slightly since the end of the year. Gulfport is not alone in reporting peak rates. Rex Energy chief executive Tom Stabley said he was "very excited" about output from three new Utica wells in a statement on March 18 that disclosed 24-hour test rates for the wells. But the speed of the declines in the Gulfport wells, and the scarcity of longer term data, makes it hard for investors to judge whether it will be a good long-term investment. "The first four months show that the peak rate was not overrepresentative of what could ultimately be recovered from the well," said Morningstar's Hanson. Further muddying the water is a new technique known in the industry as 'shake and bake' or 'resting', where a well is plugged for a number of days or months after drilling to increase pressure in the well. Shake and bake, an unproven method that companies hope might improve recovery from a well over its lifetime, can increase initial flows by raising pressure, said Gulfport's Heerwagen, though it is not yet clear if it increases flows long term. So far, more than 500 well permits have been issued in the Utica since 2011, many of which are expected to begin producing as new pipelines and processing plants are built to connect wells to markets as early as this spring. As more wells are drilled, more information will be made available - but not for a while. The data on wells drilled in 2013 will remain largely unknown until April 2014.

THE DAY AHEAD

For March 26, 2013

ANALYSIS AND INSIGHT (continued)

BREAKINGVIEWS ECBs street-cred faces another hit over Cyprus By George Hay The European Central Banks street-cred is facing another hit over Cyprus. The Frankfurt-based institution has pledged to fund the Bank of Cyprus if deposits flee following Nicosias 10 billion euro bailout on March 25. This in theory removes the need for Cyprus to adopt counterproductive capital controls. But it also administers another knock to the ECBs credibility as an ironfisted central bank. To access ECB-sanctioned liquidity, the Bank of Cyprus needs collateral. After it splits off its Greek arm, the lender will have 15 billion euros of loans, according to third-quarter data from September. Against that, it had 8.5 billion euros of insured deposits, some of which have been withdrawn in the last week, according to a person familiar with the situation. Assume then that there are 7 billion euros that could run. Most of the lenders collateral will be too risky for Frankfurts taste. It will qualify instead for so-called emergency liquidity assistance (ELA) operated by Cypruss own central bank, and doled out only after massive haircuts. Greek banks currently have 31 billion euros of ELA, against 122 billion euros of collateral. If Cypriots banks get the same treatment, Bank of Cyprus would be able to secure only 3.8 billion euros of ELA. Yet the 3 billionplus euro gap could be closed because the bank probably has a fair chunk of Cypriot sovereign debt, which doesnt need such a large haircut. And even then, there is a get-around. Bank of Cyprus could manufacture its own ELA collateral by issuing bonds that are then guaranteed by its own government. Nicosias need for draconian capital controls probably depends on whether Cypruss smaller banks also have the collateral to survive a run. Bank of Cyprus position should embolden the government to implement capital controls only on uninsured deposits, rather than insured deposits. Restrictions to the free movement of capital would hurt Cyprus already sputtering economy even more. The snag is that by agreeing to the bailout, the ECB has to condone ELA for as long as it is needed a far cry from its preferred stance of lending good-quality collateral to banks experiencing short-term liquidity problems. But the time for being fastidious is long gone. CONTEXT NEWS The Governing Council of the European Central Bank has pledged to provide liquidity to the Bank of Cyprus as a part of a 10 billion euro bailout agreed in the early hours of March 25. However, the ECB added that the liquidity would be provided "in line with applicable rules". The Cypriot government was on March 25 deciding whether to implement capital controls on insured depositors in Bank of Cyprus and smaller Cypriot banks. (The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

