>>> Brokers Upgrades & Downgrades - 03/09/2014

>>> Up
*AFREN RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*AVEVA RAISED TO BUY VS NEUTRAL AT UBS
*ENAGAS RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*ING RAISED TO BUY VS REDUCE AT KEPLER CHEUVREUX
*NATIONAL EXPRESS RAISED TO BUY VS NEUTRAL AT GOLDMAN
*REN RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*STAGECOACH GROUP RAISED TO NEUTRAL VS SELL AT GOLDMAN

>>> Down
*ADMIRAL CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*BALOISE CUT TO HOLD VS BUY AT BERENBERG
*PGS CUT TO UNDERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY
*PKN ORLEN CUT TO NEUTRAL VS BUY AT BOFAML
*RED ELECTRICA CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*SAFILO CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
*SAFILO CUT TO REDUCE VS HOLD AT KEPLER CHEUVREUX
*SAP CUT TO UNDERPERFORM FROM NEUTRAL AT EXANE
*SISTEMA CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
*SWISS LIFE CUT TO HOLD VS BUY AT BERENBERG
*TDC CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE

>>> PT Changes


>>> Initiation
*ALROSA REINITIATED AT SELL AT RENAISSANCE CAPITAL; PT RUB35
*BBVA RATED NEW OUTPERFORM AT BERNSTEIN, PT EU10.7
*BNP PARIBAS RATED NEW OUTPERFORM AT BERNSTEIN, PT EU62.2
*CREDIT AGRICOLE RATED NEW MARKETPERFORM AT BERNSTEIN, PT EU10.9
*DIRECT LINE RATED NEW EQUALWEIGHT AT BARCLAYS, PT 296P
*ESURE RATED NEW UNDERWEIGHT AT BARCLAYS, PT 235P
*INTESA SANPAOLO RATED NEW OUTPERFORM AT BERNSTEIN, PT EU2.9
*JUST EAT RATED NEW BUY AT JEFFERIES; PT 450P
*SANTANDER RATED NEW MARKET PERFORM AT BERNSTEIN, PT EU7.6
*SOCGEN RATED NEW OUTPERFORM AT BERNSTEIN, PT EU45.7
*UNICREDIT RATED NEW OUTPERFORM AT BERNSTEIN, PT EU7.4
*URALKALI REINITIATED AT HOLD AT RENAISSANCE; PT $21/GDR

>>> Call
>> Stock
*GO‐AHEAD GROUP ADDED TO CONVICTION BUY LIST AT GOLDMAN
*CELEBI HAVA SERVISI EXITS GOLDMAN CEEMEA FOCUS LIST, STAYS BUY

(GS)European Banks : Stress Test

* capital shortfalls are most likely to be identified at BMPS (48%), Commerzbank (43%), BCP (34%), BAPO
(33%), Piraeus (33%), PMI (32%), Eurobank (30%), Raiffeisen (29%), Alpha Bank (28%) and POP (28%).

*Key changes to market expectations:
- Compared with our previous survey (October 14,
2013), we note:
(1) Credibility has risen: 89% of investors expect
the AQR/test to be credible (previously 70%).
(2) A €23 bn increase to recap expectations. Our
previous survey called for €75 bn of cap hikes.
With €47 bn raised since, a residual of €28 bn
remains. The current expectation (€51 bn)
therefore implies a c.€23 bn increase to aggregate
recap expectations.
(3) Among the ten banks perceived as most
likely to fail, seven remain the same – despite six
of them having raised capital already. Unicredit is
the sole bank to have substantially improved
investor perceptions without having raised capital.
(4) Market perceptions of the likelihood of
failing have increased most for Greek, CEE and
Austrian banks. Conversely, perceptions have
improved the most for Spanish banks.
(5) The average expectation is for banks to
outperform (75%) the broader market, once the
results are announced.

