TheChek News Flow

Weekly Market Update: Markets Back to the New Abnormal

- With political noise out of the way, investors got back to focusing on fundamentals this week. Economic data delayed by the fiscal battle in Washington, DC was released, most notably the September jobs report. The weak numbers reinforced the sense that there is little chance that the Fed will begin tapering QE at either its October or December meetings. As has been the case over and over this year, 'bad news' was taken for 'good news,' and market closed higher after the weak jobs data. In Europe, advanced October manufacturing PMI readings were lackluster - France's stayed in contraction for the 20th straight month - although the first reading of the UK Q3 GDP was pretty good, with the y/y figure at +1.5%, the best growth rate since early 2010. Earnings were a mixed bag, while the dollar continued to weaken. Nevertheless, the S&P500 pushed out to fresh all-time highs. For the week, the DJIA gained 1.1%, the S&P500 rose 0.9% and the Nasdaq added 0.7%.

- On Tuesday, the Labor Department released the delayed September jobs report. Non-farm payrolls were +148K, more than 30K below expectations, but largely offset by an upward revision in the August payroll figures. Unemployment fell to 7.2%, the lowest level since November 2008. Traders clearly discounted the data, waiting instead for the October report, which will include the full impact of the US fall fiscal crisis. The consensus view is that the soft jobs data assures that the Fed will not begin the taper at its October 29-30th policy meeting, and a growing number of analysts now expect the taper to be put off until the Spring of 2014. Note that the yield on the 10-year UST bottomed out at around 2.5% this week.

- The Shanghai Composite fell 2.8% this week on some uncertainty in money markets. The PBoC refrained from conducting open market operations during the week, and Chinese money market rates rose all week long. Overnight Shibor had pushed out to its highest levels since June by week's end. Additionally, the PBoC took more steps toward interest rate liberalization by announcing that it would allow banks to set a prime lending rate while phasing out its own policy lending rate. Data showed that Chinese new home prices continued to soar in September, with average house prices in 70 major cities up 9.1% year-on-year, making it the 9th consecutive month of increases.

- Shares of tech darlings Amazon and Netflix saw sizable gains on very good results. Netflix added nearly 1.3M new US subscribers, pushing its total US subscriber base higher than HBO's. Strong revenue at Amazon set it up for another record holiday season and a return to profitability in Q4. Microsoft also had solid results, and said that consumer PC Demand was better than anticipated. Not all the tech earnings were rosy: Broadcom, Altera, and Juniper Networks all saw steep losses after offering disappointing Q4 guidance.

- Caterpillar took a step down this week after reporting poor Q3 results and cutting its FY13 guidance yet again. Most of the softness comes from Cat's mining business, where revenue is expected to fall 40% y/y in FY13 thanks to slowing growth in China. Defense names General Dynamics, Northrop Grumman, and Raytheon offered very good results and seem to be thriving despite the sequester cuts. Boeing's adjusted earnings topped expectations for the eighth straight quarter. Ford saw record Q3 profits and raised its total FY13 outlook to be higher y/y.

- UPS had a firmly in-line third quarter. Executive said some retailers were cautious about the holiday season outlook but expect to see more online orders, and indicated UPS's daily volumes would rise about 8% y/y due to fewer shopping days since Black Friday comes late in November this year. Delta soared on good growth while United couldn't get off the ground. UAL's CEO said management was "not satisfied with our financial performance."

- In the materials space, 3M was flat despite hiking FY guidance, while DuPont shares gained a few points on modest outperformance. Dow Chemical was a bomb, with shares down 6% on the week after the company said it had raised its asset divestiture target, including most of its performance materials business, which it blamed for a weak quarter. Mining giant Freeport crushed expectations.

- Dollar weakness remained a theme in FX markets. The euro made another big move up after the weak US jobs report, with EUR/USD pushing out to two-year highs in the low 1.3800 handle from 1.3670 ahead of the data. USD/JPY moved back into the 97 handle after the jobs data and by Friday had briefly dipped below 96, but remained above its US fiscal food fight low of 96.60.

- In Japan, the Abe Administration was happy to see September CPI break out to +1.1%, ahead of expectations. However, the main reason for the surprise was the rapid increase in food prices - Core CPI, ex food inflation, remained subdued, though it posted its first non-negative number since 2008. The September trade numbers indicated another big trade deficit, the 15th in a row. Shipments from China, Japan's largest trade partner, rose by 30.9% to a record high of ¥1.68T.

