Telefonica raises bid for Vivendi's Brazilian unit GVT to €7.45B
Asian Market Update: China industrial profit growth slows further; Australia CAPEX outperforms
***Economic Data***
- (CN) CHINA JULY INDUSTRIAL PROFITS Y/Y: 13.5% V 17.9% PRIOR; YTD Y/Y: 11.7% (6-month high) V 11.4% PRIOR
- (AU) AUSTRALIA Q2 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: +1.1% V -0.9%E
- (AU) AUSTRALIA JUL HIA NEW HOME SALES M/M: -5.7% (biggest decline in 28 months) V +1.2% PRIOR
- (JP) Japan investors sold net ¥609.0B in foreign bonds v bought net ¥659.8B prior week; Foreign Investors bought net ¥174.6B in Japan stocks v bought net ¥87.7B in prior week
- (KR) SOUTH KOREA JULY CURRENT ACCOUNT BALANCE: $7.9B (29th consecutive surplus) V $7.9B PRIOR; GOODS BALANCE: $6.9B V $6.6B PRIOR
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.5%, S&P/ASX -0.4%, Kospi +0.4%, Shanghai Composite +0.4%, Hang Seng +0.5%, Sept S&P500 flat at 1,997
***Commodities/Fixed Income/Currencies***
- Dec gold +0.3% at $1,287, Oct crude oil flat at $93.86/brl, Sept Copper flat at $3.18/lb
- JGB: (JP) Japan MoF sells ¥2.47T in 0.1% 2-yr notes, Avg Yield: 0.067% v 0.066% prior; bid to cover: 5.88x v 5.94x prior
- (CN) PBoC to drain CNY10B in 14-day repos (10th consecutive drain); Injects net CNY45B v Injected net CNY11B prior (3rd consecutive week of injection)
***Market Focal Points/Key Themes***
- Traders are once again treading cautiously amid fresh signs of a slowdown in China and ongoing military activity in east Ukraine only a day after a high-profile Putin-Poroshenko meeting. Earnings out of US retailers Guess and Williams-Sonoma were also largely disappointing, both containing a very soft outlook for the 3rd quarter.
- China industrial profits YTD rose slightly on y/y basis, but July y/y slowed from June. HSBC China economist noted weak growth in sectors impacted by overcapacity as well as declines in jewellry and other high-end tickets, adding PBoC is increasingly justified to respond with a "comprehensive cut of the reserve requirement ratio (RRR) for banks or (even) a policy rate cut." Also of note in China, regulators are considering expanding Renminbi Qualified Foreign Institutional Investors (RQFII) trial to Switzerland and Luxembourg for stocks and bonds, potentially bringing more buyers from some of the wealthier regions out of growth-deprived eurozone landscape.
- Australia is a surprisingly brighter spot in terms of economic data. Q2 private CAPEX topped forecasts, but more importantly the revision in estimates for FY14/15 was to the upside at A$145.2B vs $137.1B prior estimate. Analysts suggested this forward-looking indicator could renew speculation of an RBA rate hike by late 2014 / early 2015, sending AUD/USD up about 40pips to $0.9370 and S&P/ASX lower. Among key Australia earnings, Qantas confirmed the split of its international and domestic units while posting a net loss of A$649M, not as bad as feared A$750-770M range.
- Despite the expressed commitment to political process toward peace by Ukraine's Poroshenko and Russia's Putin at their meeting, military incursions reportedly continued across the border by Russian troops. US State Dept is calling the latest reports of Russian incursions indicative of a counteroffensive in support of the rebel forces, while German Chanceller Merkel noted the progress on the issue has not been satisfactory.