(GS) Strastegy - QE : A look back at the US, UK and Japanese exp

Europe
Strategy Matters: QE: A look back at the US, UK and Japanese experiences

Our economists do not expect the ECB to announce sovereign QE at the September meeting; however weak activity and inflation data in Europe combined with Mr. Draghi’s recent comments highlight the potential of QE as a policy tool. We look at how equities have responded to QE in the past. In the US and UK, equities were up strongly with the impact accumulating over time and cyclicals outperforming. Japan, where the market was expensive and QE less effectual, provides a counter-example. For Europe this time much depends on whether policy can kick-start demand.


QE in the US and UK saw equities respond well...
Judging by the US and UK experiences quantitative easing has generally been good for equities; performance one year after announcement has been consistently positive, up on average c.20% in price terms.


...even though it took up to a year for earnings to start to grow...
Furthermore, the policy stimulus and signaling provided by QE seem to be sufficient a catalyst to buoy equities at least in the initial months. Earnings growth did not turn positive until a year after the initial announcement (and in the case of the first ‘rounds’ of QE even longer).


...although performance had been weaker and valuations lower
However, both the US and UK markets had fallen substantially going into QE1 and valuation at the outset was considerably lower. When QE1 was announced by the Fed the forward P/E on the S&P 500 was 10.1x; STOXX Europe currently trades on 14.0x.


The experience of Japan is far less sanguine...
Arguably the BoJ asset purchases in the early 2000s represent a more comparable case study – especially from the perspective of deflation fears in Europe. In this case while the initial announcement of JGB purchases was greeted with optimism (Topix +8% in a week) it was not sustained.


...For Europe much depends on the growth outcome
However, the Topix at the outset of QE was trading at over 23x forward P/E. And QE proved insufficient to combat Japan’s structural problems. For Europe given that equity valuations are not stretched in the same way much depends on growth. Speculation regarding QE has pushed down both the Euro and bond yields and if this proves ultimately positive for growth – our economists argue that financial conditions have eased in recent weeks – then it ought to continue to support European equities.

(BFW) Glencore May Bid for Anglo American in 2015, Jefferies Says

Glencore May Bid for Anglo American in 2015, Jefferies Says
2014-09-03 05:55:28.136 GMT


By Tim Barwell
Sept. 3 (Bloomberg) -- There’s an increasing possibility of
Glencore buying Anglo next year in all-share offer, Jefferies
says in note.
* Jefferies (buy): Same benefits from Xstrata purchase (asset
quality, increased control of commodity supply, boost for
trading unit, synergies) would result from such a deal
* Would create at least $1.5b of operational, revenue
synergies per yr
* Anglo CEO Cutifani comments yday highlight co. would be
open to offer at right price
* An offer of 5.3 Glencore shares for each Anglo share
would be about 12% EPS accretive for Glencore by year 3;
would imply 25% premium to Anglo’s current share price
* If Glencore shares outperform over the next 6-12 months,
as Jefferies expects, the required ratio to get to a 25%
premium would decline; deal could get done closer to 5.0
* Antitrust risk could be an issue in platinum, copper and
South African coal; Jefferies thinks these could be
overcome
* Doesn’t see any other likely bidders, says Rio Tinto
can’t be fully ruled out
* NOTE (yday): Anglo American CEO Says Open to Takeover
Offers: WSJ; Shares Up


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Tim Barwell in London at +44-20-7073-3512 or
tbarwell@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net

>>> US After Hours

After Hours Summary: TERP +4.7%, HELE -9.1%, GWRE -4.5%, AVNW -3.9% following earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to earnings: TERP +4.7%

Companies trading higher in after hours in reaction to news: CNQR +12.4% (Seeing reports that co has explored a sale and approached companies including SAP and Oracle; Oracle decided not to pursue a transaction), TTPH +9.3% (announced positive oral dosing data from lead-in of IGNITE 2 Phase 3 trial of eravacycline for the treatment of complicated urinary tract infections), CBLI +6.8% (co announced it will report the outcome of its July FDA meeting and host conference call on September 3), FLEX +3.2% (received shareholder approval to purchase up to 20% of its outstanding shares; also, co's Board of Directors authorized management to purchase the co's shares in an aggregate amount of up to $500 mln), ACHN +0.7% (RA Capital Management discloses 18.1% passive stake in 13G filing)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: HELE -9.1%, GWRE -4.5%, AVNW -3.9%