Eike Batista's OGX Prepares Bankruptcy Filing Brazilian Businessman's Flagship Oil Company Is Running Low on Cash

Brazilian businessman Eike Batista's flagship oil company, OGX Petroleo e Gas Participacoes SA, is preparing an imminent bankruptcy-protection filing in Brazil to reorganize as its cash reserves dwindle, people familiar with the matter said. OGX is preparing a so-called judicial recovery plan for reorganization, similar in part to a streamlined U.S. bankruptcy filing, the people said. This approach differs from the traditional Brazilian bankruptcy process that tends to end in liquidation, some of these people said. A filing could come any day now and is expected within about a week, the people said. Spokespeople for OGX and Mr. Batista didn't immediately respond to requests for comment. The cash-strapped company, operating with about $3.6 billion of debt, has tried but so far has yet to reach a restructuring deal with creditors, many of whom traveled to Brazil to meet with advisers and management this week, the people familiar with the matter said. The company asked creditors for a $75 million capital injection but didn't get an immediate answer from creditors, who are concerned they won't recover the money, the people said. OGX, once the backbone of Mr. Batista's falling infrastructure empire, has failed to meet production targets and is desperately low on cash. It missed a $45 million bond interest payment in early October, and it has another payment of roughly $100 million due in December. The company is using its remaining cash to start production at what it considers potentially to be one of its most-productive assets, an oil field called Tubarao Martelo in Rio de Janeiro. One reason a filing is imminent is that suppliers are growing reluctant about doing business with the company as its woes deepen, one of these people said. The company's shares have fallen more than 90% over the last 12 months. The bonds are trading at around 10 cents on the dollar, indicating investors expect to recover little of the original value.

Abe Says Japan Ready to Counter China's Power Premier Urges China to Refrain from Using Force

In an interview with The Wall Street Journal, Japanese Prime Minister Shinzo Abe urges China not to use force to change the status quo in Asia. His comments are the latest signs of the troubled ties between the Asian giants. TOKYO—Japanese Prime Minister Shinzo Abe said on Friday that many nations were concerned that China was attempting to use force to change the status quo in Asia, adding that Tokyo's role as the region's leader is to urge Beijing not to follow such a path. The comments by the Japanese leader are the latest signs of the troubled ties between the Asian giants, strained by a territorial dispute and differences over how they view their wartime history. "I've realized that Japan is expected to exert leadership not just on the economic front, but also in the field of security in the Asia-Pacific," Mr. Abe told The Wall Street Journal, referring to his meetings with the region's leaders at a series of summits earlier this month. "There are concerns that China is attempting to change the status quo by force, rather than by rule of law. But if China opts to take that path, then it won't be able to emerge peacefully," he added. "So it shouldn't take that path, and many nations expect Japan to strongly assert that. And they hope that as a result, China will take responsible action in the international community." Mr. Abe, whom China has criticized as attempting to whitewash Japan's wartime actions and beef up its military, also said countries in the region shared concerns over Beijing's arms buildup. "It's not just Japan. Many countries have expressed concerns over the increase in China's military spending which is not transparent," he said. But the Japanese leader, who has set economic recovery as his top policy agenda, stressed that ties with China—Japan's top trading partner—is of utmost importance for Tokyo. He called it a "strategic relationship of mutual benefit" stressing that he was open to talks with Chinese leaders and urged Beijing to take the same approach. "One should not shut the door to dialogue just because of one issue. Japan's has its door open, always." Mr. Abe has not held formal talks with Chinese leaders since becoming prime minister last December. He has said that Beijing has refused to come to the table unless Tokyo makes a concession over a key territorial dispute. Both make claims to a series of islets in the East China Sea, currently administered by Japan. Japan says the Senkakus, as it calls them, are Japanese, and that there is no room for debate. China refers to them as the Diaoyus and say they belong to Beijing, demanding that Tokyo recognize the existence of a dispute. While Mr. Abe shook hands and spoke briefly with Chinese President Xi Jinping at a gathering of Asian leaders in Indonesia, they have not had a sit-down summit, and the Japanese leader has yet to visit China. China's foreign ministry did not immediately respond to requests for comment.

