>>> Asian Update

Asia Mid-Session Market Update: North Korea continues to drive risk off sentiment; RBNZ assures rate to be left on hold for now

***Asia Summary***
- Asian equity markets opened slightly higher before falling nearly 1% across the board on continued tensions with North Korea. The US has affirmed that all options remain on the table when it comes to North Korea. USD took safety flows on the continued tension, though outside of the NZ$ there were no large moves. Moves likely to remain a bit volatile on thinner volume, as we exit the peak of earnings season and get knee deep in the largest summer holiday month. China’s yuan has been steadily appreciating recently, with today’s setting the highest since mid-September, and is up ~4% so far in 2017.

- The Kiwi fell 0.7% to 0.7300 after RBNZ kept cash target rate unchanged at 1.75%. Gov Wheeler said that RBNZ is still very much Neutral on rates and for foreseeable future does NOT see OCR increasing. He did confirm monitors "traffic light system" for currency intervention 'closely', won't comment on whether currency strength is affecting the system. Later speaking to Parliament said intervention in FX market is always open to us, have intervened in the past, Then reiterated that he does not feel rate cut is needed at this time.

***Key economic data***
- (NZ) New Zealand July Retail Card Spending M/M: -0.5% v 0.2% prior; Total Card Spending M/M: -0.7% v 8.3% prior
- (JP) JAPAN JUN MACHINE ORDERS M/M: -1.9% V +3.6%E; Y/Y: -5.2% V -1.1%E
- (JP) JAPAN JULY PPI M/M: 0.3% V 0.2%E; Y/Y: 2.6% V 2.3%E
- (UK) JULY RICS HOUSE PRICE BALANCE: 1% V 9%E

***Speakers and Press***
China
- (CN) Said that China Govt has summoned steel execs, regulators, bourse to discuss price surge - financial press
- (CN) China propaganda chief visited govt workers holidaying at the resort of Beidaihe, signaling that an annual conclave of senior leaders was happening before an autumn party congress - Chinese press
Australia/New Zealand
-(NZ) RBNZ Gov Wheeler: Still very much in Neutral on rates, for foreseeable future does NOT see OCR increasing; Structural factors weigh on inflation globally - post rate decision press conference
- (NZ) RBNZ Gov Wheeler: Intervention in FX market is always open to us, have intervened in the past, always assessing criteria; Do not feel rate cut is needed - speaking to parliamentary committee
Korea
- (KR) North Korea govt: our military will have a strike plan against Guam prepared by mid-August, then await orders from our leader
Japan
- (JP) Japan publicly traded foreign stock investment trust total assets likely reached record high at end of July - Nikkei
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.2%, Hang Seng -1.6%, Shanghai Composite -1.1%, ASX200 -0.1%, Kospi -1.1%
- Equity Futures: S&P500 -0.3%; Nasdaq100 -0.4%, Dax -0.3%, FTSE100 -0.4%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1770-1.1733; JPY 110.18-109.89; AUD 0.7911-0.7870; NZD 0.7368-0.7299
- Dec Gold +0.3% at 1,282/oz; Sept Crude Oil 0.0% at $49.55/brl; Sept Copper -0.1% at $2.93/lb
- (CN) China PBOC OMO injects CNY90B in 7 and 14-day reverse repos v CNY140B prior; Injects net CNY30B v CNY0B prior
- USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.6770 V 6.7075 PRIOR (strongest setting since Sept 29th)

***Equities notable movers***
Hong Kong/China
- Wanda Hotel Development,169.HK To acquire Wanda Culture Travel Innovation from a company indirectly owned by Wang Jianlin for CNY6.3B – filing; +20.8%
Japan
- Toshiba,6502.JP Reports Q1 Net ¥50.3B v ¥79.8B y/y, Op ¥96.7B v ¥16.3B Rev ¥1.14T v ¥1.06T y/y; +1.4%
- Toshiba, 6502.JP Reports delayed FY16 results, Net loss ¥966B v loss ¥460B y/y, Rev ¥4.87T v ¥5.15T y/y
- Shiseido, 4911.JP Reports H1 Net ¥18.8B v ¥24.5B y/y; Op ¥34.7B v ¥19.9B y/y; Rev ¥472.1B v ¥412.3B y/y; +14.%
Australia
- Virgin Australia,VAH.AU Reports FY17 Net loss A$220.3M v loss A$260.9M y/y; Rev A$5.05B v A$5.02B y/y; +5.7%
- Origin, ORG.AU To recognize ~A$1.2B non-cash impairment charge in H2 from ALPNG, sees A$357M impairment related to Lattice; -1.0%
- AGL.AU Reports FY17 Underlying Profit A$802M v A$788Me; underlying EBIT A$1.37B v A$1.36Be; Rev A$12.6B v A$11.9Be; +1.2%
- Boart Longyear, BLY.AU Reaches settlement with First Pacific Advisors; +9.4%
India
- Tata Motors,TTMT.IN Reports Q1 (INR) Net 31.8B v 22.4B y/y, Rev 598.2B v 597.9Be; -4.6%

