>>> What to look at today - 7th of July 2020

The global equity rally paused Tuesday after a strong start to the week Monday, with the notable exception of further gains in China. The dollar pared losses.
The Shanghai Composite climbed for a sixth day, bringing this month’s gain to around 13%. Stocks retreated in Japan and South Korea, and fluctuated in Australia and Hong Kong. S&P 500 futures slipped after the benchmark closed higher for a fifth session, with tech gains pushing the Nasdaq Composite to a record high. The dollar remained close to its lowest since early June, while Treasuries were little changed. The offshore yuan strengthened briefly through the 7 per dollar level for the first time since March before paring gains.
US after Hours Quiet after hours; QDEL -1.1% ticks lower despite upside guidance; PCRX -2.3% down after hours, CLLS -15.7% OTIC +19.5% GLDD +10.2%

Nikkei -0.61% Hang Seng -0.52% CSI +2.10% Shanghai +1.63% shenzen +3.10%

Eur$ 1.1310 CNH 7.0142 CNY 7.0158 JPY 107.40 GBP 1.2503 CHF 0.9427 RUB 71.6749 WTI$40.50 -0.32%

S&P -0.45% Nasdaq -0.13% EuroStoxx -0.65% FTSE -0.32% Dax -0.58% SMI -0.34%

Macro :
- Italy Bets on Public Spending to Grow Out of Its Crippling Debt
- French Economy Rebounding Faster Than Expected From Lockdown
- Hedge Fund Sloane Robinson to Shut After More Than Two Decades
- Falling VIX Can Unlock Higher Levels for S&P 500, Evercore Says

Keep an eye on :
- 2CUREX SS : 2cureX Seeks to Raise ~SEK30m-40m in Directed Issue of Units, 2cureX Sells Shares, Warrants to Raise SEK40m
- AGN NA : Aegon Fined EU0.5m by Dutch Regulator for Pension Product UBP
- AI FP : Air Liquide, Port of Rotterdam to Partner on Hydrogen Trucks
- EN FP : Bouygues Construction Unit Chosen In GBP240M U.K. Program
- IAG LN : Union Reaches Outline Deal With British Airways on Job Cuts: Sky
- BYTEDANCE IPO : TikTok’s Pulling Out of Hong Kong After Chinese Law Controversy
- CCL US : Carnival Delays Launch of Ship with Roller Coaster to Feb. 2021
- ALCLS FP : Cellectis Falls After Study Halted Following Patient Death (1)
- CLNX SM : Cellnex Is Said to Consider Over 3 Billion-Euro Capital Increase
- CGG FP : CGG: Sercel Buys 34% Stake In Industrial Robots Startup AMBPR
- CBK GY : Commerzbank to Close More Than Half of German Branches: BZ
- CRDA LN : Croda Purchase of Avanti Could Be Accretive Over Time, Citi Says
- CC1 GY : ADO Properties Takes Control of Consus Real Estate
- DFV GY : DFV Deutsche Familienversicherung to Offer Up to 1.33m Shrs
- ERICB SS : Ericsson to Benefit as U.K. Mulls Stricter Ban on Huawei: React
- FAA GY : Fabasoft Holder to Offer Shares
- GAM SW : GAM Sales Chief Tim Rainsford to Depart: FT
- HAFNIA NO : Hafnia Proposal to Buy Ardmore Rejected; No Talks Ongoing (1)
- HEI GY : HeidelbergCement Revaluation Leads to EU3.4B Depreciation
- IVA FP : Inventiva Starts Roadshow for Global Offering of 8.6m Shares
- LOOMIS SS : Loomis Restructures Norway FX Business, Returning Its License
- MOLN SW : Molecular Partners to Offer 5.5m Shrs
- NOKIA FH : Nokia Stands to Gain Share as U.K. Tightens Huawei Ban: React
- NOVN SW : Novartis Gets EC Approval for Enerzair Breezhaler in the EU
- ORSTED DC : Gulf Energy Acquires 465-MW Wind Farm Project in Germany
- SW FP : Sodexo Sees Full Year Revenue -13.7%
- TLX GY : Talanx Holder Meiji Yasuda Life Insurance to Offer 3.79m Shrs @ 33.10/share
- VMUK LN : Systematica Investments Takes 0.50% Short in Virgin Money UK
- VLTSA FP : Ikea France, Voltalia to Propose Roof-Top Solar Offer in France
- VSLR US : Sunrun to Buy Vivint Solar for an Enterprise Value of $3.2B
- WDI GY : Munich Prosecutors Arrest Another Manager in Wirecard Probe (1)

