>>> What to look at today - 30th of May 2018

Stocks in Asia gained, with some major markets shut for holidays, as investors weighed the ongoing earnings season against a mixed set of signals for global economic growth. The won rallied as the two Koreas moved closer to peace on the peninsula. The biggest gain for shares was in Hong Kong, where technology and bank shares rebounded. Markets in Japan and China were closed for holidays. Equities in Seoul advanced with the won after North Korea pledged denuclearization on Friday ahead of the upcoming summit between Kim Jong Un and U.S. President Donald Trump. Results from tech giants Microsoft Corp., Intel Corp. and Amazon.com Inc. boosted U.S. equities at the end of last week.

Nikkei Closed Hang Seng +1.56% CSI Closed Shanghai +0.23% Shenzen +0.32%

Eur$ 1.2129 CNH 6.3113 CNY 6.3322 JPY 109.17 GBP 1.3784 CHF 0.9875 RUB 62.2990 WTI$ 67.84 -0.38%

S&P +0.29% EuroStoxx +0.06%^FTSE +0.19% Dax +0.13% SMI -0.01%

Macro :
- EU Is Said to Have Talked With Tech Cos. on Banks’ Cloud Use: FT
- London Is Bullish Dollar and Negative on Credit: Macro View
- Bill Gates Urges U.S. to Prepare for Pandemic: Washington Post

Keep an eye on :
- AC FP : AccorHotels Acquires Mövenpick Hotels & Resorts for CHF560M
- ALIG SS : Alimak Has Potential, Buy the Shares: Dagens Industri
- AZA IM : Alitalia Halved Ebitda Loss in 1Q, Commissioner Tells Sole
- B5A GY : Bauer Says Thomas Bauer to Leave Management Board
- BOL FP : Bollore Tells JDD He’s Victim of Prejudice in Africa
- CYBG LN : CYBG Is Said to be Seen as a Candidate for Consolidation: FT
- DBK GY : Deutsche Bank Said to Plan Postbank Integration by End-May: HB
- DTE GY : American Tower Gives Info on Business W/ Sprint, T-Mobile U.S.
- DTE GY : Deutsche Telekom Ratings May be Cut by S&P on Sprint Deal
- DFS LN : DFS 1H Raises Confidence in Outlook, Up to Buy: Jefferies
- DIS US : Disney’s ’Avengers’ Global Opening Collects Record $630 Million
- EDF FP : Hitachi in Talks to Cut U.K. Nuclear Project Stake, Nikkei Says
- ENEL IM : Enel 1Q Group Net Production Falls 1.7% to 62,206 GWh
- FCC SM : FCC Aims to Grow in Spanish Housing Market: Expansion
- HUH1V FH : Huhtamaki Buys 65% Tailored Packaging for About EUR35M Debt Free
- INVEB SS : Investor AB Wants to Buy Piab From EQT, Dagens Industri Reports
- LHA GY : Lufthansa to Simplify Supervisory Board Procedures: Spiegel
- NAS NO : Norwegian CEO Says Airline Has Enough Capital for Expansion: DI
- NDX1 GY : Nordex CFO Sees German Market Demand Growing Again in 2020: BZ
- PST IM : Poste Italiane in Talks With Generali for Partnership: Sole
- RNO FP : Renault Plan to Limit Diesel Car’s NOx Emissions Delayed: Echos
- RIB GY : RIB Software First Quarter Oper Ebitda EU10.9 Mln
- RIO LN : Global Funds to Vote Against Rio on Industry Groups, ACCR Says
- SAN FP : Regeneron, Sanofi Cancer Drug Accepted for FDA Priority Review
- SBRY LN : *SAINSBURY, ASDA AGREE MERGER TERMS, VALUING ASDA AT GBP7.3B
- SEBA SS : SEB First Quarter Net Income Misses Estimates
- S US : T-Mobile, Sprint to Merge in All Stock Deal
- TIT IM : Tel Italia Says Report On Genish Ready To Quit Misleading
- TCG LN : Thomas Cook is Appealing Recovery Play, Initiated Buy: Jefferies
- WPP LN : Kantar CEO Said to Be in Talks With Banks for $5b MBO: Times
- WPP LN : WPP 1Q LFL Revenue Less PT Costs Down 0.1%, Outlook Unchanged
- WSU GY : Washtec First Quarter Ebit EU5.4 Mln