>>> US After Hours Summary: CHEF +17%, ASYS +15%, LYV +5.5%, JACK +3%


After Hours Summary: CHEF +17%, ASYS +15%, LYV +5.5%, JACK +3% higher and BW -29.2%, CBI -18%, SYNC -17% lower following earnings/guidance... SKLN +21% on merger news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: HDSN +22.5% (Hudson Technologies to acquire Airgas' subsidiary Airgas-Refrigerants in a transaction valued on a gross basis at approximately $220 million), PFIE +17.9% (ticking higher), CHEF +17.2%, ASYS +14.6%, XXII +7.1%, QHC +6.5%, AOSL +5.8%, LYV +5.5%, ONVO +5.3%, HRTX +4.9% (also reaches agreement w/ the FDA on the desing/key elements for HTX-011's Phase 3 program; co expects to file an NDA for HTX-011 in 2018), SGMO +4.8%, AMBC +4.7%, PAAS +4%, PLNT +3.7%, CYCC +3.6%, RARX +3%, JACK +2.9%, COLL +2.6%, PIRS +2%

Companies trading higher in after hours in reaction to news: SKLN +21.3% (Skyline Medical signs definitive merger agreement with CytoBioscience in transaction expected to close by September 30, 2017), ANTH +9.6% (receives orphan drug designation from the FDA for the treatment of Immunoglobulin A nephropathy), GLPG +3.9% (Galapagos NV announces positive topline results with its autotaxin inhibitor GLPG1690 in patients with idiopathic pulmonary fibrosis (IPF) in the FLORA Phase 2a trial), ACRX +1.5% (after closing near highs)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: BW -29.2%, QTM -21.9%, XTNT -20%, CBI -17.6%, SYNC -16.9%, BDSI -14.3%, GV -12.6%, DOOR -9.7%, FRSH -8.1%, PEGA -5.7%, PTLA -5.4%, XON -4.8%, AQMS -4.8%, DAR -3.8%, SGYP -2.3%

Companies trading lower in after hours in reaction to news: ZFGN -11.2% (files for $150 mln mixed securities shelf offering), MX -2.5% (commences 4,088,978 common stock offering by selling stockholders that are affiliated with Avenue Capital), FANG -2% (will be offering of 3 mln shares of its common stock by certain selling stockholders), ACRS -1.8% (commences $75 mln common stock offering , MANU -1.5% (announced the offering of 4,250,000 of its Class A ordinary shares by Red Football)

>>> US Notable post-earnings movers

Notable post-earnings movers

  • Post-earnings gainers: HDSN +23.1%, PFIE +17.9%, ASYS +13.6%, ONVO +9.6%, FBIO +8.4%, QHC +7.8%, LYV +7.1%, SGMO +5.9%, AOSL +5.8%, PLNT +5.2%, RGSE +4.8%, EGLT +4.3%, COLL +4.1%, SENS +3.4%, SIEN +3%, SGYP +2.3%, AMBC +2.2%, XXII +2.2%
  • Post-earnings losers: BW -30.8%, CBI -22.1%, QTM -19.7%, SYNC -14.1%, DOOR -13.9%, GV -6.9%, DAR -5.1%, PEGA -3.1%, XON -2.3%

>>> US Close Dow -0.17% S&P -0.04% Nasdaq -0.28% Russell -0.94%

Closing Market Summary: U.S.-North Korea Concerns Linger

Investors took some additional profits on Wednesday as concerns surrounding the continued breakdown of U.S.-North Korea relations weighed on investor sentiment for the second day in a row. However, the cautious tone largely subsided by the day's end, making way for a late-afternoon rally that left the major averages at their best marks of the day. The S&P 500 finished just a tick below its flat line while the Dow and the Nasdaq settled lower by 0.2% and 0.3%, respectively. Small caps underperformed, sending the Russell 2000 lower by 0.9%.

