>>> What to look at today - 13th of Sept. 2017

Dow +0.28% S&P +0.34% Nasdaq +0.34% Russell +0.61%
US Market closed higher for a second day. the biggest event of the day was Apple's (AAPL 160.82, -0.68) annual product unveiling, in which the tech giant showed off three new iPhones, including the iPhone 8, the iPhone 8 Plus, and the high-end iPhone X--which CEO Tim Cook called "the biggest leap forward since the original iPhone." Apple also introduced a new 4K Apple TV and its Apple Watch Series 3, which is the first series to include LTE-capability, allowing users to make phone calls and stream music without hauling a phone, most of news were leaked before. AAPL was volatile (163.96/158.77 to close @ 160.82). Financial bounce back +1.2%, sector benefited from a curve-steepening trade within the Treasury market, which sold off once again as investors dialed up their appetite for more risky assets--like equities.
Telecom outperformed too. the rate-sensitive utilities (-1.8%) and real estate (-1.2%) sectors struggled amid the increase in interest rates. US After Hours JWN +10% (and lifting retail names) on potential privatization deal, CNC +2% higher on $3.75 bln acquisition news. Asian equity markets opened mixed, trading remained subdued with yields falling slightly and US dollar taking a break from its recent climb. Lithium miners in Australia, Syrah Resources, Galaxy Resources rose on the news yesterday that China could accelerate its move to non-fossil fuel burning cars. Iron ore futures on China’s Dalian exchange were +2%. Crude saw little movement from the release of API data, showing a build of 6.2M. PBOC weakened the yuan for the second consecutive day.

Nikkei +0.48% Hang Seng -0.29% CSI +0.09% Shanghai +0.04% Shenzen +0.12%

Eur$ 1.1978 CNH 6.5291 CNY 6.5298 JPY 110.10 GBP 1.3305 CHF 0.9595 RUB 57.5898 WTI$ 48.26 +0.06%

S&P -0.08% EuroStoxx -0.11% Dax -0.07% FTSE -0.20% SMI +0.13%

Macro :
- Europe’s MiFID Overhaul Will Benefit the U.S., CME’s Duffy Says

Keep an eye on :
- ADP FP : ADP Paris Airports August Traffic Rises 3.8%
- BAYN GY : Bayer Sells Covestro Shares for EU63.25/Share
- BMW GY : BMW Sees More Carmakers Partnering for Self-Driving Platform
- BOL FP : Lithium Rally Gets More Fuel; Eight Capital Remains Bullish
- 1COV GY : Bayer Sells Covestro Shares for EU63.25/Share
- DIS US : ’Star Wars: Episode IX’ Release Date Moves to Dec. 20, 2019
- ERA FP : Intesa, UniCredit Start Sale of Up to 11.176% in Eramet, Eramet Holders’ Share Sale Priced at EU57/Shr
- G IM : ASR Buys Generali’s Dutch Operations for EU143m
- NDA SS : Nordea Is Just Too Big for Sweden, Bruegel Think Tank Says
- ORA FP : French Govt Must Stop Rumors on Sale of Orange Stake, Union Says
- CFR VX : Richemont 5-Month Constant FX Sales Beat Estimates
- SAN FP : Sanofi Names Guillaume Leroy Chairman for France as of Oct. 1
- SDRL NO : *SEADRILL FILES FOR BANKRUPTCY IN TEXAS
- VOE AV : Voestalpine Says It Was Raided by German Antitrust Regulator
- WDAY US : Workday Prices $1.0B Convertible Senior Notes Due 2022

>>> Europe : Brokers Upgrades & Downgrades - 13th of Sept. 2017

>>> Up
* Buzzi Unicem Raised to Outperform at MedioBanca
* Covestro Raised to Outperform at Evercore ISI, PT EU71
* Merck KGaA Raised to Buy at Berenberg
* Vivendi Raised to Buy at UBS

>>> Down
* Diageo Cut to Hold at Berenberg
* Edenred Cut to Underweight at JPMorgan, PT EU20
* Genus Cut to Hold at Liberum
* ITV Cut to Underperform at Macquarie, PT GBP1.10
* Mediaset Cut to Underperform at Macquarie, PT EU2.10

>>> Initiation
* Gocompare.com New Buy at Berenberg, PT 130p
* Kion New Neutral at Goldman, PT EU79
* Kloeckner New Buy at HSBC, PT EU12
* Moneysupermarket New Hold at Berenberg, PT 320p
* Molson Coors New Sell at Berenberg, PT $78
* Revlon New Hold at Jefferies, PT $16
* Travis Perkins New Underperform at Bernstein, PT GBP12.40
* Wolseley New Outperform at Bernstein, PT GBP55.70

>>> Call

FT : Return of the stockpicker bolsters hedge fund performance

Return of the stockpicker bolsters hedge fund performance

Better showing as stock market breaks free of tight correlations of recent years

Stockpickers are showing signs of rescuing the reputation — and fortunes — of the hedge fund industry.