>>> Europe : Brokers Upgrades & Downgrades - 30th of May 2018

>>> Up
* Bilia Upgraded to Buy at SEB Equities; PT 80 Kronor
* DFS Furniture Upgraded to Buy at Jefferies
* Fortum Upgraded to Accumulate at OP Corporate Bank; PT 20 Euros
* Konecranes Upgraded to Buy at OP Corporate Bank; PT 41 Euros
* LEG Immobilien Upgraded to Overweight at Morgan Stanley
* Norden Upgraded to Buy at Danske Bank; Price Target 130 Kroner
* Raisio Upgraded to Neutral at OP Corporate Bank; PT 3.50 Euros
* SSAB Upgraded to Overweight at JPMorgan; PT 56.50 Kronor
* Sainsbury Upgraded to Hold at HSBC; PT 2.70 Pounds
* Sprint Upgraded to Buy at New Street Research
* Tenaris ADRs Upgraded to Overweight at Capital One; PT $43

>>> Down
* Ahold Delhaize Downgraded to Hold at Jefferies
* Outokumpu Downgraded to Neutral at JPMorgan; PT 6 Euros
* Patrizia Immobilien Cut to Neutral at Equinet; PT 18 Euros
* Viscofan Downgraded to Hold at Berenberg

>>> Initiation
* Continental Reinstated Neutral at Credit Suisse; PT 222 Euros
* ElringKlinger Reinstated Underperform at Credit Suisse
* Faurecia Reinstated Outperform at Credit Suisse; PT 82 Euros
* Hella Reinstated at Credit Suisse With Underperform; PT 48 Euros
* Leoni Reinstated at Credit Suisse With Neutral; PT 53 Euros
* Michelin Reinstated at Credit Suisse With Neutral; PT 116 Euros
* Nokian Renkaat Reinstated Underperform at Credit Suisse
* Pirelli Reinstated at Credit Suisse With Neutral; PT 7 Euros
* Schaeffler Reinstated Outperform at Credit Suisse; PT 19 Euros
* Stabilus Rated New Neutral at Credit Suisse; PT 81 Euros
* Valeo Reinstated at Credit Suisse With Neutral; PT 56 Euros

>>> Call

>>> Weekend Reading Summary


Weekend Reading Summary

Macro Related
  • NY Times reports that North Korea plans to denuclearize if U.S. promises not to invade; N Korea will also close nuclear site (EWY). NY Tines Report.
  • WSJ previews meetings on Thursday between Trump Administration officials and China officials on trade (FXI). WSJ Report.
  • The Hill profiles comments from President Trump during a campaign rally in Michigan where he said he will shut down the Government if border wall is not funded in late September. The Hill Report.