Companies trading lower in after hours in reaction to news: END -20.0% (announced decision to not pay ~$33.5 mln in interest due on September 2, 2014), CPLP -5.4% (announced offering of 15 mln common units), DEPO -4.6% (announced offering of $230 mln convertible senior notes due 2021), CDW -3.7% (commenced public offering of 15 mln shares of its common stock held by selling stockholders), EFC -3.2% (commenced public offering of 8 mln common shares representing limited liability company interests), EFII -2.3% (announced proposed offering of $300 mln convertible senior notes due 2019), CLVS -1.7% (to offer $200 mln of convertible senior notes), AER -1.4% (filed for ~29.85 mln share common stock offering by selling shareholders), GRUB -1.3% (announced launch of proposed follow-on offering of ~10.03 mln shares of common stock)

>>> Asian Update

Asian Market Update: Australia GDP slows but tops consensus; China services PMI recovers from record lows

***Economic Data*** - (CN) CHINA AUG HSBC SERVICES PMI: 54.1 V 50.0 PRIOR (17-month high) - (CN) CHINA AUG NON-MANUFACTURING PMI: 54.4 V 54.2 PRIOR (first increase in 3 months) - (AU) AUSTRALIA Q2 GDP Q/Q: 0.5% V 0.4%E; Y/Y: 3.1% V 3.0%E - (AU) AUSTRALIA AUG AIG PERFORMANCE OF SERVICES INDEX: 49.4 V 49.3 PRIOR (6th consecutive contraction) - (HK) HONG KONG AUG HSBC PMI: 49.6 V 50.4 PRIOR (first contraction in 3 months) - (NZ) NEW ZEALAND Q2 VALUE OF ALL BUILDINGS: 1.0% V 0.0%E - (UK) UK AUG BRC SHOP PRICE INDEX Y/Y: -1.6% V -2.0%E

***Index Snapshot (as of 03:30 GMT)*** - Nikkei225 +0.8%, S&P/ASX +0.1%, Kospi -0.1%, Shanghai Composite +0.8%, Hang Seng +1.0%, Sept S&P500 +0.1% at 2,002

***Commodities/Fixed Income/Currencies*** - Dec gold +0.2% at $1,268, Oct crude oil +0.4% at $93.27/brl - GLD: SPDR Gold Trust ETF daily holdings falls 1.8 tonnes to 793.2 tonnes; Lowest level since June 30 - SLV: iShares Silver Trust ETF daily holdings rise to 10,371 tonnes from 10,311 tonnes prior; Highest since May 5th - (JP) BOJ offers to buy ¥300B in 1-3yr JGB, ¥200B in 3-5 yr JGB and ¥400B in 5-10yr JGB - (CN) China sells 7-yr govt bonds at avg yield of 4.16% - financial press - (AU) Australia MoF (AOFM) sells A$600M in 4.25% bonds due 2026; Avg yield: 3.5548%; Bid-to-cover: 3.33x - USD/CNY: (CN) PBoC sets yuan mid point at 6.1697 v 6.1684 prior setting (weakest yuan setting since June 4th)

***Market Focal Points/Key Themes*** - AUD/USD briefly topped the $0.93 handle after a slightly stronger than expected Australia Q2 GDP but quickly reversed those initial gains. Australia Q2 sequential GDP was up 0.5%, slowing from 1.1% growth in Q1, as terms of trade components fell sharply to -4.1%. Manufacturing and Consctruction were the bright spots, while the mining sector predictably posed the strongest headwind, falling 1.4% and detracting 0.2 percentage points from growth in GDP. Later in the day, RBA Gov Stevens testimony rehashed some of the commentary from the central bank statement overnight - pledging to run accommodative policy, reiterating AUD remains overvalued, and warning the labor market is still soft.