>>> Europe : Brokers Upgrades & Downgrades -7th of July 2020

>>> Up
* ABN AMRO GDRs Raised to Outperform at Exane; PT 9.70 euros
* Commerzbank Raised to Overweight from UnderWeight at Morgan Stanley
* EDP Raised to Buy at Berenberg; PT 5 euros
* EDP Renovaveis Raised to Buy at Berenberg; PT 14.50 euros
* Hikma Raised to Overweight at Morgan Stanley; PT 2,600 pence
* Italgas Raised to Neutral at Citi; PT 5.20 euros
* Schindler Raised to Buy at UBS
* Schindler Raised to Buy at Berenberg; PT 275 Swiss francs
* Unite Group Raised to Add at Peel Hunt; PT 1,000 pence

>>> Down
* Credit Suisse Cut to Neutral at UBS; PT 10.90 Swiss francs
* DNB Cut to Sell at Handelsbanken; PT 125 kroner
* Hexagon Cut to Sell at Handelsbanken; PT 512 kronor
* HBM Healthcare Cut to Add at Baader Helvea; PT 264 Swiss francs
* Kone Cut to Sell at UBS
* Nemetschek Cut to Underweight at Morgan Stanley; PT 49.50 euros
* Saint-Gobain Cut to Hold at MainFirst; PT 29.50 euros
* SSE Cut to Hold at HSBC; PT 1,430 pence
* Whitbread Cut to Sell at SocGen; PT 2,260 pence
* Whitbread Cut to Sell at AlphaValue

>>> Initiation
* ASMI Rated New Overweight at Barclays; PT 180 euros
* Bachem Rated New Hold at Octavian; PT 210 Swiss francs
* Beazley Rated New Buy at Panmure Gordon; PT 510 pence
* Empiric Student Rated New Buy at Peel Hunt; PT 75 pence
* Enagas Resumed Sell at Citi; PT 17.20 euros
* Epiroc Rated New Sector Perform at RBC; PT 120 kronor
* FLSmidth Rated New Outperform at RBC; PT 265 kroner
* GCP Student Living Rated New Hold at Peel Hunt; PT 130 pence
* Hiscox Rated New Buy at Panmure Gordon; PT 910 pence
* Honeycomb Investment Rated New Buy at Jefferies
* Integra Rated New Speculative Buy at Cormark Securities; PT C$3
* Lancashire Rated New Hold at Panmure Gordon; PT 850 pence
* Metso Outotec Oyj Rated New Overweight at JPMorgan
* NB Global Floating Rated New Hold at Jefferies
* Osram Resumed Hold at Deutsche Bank; PT 41 euros
* Sequoia Economic Rated New Buy at Jefferies

>>> Call
* Commerzbank Double-Upgraded on Restructuring Potential: MS
* Croda Purchase of Avanti Could Be Accretive Over Time, Citi Says
* EDPR Needs to Step Up Its Ambitions, Berenberg Upgrades to Buy
* Eni To Face More Downgrades Amid 2020 Challenges, RBC Says
* Nemetschek Cut to Underweight; MS Prefers Autodesk for Recovery

>>> US After Hours Summary: Quiet after hours; QDEL -1.1% ticks lo

After Hours Summary: Quiet after hours; QDEL -1.1% ticks lower despite upside guidance; PCRX -2.3% down after hours

After Hours Gainers:

Companies trading higher in after hours in reaction to news: OTIC +19.5% (provides update on OTIVIDEX program, reports "positive" top-line results from Phase 1/2 trial), GLDD +10.2% (wins several dredging awards totaling $51.1 mln), B +6.7% (announces restructuring actions, including workforce reductions), UBX +3.7% (announces departure of CFO Bob Goeltz), CATS +0.5% (to change its name and ticker to Ontrak (OTRK))

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: QDEL -1.1% (guides Q2 revs above consensus)

Companies trading lower in after hours in reaction to news: CLLS -15.7% (announces clinical hold for MELANI-01 trial), CIDM -6.7% (files for $75 mln mixed securities shelf offering), RVMD -4% (announces offering of 5.5 mln shares), PING -3.9% (guides Q2 revs above consensus, but co says some customers phased-in their purchases, resulting in smaller deal sizes; also files for 7.5 mln share offering by selling shareholders), PCRX -2.3% (guides Q2 revs well above consensus; also announces $300 mln convertible offering), ARE -1.9% (commences 5 mln share offering)

FT : Cineworld to countersue Cineplex in spat over abandoned $2.1bn deal

Cineworld to countersue Cineplex in spat over abandoned $2.1bn deal
World’s second-largest cinema chain accused of ‘buyers remorse’ by Canadian riva

Cineworld, the world’s second-largest cinema chain, has announced that it plans to countersue Cineplex as it squares up for an expensive legal battle with the Canadian chain that it pulled out of buying last month.