***Equities***
US markets:
- WDAY: Reports Q2 -$0.11 v -$0.14e, R$186.8M v $176Me; +0.8% afterhours
- GES: Reports Q2 $0.26 v $0.28e, R$609M v $619Me; -7.7% afterhours
- WSM: Reports Q2 $0.53 v $0.53e, R$1.04B v $1.04Be, guides Q3 $0.58-0.63 v $0.65e, R$1.10-1.13B v $1.13Be, SSS +4-6%; -11.4% afterhours
Notable movers by sector:
- Consumer Discretionary: Corporate Travel Management CTD.AU +5.7% (FY14 results); Qantas Airways QAN.AU +6.8% (FY14 results); Billabong BBG.AU -3.6% (FY14 results); Hisense Kelon Electrical Holdings 921.HK -2.3% (H1 results)
- Financials: Perpetual PPT.AU -4.7% (FY14 results); China Life 2628.HK +1.6% (H1 results)
- Materials: Sedgman Ltd SDM.AU +5.9% (FY14 results)
- Energy: Ausdrill ASL.AU +13.1% (FY14 results)
- Industrials: Shanghai Zhenhua Heavy 600320.CN +1.2% (to sell asset)
- Technology: Lenovo 992.HK +1.0% (comments on lawsuit settlement)
After Hours Summary: CCUR +7.1%, VNET +2.1%, WDAY +0.2%, GOMO -20.3%, WSM -11.3%, GES -6.3% following earnings/guidance
After Hours Gainers: Companies trading higher in after hours in reaction to earnings: CCUR +7.1%, VNET +2.1%, WDAY +0.2%
Companies trading higher in after hours in reaction to news: CREG +15.1% (co announced that Chairman Guohua Ku has entered into a share purchase agreement to purchase ~13.83 mln shares at $1.37/share), MRCY +2.0% (received $27 mln order for airborne sensor processing application; follows $39 mln missile defense radar subsystems order received last quarter), WOOF +1.7% (announced new $1.4 bln credit facility and share repurchase authorization of up to $400 mln), AXE +0.4% (announced closing of a $200 mln term loan)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings: GOMO -20.3%, WSM -11.3%, VMEM -10.3%, TLYS -9.6%, GES -6.3%, DHT -3.2%
Companies trading lower in after hours in reaction to news: ROX -7.3% (filed for $30 mln mixed securities shelf offering), TIF -0.5% (filed mixed securities shelf offering), RHT -0.2% (announced that Brian Sevens will step down as CTO)
Start the Countdown Timer on Whatever Old-Fashioned Piece of Junk You Have on Your Wrist Right Now
Remember back in June when I said Apple hoped to schedule a special event in October to show off a new wearable device? Remember how I also said this: “Could things change between now and fall? That’s certainly possible.” Turns out that was a prescient hedge, because things have changed. Apple now plans to unveil a new wearable alongside the two next-generation iPhones we told you the company will debut on September 9. (Funny “joke,” Gruber.) The new device will, predictably, make good use of Apple’s HealthKit health and fitness platform. It will also — predictably — make good use of HomeKit, the company’s new framework for controlling connected devices — though it’s not clear how broadly or in what way. Sure would be nice to turn the lights on and off from my wrist, though — or navigate my Apple TV (caution: Total speculation). Oh. Could things change between now and September 9? That’s certainly possible — har-har — but I doubt it. Invitations should be going out any day now, right? No word yet on the fate of the October event I mentioned earlier this summer, though I imagine it’s still on. With its best product pipeline in 25 years, Apple should have more than enough hardware to fill two events. Apple declined comment.
German creditors challenge sale of BES insurance arm
A group of German creditors is attempting to block the planned sale of a Portuguese insurance company in a move that could disrupt the disposal of assets belonging to the collapsed Espírito Santo business empire.
The bid to stop the sale of the insurer Tranquilidade to Apollo Global Management, a US private equity fund manager, in a deal worth about €200m could mark the beginning of other legal challenges to attempted disposals by the failed business group.
When Banco Espírito Santo was split into “good” and “bad” banks this month as part of a €4.9bn bailout, Tranquilidade came under the ownership of Novo Banco, the “good” bank.
Apollo has since been in exclusive talks with Novo Banco to acquire Tranquilidade in a deal that is expected to be finalised shortly. But the group of about 10 German creditors say such a disposal would be illegal and would “seriously damage their legitimate interests”.
The group are creditors of Espírito Santo Financial Group (Portugal) (ESFP), which indirectly owns 45 per cent of Tranquilidade. Together the creditors hold 12 per cent of a €70 million euro bond issued by ESFP, which is due to be redeemed in May 2016.
ESFP, part of a complex structure of holding companies that makes up the Espírito Santo business empire, is in receivership under the supervision of a Lisbon court.
Lawyers representing the German creditors have written to Novo Banco saying they will take legal action to annul the transaction if the planned sale to Apollo goes ahead.
“We are confident the sale can be easily stopped if we take legal action,” Rainer Manthey, one of the German bondholders said.
Novo Banco said talks on the planned sale of Tranquilidade were continuing, but made no comment on any potential legal challenge.
Before BES was bailed out, the Bank of Portugal determined that Tranquilidade shares should be pledged to BES as a guarantee that Espírito Santo Financial Group (ESFG) would repay group debt that it had sold to BES’s retail clients.
The German creditors say they “strongly disagree with the legal validity of the pledge”.
ESFG, which is under creditor protection in Luxembourg, owns 100 per cent of ESFP and the other 55 per cent of Tranquilidade, giving it in effect ownership of 100 per cent of the insurer.