- Next set of PMI prints out of the far east has also been mixed. China's HSBC services PMI rebounded from record-low 50.0 all the way to a 17-month high, and the official PMI reversed two consecutive months of declines. Out of HSBC, chief economist warned the "economy still faces downside risks to growth in the second half of the year from the property sector slowdown. We think policy makers should use further easing measures to help support the recovery." In Hong Kong, HSBC PMI surprisingly contracted for the first time in 3 months, and resident expert said "outlook remains uncertain, with new orders contracting for the fourth consecutive month and new business from Mainland China falling again."

- In Japan, LDP Sec Gen reiterated PM Aso may look to raise sales tax to 10% in principle, despite more cautiously oriented urging by his economic advisor. JPY remains under pressure, with USD/JPY topping 105.20

***Equities*** Market Snapshot (as of 03:30 GMT): US markets: - CNQR: Reportedly considering sale of the company and has reached out to potential buyers - financial press; +15.9% - BPL: To Acquire 80% Interest in Corpus Christi Terminal Complex and Associated Eagle Ford Assets in South Texas for $860M; -1.4% afterhours - HELE: Lowers FY15 $3.70-3.80 (prior $4.30-4.40); Including Healthy Directions FY15 EPS would be $3.90-4.04; Guides FY15 R$1.275-1.30B; cites weaker retail environment and slower store traffic; -10.4% afterhours

Notable movers by sector: - Consumer Discretionary: Fast Retailing 9983.JP +2.9% (Uniqlo Aug SSS) - Energy: Xinjiang Goldwind 2208.HK +6.6% (private placement) - Industrials: Jiangling Motor 000550.CN -0.9% (Aug sales result); Fanuc 6954.JP +2.3% (plans to build domestic facility) - Healthcare: Australian Pharma API.AU +10.3% (FY14 guidance) - Telecom: China Mobile 941.HK +2.6% (iPhone 6 pre-sale)

(MergerMarket) Basilea niche antifungal focus hurts sale prospec

Basilea niche antifungal focus hurts sale prospects 

Swiss anti-infectives drugmarker Basilea [SWX:BSLN] would have hard time convincing potential buyers of its attractiveness due to its position as a niche antifungal producer, two health care bankers said.

CEO Ronald Scott said last month that he would consider the sale of Basilea if the offer created value for the company and its shareholders. But it will be a challenge to drum up interest for a company that only has a late-stage antifungal as it main attraction, the bankers pointed out.

Producing antibiotics is generally seen as less profitable than areas such as rare disease treatments. So, while larger players are still in the antibiotics market, it is not an area as the pharmaceutical companies are clamouring to buy, the bankers noted.

Big pharma players currently active in the anti-infectives space include Merck [NYSE:MRK], GlaxoSmithKline [LON:GSK], Sanofi [EPA:SAN], AstraZeneca [LON:AZN], Roche [VTX:ROG] and Actavis [NYSE:ACT].

Should Basilea have kept Toctino (alitretinoin), its drug for chronic hand eczema that was sold to GlaxoSmithKline in 2012, it would be able to build a story around having a broader European sales infrastructure, said one of the bankers. Instead, it has a late-stage asset that it shares rights to with Astellas Pharma [TYO:4503].

Basilea only has full rights to the EU, rather than the more lucrative, antibiotic-friendly US market, the other banker said, adding that even if isavuconazole obtains FDA approval in May 2015, this will only give Basilea royalties.

But, a person familiar with Basilea pointed out the company also has meticillin-resistant staphylococcus aureusis (MRSA) antibiotic ceftobiprole under brand names Zevtera and Mabelio. Following its EU approval in 4Q13, Basilea anticipates launching Zevtera in Germany in the second half of this year, followed by other European launches next year.

