FT : Israel launches attacks on military sites in Syria

Israel’s air force attacked two military sites inside Syria on Wednesday evening, US military sources confirmed, marking the latest of several such covert strikes on the country’s northeastern neighbour this year. The sites are near the port city of Latakia and the capital Damascus, according to a person briefed on the matter, who said the US military believed that it was Israel that attacked. Confirmation of the attack late on Thursday followed earlier reports of sightings of Israeli jets in Lebanon and at least one explosion in Syria.

Israel’s military, which has struck targets in Syria several times this year, declined to confirm or deny that it carried out the strikes. “We never comment on foreign reports,” an Israel Defence Forces spokeswoman said. Nagham Ghadri, a member of the Syrian National Coalition, the Turkey-based opposition group, said that activists in Latakia had reported hearing a huge explosion coming from the area of Jibla, which hosts a military airport, on Wednesday. “It came suddenly, activists didn’t hear anything before it,” she said. The coastal province of Latakia is a military and political stronghold for President Bashar al-Assad’s regime. There were reports that Israel previously struck an arms depot that served Syrian and Russian interests in the area in July. CNN, the US news network, on Thursday cited an unnamed official in Barack Obama’s administration who said that Israel attacked because it believed that there was “sensitive and sophisticated missile equipment” that might have been transferred to the military group Hizbollah, an ally of the Assad government. Earlier on Thursday in neighbouring Lebanon, the state news agency said that three Israeli reconnaissance aircraft had flown over its territory on Wednesday, although such violations occur frequently. During previous Israeli airstrikes on Syria, the aircraft are believed to have gone through Lebanon. Benjamin Netanyahu’s government has repeatedly said that it would not allow game-changing weapons to fall into the hands of any of the warring parties in Syria or Hizbollah. In May, the IDF struck military sites near Damascus and in southern Syria, reportedly targeting Iranian-built Fateh-110 long-range missiles that were in transit through Syria to Hizbollah in southern Lebanon. In January, Israel struck a convoy of Russian SA-17 anti-aircraft missiles, western and regional sources said. Confirmation of the IDF’s strikes this year, including the one carried out on Wednesday, have all come from outside the country. Israel’s silence on its incursions into Syria have allowed it to act without publicly embarrassing Mr Assad’s government or compromising its own official stance of neutrality in the neighbouring civil war. The two countries share a border in the Israeli-occupied Golan Heights, where fighting has come close to the ceasefire line several times this year, and mortars and bullets have landed inside Israel, prompting the IDF to return fire.

>>> Meggitt Plc Sees trading below views, now sees Q3 sales growth in the low si

Meggitt Plc Sees trading below views, now sees Q3 sales growth in the low single digits. - Underlying trading during the period covered by this statement has been slightly below expectations, principally due to short term production difficulties at Meggitt Sensing Systems and the timing of contract wins and project milestones in one of our energy businesses.Civil aftermarket revenues continued their gradual recovery, up 2% year on year in the third quarter. Encouragingly, military revenues remained flat despite sequestration. - The military outlook remains less certain due to the lack of visibility on sequestration in the USA. Prospects for the energy market remain very encouraging. - Now expects a 2013 revenue growth rate in the low single digits. - The Group continues to expect percentage constant currency revenue growth in the mid-single digits in 2014.

- Raw materials supply issue: the Group has recently identified a raw material supply issue relating to one product type dating back to 2012. A solution is in place, including where necessary the replacement of the relevant parts over the next few years. The cost of this issue is uncertain but we are providing £20m to account for the expected total financial exposure over the coming years. - Source TradeTheNews.com