Nearly three-quarters of the way through the year, hedge funds focused on equities are outperforming nearly every other strategy, buoying the returns of the industry even as some high-profile macro and commodities funds struggle, according to people with knowledge of the funds’ recent performance.

The better showing comes as the US stock market has broken free of tight correlations of recent years in which sectors have generally moved up and down together, a pattern that has favoured passive investors over stockpickers.

The realised correlation of companies that make up the S&P 500 is just under 20 per cent this year, down from 60 per cent a year ago and one of the lowest readings in more than a decade, according to Morgan Stanley.

The easing in correlation between both sectors and companies has rewarded doyens of long/short strategies, in which funds sell the shares of companies they believe to be weak while buying those with stronger prospects of outperforming. Equity hedge funds including Chris Hohn’s TCI, Luxor Capital, Glenview Capital and Light Street Capital are all up double-digits for 2017, making them some of the year’s top performers.

Karim Leguel, the head of hedge fund solutions for Emea at JPMorgan Asset Management, says they are still bullish on equity long-short funds “given the improving fundamentals and rising dispersion across stocks and sectors”.

In broad terms, hedge funds focused on US equities are up more than 8 per cent this year. While lagging the S&P 500’s total return of 12.7 per cent and the Nasdaq 100’s gain of 24 per cent, some funds have generated a double digit performance for 2017.


Among smaller equity funds, Light Street Capital, a Palo Alto-based tech-focused fund that goes long and short stocks and manages around $1.1bn, has returns of 47 per cent. Another California-based long-short equity fund, the $500m China-focused Yiheng Capital, is up 51 per cent.

Many big-name equity shops are also having strong years. TCI, one of the largest activist funds in Europe with $16bn under management, is up 25.6 per cent to the end of August. One of its most lucrative investments has been in Safran, the French aerospace company. TCI led a fierce campaign to force Safran to revise its offer for Zodiac Aerospace.

The largest London-based European long-short equity funds, Lansdowne and Marshall Wace, are also having strong years. Lansdowne’s smaller funds — European Equity, Princay and Energy Dynamics — have all returned close to 15 per cent. Marshall Wace’s flagship Eureka fund has returned about 8.5 per cent.

Hedge funds, which had come under a barrage of criticism in recent years for charging hefty fees while underperforming, saw investors pull billions of dollars last year, while flocking to passive or private equity strategies instead.

The chorus of investors demanding fee reductions has started to subside as performance has improved, and investors are again trickling back to the strategy, allocating slightly more money to hedge funds than they are redeeming.

Yet not all funds have capitalised on the renewed surge in equities that began with US President Donald Trump’s election, as investors anticipated a business-friendly regime would allow share prices to flourish. Crispin Odey’s European fund, which fell 50 per cent last year, is down more than 10 per cent this year. David Einhorn’s Greenlight Capital, meanwhile, has dropped about 2 per cent.

As much as some equity and emerging markets funds have returned hefty numbers, some big-name macro fund managers have struggled, while systematic and commodities funds have also been lacklustre.

Brevan Howard, one of the largest hedge funds in Europe, run by Alan Howard, was down nearly 4 per cent in its flagship fund at the end of July, while Paul Tudor Jones’s Tudor Global was down about 2 per cent through the end of August. Paul Brewer’s Rubicon Global Fund, Andrew Law’s Caxton Global, and Louis Bacon’s Moore Capital also saw returns in some of their funds decline.

For some of the funds that have performed well, the high returns have given them something of a comeback.

Och-Ziff, whose assets have fallen to $32bn from a peak of $48bn in July 2015, is still recovering from a $413m charge it paid last year for violating anti-corruption laws. Its returns will be a rare bright spot. The firm’s flagship Master Fund, a multi-strategy fund, is up 10 per cent through to the end of August while its smaller Asia Master Fund is up nearly 20 per cent. For the equities fund Luxor Capital, the comeback began last year and has continued this year as its investments in a handful of food delivery service companies have turned a hefty profit.

Overall, hedge funds across all strategies are up about 5.5 per cent this year, according to the data provider eVestment, just below the 5.7 per cent they returned for all of last year.

While stockpickers have made a start this year, the industry’s overall performance will have to improve further to quell the criticism and entice investors back.

