>>> Rio Tinto board confirms that no discussions are taking place with Glencore

Rio Tinto board confirms that no discussions are taking place with Glencore regarding a potential merger

The board of Rio Tinto notes the recent press speculation regarding a possible combination of Rio Tinto and Glencore. This is according to a press release on 7 October.

The Rio Tinto board confirms that no discussions are taking place with Glencore.

In July 2014, Glencore contacted Rio Tinto regarding a potential merger of Rio Tinto and Glencore.

The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto’s shareholders.

The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter.

Rio Tinto remains focused on the successful execution of its strategy, which the board of Rio Tinto is confident will continue to deliver significant and sustainable value for shareholders.

Rio Tinto chairman Jan du Plessis said “Under the leadership of Sam Walsh and Chris Lynch, Rio Tinto has made significant progress in refocusing and strengthening its business.

“The board believes that the continued successful execution of Rio Tinto’s strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders. Rio Tinto’s shareholders stand to benefit from the very considerable value that this will generate.”

>>> London Mining rumoured to have received bid approach from Cape Lambert

London Mining rumoured to have received bid approach from Cape Lambert

London Mining, the UK-listed iron-ore mining company, is believed to have been approached by the Australian exploration company Cape Lambert Resources, The Times reported. The market report cited unattributed rumours that Cape Lambert, in which London-listed African Minerals owns a 20% stake, had contacted London Mining regarding a potential deal.

The item also noted media reports yesterday, 6 October, suggesting London Mining has entered takeover discussions with the India-based steel group JSW.

The report pointed out that Cape Lambert and London Mining own adjacent licences in Africa, and London Mining would benefit from the use of African Minerals’ railway assets for transporting iron ore to port.

London Mining has a GBP 6.78m (USD 10.87m) market cap.


Source The Times

>>> SABMiller CEO denies Heineken approach was intended to deter Anheuser-Busch

SABMiller CEO denies Heineken approach was intended to deter Anheuser-Busch InBev bid
SABMiller’s recently rejected takeover approach to Heineken was not intended to pre-empt any bid from rival brewer Anheuser-Busch InBev, the chief executive of SABMiller said. The Times reported that CEO Alan Clark dismissed any suggestion that the UK-headquartered drinks giant was moving to fend off a potential approach from Belgium-based Anheuser-Busch InBev.

Speaking at a London investor seminar, Clark also defended the Heineken approach as normal strategy for SABMiller, the item reported. He said that situation was only unusual because news of the negotiations was leaked, leading Heineken to announce its rejection of SABMiller.

SAB is always looking at potential opportunities and some may take years to happen, while others might come to nothing, the CEO said.

SABMiller has a GBP 54.1bn (USD 86.8bn) market cap.


Source The Times

Fwd: Br>>> US After Hours: CAMP +5.8%, IDT +0.6%, TCS -12.3%, EZPW -1

NAfter Hours Summary: CAMP +5.8%, IDT +0.6%, TCS -12.3%, EZPW -11.6% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: CAMP +5.8%, IDT +0.6%

Companies trading higher in after hours in reaction to news: OXGN +3.7% (announced that data from the Phase 2 GOG186I study of fosbretabulin in combination with bevacizumab will be presented on November 9 at the International Gynecologic Cancer Society), REGN +2.0% (EYLEA (aflibercept) Injection received FDA approval for macular edema following retinal vein occlusion), ACHN +1.8% (disclosed it entered into a Master Security Agreement for a $1,000,000 Capital Expenditure Line of Credit), SBLK +1.6% (collected $8.016 mln from the sale of its claim against PAN OCEAN)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: TCS -12.3%, EZPW -11.6%

Companies trading lower in after hours in reaction to news: IBIO -15.0% (filed for sale of up to 23,418,172 shares of common stock by Aspire Capital Fund), KCAP -4.3% (commenced 3 mln share public offering), KOS -4.1% (announced secondary public offering of 15 mln common shares), BBEP -3.4% (announced public offering of 14 mln common units), END -2.8% (announced the appointment of a Chief Restructuring Officer), OTIV -1.6% (filed for $50 mln mixed securities shelf offering), DYN -1.3% (launched 22.5 mln share common stock and 4 mln share mandatory convertible preferred stock offerings)

(Makor)Relative Value/MRPT - long BASF vs. AKZO, XLB

Trade action flash – LONG BASF / SHORT AKZO, SHORT BASIC MATERIALS ETF (XLB US)

October 6, 2014

Relative value / MRPT© mean reverting pair trading strategies

BAS GR: Eur70.15; AKZ NA: Eur51.32 ; XLB US: US$48.43

Following the significant underperformance of BASF over the last four months, we recommend to go long BASF and short Akzo Nobel as well as the US basic materials ETF XLB (Materials Select Sector SPDR) with which BASF is most mean reverting.  Following a price drop of 20% since June (reduced expectations/exposure to Russia), BASF is significantly undervalued in the global Chemicals sector, although in absolute terms the stock is overvalued (as the rest of the sector) – hence our long/short recommendation with a market neutral exposure, possibly slightly net short.