>>> MArket October Perf. index & Sector

Oct YTD European Sector Perf in Oct Dow Jones +2.33% +18.63% Insurance +6.66% S&P 500 +3.63% +23.16% Telecom +5.42% Nasdaq +2.66% +29.81% Media +4.64% Russel 2k +1.17% +29.53% Oil&Gas +4.61% Brazil +2.10% -10.99% BAnk +3.77% Basic Res +3.72% EuroStoxx +4.60% +16.39% Fin. Serv.+3.37% FTSE 100 +4.20% +14.13% AutoPart +3.19% CAC40 +2.46% +18.09% Food &Bev +3.07% IBEX35 +6.06% +21.31% Real Est. +2.91% FTSE MIB +7.65% +18.92% Const&Mat +2.82% AEX +3.78% +14.36% Pers&Hsld +2.39% OMX +1.20% +16.18% Healthcar +2.36% Swiss +2.17% +20.69% Util +2.34% Retail +2.14% Nikkei -1.95% +36.62% Chemical +1.95% Hang Seng +1.83% +2.78% Travel&Ls +1.87% Shanghai -1.10% -5.20% Ind. Good +0.94% Tech -0.82%

>>>Brokers Ups & downs

Up

*ALCATEL-LUCENT RAISED TO HOLD VS SELL AT SOCGEN *HENDERSON RAISED TO HOLD VS SELL AT SOCGEN *LUNDIN PETROLEUM RAISED TO BUY VS HOLD AT SOCGEN *MOTHERCARE RAISED TO NEUTRAL VS SELL AT UBS

Down

*AIR FRANCE CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE *COLOPLAST CUT TO NEUTRAL VS BUY AT BOFAML *GO-AHEAD CUT TO SELL VS NEUTRAL AT UBS *INDRA SISTEMAS CUT TO SELL VS HOLD AT SOCGEN *SHELL CUT TO HOLD VS BUY AT SOCGEN *WACKER CHEMIE CUT TO SELL VS NEUTRAL AT CITI *WEIGHT WATCHERS CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS

PT Change

x

Initiation

*CAPITA RATED NEW SELL AT LIBERUM, PT 880P *TENARIS RATED NEW NEUTRAL AT MACQUARIE, PT EU17.4 *VALLOUREC RATED NEW OUTPERFORM AT MACQUARIE, PT EU49 *VESTAS WIND SYSTEMS RATED NEW BUY AT SOCGEN, PT DK175

Country Sector Stock Call

*EUROPEAN BASIC RESOURCES RAISED TO OVERWEIGHT AT CITI *INDUSTRIALS/REAL ESTATE/RETAIL RAISED TO NEUTRAL AT CITI *BofAML Now Sees ECB 25bps Refi-Rate Cut Next Week

*AB INBEV REMOVED FROM CONVICTION SELL AT GOLDMAN, STILL SELL *E.ON NAMED A LEAST PREFERRED STOCK AT CITI, REPLACES RWE *Overweight BNP, Dividend Hike Increasingly Likely: M. Stanley *Veolia Environnement Named a Most Preferred Stock at Citi *WH SMITH CUT FROM UBS’S LEAST PREFERRED LIST

>>> What to look at today

US Markets finish the month on -ve note, S&P is still 4.5% on the month, volumes were quite low before a sell program hit the market on the last 30mnst pushing volumes to 900mil shares...VIX +0,7% @ 13,75...Twin Manufacturing PMIs from China - official and final HSBC - both top estimates to hit multimonth highs. HSBC chief economist points to stronger momentum of manufacturing growth translating into the first expansion of employment since March. Moreover, Oct marked the strongest expansion of new business from abroad in nearly a year, and the stocks of finished goods increased for the first time in four months. ...Shanghai +0.38%...Sony slump, Nissan cuts FY forecasts...Nikkei is down -0.9% but still up 0.8% on the week...

