>>> US Close Dow -1.21% S&P -0.82% Nasdaq -1.81% Russell -1.46%


Closing Market Summary: Stocks Fall As Yields Rise; Jobs Report On Tap

Stocks tumbled in Thursday's trading session, extending yesterday afternoon's slow and steady retreat, which was triggered by U.S. Treasury yields reaching multi-year highs. The S&P 500 was down as much as 1.4% in intraday trade, but bounced back late to close at -0.8%.

As for the other major averages, the Dow Jones Industrial Average closed at -0.8%, while the tech-heavy Nasdaq Composite showed relative weakness, ending at -1.8%. The small-cap Russell 2000, which has struggled recently, lost 1.5% on Thursday, extending its weekly loss to 2.9%.

A robust economic outlook, underlined by Wednesday's stronger-than-expected ADP Employment Change report for September -- which is a prelude to Friday's consequential nonfarm payrolls reading -- helped ignite the Treasury sell-off, thereby increasing yields. The yield on the benchmark 10-yr note climbed another four basis points on Thursday to 3.20% and is now up 16 basis points since Tuesday.

Unsurprisingly, the rate-sensitive financials sector was the strongest-performing sector in today's session, adding 0.7%. However, nine of the 11 sectors finished in negative territory.

Tech stocks were hit with news that China infiltrated leading companies', including Apple (AAPL 227.99, -4.08, -1.8%) and Amazon (AMZN 1909.42, -43.34, -2.2%), supply chains by implanting a spy chip in their servers. Both companies, however, denied the claim.

In earnings news, Constellation Brands (STZ 222.10, +11.34) finished 5.4% higher after beating top and bottom line estimates and raising its guidance for the fiscal year.

Also of note, Barnes & Noble (BKS 6.65, +1.19) closed 21.8% higher after the company decided to enter into a formal review process to evaluate strategic alternatives in response to multiple parties expressing interest to acquire the bookseller.

In other markets, WTI crude fell 2.6% to $74.44 a barrel after reaching a four-year high yesterday; Looking ahead, U.S. sanctions on Iran, which holds the fourth largest supply of crude oil reserves, will take effect next month on November 4. Meanwhile, the U.S. Dollar Index fell 0.3% at 95.40, ending a six-day winning streak, despite the jump in yields.

Reflective of today's price movements, CBOE Volatility Index, which is often referred to as the "investor fear gauge," catapulted as high as 32.9% before closing +21.8% at 14.14.

Recapping Thursday's economic data, which included the weekly Initial Claims report and August's Factory Orders report:

  • Initial claims for the week ending September 29 decreased by 7,000 from the prior week to 207,000 (consensus 210,000), while continuing claims for the week ending September 22 decreased by 13,000 to 1.650 million.
    • The key takeaway from the report is that it shows the labor market remains tight and conducive to an increase in wage growth.
  • Factory orders increased 2.3% in August (consensus +1.8%) following an upwardly revised 0.5% decline (from -0.8%) in July.
    • The key takeaway from the report is that there wasn't much strength in factory orders outside transportation equipment; moreover, a downward revision to shipments of nondefense capital goods excluding aircraft will detract from Q3 GDP growth estimates.

Looking ahead, investors will receive the Employment Situation report for September at 8:30 AM ET and the Consumer Credit report for August at 15:00 PM ET.

  • Nasdaq Composite +14.1% YTD
  • S&P 500 +8.5% YTD
  • Dow Jones Industrial Average +7.7% YTD
  • Russell 2000 +7.3% YTD

(BFW) Brookfield Property Group Confirms Possible Offer

RNS 10/04 17:14 [Delayed] Brookfield Prop.Grp. Statement re Possible Offer
BN 10/04 16:15 *BROOKFIELD PROPERTY GROUP SAYS NO APPROACH MADE TO INTU BOARD
BN 10/04 16:14 *BROOKFIELD PROPERTY GROUP CONFIRMS POSSIBLE OFFER
BN 10/04 16:13 *BROOKFIELD PROP.GRP. STATEMENT RE POSSIBLE OFFER
Brookfield Property Group Confirms Possible Offer
2018-10-04 16:21:01.116 GMT


By Cara Moffat
(Bloomberg) -- Consortium including Peel, Olayan and
Brookfield Property confirm preliminary stages of possible offer
for issued share capital of Intu not already owned by members of
the Consortium.
* No approach has been made to Intu board
* EARLIER: Brookfield Preparing Bid For Intu Properties, EG
Reports

Link to Statement: Brookfield Prop.Grp. Statement re
Possible Offer

To contact the reporter on this story:
Cara Moffat in Los Angeles at cmoffat@bloomberg.net
To contact the editor responsible for this story:
Lauren Berry at lberry4@bloomberg.net

FT Lex : Italian banks: popular uprising

FT LEx : Italian banks: popular uprising
A frenetic political news cycle leaves lenders vulnerable

Italian bankers would be forgiven for swapping a double espresso for a quadruple, as they make their way in to work.

A slide in the price of government bonds, in which the country’s banks are heavily invested, would be bad enough. But note the rising cost of credit default swaps, the price of insuring the banks’ own debt against default. The populist government’s decision to run a higher than expected deficit has shaken markets, pushing up the banks’ cost of funding.

A quick glance at Europe’s widest CDS spreads shows that only Turkish banks have deteriorated more rapidly over the past six months, in terms of creditworthiness. Among the Italians with the biggest jumps in default risk are Banca Monte dei Paschi di Siena and UBI Banca, two of the mid-sized banks. But there are risks for the biggest too.