Officials familiar with the aftermath of the BES bailout say other creditors of Espírito Santo companies are also likely to challenge attempts to dispose of the group’s assets.
TIM-Oi possible deal could have less regulatory problems than previous consolidation attempts
The possible acquisition of TIM Participacoes by Oi could be more easily approved by Brazilian regulators than other previous consolidation moves, such as the stake increase in Telecom Italia by Telefonica, a newswire reported.
Citing one source close to the Brazilian government, Reuters said Oi and TIM would have fewer problems with license overlaps. TIM and Oi each acquired a 10 + 10 MHz spectrum in the fourth-generation mobile service auction which took place in 2012, while the other two operators, Claro and Vivo, acquired 20 + 20 MHz spectrum. Thus, TIM and Oi would not exceed the regulatory limit of the spectrum in that range.
According to the same source, the possible TIM-Oi deal would be easier to approve from an antitrust point of view than a possible indirect control of TIM by Telefonica through a stake hike of the Spanish group in Telecom Italia. Telefonica owns Vivo, Brazil's largest telco, while Telecom Italia is TIM’s controlling shareholder, noted the Portuguese-language report.
A deal between the fourth (Oi) and the second (TIM) largest companies in the Brazilian telecom market is easier to be approved than a deal between the first (Vivo) with the second, the source was quoted as saying. Vivo has 28.7% market share in Brazil, followed by TIM with 26.9%, Claro with 24.9% and Oi with 18.5%.
AB InBev Merger W/Coke Would Make Most Sense: Brasil Plural
2014-08-27 17:54:23.818 GMT
By Karen Eeuwens
Aug. 27 (Bloomberg) -- Merger w/Coca-Cola “holds more
upside” than a deal with SABMiller, unless the latter agrees to
a very compelling deal, analysts including Carlos Laboy write in
report dated Aug. 25.
* AB InBev “needs more engines of growth to mitigate the
effect of its mature markets and to fix elements of its
business”
* Co. needs deal that could “revolutionize U.S. beverage
distribution for share growth in a declining mega-brand
market”
* How AB InBev decides to proceed “will impact Ambev and also
our Coke bottlers, which should be attentive to how a new
owner of The Coca-Cola Company or of SABMiller might affect
their growth plans”
Link to Company News:{KO US <Equity> CN <GO>}
Link to Company News:{ABI BB <Equity> CN <GO>}
Link to Company News:{ABEV3 BZ <Equity> CN <GO>}
Link to Company News:{SAB LN <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the reporter on this story:
Karen Eeuwens in Sao Paulo at +55-11-2395-9064 or
keeuwens@bloomberg.net
To contact the editor responsible for this story:
Richard Jarvie at +54-11-4321-7732 or
rjarvie@bloomberg.net
2014-08-27 17:54:23.818 GMT
By Karen Eeuwens
Aug. 27 (Bloomberg) -- Merger w/Coca-Cola “holds more
upside” than a deal with SABMiller, unless the latter agrees to
a very compelling deal, analysts including Carlos Laboy write in
report dated Aug. 25.
* AB InBev “needs more engines of growth to mitigate the
effect of its mature markets and to fix elements of its
business”
* Co. needs deal that could “revolutionize U.S. beverage
distribution for share growth in a declining mega-brand
market”
* How AB InBev decides to proceed “will impact Ambev and also
our Coke bottlers, which should be attentive to how a new
owner of The Coca-Cola Company or of SABMiller might affect
their growth plans”
Link to Company News:{KO US <Equity> CN <GO>}
Link to Company News:{ABI BB <Equity> CN <GO>}
Link to Company News:{ABEV3 BZ <Equity> CN <GO>}
Link to Company News:{SAB LN <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the reporter on this story:
Karen Eeuwens in Sao Paulo at +55-11-2395-9064 or
keeuwens@bloomberg.net
To contact the editor responsible for this story:
Richard Jarvie at +54-11-4321-7732 or
rjarvie@bloomberg.net
Closing Market Summary: Stocks End Flat Amid Measly Volume
The major averages ended the midweek session on a flat note after spending the day inside narrow ranges. The S&P 500 hovered near the 2,000 mark for the majority of the trading day, but slumped to new lows during the last hour of action. The index then returned to its flat line, where it settled for the day. For the third day in a row, participation left a lot to be desired with just 487 million shares changing hands at the NYSE.
Equity indices opened with slim gains, but were quick to return to their flat lines as most sectors traded little changed. Two countercyclical groups—telecom services (+0.5%) and utilities (+1.0%)—held gains throughout the day, but neither had much say over the direction of the broader market.