FULL REPORT ATTACHED

>>> Asian Update


Asian Market Update: RBA maintains policy stance and view of AUD; Hong Kong PMI contracts for 2nd month


***Economic Data***
- (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 2.50%; AS EXPECTED (13TH STRAIGHT PAUSE)
- (AU) AUSTRALIA SEPT AIG PERFORMANCE OF CONSTRUCTION INDEX: 59.1 (9-year high, 3rd consecutive rise) V 55.0 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 112.6 (first decline in 3 weeks) v 113.7 prior
- (HK) HONG KONG SEPT HSBC PMI: 49.8 (2nd consecutive contraction) V 49.6 PRIOR
- (JP) JAPAN SEPT OFFICIAL RESERVE ASSETS: $1.26T (1-year low) V $1.28T PRIOR
- (NZ) NEW ZEALAND Q3 NZIER BUSINESS OPINION SURVEY: 19 (2-yr low) V 32 PRIOR

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 flat, S&P/ASX -1.0%, Kospi flat, Shanghai Composite closed, Hang Seng +0.1%, Dec S&P500 flat at 1,955

***Commodities/Fixed Income***
- Dec gold -0.2% at $1,204/oz, Nov crude oil -0.1% at $90.20/brl, Dec copper +0.1% at $3.04/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 10,857 tonnes from 10,884 tonnes prior

***Market Focal Points/Key Themes/FX***
- Reserve Bank of Australia was on hold at 2.5% for the 13th straight meeting as widely expected, reiterating "monetary policy is appropriately configured" and "inflation is consistent with the 2-3% target". The accompanying statement was nearly a carbon copy with a marginal update on exchange rate, noting AUD remains high by historical standards (previously said "above most estimates of fundamental value"). RBA also acknowledged a "volatile" labor data after AUG employment change put in a 36-year high. AUD/USD briefly fell about 20pips above 0.8730 post-RBA before erasing all of those losses.

- Rio Tinto was up over 3% on overnight speculation of a potential bid from Glencore down the line despite formally stating that no talks are taking place. Rio added combination would not be in the best interest of shareholders. Samsung Electronics put out its prelim Q3 results below the median estimates but better than some of the worst analyst expectations, supporting shares. Samsung noted earnings are affected by smartphone competition, mobile margins are declining, and that uncertainty could persist into Q4.

- BOJ policy statement is delayed by Gov Kuroda's speech at Japan's parliament. Kuroda noted export growth is lacking momentum despite softer JPY and sales tax rise impact has been prolonged, reiterating he is prepared to ease further if the economy undershoots forecasts. An earlier press report indicated the majority of the policy board is now in favor of doing away with the 2-yr inflation target timeframe given the slower rise in CPI in the past few months. USD/JPY rose about 50pips from session lows to test 109.20

- Hong Kong PMI contracted for the 2nd consecutive month, though it rose marginally from last month's levels. HSBC economist said "the impact of the cyclical slowdown is being felt through deteriorating labour market conditions, (and) new orders will likely have to pick up more significantly in the coming months before the downward trend in employment reverses." Separately, Hong Kong student leader said the Occupy Central will respond if talks with the govt fail, adding they are not very optimistic about the outcome of negotiations for any constitutional reform.

- North and South Korea patrol boats exchanged gunfire in the western sea after the former reportedly entered the waters of the South. This follows weekend reports that the two sides have agreed to hold high level talks this year. North Korea's patrol boat was quick to leave the scene, and no casualties were reported.

- Fed's George (non-voter, hawk) reiterated her hawkish stance, forecasting wage growth accompanying stability in the labor market. George also noted most FOMC participants expect rates to start rising in 2015, and that it was generally better to have tighter policy in the event of another recession.