Take UniCredit. As of July this year, the Milan-based bank had completed just one-third of its funding schedule for the year. The bank says it has not been back to the capital markets since then, deploying other resources instead. Months spent waiting for the market to improve have been in vain. If anything, conditions have worsened.

How bad could things get? Since the height of the eurozone crisis, capital ratios across the Italian banking sector have improved. Banks are also trimming vast portfolios of bad loans. UniCredit’s non-core gross non-performing exposures were down 25 per cent on the year at the end of the second quarter.

This de-risking is not over yet and market uncertainty will not help it. Then as now, a frenetic political news cycle leaves banks vulnerable.

At the half way point this year, UniCredit said falls in Italian bonds had hurt its core tier 1 equity ratio by 30 basis points. Spreads over German Bunds have further widened since then. Every 10bp movement in the spread has a 2.6bp impact on UniCredit’s CET1 ratio.

For now, Italian banks remain stuck in a doom loop: instability of the banks and instability of the government, perpetually feeding off each other. The Five Star-League coalition appears to be at war with itself and the economy ministry. In response to the market sell off, Rome has said it would cut its deficit target from 2020. A small concession.

The government will submit its formal spending plan to the European Commission for approval this month. Bank investors should buckle up.

>>> Barnes & Noble announces strategic alternatives review; decision follows exp

Barnes & Noble announces strategic alternatives review; decision follows expressions of interest from multiple parties in making an offer to acquire the company; co has observed rapid material accumulations of its stock by a party or parties; announces shareholder plan
Co announces that its Board of Directors has decided to enter into a formal review process to evaluate strategic alternatives.
  • This decision follows expressions of interest from multiple parties in making an offer to acquire the Company, including from the Company's Chairman, Leonard Riggio.
  • The Board of Directors has appointed a Special Committee of independent directors to lead the strategic review process.
  • Mr. Riggio has committed to support and vote his shares in favor of any transaction recommended by the Special Committee. There can be no assurance that a transaction will be consummated.
  • Co further notes that it has observed rapid material accumulations of its stock by a party or parties that cannot be identified.
  • In light of the impending strategic alternatives process and such share accumulations, the Board also announced the adoption of a short-term Shareholder Rights Plan. This is intended to maximize the likelihood of a successful outcome for the strategic alternatives process. The rights will expire on October 2, 2019.
  • The rights will be exercisable if a person or group, without Board approval, acquires 20% or more of BKS common stock or announces a tender offer greater than 20%. If the rights become exercisable, all rights holders (other than the person triggering the rights and related parties) will be entitled to acquire preferred shares equivalent to common stock at a 50% discount. The rights will trade with the common stock, unless and until they are separated.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • RTEC -12% (lowers Q3 guidance due to expansion delays from front-end metrology customers), PIR -10.4%, SNX -3.4%, ATRC -2.5% (commenced an underwritten public offering of 2.5 million shares of its common stock; reports prelim Q3 sales above consensus), JEF -1.5% (Q3 guidance)

Other news:

  • MNR -8.2% (prices 8 mln common stock offering at $15.00/share)
  • IIPR -4.5% (prices offering of 2.6 mln shares of common stock at $40.00 per share)
  • WLDN -4% (prices offering of 1.75 mln shares at $30.00/share)
  • TLRY -3.3% (commences $400 mln private placement of Convertible Senior Notes due 2023, also provided Q3 guidance)
  • SIR -3.2% (Government Properties Income Trust (GOV) sell remaining stake in public offering of 24.9 mln shares of SIR common stock at $18.25 per share)

Analyst comments:

  • ANET -1.4% (removed from Conviction Buy List at Goldman)
  • FSIC -1.4% (downgraded to Market Perform from Outperform at Wells Fargo)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • RECN +19.3%, PKE +5%, STZ +4.4%, HPQ +3.2% (sees FY19 EPS in-line, announces 15% dividend increase), CP +1.1%

M&A news:

  • CLDR +23.5% (Hortonworks [HDP] and Cloudera [CLDR] will combine in an all-stock merger; HDP shareholders will receive 1.305 common shares of Cloudera for each share of Hortonworks stock owned), HDP +22.9%
  • BKS +22.7% (announces strategic alternatives process)
  • SSTI +6.8% (announces acquisition of Hunchlab technology and related assets from Azavea)

Other news:

  • ARWR +17.9% (enters into license and collaboration agreement with Janssen Pharmaceuticals (JNJ) to develop and commercialize ARO-HBV, will receive $175 mln as an upfront payment & $75 mln investment at $23.00/share)
  • SIGA +4.7% (enters into a CRADA w/ the United States Army Medical Research Institute of Infectious Diseases)
  • SRPT +3.2% (pulling back after reporting updated results from the four children dosed in its gene therapy micro-Dystrophi trial in individuals with Duchenne muscular dystrophy)
  • LLY +3.1% (announces that empagliflozin met the primary efficacy endpoint for all doses investigated (2.5, 10 and 25 mg) in the Empagliflozin as Adjunctive to inSulin thErapy Phase III program in adults with type 1 diabetes)
  • BLRX +2.2% (continued strength)

Analyst comments:

  • EGLE +2.6% (initiated with Buy at B. Riley FBR)
  • COMM +1.5% (upgraded to Buy from Hold at Cross Research)
  • CMI +1.1% (upgraded to Overweight from Neutral at Piper Jaffray)
  • PFBC +1.1% (upgraded to Strong Buy from Outperform at Raymond James)