Stock Spcific

  • Barron's profiles positive views on ALLY, KMT, CTL, WU. Barron's Report.
  • Barron's profiles positive view on Netflix (NFLX). Barron's Report.
  • Barron's profiles cautious views on TSM, QCOM, NVDA, INTC. Barron's Report.
  • Barron's profiles positive views on FDX, RTN, VRTX, GOOG, GE, MA. Barron's Report.
  • Barron's profiles cautious views on GOOG, TWTR, FB. Barron's Report.
  • Barron's profiles positive views on EOG, RIG, XOM, HAL, COP, DVN, ESV. Barron's Report.
  • Barron's profiles positive views on Net Element (NETE). Barron's Report.
  • Barron's profiles cautious views on Chipotle Mexican Grill (CMG). Barron's Report.
  • NY Post details that MoviePass' (HMNY) one movie per day deal is likely not coming back. NY Post Report.
  • WSJ discusses that Wal-Mart (WMT) plans to sell Asda Group stake to J Sainsbury (JSAIY). WSJ Report.
  • Telegraph discusses accusations that Twitter (TWTR) sold data to the Cambridge University academic. Telegraph Report.
  • Reuters discusses that Schlumberger (SLB) has been given approval by Russia for purchase of Eurasia Drilling stake. Reuters Report.
  • WSJ details Xerox (XRX) / Fujifilm Holdings (FUJIY) M&A deal has been blocked by US Judge. WSJ Report.
  • CNN details that Southwest (LUV) passenger has filed a lawsuit over engine failure on recent flight. CNN Report.
  • Bloomberg details that Denmark is open to subsidies for electric cars (TSLA, KNDI). Bloomberg Report.
  • Reuters profiles new guidelines for foreign investment in Chinese security joint ventures (FXI). Reuters Report.
  • WSJ discusses that Samsung (SSNLF) plans to change conglomerate's ownership structure. WSJ Report.
  • TechCrunch discusses that Disney's (DIS) Avengers set a box office record this weekend with $250 mln in U.S. ticket sales. TechCrunch Report.
  • FT details that CVC Capital is interested in Kantar unit of WPP (WPP). FT Report.
  • FT profiles analysis that Apple (AAPL) could return $100 bln to investors on Tuesday. FT Report.

>>> Barrons weekend summary: positive feature on DIS Cover story: Value stocks

Barrons weekend summary: positive feature on DIS
* Cover story: Value stocks have languished for seven of the past 11 years, but the strategy isn’t dead: There are signs the market will soon turn in favor of value stocks, active management is becoming more important, and some classic measures of value aren’t working, which could lead to a broadly different definition of value.

* Features: 1) Positive on DIS: NFLX could surpass DIS in market value, and Barron’s is no longer bearish on the streaming giant, but Disney could be the better long-term bet because of its diversified business model; 2) Barron’s “Top 100 Hedge Funds” list is topped by MMCAP, Knight Vinke Institutional Partners, EQMC Development Capital—Class A, Pelham Long/Short Small Cap Ltd Class A USD, and Quantitative Tactical Aggressive LLC; 3) Cash is making a comeback as rising interest rates punish bonds and cause volatility in stocks, and yields on money-market funds and other cash sanctuaries are at nearly two percent; 4) A list created by Strategas of the companies that get the most out of their Washington lobbying efforts has outperformed the S&P 500 for nearly a decade by an average of five percentage points.

* Tech Trader: Computer chips are a tremendous source of leverage for the U.S., especially given China’s poorly developed semiconductor sector; A possible Trump administration ban on the sale of chips to China could have wide ramifications, and force China to redouble efforts to build a home-grown industry.

* Trader: The bull market isn’t over, says Jason Pride, chief investment office of Glenmede’s private client group, but it has reached a late cycle that makes every risk seem bigger than it might be; Cautious on CMG: Shares are up at the troubled food chain, which has made changes such as improving its digital ordering platform, but investors should be skeptical of buying the rebound; Negative on NETE: There’s little good news about the unprofitable processor of online payments, whose financial condition remains dire despite buzz about its blockchain technology and celebrity backers.

* Interview: Ilya Zaides and Ike Kier of KG Investments Fund study companies for years before investing and keep their number of investments low, with at most 20 names (picks: DIS, MA, V, TWX).

* European Trader: Positive on Ensco: To benefit from a surge in crude prices if Donald Trump imposes Iran sanctions, investors should consider the U.K. oil-drilling firm, which is highly levered to crude futures prices.

* Emerging Markets: China’s petro-yuan, which was established to end the dollar dominance of the $2T annual oil trade, is off to a slow start and unlikely to supplant the dollar anytime soon.