On Tuesday, President Donald Trump warned that North Korea will be "met with fire and fury" if it continues to threaten nuclear action against the United States. Undeterred, North Korea responded just a few hours later by saying it's "carefully examining" a plan to strike the U.S. territory of Guam.

Investors have largely shrugged off the ongoing feud between the U.S. and North Korea, but yesterday's comments held a little more weight following reports that Pyongyang now has the capability to load their missiles with miniaturized nuclear warheads. Still, given the stock market's very modest two-day decline, it's clear that investors don't truly believe conflict is on the horizon.

Rather, market participants have used the aforementioned headlines as a convenient excuse to take some money off the table following the stock market's most recent run to new record highs.

Sector movement was pretty modest with eight of the eleven groups settling within 0.2% of their unchanged marks. Six sectors finished in the green with health care (+0.2%) leading the advance. On the flip side, four sectors closed in negative territory with the consumer discretionary (-0.5%) and utilities (-0.5%) spaces pacing the retreat. The industrial group finished flat.

Walt Disney (DIS 102.83, -4.15) and Netflix (NFLX 175.78, -2.58) weighed on the consumer discretionary space, dropping 3.9% and 1.5%, respectively, after Disney announced that it will end its distribution agreement with Netflix in 2019 in favor of a new direct-to-consumer streaming strategy. In addition, Disney reported earnings, beating bottom-line estimates, but missing on revenues.

Elsewhere on the earnings front, Priceline (PCLN 1906.80, -142.20) plunged 6.9% after below-consensus guidance overshadowed the company's better than expected earnings and revenues. 

In the bond market, U.S. Treasuries climbed higher as safe-haven assets benefited from the day's risk-off tone; the benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, slipped four basis points to 2.24%. Meanwhile, gold jumped 1.3% to $1,279.20/ozt and the Japanese yen climbed 0.3% to 110.02 against the U.S. Dollar.

Crude oil advanced 1.0% to $49.59/bbl after the Department of Energy reported a larger than expected draw in U.S. crude inventories (-6.5 million barrels actual vs -2.2 million barrels consensus). The commodity trended sideways near its flat line for some time before moving decidedly higher in the afternoon.

Reviewing Wednesday's economic data, which included second quarter Productivity and Unit Labor Costs, June Wholesale Inventories, and the weekly MBA Mortgage Applications Index:

  • The preliminary unit labor costs increased 0.6% during the second quarter, which was lower than the 1.5% increase that had been anticipated by the consensus. The preliminary productivity reading came in at +0.9% while the consensus expected an increase of 0.5%.
    • The key takeaway from the report, which also included revisions for the first quarter 2014 through the first quarter 2017, is that productivity continues to be weak, which is an impediment for an increased standard of living. In fact, with the revisions, it was shown that productivity decreased 0.1% in 2016, which is the first annual decrease since a 1.0% decrease in 1982.
  • June Wholesale Inventories increased 0.7% (consensus +0.6%). The prior month's reading was revised to +0.6% from +0.4%.
    • The key takeaway from the report is that there wasn't any progress in reducing the inventory-to-sales ratio, which would be helpful for wholesalers looking to gain some more pricing power.
  • The weekly MBA Mortgage Applications Index increased 3.0% to follow last week's 2.8% decrease.

On Thursday, investors will receive two pieces of economic data--the July Producer Price Index (consensus +0.2%) and the weekly Initial Claims Report (consensus 240K). Both reports will be released at 8:30 ET.

  • Nasdaq Composite +18.0% YTD
  • Dow Jones Industrial Average +11.6% YTD
  • S&P 500 +10.5% YTD
  • Russell 2000 +2.9% YTD

TechCrunch : Marvel and Star Wars standalone streaming services are still being

Marvel and Star Wars standalone streaming services are still being considered, says Disney


If you’re wondering why Marvel movies and Star Wars weren’t mentioned as being among the titles included in Disney’s upcoming streaming service, announced yesterday, that’s because they might be getting their own branded services instead. According to Disney CEO Bob Iger, the company is still considering how it wants to bring Marvel and LucasFilm titles to consumers. There’s been talk of launching proprietary Marvel and Star Wars services, he said on Disney’s earnings call on Tuesday.

But that decision is not yet set in stone.

“We’re mindful of the volume of product that would go into those services, and we want to be careful about that,” Iger explained.