Eur$ 1.3552 S&P Fut +0.11% European fut indicated 10bps higher

Keep an eye on : - BMPS IM : Monte Paschi Foundation Says Sale of Stake in Bank Is Possible - BNP FP : Overweight BNP, Dividend Hike Increasingly Likely: M. Stanley - BRNL NA : Brunel 3Q Revenue Rises on Boost in Energy, Reiterates Outlook - CAV1V FH : Caverion 3Q Profit Beats, Sales Miss Ests.; 2H Forecast Is Kept - CSGN VX : Credit Suisse Fires Trader on ‘Unusual Trading’ Losses ($6m loss) - DETNOR NO : Det Norkse 3Q Oper. Loss NOK518m; Total Production 5,940boe/d - FIS1V FH : Fiskars 3Q Sales Rise, Profit Declines; 2013 Outlook Unchanged - GSF NO : Grieg Seafood 3Q Ebit Before Fair Value Adjustment NOK76.5m - PRA GY : Praktiker Management Said to Bid for Company - PUB FP : Omnicom, Publicis Report Expiration of HSR Act Waiting Period - RNO FP : Nissan Cuts Full-Year Profit Forecast, Overhauls Management - SDA1V FH : Sponda 3Q Earnings Miss Ests.; Now Sees 2013 Vacancy Rate Rising - SNE US : Sony May Need More ‘Aggressive’ Reform, Fitch Says, stock -12% in jap. - SNG GY : Singulus 9M Sales Rise 11%; Sees 2013 IFRS Net Loss - TEL NO : Telenor Hires JPMorgan to Advise on Conax Sale, Reuters Reports - UBSN VX : UBS Examines Transfer of Swiss Business to Subsidiary, NZZ Says - VOD LN : AT&T said to prepare Vodafone bid as soon as next year - VIE FP : Veolia Environnement Named a Most Preferred Stock at Citi

>>> S&P

*S&P Affirms Jordan BB-/B Ratings; Outlook Still Negative *Lebanon Rating Cut at S&P on Impact of Syrian Civil War *UKRAINE CUT TO B- FROM B, OUTLOOK REMAINS NEGATIVE, S&P SAYS

>>> Asia Update

Asian Market Update: China manufacturing PMIs hit multi-month highs

***Observations/Insights*** - Twin Manufacturing PMIs from China - official and final HSBC - both top estimates to hit multimonth highs. HSBC chief economist points to stronger momentum of manufacturing growth translating into the first expansion of employment since March. Moreover, Oct marked the strongest expansion of new business from abroad in nearly a year, and the stocks of finished goods increased for the first time in four months. - Fluor and AIG miss on the top line, shares down over 3% in extended session; FSLR up sharply after beating estimates and upgrading guidance as a result of initial revenue recognition of Desert Sunlight project. - Japan Finance Minister targets a ¥4T cut in primary balance; Says will monitor the impact of US monetary policy a day after US Treasury announced plans to track Japan. - Australia PPI hits a 3-year high while manufacturing sector shines with its highest level in over 3 years.

***Economic Data*** - (CN) CHINA OCT FINAL HSBC/MARKIT MANUFACTURING PMI: 50.9 V 50.7E (7-month high) - (CN) CHINA OCT MANUFACTURING PMI: 51.4 V 51.2E (18-month high) - (AU) AUSTRALIA Q3 PPI Q/Q: 1.3% V 0.1% PRIOR (3-year high); Y/Y: 1.9% V 1.2% PRIOR - (AU) AUSTRALIA OCT RPDATA/RISMARK HOUSE PRICE: 1.3% V 1.6% PRIOR - (AU) AUSTRALIA OCT AIG PERFORMANCE OF MANUFACTURING INDEX (PMI): 53.2 V 51.7 PRIOR (2nd straight month above 50; highest level since Jul 2010) - (ID) INDONESIA OCT HSBC/MARKIT MANUFACTURING PMI: 50.9 V 50.2 PRIOR - (ID) INDONESIA OCT CPI M/M: +0.1% V -0.3% PRIOR; Y/Y: 8.3% V 8.4% PRIOR; CORE CPI Y/Y: 4.7% V 4.7% PRIOR - (ID) INDONESIA SEPT TRADE BALANCE: -$660M V +$132M PRIOR - (VN) VIETNAM OCT HSBC/MARKIT MANUFACTURING PMI: 51.5 V 51.5 PRIOR - (TW) TAIWAN OCT HSBC/MARKIT MANUFACTURING PMI: 53.0 V 52.0 PRIOR - (KR) SOUTH KOREA OCT HSBC/MARKIT MANUFACTURING PMI: 50.2 V 49.7 PRIOR (5-month high) - (KR) SOUTH KOREA OCT TRADE BALANCE: $4.9B V $4.3BE - (KR) SOUTH KOREA OCT CPI M/M: -0.3% V +0.1%E; Y/Y: 0.7% V 1.0%E (14-year low); CPI CORE Y/Y: 1.6% V 1.6% PRIOR