***Equities***
US markets:
- TCS: Reports Q2 $0.11 v $0.11e, R$193M v $200Me; - Guides FY14 $0.41-0.46 (ex items) v $0.50e, Rev $800-810M v $823Me; -13.2% afterhours
- EZPW: Q4 Guidance to be cut below prior range (prior Q4 $0.37-0.39 (cont ops) v $0.36e); -11.6% afterhours
- Z: Reports Sept monthly unique users 82.8M v 86.3M m/m (4-month low and 2nd straight decline); -1.7% afterhours
- SWK: Guides FY14 EPS lower to $5.30-5.50 v $5.54e (prior $5.50-5.60) - filing; -0.8% afterhours
- REGN: FDA approves EYLEA (aflibercept) Injection for expanded indication in Macular Edema Following Retinal Vein Occlusion (RVO); +1.9% afterhours

Notable movers by sector:
- Materials: Glencore Xstrata 805.HK +3.8%, Aluminum Corporation of China 2600.HK +2.2%, Rio Tinto +3.4% (reports of possible joint bid for Rio; rumors later dispelled); Newcrest Mining NCM.AU -0.3% (Q1 gold production)
-Technology: MediaTek 2454.TW -2.3% (Sept results); TDK Corp 6762.JP +1.0% (to increase hard-desk capacity); Fujifilm 4901.JP +5.6% (positive use of drug in Ebola case); Samsung Electronics 005930.KR +1.2% (prelim Q3 results)
- Energy: China Longyuan Power Group 916.HK +0.7%, Huaneng Renewable Corp 958.HK +3.0% (China to support wind power development)
- Utilities: Tepco 9501.JP +1.4%, Chubu Electric 9502.JP +1.5% (thermal power partnership)

>>> US Close Dow -0,10% S&P-0,16% Nasdaq -0,47% Russell -0,91%

Closing Summary: Small Caps Pace Broad Market Retreat

It was a good start for the stock market today and that was about it. The major indices hit their best levels of the session within fifteen minutes of the opening bell and then spent the rest of the morning retracing those gains. The afternoon session produced a half-hearted rebound try, yet the major indices couldn't stake a position on positive ground when the closing bell rang.

Overall losses were modest in scope, which isn't bad given the scope of Friday's gains. However, with the presumed buying catalyst of a weakening dollar in place, more M&A activity, and a surprise announcement from Hewlett-Packard (HPQ 36.87, +1.67) that it is going to split into two companies in an effort to bolster shareholder value, there was likely some disappointment that the stock market didn't do any better than it did.

The quick inclination to sell into the opening strength left buyers on guard that the de-risking move seen at the end of the third quarter may not have yet run its course.

The latter consideration along with technical resistance for the S&P 500 at the 1980 level, a stunning bankruptcy protection filing from GT Advanced Technologies (GTAT 0.80, -10.25), which supplies sapphire glass to Apple (AAPL 99.62, unch), and the underperformance once again of the Russell 2000 (-0.9%) helped keep buying interest in check.

The main pockets of weakness in the market were found in the biotech, transport, and semiconductor spaces. Word from Sunesis Pharmaceuticals (SNSS 1.46, -5.18) that a Phase 3 trial it was conducting failed to meet its primary endpoint sucked the momentum out of the biotech space; Ebola concerns once again weighed on the transports; and a 4.0% drop in Micron (MU 32.57, -1.37) after reports said Samsung is planning to invest close to $15 billion in a new semiconductor plant pressured the Philadelphia Semiconductor Index (-0.8%).

Separately, the energy sector (+0.1%) had a roller-coaster day of trading, vacillating with oil prices, which dipped below $89/bbl before finishing the day at $90.57/bbl.

The rebound in oil prices coincided with a break lower in the U.S. Dollar Index (85.71, -0.98) in afternoon trading. The greenback was weak throughout the session, yet its losses accelerated in the afternoon action on what was considered to be a profit-taking move following a huge run in the third quarter.

Stock sector moves were pretty limited in scope to both the upside and the downside. The biggest winner was the telecom services sector (+0.4%) while the biggest loser was the consumer discretionary sector (-0.6%). The limited moves fit the standing of the S&P 500 at the closing bell.

There wasn't any economic data out of the U.S. today, but resonating in the background was a report that the World Bank cut its 2014 and 2015 GDP views for China and news that German factory orders declined 5.7% in August.