The exec also noted that the other option on the table was to add the Marvel and Star Wars films to the new Disney streaming service. However, it sounds like the company isn’t sure that’s the right place for them. The feeling is that there may not be as much overlap between the Disney fans and Marvel or Star Wars fans to warrant such a move, he said.

That’s an odd take, especially given the appeal that superhero movies and Star Wars has for kids. Sure, they might be slightly older children than those who want to tune in to watch the new Frozen sequel or the latest in the Toy Story franchise, but there’s definitely going to be overlap among the potential customer base for a Disney streaming service, and one for either Marvel or Star Wars.

After all, it’s not the children who are paying for these services – it’s the parents. And many families have children of different ages, not to mention adults who are also interested in Marvel and Star Wars, too.

Still, it seems like Disney doesn’t believe it will need to add these titles to generate demand for its Disney/Pixar streaming service.

While its flagship Disney and Pixar movies will bring in subscribers, the company also said yesterday that it has already begun the development process at the Disney Channel and the Studio divisions to create original TV shows and movies that will be made exclusively for the new service. Essentially, Disney is mimicking the Netflix model here, with an attempt to create must-see shows and films that you can’t find elsewhere.

The other thing that makes a Marvel or Star Wars-branded service a possibility is that Disney now has the technical capabilities to make that happen – something that could have otherwise held up projects like this. With the company’s $1.58 billion investment in streaming technology infrastructure provider BAMTech, which gave it a controlling interest, it’s able to go where the market takes them when it comes to streaming.

“This lays the groundwork for the company to do a number of things,” Iger said, speaking in a post-earnings interview with CNBC. “It provides us with all sorts of optionality that we haven’t had before. You know, it’s one thing to say you’ll be in the business of direct-to-consumer or over-the-top, and it’s one thing to do it. And to do it, you need a really strong technology engine,” he added.

If Disney wanted to go the route of standalone streaming services for all its brands, it would have the content to do that. There are TV shows like ABC’s Marvel’s Agents of SHIELD and Marvel’s Inhumans, Freeform’s Cloak and Dagger and New Warriors, Disney XD’s Star Wars Rebels, online content, plus all the movies, and more when other licensing deals expire. But this also raises the question – what does this mean for the Marvel shows that are now on Netflix?

Disney and Netflix, as you may recall, struck a multiyear deal several years ago under which Marvel would develop four original live-action series for Netflix, “Daredevil,” “Jessica Jones,” “Iron Fist,” and “Luke Cage,” plus “The Defenders.” The deal followed an earlier agreement that exclusively licensed Disney movies during the pay TV window from Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios, and Disneynature.

This latter deal is the one that’s wrapping up in advance of the 2019 launch of Disney’s streaming service. The 2019 releases – Lion King, Frozen 2, Toy Story 4 and others – will go to Disney’s service instead, along with back catalog content from the Studio and Channel made over the years, and original programming.

According to Iger, however, the company has no plans to pull its Marvel TV shows from Netflix – adding that Disney and Netflix have had a “great relationship” on that front.

He said, too, that the possibility still exists that Disney will license other titles to Netflix down the road.

Reuters - Tesla developing self-driving tech for semi-truck, wants to test in Ne

Tesla developing self-driving tech for semi-truck, wants to test in Nevada - http://reut.rs/2vP569K

SAN FRANCISCO (Reuters) - Tesla Inc is developing a long-haul, electric semi-truck that can drive itself and move in "platoons" that automatically follow a lead vehicle, and is getting closer to testing a prototype, according to an email discussion of potential road tests between the car company and the Nevada Department of Motor Vehicles (DMV), seen by Reuters.

Meanwhile, California officials are meeting with Tesla on Wednesday "to talk about Tesla's efforts with autonomous trucks," state DMV spokeswoman Jessica Gonzalez told Reuters.

The correspondence and meeting show that Tesla is putting self-driving technology into the electric truck it has said it plans to unveil in September, and is advancing toward real-life tests, potentially moving it forward in a highly competitive area of commercial transport also being pursued by Uber Technologies Inc [UBER.UL] and Alphabet Inc's Waymo.

After announcing intentions a year ago to produce a heavy-duty electric truck a year ago, Musk tweeted in April that the semi-truck would be revealed in September, and repeated that commitment at the company's annual shareholder meeting in June, but has never mentioned any autonomous-driving capabilities.

Tesla has been a leader in developing autonomous driving capability for its luxury cars, including the lower-priced Model 3, which it is beginning to manufacture.