***Fixed Income/Commodities/Currencies*** - USD/CNY: (CN) PBoC sets yuan mid point at 6.1452 v 6.1425 prior setting (weakest Yuan setting since Oct 10th) - (JP) BOJ offers to buy ¥2T in T-bills outright on Nov 6th - (AU) Australia MoF (AOFM) sells A$800M in 5.75% 2021 Bonds; avg yield: 3.800%; bid-to-cover: 4.27x - (US) Weekly Fed Balance Sheet Assets Week ending Oct 30th: $3.800T (record high) v $3.795T prior; M1 y/y change: 9.0% v 9.0% w/w; M2 y/y change: 6.6% v 6.6% w/w

- Euro remains under pressure across the board, as less dovish than expected FOMC statement and soft EZ inflation data overnight are helping send EUR/USD to 2-week lows below $1.3550, now down about 3 big figures from the highs seen just last week. EUR/JPY is also at a 2-week low below 133, while EUR/GBP is at a 1-week low. By contrast, the recent decliner AUD is off its lows on the heels of higher than expected PPI, strong AiG manufacturing, and robust China PMI's. AUD/USD is up 40pips to 0.9480, and EUR/AUD cross is at a 1-week low. USD/JPY fell below the ¥98 handle in the afternoon session, off by about 50pips from the highs.

***Speakers/Political/In the Papers*** - (CN) China Oct home prices +1.24% m/m to CNY10.7K/sqm- Soufun - (CN) China State Administration of Foreign Exchange (SAFE) may issue policy on Yuan demand limit - Hong Kong press - (CN) Nikkei News comments on a rise in non-performing loans among China's top banks - (NZ) New Zealand Oct new residential listings +27% m/m - Realestate.co.nz - (JP) Japan Fin Min Aso: Aims to cut primary balance by ¥4T in FY14/15 - (JP) According to a majority of private-sector economists, there is still a "deflationary mindset" in Japan - Nikkei News

***Equities*** Market Snapshot (as of 03:30 GMT): - Nikkei225 -0.9%, S&P/ASX -0.1%, Kospi +0.2%, Shanghai Composite flat, Hang Seng flat, Dec S&P500 +0.2% at 1,754, Dec gold -0.1% at $1,323, Dec crude oil -0.1% at $96.31/brl

US markets: - ELLI: Reports Q3 $0.25 v $0.29e, R$33M v $34.3Me; -17.4% afterhours - ABX: Plans To Reduce Debt; Launches a $3.0B Public Equity Offering (15% of market cap); -5.4% afterhours - FLR: Reports Q3 $1.05 v $1.03e, R$6.68B v $7.27Be; -3.3% afterhours - AIG: Reports Q3 $0.96 adjusted v $0.93e, R$8.43B v $10.1Be; -3.2% afterhours

- NEM: Reports Q3 $0.46 v $0.32e, R$1.98B v $1.98Be; +0.3% afterhours - RSG: Authorizes additional $650M for Stock Repurchases (about 5% of market cap); +2.3% afterhours - FSLR: Reports Q3 $2.28 v $0.92e, R$1.27B v $961Me; +7.3% afterhours - TRMB: Reports Q3 $0.39 v $0.36e, R$556.5M v $558Me; +7.4% afterhours - GDOT: Reports Q3 $0.24 v $0.22e, R$139.1M v $136Me; Green Dot and Walmart Expand Walmart MoneyCard Portfolio with a Suite of Prepaid Debit Cards; +14.6% afterhours