>>> Asian Update

Asia Mid-Session Market Update: Equities and currencies muted, awaiting notable data tomorrow; N. Korea responds to UN sanctions

***Asia Summary***
- Asian equity markets opened mixed, trading remained subdued with yields falling slightly and US dollar taking a break from its recent climb. Lithium miners in Australia, Syrah Resources, Galaxy Resources rose on the news yesterday that China could accelerate its move to non-fossil fuel burning cars. Iron ore futures on China’s Dalian exchange were +2%. Crude saw little movement from the release of API data, showing a build of 6.2M.
- PBOC weakened the yuan for the second consecutive day and returned to its use of 7, 14 and 28 day reverse repos. Markets look ahead to tomorrow’s release of China’s August industrial production and fixed asset investments and Australia’s employment data. The offshore yuan overnight HIBOR was +95bps to 3.05 while the 1-week rose 66bps to 3.51%.
- The kiwi fell 0.4% after a report that New Zealand National Intelligence Agency has started probe of China-born parliament member Jian Yang. Yang is in the ruling National Party; The report says the probe focuses on the time that Yang spent at military colleges in China. This could be trouble heading into elections for the ruling party.

***Key economic data***
- (JP) JAPAN AUG PPI M/M: 0.0% V 0.1%E; Y/Y: 2.9% V 3.0%E
- (JP) JAPAN Q3 BSI LARGE ALL INDUSTRY Q/Q: 5.1 V -2 PRIOR; BSI LARGE MANUFACTURING Q/Q: 9.4 V 5.0E
- (AU) Australia Sept Westpac Consumer Confidence Index: 97.9 v 95.5 prior, Consumer Confidence M/M: +2.5% v -1.2% prior

***Speakers and Press***
China/Hong Kong
- (CN) China FX Regulator SAFE: No changes to foreign currency cash withdrawal rule
- (CN) President Trump has warned China to get tough on North Korea and reduce trade and financial transactions or it will target Chinese banks - FT

Korea
- (KR) North Korea rejects UN adding new sanctions; to establish 'practical equilibrium' with the US; will redouble efforts to increase its strength – KCNA
- (KR) Bank of Korea (BOK) Gov Lee: FX swap with China not on agenda for meeting
- (KR) South Korea Nuclear Safety and Security Commission: traces of radioactive xenon gas were confirmed to be from a North Korean nuclear test earlier this month, but it was unable to conclude whether the test had been for a hydrogen bomb

Japan
- (JP) Japan to start watching virtual currency exchange markets from Oct - Nikkei

Australia
- (AU) RBA's Harper: Currency gains being driven by weaker USD; economic growth is too weak to justify a rate hike; AUD -0.2% on the comments before returning to +0.1%

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.5%, Hang Seng -0.3%; Shanghai Composite -0.1%, ASX200 +0.2%, Kospi +0.2%
- Equity Futures: S&P500 -0.1%; Nasdaq100 -0.1%, Dax -0.1%, FTSE100 -0.1%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1993-1.1964; JPY 110.29-109.98; AUD 0.8039-0.8011; NZD 0.7298-0.7257
- Dec Gold +0.2% at $1,335/oz; Oct Crude Oil 0.0% at $48.24/brl; Sept Copper -0.3% at $3.03/lb
- GLD SPDR Gold Trust ETF daily holdings +0.4% to 838.6 metric tonnes
- USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.5382 V 6.5277 PRIOR (2nd straight weaker yuan fix)
- (CN) PBOC injects combined CNY70B in 7,14 and 28-day reverse repos v skipped prior
- (AU) Australia sells A$900M in Nov 2028 bonds, avg yield 2.7414%, bid to cover 4.03x
- USD/PHP Philippines Central Bank (BSP) spent PHP5B over the last 2 months defending the peso

***Equities notable movers***
Australia/New Zealand
- SEA.AU Reports H1 (A$) Net loss 5.7M v loss 20.1M y/y; Rev 44.5M v 24.2M y/y; +5%
- OIC.NZ WSP NZ raises offer to NZ$1.85/shr; Board unanimously recommends offer; +6.8%

Hong Kong/China
- 2020.HK UBS Raised 2020.HK to Buy from Neutral; +6.4%

- 066570.KR To showcase car components at German motor show; +4.6%

Japan
- 6502.JP Board resolved to sign MOU with Bain for chip unit; targeting final decision on board meeting next week - Nikkei; +0.3%

>>> US After Hours Summary: JWN +10% (and lifting retail names) on pot

After Hours Summary: JWN +10% (and lifting retail names) on potential privatization deal, CNC +2% higher on $3.75 bln acquisition news

After Hours Gainers:

Companies trading higher in after hours in reaction to news: SNAK +26.6% (to sell its frozen business for $50 mln; strategic and financial review remains ongoing), SENS +13% (Senseonics received CE Mark approval for the Eversense XL Continuous Glucose Monitoring System), ZFGN +4.7% (ticking higher - announces initiation of ZAF-1061-201, the Co's Phase 2 clinical trial evaluating ZGN-1061 in patients with type 2 diabetes), AKCA +3.2% (Akcea Therapeutics and Ionis announce filing of New Drug Submission for Volanesorsen to Health Canada - an investigational medicine for the treatment of familial chylomicronemia syndrome), CNC +2.3% (Centene to acquire substantially all of the assets of Fidelis Care for $3.75 bln - will become Centene's health plan in New York State), TEX +2.1% (ticking higher; Marcato's McGuire discusses Terex position on Delivering Alpha), ARRY +1.9% (Point72 Asset Management increases passive stake to 5.4%), NCS +1.1% (Director purchased 30K shares on 9/11), MU +1% (upgraded at Goldman after the close), EOG +0.8% (upgraded to Overweight at Morgan Stanley)