Several Silicon Valley companies developing autonomous driving technology are working on long-haul trucks. They see the industry as a prime early market for the technology, citing the relatively consistent speeds and little cross traffic trucks face on interstate highways and the benefits of allowing drivers to rest while trucks travel.

Some companies also are working on technology for "platooning", a driving formation where trucks follow one another closely. If trucks at the back of the formation were able to automatically follow a lead vehicle, that could cut the need for drivers.

PROTOTYPE TESTS

An email exchange in May and June between Tesla and Nevada DMV representatives included an agenda for a June 16 meeting, along with the Nevada Department of Transportation, to discuss testing of two prototype trucks in Nevada, according to the exchange seen by Reuters.

"To insure we are on the same page, our primary goal is the ability to operate our prototype test trucks in a continuous manner across the state line and within the States of Nevada and California in a platooning and/or Autonomous mode without having a person in the vehicle," Tesla regulatory official Nasser Zamani wrote to Nevada DMV official April Sanborn.

No companies yet have tested self-driving trucks in Nevada without a person in the cab. On July 10, Zamani inquired further to the Nevada DMV about terms for a testing license, an email seen by Reuters shows.

California DMV spokeswoman Gonzalez said that Tesla had requested a meeting on Wednesday to introduce new staff and talk about Tesla’s efforts with autonomous trucks. She said that the DMV was not aware of the level of autonomy in the trucks.

Tesla declined to comment on the matter, referring Reuters to the previous statements by Musk, who has discussed the truck in tweets and at the annual shareholder meeting.

Nevada officials confirmed the meeting with Tesla had occurred and said that Tesla had not applied for a license so far. They declined to comment further.

SKEPTICS

Musk has said that potential customers are eager to get a Tesla electric long-haul truck, but he faces doubt that the company can deliver.

While established trucking companies and truck manufacturing startups have poured resources into electrifying local package delivery fleets, battery range limitations have largely kept the industry from making electric trucks that travel across swaths of the country.

Lithium ion battery researcher Venkat Viswanathan of Carnegie Mellon University said electric long-haul trucking is not economically feasible yet.

“Your cargo essentially becomes the battery,” Viswanathan said of the massive batteries that would be needed to make range competitive with diesel.

Diesel trucks used for cross-country hauls by United Parcel Service Inc can travel up to 500 miles (800 km) on a single tank, according to UPS's director of maintenance and engineering, international operations, Scott Phillippi. By comparison, the company's electric local package delivery trucks travel up to 80 miles on a full charge.

FT : Altice lines up $185bn pitch for cable group Charter

Altice lines up $185bn pitch for cable group Charter
Acquisitive European group could be set for latest round of US media consolidation


Altice, the deal-hungry cable and telecoms group controlled by Franco-Israeli billionaire Patrick Drahi, is lining up a potential $185bn bid for Charter Communications, the second-largest US cable company with over 26m subscribers.

Interest in a deal by Mr Drahi’s Altice, which has grown ferociously through debt-laden acquisitions in recent years in France, Portugal and the US, is the latest in a series of consolidation moves among US telecom, cable and media providers.

It pits Mr Drahi against SoftBank’s Masayoshi Son in a battle for the hand of Charter, in which John Malone, the billionaire so-called cable cowboy, owns a 21 per cent stake.

Altice has not formally made an approach and may not proceed, according to multiple people close to the Netherlands-listed group. One complication will be whether the group and its advisers can amass the huge amount of debt financing needed to support a bid for its much larger rival.

These people also cautioned that Charter, which beat out Altice in a battle to acquire Time Warner Cable in a $78.7bn deal that closed just last year, has not expressed interest in a possible combination.

Charter shares rose 2.4 per cent to $399.06 at mid-afternoon in New York to give it a market value of roughly $121bn. The company has net debt of $62.5bn, meaning a deal including debt could easily surpass an enterprise value of more than $185bn.

Altice only recently listed its US cable subsidiary in New York to position itself for more dealmaking in America, but has managed to win support from shareholders thanks to the speed with which it has delivered operational improvement at Cablevision and Suddenlink. It acquired those regional operators for $17.7bn and $9.1bn in the past two years and then bundled them into Altice USA.

Shares in Altice USA, which has a market value $23bn and a net debt of $22.6bn, were up 0.9 per cent following the news of a potential bid, which was first reported by CNBC. However, shares in its parent company Altice NV dropped 5.2 per cent to €19.65 in Amsterdam trading.