Notable movers by sector: - Consumer discretionary: Panasonic Corp 6752.JP +5.6% (H1 results); Capcom Co Ltd 9697.JP -0.9% (H1 results); Japan Airlines Corp 9201.JP -0.5% (H1 results); David Jones Ltd DJS.AU +6.8% (Q1 results); Bega Cheese BGA.AU +10.0% (Fonterra acquires stake); Dongfeng Motor 489.HK +2.4% (Q3 results); SK Networks 001740.KR +1.8% (Q3 results) - Industrials: Mazda Motor Corp 7261.JP -0.5% (H1 results); Toto Ltd 5332.JP +5.6% (H1 results); Yamaha Corp 7951.JP -1.6% (H1 results); Sumitomo Heavy Industries 6302.JP +8.3% (H1 results) - Materials: PanAust PNA.AU -3.7% (acquires project) - Financials: Macquarie Group Ltd MQG.AU +4.7% (H1 results); Shinsei Bank Ltd 8303.JP flat (H1 results) - Technology: Sony Corp 6758.JP -12.1% (H1 results); Sharp Corp 6753.JP +2.8% (H1 results); Sumitomo Electric Industries Ltd 5802.JP -0.2% (H1 results); NTT Data Corp 9613.JP -6.5% (H1 results); TCL Corp 1070.HK +3.1% (sees to profit in Q4) - Utilities: TEPCO 9501.JP +2.5% (H1 results) - Telecom: Softbank 9984.JP +2.9% (H1 results)

FT : ECB faces pressure to cut interest rates

ECB faces pressure to cut interest rates

Pressure grew on the European Central Bank on Thursday to cut interest rates after inflation slowed sharply in the euro area. Meanwhile Germany hit back at a jibe from the US Treasury that laid the blame for deflationary trends at Berlin’s door. The euro area’s annual inflation rate unexpectedly slowed to 0.7 per cent in October, well below the ECB’s target of close to, but below, 2 per cent. The slowdown came as Germany, the biggest eurozone economy, reacted angrily to accusations by the US Treasury that its large and persistent current account surpluses created a deflationary bias in the global economy. The Treasury urged Berlin to do more to boost domestic demand. "The German current account surplus is no cause for concern, neither for Germany, nor for the eurozone or the global economy. There are no imbalances in Germany that need correction," the country’s finance ministry said. The Treasury’s semi-annual currency report, released on Wednesday, elevated the Germany criticism to a "key finding" at the top of the report – alongside China’s undervaluation of the renminbi and Japan’s monetary stimulus. It comes at a low ebb in German-US relations after allegations that the US tapped Chancellor Angela Merkel’s mobile phone. Slowing eurozone inflation highlights how sluggish the region’s recovery is and raises the risk of Japan-style deflation, when prices persistently fall. It also effectively raises the debt-reduction bar for the currency union’s crisis-hit members, since less of their national debt is inflated away over time. The so-called "flash" or initial inflation estimate by Eurostat, the EU’s statistical office, represented a further slowdown since September, when inflation was 1.1 per cent, which is roughly what economists had predicted for October. A sharp outright fall in energy costs, by 1.7 per cent, drove the slowdown in the harmonised indices of consumer prices, which the ECB targets but the "core inflation" rate, which strips out energy, food, alcohol and tobacco, also dropped, from 1 per cent to 0.8 per cent . The ECB’s governing council meets next week to discuss interest rates. It has been divided for months over whether a further cut below 0.5 per cent on its main refinancing rate would be justified. Slowing inflation and the appreciation of the euro, which may explain the energy price falls, are strong arguments for those in favour of a cut. The bloc’s fragile recovery and an expectation that inflation will pick up next year are the main reasons cited by those favouring no change on monetary policy. German policy makers, in particular, are likely to resist calls for a rate cut, given their view that monetary policy is already too loose in a country with low unemployment and rapid price rises in some parts of its property market. Despite the increased pressure to loosen policy, the central bank may yet wait until its December meeting, when new staff forecasts will give it an updated medium-term inflation forecast – the timescale over which it is meant to keep prices stable. "We see December as the most probable timing for a 25 basis point cut in the refi [refinancing] rate, in tandem for another round of low staff projections for inflation," Ken Wattret, economist at BNP Paribas, said in a note. Unemployment data for the bloc, also released by Eurostat on Thursday, remained stable at 12.2 per cent in September compared with the August rate. This illustrates how the bloc’s recovery has yet to help reduce unemployment, which is highest in Spain and Greece, where more than one in four is out of work. Although Portugal reduced its unemployment rate from 16.5 per cent to 16.3 per cent, the lack of major progress on jobs fuels the disinflationary trend as there is no upward pressure on wages. Economists at Commerzbank pointed out that wage freezes and cuts were helping companies in stressed countries improve their competitiveness. "The low rate of inflation is a positive sign as it is largely due to weak price pressure in the crisis countries," Commerzbank’s Christoph Weil said in a note. "Declining prices in Greece and Spain confirm that companies are using the drop in unit labour costs to improve their price competitiveness." However, inflation is also undershooting in Germany, where it slowed from 1.4 per cent in September to 1.2 per cent in October, according to the federal statistics office. The German slowdown was attributed to lower petroleum prices in October compared with a year ago. If the ECB does decide to cut its refinancing rate it will have to choose between lowering its 0 per cent deposit rate into negative territory for the first time, or narrowing the corridor between the two rates. A narrower corridor between the rate at which it lends money to commercial banks and pays them for their deposits could disrupt how money markets function. A negative deposit rate, where the ECB would in effect charge banks to deposit funds with it, would be a first for any major central bank and could also lead to unexpected consequences.