Retail names higher with Nordstrom (JWN +10.3%) leading the way on PE speculation: M +2.7%, SHOS +1.2%, JCP +0.7%, etf - XRT +0.7%, DDS +4%, SHLD +1.3%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: AMRK -10.9% (thinly traded), RLGT -6.4%

Companies trading lower in after hours in reaction to news: ITEK -9.5% (Inotek Pharmaceuticals to merge with US-based gene therapy company Rocket Pharmaceuticals - will host a conference call Sept 13 at 8:30am ET), TCMD -4.3% ( announces 2.7 mln share secondary offering by stockholders), AGNC -3.3% (to make public offering of 24,500,000 shares of common stock), CLDX -2.6% (announces the resignation of Chief Medical Officer Thomas Davis effective September 29 ), WLL -1.8% (downgraded to Underweight at Morgan Stanley), ON -1.7% (downgraded at Goldman after the close)

>>> US Close Dow +0.28% S&P +0.34% Nasdaq +0.34% Russell +0.61%

Closing Market Summary: Notching New Record Highs

Stocks moved higher for the second day in a row on Tuesday, but conviction was much more subdued than it was on Monday when the major averages rose over 1.0% apiece. The S&P 500 climbed 0.3% to notch its second record-high close of the week, while the Nasdaq (+0.3%) and the Dow (+0.3%) each managed to notch their first. Small caps outperformed, sending the Russell 2000 higher by 0.6%.

The biggest event of the day was Apple's (AAPL 160.82, -0.68) annual product unveiling, in which the tech giant showed off three new iPhones, including the iPhone 8, the iPhone 8 Plus, and the high-end iPhone X--which CEO Tim Cook called "the biggest leap forward since the original iPhone." Apple also introduced a new 4K Apple TV and its Apple Watch Series 3, which is the first series to include LTE-capability, allowing users to make phone calls and stream music without hauling a phone.

On the whole, the product event provided little new information as many of the details had been leaked to the public beforehand. Nonetheless, Apple shares were volatile following the event's afternoon kick off, first surging from their flat line to a new session high ($163.96/share, +1.5%) and then dropping sharply to a new session low ($158.77/share, -1.7%). In the end, AAPL shares finished lower by 0.4%.

Unsurprisingly, the top-weighted technology sector--and the broader market to some degree--mimicked Apple's volatility as the company is the largest component by market cap within the sector (and the S&P 500 in general). The tech group ended Tuesday's session a tick above its flat line (+0.1%), but held a gain of 0.4% at its best mark of the day and a loss of 0.4% at its worst. 

Conversely, the influential financial space (+1.2%) proved to be pillar of strength on Tuesday, settling comfortably above the broader market for the second time this week. The sector benefited from a curve-steepening trade within the Treasury market, which sold off once again as investors dialed up their appetite for more risky assets--like equities. The yield on the benchmark 10-yr Treasury note climbed five basis points to 2.17%, hitting its best level in over a week, while the 2-yr yield ticked up just two basis points to 1.33%.

Like financials, the lightly-weighted telecom services space (+1.4%) comfortably outperformed the broader market, but the remaining advancers finished with more modest gains, raging from 0.1% to 0.8%. The consumer discretionary sector settled in the middle of said range (+0.4%), overcoming a disappointing performance from McDonald's (MCD 156.33, -5.20), which tumbled 3.2% on the heels of some cautious commentary from market research firm M Science. 

At the opposite end of the sector standings, the rate-sensitive utilities and real estate sectors struggled amid the increase in interest rates. The two groups were the only sectors to finish Tuesday in the red, registering sizable losses of 1.8% and 1.2%, respectively.

Reviewing Tuesday's economic data, which was limited to the Job Openings and Labor Turnover Survey (JOLTS) for July:

  • The July Job Openings and Labor Turnover Survey showed that job openings increased to 6.170 million from a revised 6.116 million (from 6.163 million) in June.

On Wednesday, investors will receive several economic reports, including the weekly MBA Mortgage Applications Index at 7:00 ET, the August Producer Price Index (consensus +0.3%) at 8:30 ET, and the August Treasury Budget at 14:00 ET.

  • Nasdaq Composite +19.9% YTD
  • Dow Jones Industrial Average +11.9% YTD
  • S&P 500 +11.5% YTD
  • Russell 2000 +4.9% YTD