* Commodities: “Cocoa has climbed by nearly 50% this year, making it the best-performing commodity, but there might not be enough fuel left to power its price much higher.”

* Streetwise: If public pension funds used the most conservative return rate, total state and locally administered pension liabilities could be more than $6T, says Christopher Burnham of the Institute for Pension Fund Integrity.

FT : Asda and Sainsbury’s £15bn deal faces competition hurdle

Asda and Sainsbury’s £15bn deal faces competition hurdle
Suppliers wary of how much muscle the new number-one retailer would flex

Britain’s competition watchdog is expected to investigate merger plans by J Sainsbury and Asda, which would see the supermarket rivals leapfrog over retail leader Tesco with more than 31 per cent share of the UK grocery market.

Details of the £15bn tie-up between one of Britain’s oldest food retailers and the Walmart-owned grocer are set to be announced on Monday.

Lawyers, politicians and retail suppliers said the UK’s Competition and Markets Authority would launch a probe into the all-share deal that would see the US’s Walmart become the merged group’s biggest shareholder.

However, the American retail giant, which will receive new shares in Sainsbury’s, will not have a controlling stake in the new company, according to people close to the talks.

Mike Coupe, Sainsbury’s chief executive and a former Asda executive, is set to run the new group, which would continue to operate Sainsbury’s and Asda as two separate brands.

Suppliers were wary of the proposed deal, and how much power the new number-one supermarket group would have. One big supplier, which did not want to be identified, said the CMA would have to get involved: “Clearly, this is concerning from a customer concentration point of view. Two of the largest customers will have 60-plus per cent of the market.”

Mike Pullen, a consultant at Carter Ruck who specialises in competition law, said: “The CMA will definitely look at this. They will look at market power and the national market, but they will also scrutinise regional clusters, and the power over suppliers.”

He added that there were likely to be divestments for the merger to be approved.

Liberal Democrat leader Sir Vince Cable said the CMA “must investigate” the deal while shadow business secretary Rebecca Long-Bailey warned the merger risked “squeezing what little competition there is in the groceries market even further”.

Mike Cherry, chairman of the Federation of Small Businesses, warned of smaller suppliers “being put over a barrel by a giant company too big to stand up to” and said the CMA should look “carefully at this proposed merger”.

There is no automatic inquiry for deals of this size but guidelines for the CMA to launch a probe include the combined company having at least £70m in turnover, or more than 25 per cent market share. The combined sales of the two retailers would be about £50bn in annual sales and more than 30 per cent market share.

The CMA has some of the most swingeing powers in the world and can order companies to divest businesses or unscramble mergers even if there is no technical breaking of competition law.

It will be one of the largest and most significant tests of the CMA since it replaced the old Office of Fair Trading and Competition Commission in 2014. Andrew Tyrie, the scourge of bankers when he headed the Treasury select committee as a Conservative MP, is its new chairman.


The deal, worth £15bn including debt, comes at a time when retailers and grocers around the world are facing immense pressure in both food and non-food.

Scale and enhanced buying power are the main attractions, according to analysts. There could also be significant cost savings. Bruno Monteyne, an analyst at Bernstein, estimated gross synergies of £600m a year, enough to raise earnings before interest, tax, depreciation and amortisation by a quarter.

In the UK, the traditional “big four” supermarkets — Tesco, Sainsbury’s, Asda and Morrisons — have seen their profit margins stripped by German discounters such as Aldi and Lidl. The pair have sharply increased their market share as Britons’ spending power has been constrained by weak wage growth. In the US, the recent acquisition of Whole Foods by Amazon has promised more disruption. 

Although the deal is likely to attract significant regulatory scrutiny, Mr Coupe and Roger Burnley, his opposite number at Asda, will be emboldened by the recent CMA decision not to block the takeover of Booker, a wholesaler, by Tesco.