The UK-based cinema group said on Monday that it would “vigorously defend” claims that it breached its obligations to complete a $2.1bn takeover of Cineplex, which it announced in December before the coronavirus crisis hit.

“Cineworld terminated the arrangement agreement because Cineplex breached a number of its covenants under the arrangement agreement. Cineplex did not remedy these breaches when given the opportunity to do so,” the company said in a statement, adding that it planned to pursue damages for its financing costs and advisory fees.

Under the terms of the deal, the sale would not proceed if Cineplex breached a level of C$725m ($535m) debt. On Friday, Cineplex said that it had C$664m of debt outstanding at the end of June.

The two companies have been wrangling over the completion of the takeover since the pandemic caused governments to close cinemas around the world.

On Friday, Cineplex stated that it would pursue around $1.1bn in damages from Cineworld, according to a claim filed at the Ontario Superior Court of Justice and seen by the Financial Times.

“This is a case of buyer’s remorse,” it said.

The Canadian company had been planning to go to court to try to force Cineworld to close the deal before the larger chain announced that it was pulling out in June, according to a person with knowledge of Cineplex’s thinking.

The basis for Cineplex’s claim against Cineworld is that, while the larger chain cited the “material adverse effect” clause as a reason for terminating the contract, events such as global pandemics were not included and Cineplex stated it could not be held accountable for financial changes caused by the crisis. 

Cineplex declined to comment further on Monday.

A number of deals have been called off since the outbreak of coronavirus using material adverse effect clauses but none have gone to court.

Lawyers at New York law firm Paul, Weiss, Rifkind, Wharton & Garrison said in a note that the effect cited under these clauses had to be “durationally significant” and that it was not clear yet what the long-term effects of Covid-19 would be.

For cinema businesses that rely heavily on the gathering of large groups of people, the pandemic has been particularly tough as the majority have been forced to shut their screens and, once reopen, only operate at fractional levels of normal capacity.

They have also been hard hit by the delayed release of major blockbusters such as the latest film in the James Bond franchise, which had been due out in April but will now be shown in November.

“It will be very messy in the hand of lawyers what common sense should have resolved ahead of time,” said Giuseppe Bivona, a partner at Bluebell Partners, a former shareholder in both Cineworld and Cineplex who sold out of both positions shortly before the deal collapsed.

Analysts at Citi warned that “uncertainty over potentially lengthy and expensive” legal proceedings would weigh down on Cineworld’s share price, which has already taken a hammering from the crisis.

Shares in the company, which have fallen 73 per cent this year, were down 8 per cent following the announcement on Monday.

FT : Turkey bans six banks from betting against local stocks

Turkey bans six banks from betting against local stocks
Barclays, Credit Suisse and BofA face three-month exclusion as other trio are banned for a month

Turkey has banned six international banks from betting against its stock market in the latest in a series of moves against foreign investors engaged in short selling.

Borsa Istanbul said Barclays, Credit Suisse and Merrill Lynch (part of Bank of America) would be subject to a three-month ban on short sales of shares listed on its exchange after failing to comply with a requirement to notify the authorities about such trades.

The bourse added that Goldman Sachs, JPMorgan and Wood & Co, the specialist emerging markets investment bank, would face a one-month restriction for the same reason. 

BofA, Barclays and JPMorgan declined to comment on the announcement. The other banks did not immediately respond to requests for comment.

The move risks compounding concerns among foreign investors that Turkey has adopted an increasingly hostile approach to overseas fund managers, especially those looking after short-term portfolios sometimes classed as “hot money”.

Analysts say that such flows of foreign capital are vital for funding the country’s economic growth, especially at a time of low levels of longer-term direct investment. But Turkish authorities have increasingly railed against what they describe as manipulative behaviour by foreign “speculators” in recent years as the lira has faced bouts of volatility.

In 2019, authorities launched an investigation into JPMorgan after the bank published a report that advised clients to short the lira.

In May, as the currency hit a new record low, Turkey’s banking regulator briefly froze UBS, Citibank and BNP Paribas out of its foreign exchange market. The regulator said that the decision to ban the trio was taken after the banks failed to settle their lira liabilities on time. 

But some investors worry that it is part of a broader effort to push them out of Turkish markets, and say that such steps have already led to an exodus of capital. Foreign investors have withdrawn $7.9bn from the country’s stock market since the start of the year, according to central bank statistics.