*HEAD OF ITALY STATE INVESTMENT AGENCY SAYS CONSIDERING SELLING STAKES IN TERNA, GAS NETWORK OPERATOR SNAM TO DOMESTIC, FOREIGN INVESTORSSRG.MITRN.MI

Gapping down

In reaction to disappointing earnings/guidance: QLIK -19.4%, HWAY -15.4%, RMD -7.7%, NTGR -7.6%, ECHO -7.1% (also downgraded to Mkt Perform at FBR Capital), FSL -6.8%, (light volume), SYNA -5.7%, ESRX -4.3%, KLAC -3.5%, B -3.2%, (light volume), AAN -3.1%, CERN -3%, CUB -2.9%, (light volume), BMRN -2.4%, WYNN -2.2%, EMN -2%, WDC -0.6%, MTW -0.5%.

Select metals/mining stocks trading lower: AU -2.5%, AG -2.3%, HMY -2.2%, PAAS -1.3%, SLV -1.2%, GLD -0.2%.

Other news: RNF -11.7% (lowers third quarter 2013 distribution to $0.27 per unit), TI -5.8% (Telecom Italia seeing notable weakness, being attributed to potential dividend cut), SDR -5.6% (SandRidge Mississippian Trust II Announces Quarterly Distribution), DVAX -4.3% ( announces proposed public offerings of common stock and Series B convertible preferred stock), PHG -1.7% (still checking), UL -1.1% (reported earnings yesterday), SI -1.1% (still checking), CP -0.3% (announces public offering of 5,965,304 of Canadian Pacific's common shares by certain funds managed by Pershing Square).

Analyst comments: EMN -2% ( downgraded to Neutral at from Buy Goldman; removed from Conviction Buy List), CS -1.6% (downgraded to Neutral from Overweight at JPMorgan ), SIRI -1% (downgraded to Neutral from Buy at Goldman, downgraded to Equal Weight from Overweight at Evercore), STM -0.8% (downgraded to Neutral from Buy at Goldman), RS -0.5% (downgraded to Neutral from Outperform at Credit Suisse), CAT -0.3% (downgraded to Neutral from Overweight at Atlantic Equities)

Gapping up

In reaction to strong earnings/guidance: BLDR +19.4%, ELY +15.7%, DECK +13.8%, ZNGA +12.7% (also appointed Clive Downie as Chief Operating Officer, effective November 4, 2013 ), CTCT +9.5% (also upgraded to Buy from Hold at Needham), MKTO +9.3%, AMZN +8.7%, (Amazon.com upgraded to Strong Buy from Market Perform at Raymond James), AFOP +7.6%, OUTR +7.3%, LSCC +7.1%, MSFT +6.5%, INFA +6.2%, (light volume), MXIM +5.7%, IMGN +4.3%, MXWL +4.1%, NWL +2.9%, (light volume), WY +2.3%, CA +2%, (light volume), COG +1.9%, NOV +1.8%, (light volume), LEA +1.8%, UPS +1.6%, BCOV +1.3%, CLF +0.9%, (also Announces the Appointment of New President and Chief Operating Officer), COLM +0.7%, (light volume).

Select oil/gas related names showing strength: TOT +1.5%, RDS.A +1.2%, STO +1.1%, BP +1%.

A few European drug names are trading higher: AZN +1.3%, SNY +1.2%, GSK +0.8%

Other news: CECO +51.3% (reaches agreement to Sell European Education Properties; consideration is expected to be $305 mln, less certain distributions and adjustments prior to closing), COCO +12.9% (up with CECO), ALU +3.6% (still checking), OPTT +3.6% (continued strength), PRKR +3.4% (modestly rebounding), PBNY +3% (to join S&P SmallCap 600), GLUU +3% (continued strength), ATRS +2.7% ( Announces the Issuance of a New U.S. Patent on the VIBEX Device Platform; Provides Additional Long-Term Protection For Proprietary Product Pipeline Including OTREXUP), ARMH +2.4% (continued strength on IBM news), DD +2.3% (announces separation of performance chemicals segment to enhance shareholder value; upgraded to Buy from Neutral at Citigroup), AMD +2.2% (still checking), TSLA +1.6% (FT discusses comments from Tesla (TSLA) exec Elon Musk that valuation in its shares may be higher than it deserves), LCC +1.5% (Business groups want settlement in US Airways (LCC)/AAMRQ antitrust suit, according to reports), BCS +1.3% (still checking), FB +1.2% (TWTR Reports out that IPO's expected price range is $17-$20; Expected to offer 70 mln shares), DIS +1.1% (Walt Disney plans China stores, according to reports ), LUV +1.1% (WSJ discusses that Southwest Airlines may consider fees on bags), RIO +0.3% ( Glencore plans to purchase stake in RIO Clermont coal mine, according to reports), BA +0.2% (Boeing received commitments of $20.7 billion in 737 Max's from China, according to reports).