>>>US After Hours

After Hours Summary: GDOT +14.6%, FSLR +7.5%, NEM +0.7%, BODY -16.4%, AIG-3.2% following earnings/guidance After Hours Gainers: Companies trading higher in after hours in reaction to earnings: GDOT +14.6%, TRMB +7.4%, FSLR +7.5%, CALD +5.3%, EPAY +4%, CTRL +3.6%, AHS +3.2%, MHK +2.7%, SWN +1.9%, PSA +1.7%, BBG +0.8%, OHI +0.7%, IMMR +0.7%, NEM +0.7%, ANH +0.4%, MTX +0.4%, SPF +0.3%, CODE +0.3%, DGII +0.2%

Companies trading higher in after hours in reaction to news: - GDOT +14.6% (Co and Walmart (WMT) expand Walmart MoneyCard portfolio with a suite of prepaid debit cards; co also reported earnings), - STWD +2.4% (announced spin-off of single-family residential business), - PSA +1.7% (increased quarterly dividend 12% to $1.40 from $1.25 per share; co also reported earnings), - UVV +0.7% (announced expansion in Africa)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: BODY -16.4%, HTCH -15.3%, ELLI -14.2%, OPLK -8%, SSNC -4.6%, FLR -3.9%, AIG -3.2%, ADNC -2.8%, KRG -0.6%, KOG -0.5%, ONNN -0.5%, TLAB -0.4%, EDE -0.1%, PDM -0.1%, AVD -0.1%

Companies trading lower in after hours in reaction to news: - ABX -5.5% (confirms plan to reduce debt, launches $3.0 bln public equity offering), - TOWR -3.4% (announced offering of ~2.58 mln shares of common stock by Tower International Holdings), - PEB -1.6% (announced public offering of 2.2 mln common shares), - LYB -0.7% (announced offering of 15 mln ordinary shares by selling shareholders)