Also, if isavuconazole is approved next year, Basilea could have two hospital anti-infectives with European market authorization by the end of that year, giving the company significant commercialization synergies, the person said.

Basilea has previously been linked as a target to Astellas Pharma and Swiss respiratory drugmaker Actelion [ETR:ACT].

But Basilea would not add much to Actelion’s offering, which focuses on orphan diseases, said a third health care banker. Actelion is already spending a large amount of money on R&D and is unlikely to be able to afford Basilea. The banker noted that Astellas had long been rumoured as a possible bidder for Basilea but nothing has ever materialized.

While the Basilea management views the company as an attractive inversion target with a rarity value, there are very few US buyers that could actually successfully invert with the company, said the first banker. Basilea has a market cap of CHF 1.07bn (EUR 885.62m), limiting it as an inversion target for only relatively small players. Foreign target companies need to make up 20% of the new company in order for a US company to change successfully its tax domicile.

Switzerland is also not an attractive domicile to relocate the company because of laws limiting executive pay, said the second and third bankers. Swiss law gives company shareholders a say on managers’ pay and blocks golden handshakes and severance packages.

An American company that could conceivably make the numbers work is Cubist Pharmaceuticals [NASDAQ:CBST], which has a market cap of USD 5.23bn (EUR 4bn). But Cubist has not had a track record of buying on this kind of scale, the first banker said.

Basilea declined to comment on whether it had received any approaches.

>>> B/E Aerospace notable CEO Move

Heading into the long weekend, B/E Aerospace (NASDAQ:BEAV) filed the Form 10 for the separation of its consumables management business—to be called KLX—which makes it seem like our thesis for aerospace and defense company may be playing out. In the filing, BEAV revealed that current Chairman and co-CEO Amin Khoury is expected to be the post-spin CEO of KLX. That means Khoury will be abdicating control of the manufacturing arm of the company he co-founded—something which Canaccord Genuity’s Ken Herbert describes as “intriguing” in a note published this morning. After BEAV’s 2Q14 earnings call in late July, the Morning Flash highlighted comments that supported a prior Dealreporter story which stated that the company could pursue a deal similar to Alliant Techsystems (NYSE:ATK) by following its spinoff with an all-stock merger of its remaining segment. And the manufacturing unit has been seen as the most likely candidate for such a move. With key management moving on to consumables—BEAV Chief Financial Officer Tom McCaffrey is also moving over to KLX as Chief Operating Officer—it looks like another stone on the scale in favor of a manufacturing sale. (The counterargument here is that in breakups senior executives often move to whichever business they believe has the best prospects, not because there are plans to sell the remaining company in the near term.)

(BFW) Concur Said to Explore Sale to Software Makers Including SAP

Concur Said to Explore Sale to Software Makers Including SAP
2014-09-02 20:06:54.343 GMT


By Beth Mellor
Sept. 2 (Bloomberg) -- Concur Technologies has explored a
sale and approached companies including SAP to gauge their
interest, people with knowledge of matter told Bloomberg’s Alex
Sherman, Aaron Ricadela and Matthew Campbell.
* Concur is working with an investment bank on the sale and
also approached Oracle, said the people; ORCL decided not to
pursue a transaction, one person said
* CNQR gains 13% post-market
* Concur spokeswoman didn’t immediately reply to messages
seeking comment; representatives for Oracle, SAP declined to
comment
* NOTE: In June, Oracle said it would pay ~$4.6b to acquire
hotel and restaurant software maker Micros Systems: {NSN
N7MF146TTDSM <GO>}
* Story: {NSN NBAIDS6S972E <GO>}

Link to Company News:{CNQR US <Equity> CN <GO>}
Link to Company News:{ORCL US <Equity> CN <GO>}
Link to Company News:{SAP GR <Equity> CN <GO>}

For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story:
Beth Mellor at +1-212-617-3078 or
bmellor@bloomberg.net

>>> US Close Dow -0,18% S&P-0,05% Nasdaq +0,39% Russel +0,44%

Closing Summary: A Mixed Day for Stock Market

The headlines generally favored Tuesday being another good day for the stock market. Instead, it was just a mixed day with modest point changes on either side of the unchanged mark for the major indices.