Charter has emerged as an attractive target for smaller US telecoms and cable providers because of its footprint, which extends to 41 states and puts its behind only Comcast for subscribers. Earlier this year Charter and Verizon, the largest US wireless telecoms operator, explored a potential combination but the two companies decided not to pursue a deal.

Shares in the company have leapt in recent weeks as it has become the focal point of interest, particularly from Japan’s SoftBank, which is searching for a partner to connect with Sprint, the fourth-largest US mobile phone operator which it controls.

Charter has been cool on interest from Mr Son, the billionaire founder behind SoftBank, saying it had no interest in acquiring Sprint. However, it has not commented on potential takeover interest from either SoftBank or Altice.

Analysts said that Mr Malone is another factor in a potential takeover attempt of Charter. Mr Malone is the largest shareholder in Charter and has significant sway over the industry given his range of holdings that span US and international cable and media.

Greg Maffei, chief executive of Mr Malone’s Liberty Media, through which he holds a stake in Charter, said on Wednesday that Liberty and Charter would “listen to all and any offers that come in and judge them on their merit and appeal”.

However, he said: “The idea that we would take equity that we don’t want is probably unlikely . . . Any deal that would be appealing for us and other Charter shareholders would have to add real value and show real capabilities that are beyond what we think is a very well-positioned company with a very strong management team.”

Dexter Goei, a former Morgan Stanley banker and the chief executive of Altice USA, has not been shy about the French group’s ambition to grow its US footprint through acquisitions.

At the time of the listing of Altice USA in June, Mr Goei said that the IPO was “all about being ready if there is an opportunity to partner up with someone . . . to put ourselves on the map and to have a currency” for future acquisitions.

Charter and Altice have both expanded by rolling up regional operators. Other distributors are looking to gain control of content. AT&T’s $84.5bn bid for Time Warner, the owner of HBO and Warner Bros, is being reviewed by regulators and is expected to close at the end of the year, creating the world’s largest vertically integrated content and distribution company. Verizon has snapped up Yahoo and AOL.

Barron's : General Electric: Time to Worry About United Technologies & Rockwell

General Electric: Time to Worry About United Technologies & Rockwell Collins?
One team of analysts argues that General Electric might have to make an acquisition if it wants to make aviation a centerpiece of the company.

Last Friday, reports emerged that United Technologies (UTX) had taken an interest in buyingRockwell Collins (COL). The reports make sense: With Boeing (BA) looking to move some of its airplane-parts business in house, United Technologies would bolster its position by getting bigger.

Less discussed has been the potential impact of United Technologies' pursuit of Rockwell Collins on other industrial companies, particularly General Electric (GE), which gets a third of its earnings from its aviation business. In fact, Credit Suisse analyst Julian Mitchell and team note that General Electric's new CEO, John Flannery, "must be taking some interest in the UTX-COL developments." They explain why:

If Aviation is to be more of a centerpiece in Mr Flannery’s GE, management may want to think more carefully about potential ways to expand its footprint in Aviation…And this may imply more M&A in Aviation: The GE Aviation portfolio is very high-performing, but somewhat ‘narrow’ compared with the portfolios of large EE/MI peers such as UTX and Honeywell International (HON), in that commercial and military jet engines comprise ~90% of its sales. GE has made some acquisitions in Aviation, spending $1.5bn on Additive Manufacturing assets in recent years (these businesses report to David Joyce), but it has been some time since its last major deal (purchasing Avio, for $4.3bn in 2012). GE did not make a counter-bid for Goodrich in 2011, and if it sees COL go to UTX, then there would be relatively few large stand-alone Aero assets left that it could acquire. Business & General Aviation, Integrated Systems, and Avionics & Digital Solutions comprise the majority of the non-engine revenues at GE Aviation, and these may be a logical place for GE to expand its presence. The company has stated in recent quarters that its capital deployment potential is ~$10bn, which would fall far short of COL’s likely take out price ($30bn+), but GE has enough assets it can use to raise cash from if needed (its stake in Baker Hughes (BHGE) is worth ~$25bn, Transportation could be worth $12-14bn, to name but two).

Shares of General Electric have advanced 0.4% to $25.66 at 12:04 p.m. today, while United Technologies has fallen 0.6% to $117.48, Rockwell Collins has gained 1.5% to $127.62, Honeywell International has dipped 0.1% to $138.52, Boeing has declined 0.9% to $235.90, and Baker Hughes has risen 1% to $35.10.