ON THE RADAR
ECON INDICATOR WED: Mortgage Index for w/e 03/22 -- Refinancing Index Pending home sales for Feb THU: Recommended early close for bond market Real GDP qq SA for Q4-F -- Final sales -- Implicit deflator -- Core PCE price -- PCE Price Index Corporate profits for Q4 Initial claims for w/e 03/23 -- 4 week average -- Continuing claims for w/e 03/16 Chicago PMI for Mar ECRI Weekly Index for w/e 03/22 K.C. Fed Composite Index for Mar FRI: Good Friday- markets closed, government offices open 0945/1345 1030/1430 1100/1500 0830/1230 0830/1230 1000/1400 ET/GMT 0700/1100 REUTERS POLL ---0.2 pct PRIOR 765.1 4108.8 4.5 pct National Association of Realtors SOURCE Mortgage Bankers Association (MBA)

0830/1230

0.5 pct 1.9 pct 0.9 pct 0.9 pct 1.5 pct -340,000 -3.040 mln 56.5 ---

0.1 pct 1.7 pct 0.9 pct 0.9 pct 1.5 pct 2.5 pct 336,000 339,750 3.053 mln 56.8 129.8 -10

Bureau of Economic Analysis (Dept. of Commerce)

Labor Department

National Association of Purchasing Management, Chicago Economic Cycle Research Institute Federal Reserve Bank of Kansas

THE DAY AHEAD

For March 26, 2013

KEY RESULTS vs. THOMSON REUTERS I/B/E/S ESTIMATES

Company Name Quarter EPS Estimates Year Ago Rev Estimates (mln)

SAIC Inc.

Q4

$0.51

-$0.49

$2,709

** Includes companies on S&P 500 index. Estimates may be updated or revised.

PREDICTED RESULTS SURPRISES FROM STARMINE

Company Smart Estimate Predicted Surprises Market Cap. Industry

Headwaters Cincinnati Financial Lattice Semiconductor Range Resources Pultegroup Imperial Oil Sandisk Kinder Morgan Energy Partners Arlington Asset Investment Universal Truckload Services Research In Motion Aspen Insurance Holdings Blackstone Group United Therapeutics JPMorgan Chase City Holding Company American Railcar Industries

-$0.08 $0.64 $0.01 $0.28 $0.16 $0.90 $0.81 $0.71 $1.10 $0.34 -$0.27 $0.96 $0.53 $1.52 $1.42 $0.74 $0.95

13.69% 10.54% 10.00% 8.96% 8.89% 7.94% 6.76% 6.54% 5.71% 5.15% 4.34% 3.75% 3.46% 3.19% 2.64% 2.56% 2.05%

$804 $7,570 $641 $13,151 $7,983 $35,290 $13,348 $33,408 $413 $677 $7,780 $2,678 $22,555 $3,059 $186,704 $617 $950

Construction Materials Insurance Semiconductors & Semiconductor Equipment Oil, Gas & Consumable Fuels Household Durables Oil, Gas & Consumable Fuels Computers & Peripherals Oil, Gas & Consumable Fuels Capital Markets Road & Rail Communications Equipment Insurance Capital Markets Biotechnology Diversified Financial Services Commercial Banks Machinery

StarMine SmartEstimates predict future earnings more accurately than consensus (or mean) estimates by putting more weight on the recent forecasts of StarMine's toprated analysts. StarMine is a subsidiary of Thomson Reuters. The predicted surprise is the difference between the SmartEstimate and consensus. When a predicted surprise is 2 percent or more, history shows that you can anticipate an earnings surprise in the same direction with an accuracy rate of 70 percent.

The Day Ahead - North American Edition is compiled by Karan Khemani, Benny Thomas and Chandrashekhar Modi in Bangalore; Franklin Paul and Meredith Mazzilli in New York. THE DAY AHEAD - North American Edition is produced by Reuters News For questions or comments about this report, email us at: TheDay.Ahead@thomsonreuters.com Or call us at +91 80 4135 5929 Visit the Thomson Reuters Equities Community Site at: http://customers.reuters.com/community/equities/ For more information about our products: http://thomsonreuters.com/products_services Or send us a sales enquiry at: http://thomsonreuters.com/products_services/financial/contactus/ or call us on North America: +1 800 758 5555 2013 Thomson Reuters. All rights reserved. This content is the intellectual property of Thomson Reuters and its affiliates. Any copying, distribution or redistribution of this content is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.