Analyst comments: VLCCF +3% (ticking higher, upgraded to Equal Weight from Underweight at Evercore ), ESI +1.1% (upgraded to Neutral from Underweight at JPMorgan), CL +0.7% (upgraded to Hold from Sell at Canaccord Genuity ), F +0.5% (upgraded to Outperform from Underperform at Credit Agricole)

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BN 10/25 12:28 *RUSSIAN PRESIDENT PUTIN'S SPOKESMAN PESKOV SPEAKS IN MINSK BN 10/25 12:27 *PESKOV: NOTHING NEW FOR BAUMGERTNER AFTER PUTIN, LUKASHENKO MET

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*PUTIN SAYS ARRESTED URALKALI CEO WAS DISCUSSED WITH LUKASHENKO 2013-10-25 12:29:00.231 GMT

--PAUL ABELSKY

-0- Oct/25/2013 12:29 GMT

Early premarket gappers

Gapping up: CECO +51.3%, BLDR +19.4%, ELY +15.7%, DECK +13.8%, ZNGA +12.7%, MKTO +9.3%, AMZN +8.7%, AFOP +7.6%, OUTR +7.3%, INFA +6.2%, MXIM +5.7%, MSFT +5.3%, MXWL +4.1%, ALU +3.6%, PBNY +3%, GLUU +3%, DD +2.3%, CA +2%, TSLA +1.6%, CLF +1.6%, LCC +1.5%, TOT +1.5%, BCOV +1.3%, FB +1.1%, DIS +1.1%, COLM +0.7%

Gapping down: QLIK -19.4%, HWAY -16%, NQ -14%, RMD -12.1%, NTGR -7.6%, FSL -6.8%, DVAX -6%, ESRX -4.3%, KLAC -3.5%, AAN -3.1%, CERN -3%, CUB -2.9%, WYNN -2.2%, SYNA -2%, EMN -2%, PHG -1.7%, WDC -1.3%, SLV -1.2%, UL -1.1%

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ElringKlinger 3Q Rev, Ebit Miss Ests., Co. Cites FX Impact 2013-10-25 06:08:40.56 GMT

By Brian Lysaght Oct. 25 (Bloomberg) -- ElringKlinger 3Q ebit EU35.1m vs EU36m; est. EU39.44m * 3Q sales up 5.1% to EU294.0m; est. EU300.4m * Elringklinger sees ’13 adj ebit of EU150m to EU155m; est. EU155m * 3Q ebit affected by foreign exchange losses * 3Q order intake EU298.2m vs EU267.5m * Sees 2013 organic sales increase of 5% to 7% * For rest of yr, revenue and ebit growth may be at the lower end of these ranges if the euro continues to appreciate * Full 3Q results on Nov. 6

Link to Statement:{NSN MV7MWR3PWT1E <GO>} Link to Company News:{ZIL2 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: Brian Lysaght at +44-20-7330-7908 or blysaght@bloomberg.net

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Dassault Systemes May Spend EU3-EU4b on Acquisitions, CEO Says 2013-10-25 06:12:36.806 GMT

By Andrea Rothman Oct. 25 (Bloomberg) -- Dassault CEO Bernard Charles says figure is for likely acquisitions over next few years, in interview on BFM radio. * Also expects co. to double sales again over 5 yrs * NOTE: Dassault reported earnings yday, cutting its 2013 non- IFRS rev., EPS forecasts

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

--Editor: Nadine Skoczylas

To contact the reporter on this story: Andrea Rothman in Toulouse at +33-5-6365-7668 or aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at +49-30-70010-6230 or bkammel@bloomberg.net