Meanwhile, influential sectors like consumer discretionary (+0.1%), financials (-0.2%), health care (unch), and technology (-0.1%) ended mixed with respect to the S&P 500.
Retailers contributed to the relative strength of the discretionary sector following better than expected quarterly results from Brown Shoe (BWS 29.90, -1.47), Express (EXPR 16.45, +1.86), and Tiffany & Co (TIF 101.75, +0.98). For its part, the SPDR S&P Retail ETF (XRT 89.47, +0.30) advanced 0.3%.
Elsewhere, the health care space displayed intraday strength, but finished in line with the market. Biotechnology contributed to the early outperformance, but the iShares Nasdaq Biotechnology ETF (IBB 275.06, -0.65) settled lower by 0.2% after soaring 9.6% over the past two weeks.
Similar to health care, the top-weighted sector—technology—also showed intraday strength prior to an afternoon retreat. Even though the sector ended in the red, its largest component—Apple (AAPL 102.13, +1.24)—climbed 1.2% amid speculation the company will reveal a wearable device at an event scheduled for September 9.
While equities ended little changed, there was some activity in the foreign exchange market. This morning, the euro/dollar pair jumped from 1.3170 to 1.3210 in reaction to reports suggesting the European Central Bank is unlikely to take action at next week's policy meeting. The comments were attributed to ECB sources and followed earlier speculation that ECB President Mario Draghi may announce a quantitative easing program at the upcoming meeting. The single currency traded near the 1.3195 level at the end of the New York session.
Treasuries settled near their highs with the 10-yr yield down four basis points at 2.36%. More notably, the 30-yr bond rallied to send its yield lower by six basis points to 3.11%, representing the lowest close since May of last year.
Economic data was limited to the weekly MBA Mortgage Index, which rose 2.8% to follow last week's uptick of 1.4%.
Tomorrow, weekly Initial Claims (consensus 302,000) and the second estimate of Q2 GDP (expected 4.0%) will be released at 8:30 ET, while the Pending Home Sales report for July (consensus 0.5%) will cross the wires at 10:00 ET.
* Nasdaq Composite +9.4% YTD * S&P 500 +8.2% YTD * Dow Jones Industrial Average +3.3% YTD * Russell 2000 +0.7% YTD
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Coffee Extends Rally on Global Supply Concerns; Cotton Advances 2014-08-27 18:48:20.305 GMT
By Marvin G. Perez Aug. 27 (Bloomberg) -- Arabica coffee for Dec. delivery adds 0.4% to settle at $1.9815/lb on ICE Futures U.S. in New York, 3rd straight gain, longest rally since July 28 * Prices earlier touched $2.027, highest since Aug. 1 * NOTE: Brazil Coffee Output Set for Worst Slump Since 1965 * NOTE: Guatemala’s Anacafe cuts coffee-crop forecast on drought * “The grave situation in Brazil remains the focus for the market,” Hernando de la Roche, a senior VP at INTL FCStone in Miami, says in telephone interview * “Guatemala’s losses and the drought conditions in Central America just add fuel to the fire” * “If the price breaks above $2.15/lb this mkt is going to make a violent move to the upside” * Cotton futures for Dec. delivery up 0.9% to 67.46c/lb * NOTE: South-Texas Cotton Crops Threatened by Showers, MDA Says * Raw-sugar futures for Oct. delivery slide 0.8% to 15.58c/lb * Cocoa futures for Dec. delivery drop 0.2% to $3,211/mt, after touching $3,300, highest since May 2011 * Orange-juice futures for Nov. delivery down 0.9% to $1.503/lb
For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>
To contact the reporter on this story: Marvin G. Perez in New York at +1-212-617-7757 or mperez71@bloomberg.net To contact the editors responsible for this story: Millie Munshi at +1-212-617-5543 or mmunshi@bloomberg.net
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Russia Says 62 Ukraine Troops Crossed Border Seeking Cover: IFX 2014-08-27 19:25:15.35 GMT
By Elena Mazneva Aug. 27 (Bloomberg) -- Ukrainian soldiers crossed border into Russia’s Rostov region, Interfax reports, citing Federal Security Service border guards. * NOTE: Aug. 17, Russia Says 17 Ukraine Soldiers Seeking Cover Returned Home NSN NAGLBM6VDKHU <GO> * NOTE: Earlier today, Ukraine Fighting Rages on After Putin, Poroshenko Summit NSN NAZ14P6K50XU <GO>
For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>
To contact the reporter on this story: Elena Mazneva in Moscow at +7-495-771-7729 or emazneva@bloomberg.net To contact the editor responsible for this story: Will Kennedy at +44-20-7073-3603 or wkennedy3@bloomberg.net