For the most part, the stock market was a sideshow. The main trading events were seen in the commodity and Treasury markets, both of which saw some decent-sized losses within their respective complex.

Dollar strength was at the heart of the weakness in the commodity arena, which saw a 4.2% drop in natural gas futures to $3.90/btu, a 3.1% decline in oil prices to $92.96/bbl, and a 1.7% slide in gold prices to $1266.10/troy ounce.

The US Dollar Index increased 0.3% to 82.99 -- a 13-month high -- as the yen hit its weakest level (105.15) against the greenback since January; meanwhile, the euro was probing the 1.31 level, which was seen in September 2013.

The drop in commodity prices, and especially oil and natural gas, are positives for the consumer if they persist and should lead to more benign inflation readings that will provide a line of defense for the Federal Reserve's policy outlook. That is a positive consideration for longer-dated Treasuries. The fact that they traded down sharply on Tuesday went to show that the impetus for Tuesday's weak showing was primarily profit taking. The 10-yr note (-20/32) settled at its low for the day and saw its yield jump seven basis points to 2.42%. Presumably, a holiday weekend that did not feature a flare-up of geopolitical conflict also led to some unwinding of safety trades that had been established ahead of the weekend.

The latter point notwithstanding, it was not a "risk-on" trade in the stock market. It tried to run early. The S&P 500 even set a new intraday high at 2006.15 shortly after the start of trading. The follow-through was lacking, however, as participants were battling the notion that the market has gotten overextended on a short-term basis, as well as the recognition that some key, market-moving events are waiting at the back half of the week.

Specifically, the Bank of Japan, Bank of England, and ECB will all be holding policy meetings on Thursday and the US employment report for August will be released on Friday. The specter of those items overshadowed another spate of M&A news, which featured Dollar General (DG 64.36, +0.37) raising its all-cash bid for Family Dollar (FDO 80.22, +0.39) to $80 per share, the favorable impact on the consumer of lower energy prices, and some encouraging economic data that included the highest reading in the ISM Index (59.0) since March 2011 and a report that construction spending increased 1.8% in July.

Those things didn't go entirely unnoticed, however. The financial (+0.3%), industrial (+0.2%), and consumer discretionary (+0.2%) sectors all exhibited relative strength and helped keep losses in check. Remarkably, a weak earnings report electronics and appliance retaile Conns (CONN 31.00, -13.83) that was blamed in large part on weak credit trends did not take down the consumer discretionary sector.

The information technology sector (+0.1%) also outperformed. It got a boost from Apple (AAPL 103.30, +0.80), which shot down accusations its iCloud service got hacked, noting instead that certain celebrities were targeted in a direct attack on their user names and passwords.

Separately, there were some rumblings that there may have been a customer data breach at Home Depot (HD 91.15, -1.88) stores. That allegation sent the home improvement retailer lower and left it as one of the Dow's worst-performing components along with Chevron (CVX 127.54, -1.91), Boeing (BA 125.48, -1.32), and ExxonMobil (XOM 98.49, -0.97).

Losses in Chevron and Exxon weighed heavily on the energy sector (-1.3%), which was the worst-performing sector in the S&P 500. It was followed by the utilities sector (-1.0%), which traded lower as Treasury yields moved higher.

Volume remained on the light side with just 578 mln shares traded at the NYSE.

Wednesday's session will feature the Mortgage Applications, Factory Orders, Beige Book, and Auto Sales reports.
  • DJIA +3.0% YTD
  • Nasdaq Composite +10.1% YTD
  • S&P 500 +8.3% YTD
  • Russell 2000 +1.4% YTD