Notwithstanding the limited change in the S&P 500, the CBOE Volatility Index (VIX 15.29, +0.74) jumped 5.1% on Monday.
  • Nasdaq Composite +6.7% YTD
  • S&P 500 +6.3% YTD
  • Dow Jones Industrial Average +2.5% YTD
  • Russell 2000 -5.9% YTD

FT : HP signals dealmaking is on cards

Hewlett-Packard has indicated that it is considering further dealmaking, as it split its PC and printer arm from its software and corporate hardware business.
On Monday, the US technology conglomerate said it would split in two and give existing HP shareholders a tax-free distribution of shares in a new company.

However, Cathie Lesjak, chief financial officer, also disclosed that the group has material non-public information that is “not expected to be resolved before the end of Q4” – which analysts interpreted as information about a potential acquisition.
Ms Lesjak also noted that the new Hewlett-Packard Enterprise business, which will contain HP’s cloud and big data offerings, was being set up with significant net cash, and an eye towards investment.
“They’re really focused on taking the firepower of their balance sheet plus the cash flow that they generate to really go after growth opportunities both in organic and inorganic ways,” Ms Lesjak said.
Analysts suggested that the split could revive past talk of mergers. Last month, it emerged that data storage group EMC, under pressure from an activist shareholder, had held talks with HP about a sale of its business earlier this year. Those discussions broke down, but Kate Hanaghan, research director at TechMarketView, suggested HP’s new structure changed the situation.
“With the PC business attached, EMC shareholders will simply not have accepted becoming part of Hewlett-Packard,” she said. “Now, you have something that looks quite different and there might be a revival of those talks to bring those companies together.”
Maynard Um, analyst at Wells Fargo, suggested that the company’s material non-public information may be related to continued talks with EMC.
Another possibility is that the struggling PC and printer unit could look for a sale to a larger electronics company, Ms Hanaghan added.
Under the terms of the company’s split, Meg Whitman, chief executive, will become CEO of Hewlett-Packard Enterprise. Dion Weisler, an executive in HP’s printing and personal systems business, will become chief executive of HP Inc, the PC and printer focused division.
By dividing the group up in this way, HP will end a controversial 13-year chapter in its history, which began when Carly Fiorina, then chief executive, agreed to buy Compaq Computer, one of the largest US PC makers. Dissent from members of the HP founding families almost led to a rejection of the deal by shareholders. Even when the merger was completed, it was plagued by years of integration problems at the PC division.
Ms Whitman has since succeeded in stabilising HP’s finances and revived flagging shareholder confidence via stringent cost cutting. However, revenues have contracted, and she has struggled to bolster sagging competitiveness in all four of the main business divisions.
Based on last year’s revenues, both parts of HP would have ranked among the 50 largest US companies, according to the annual ranking produced by Fortune.
HP’s PC and printer businesses produced revenues of $55.9bn in its last financial year, almost identical to the combined $55.7bn of its enterprise computing, services and software divisions.

Last quarter, HP’s PC division ended two years of falling shipments, but growth in the business was markedly slower than those of rivals Dell and Lenovo, the Chinese group that recently overtook HP as the world’s largest seller of PCs by volume.
On Monday, the company also announced that a larger number of posts would be made redundant as part of its longer-term restructuring, increasing the total potential staff reduction from 50,000 to 55,000.

>>> US Unusual Options Activity

Bullish Call Activity:
  • VNDA Oct 11 calls are seeing interest with the underlying stock 4% lower (volume: 3660, open int: 150, implied vol: ~109%, prev day implied vol: 94%)
  • HOG Oct 62.5 calls are seeing interest with relative strength in the underlying stockfollowing RBC upgrade (volume: 2260, open int: 2110, implied vol: ~24%, prev day implied vol: 22%) -- co is confirmed to report earnings Oct 21 before the open (outside of Oct expiration).
Bearish Put Activity:
  • PWE Mar15 6 puts (volume: 11.7K, open int: 310, implied vol: ~53%, prev day implied vol: 44%) -- one 5K transaction traded on the offer. Co is expected to report its next quarter early November.
  • ALTR Oct 34 puts (volume: 6360, open int: 320, implied vol: ~26%, prev day implied vol: 22%) -- co is confirmed to report earnings Oct 23 after the close (outside of Oct expiration).
  • OLED Nov 30 puts are seeing interest following electronic display peer GTAT bankruptcy news (volume: 5080, open int: 50, implied vol: ~57%, prev day implied vol: 53%) -- more than 3K traded in single transaction near offer. OLED is expected to report earnings early November.