Walmart bought Asda, known at the time for its low prices, for £6.7bn in 1999, but the UK business has struggled recently against a resurgent Tesco and the German discounters.



“Asda has not really had a coherent response to the recent changes in the market,” said Richard Hyman, a retail consultant.

In the meantime, Walmart has become embroiled in a massive battle at home with Amazon. It is investing heavily in ecommerce and is also looking to expand in other markets such as India and China.

Sainsbury’s, traditionally a higher-end retailer with a market value of £5.9bn, expanded into household catalogue goods through its £1.4bn purchase of Argos in 2016. It is due to report full-year results next week and in January raised its forecasts for full-year profits.

The Qatar Investment Authority is the largest shareholder in Sainsbury’s, with a 22 per cent stake. The Asda-Sainsbury’s talks were first reported by Bloomberg. Rothschild is advising Asda. Morgan Stanley and UBS are working with Sainsbury’s.

FT : Apple expected to boost shareholder returns by at least $100bn

Apple expected to boost shareholder returns by at least $100bn
Record expansion could win over investors concerned about slowing smartphone sales

Apple plans to return an extra $100bn at least to shareholders, analysts predict, as it prepares to redistribute its repatriated overseas profits.

A record-breaking expansion to Apple’s capital returns scheme, set to be announced alongside its latest quarterly earnings this week, could help win over investors who have become preoccupied by concerns of a global slowdown in smartphone sales. 

Apple said in February that it planned to eliminate what was then a $163bn cash pile, net of debt, after repatriating capital accumulated overseas following recent US tax reforms. 

Wall Street analysts expect the vast majority of those profits to be given back to shareholders in the coming years, in a move that could take Apple’s cumulative capital returns since 2012 to as much as $450bn by 2020. 

After resuming dividend payments and instituting a share buyback scheme in 2012, Apple has added between $30bn and $50bn to its capital returns programme at around this time every year. 

At its current pace, ahead of this week’s eagerly anticipated announcement, all those buybacks and dividends will total $300bn by March 2019.

Analysts at Morgan Stanley estimate that Apple could announce a $150bn increase to that sum on Tuesday.

“This would imply Apple repurchases $210bn in shares and pays $52bn in dividends over the next three years,” the bank said in a recent note to clients, adding that this would still leave about $30bn available for acquisitions. 

Other Wall Street analysts are not quite so optimistic but their estimates still amount to a record-breaking sum. Citigroup expects a $100bn increase while RBC Capital Markets predicts an extra $80bn-$90bn over four to five years. 

Luca Maestri, Apple’s finance chief, in February told investors the company was aiming “to become approximately net cash neutral over time”, but provided no deadline for doing so. 

Neil Cybart, an analyst at Above Avalon, said a dramatic increase in capital returns was the only way for the iPhone maker to achieve that goal, given it is still churning out more than $50bn of free cash flow a year on top of its substantial existing reserves. 

“Assuming Apple maintains its current share buyback pace and cash dividend payouts, it would take Apple close to 10 years to spend $325bn of excess cash,” he said. “Big changes are needed in order for Apple to reach an optimal capital strategy in a reasonable amount of time.”

When Apple reports its latest quarterly earnings on Tuesday, the world’s most valuable company is expected to reveal revenues of about $61bn, after selling an estimated 54m iPhones in the three months to March. 

However, the company’s shares have softened following a succession of gloomy trading updates from suppliers such as Qualcomm, Samsung and TSMC, which have warned that iPhone sales are slowing down. 

Investors will be watching Apple’s outlook closely for any signs of weakness. Morgan Stanley recently slashed its forecast for iPhone sales in the June quarter to 34m, implying a 17 per cent year-on-year decline, which its analysts fear could overshadow the long-awaited decision on what to do with all that overseas cash. 

“Apple’s capital return announcement could amount to a ‘sell the news’ type of event, especially if forward estimates are revised materially downward,” Morgan Stanley said.