Berat Albayrak, the country’s finance minister, has repeatedly indicated that he wants to make his country less reliant on short-term foreign capital — and has praised the increased share of local investors in the stock market as a positive development.

The latest decision to temporarily ban banks from engaging in short selling comes a week after the country’s capital markets board announced it was lifting a bar on betting against the top 30 shares listed on the Istanbul bourse. Short selling involves a fund borrowing shares and then selling them in the hope of buying them back later at a lower price and pocketing the difference.

In its announcement, the regulator reiterated a requirement to notify the authorities of any intraday short-selling activity, which sees investors open and close a position within a single day. 

A person close to the Turkish government said the banks had failed to comply with that requirement.

“When you say that six foreign investors are banned, it sounds horrible but the details are actually very benign,” said the person. “The rules are very clear. [The banks] failed to obey the rules.”

Turkey is not alone in requiring investors to report short positions to financial authorities.

European regulations require holders to notify authorities if their net short position on a stock exceeds 0.1 per cent of the company’s issued share capital. Before March, the threshold for reporting stood at 0.2 per cent.

FT : Activist fund Elliott weighs stake in Café Rouge owner

Activist fund Elliott weighs stake in Café Rouge owner
Private equity groups circle after Casual Dining Group enters administration

The activist hedge fund Elliott Advisors is considering a bid for the struggling UK restaurant company Casual Dining Group, which announced that it was entering administration last week.

Elliott, which owns stakes in the UK bookshop chain Waterstones and the French drinks company Pernod Ricard, has expressed an interest in buying Casual Dining Group as it seeks to pick up distressed assets as a result of the pandemic.

It is among a number of investors interested in the business but has yet to table a formal bid, according to a source with knowledge of the discussions.

Last week, Casual Dining Group, which owns the Bella Italia and Café Rouge brands, announced that it was filing for administration, resulting in the immediate closure of 91 sites and the loss of 1,900 of its 6,000 staff.

Other private equity firms including the turnround specialists Endless and Aurelius Group, which tried to buy Jamie’s Italian after it collapsed in 2018, are looking at buying parts of the business.

Elliott’s interest was first reported by Sky News.

Several mid-market restaurant businesses, struggling with hefty debt loads after a private equity fuelled boom in the sector through the mid-2010s, have appointed advisers or put themselves up for sale in recent weeks as they battle to survive the pandemic.

Byron, the burger chain, announced that it was lining up administrators as it entered talks for a rescue deal last week, while the Italian restaurant business Prezzo is preparing to launch a sale process either this week or next.

The private equity firm TowerBrook is “in the driving seat” to buy Azzurri Group, the owner of Ask and Zizzi, with a deal likely to be confirmed in the coming days, a source close to that business said.

Many restaurant groups were able in England this weekend to open their doors to dine-in customers for the first time in three months, but data from the research firm Springboard showed that although footfall on high streets increased by about 36 per cent after 5pm on Saturday on a week-on-week basis, it was still less than half of 2019 levels.

Restaurateurs have warned that trading is unlikely to return to pre-Covid-19 levels until well into 2021 due to social distancing measures and consumers’ anxieties around going out.

Casual Dining Group said last week that it had received “multiple offers” for the business but that all of them “envisage a reduced restaurant estate”.

Elliott Advisors, the UK unit of US fund Elliott Management, and Casual Dining Group declined to comment further on the sale process.

>>> US Gapping down

Gapping down

M&A news:

  • D -1.4% (Dominion Energy's Gas Transmission and Storage Business acquired by Berkshire Hathaway)

Other news:

  • BLU -76.4% (announced topline results from its Phase 2 RELIEF trial of BLU-5937 in patients with refractory chronic cough)
  • OBSV -6.2% (reports results from two Phase 3 studies, PRIMROSE 1 and 2, of Yselty)
  • APLT -5.6% (continued pressure following short report)
  • VIR -3% (announces proposed underwritten public offering of 6,200,000 shares of its common stock)
  • VXX -2.9% (trading lower with US futures up over 1%)
  • UIHC -1.9% (provides estimates of Q2 catastrophe losses)
  • ETNB -1.8% (commences underwritten public offering of 2,200,000 shares of common stock) 
  • AKRO -0.8% (files for 4.75 mln share common stock offering)

Analyst comments:

  • SPOT -1.5% (downgraded to Underperform from Mkt Perform at Bernstein)
  • GMED -1.4% (downgraded to Neutral from Overweight at Piper Sandler)
  • EVH -0.7% (downgraded to Sector Weight from Overweight at KeyBanc Capital Markets)
  • INTC -0.5% (downgraded to Sell from Neutral at Goldman)