>>> PPG chief claims support from top 20 Akzo Nobel shareholders, not ruling out

PPG chief claims support from top 20 Akzo Nobel shareholders, not ruling out hostile offer
06 APR 2017
PPG Industries [NYSE:PPG] CEO Michael McGarry said the Pittsburgh, Pennsylvania-based chemicals group has contacted almost all of the 20 biggest shareholders in Dutch counterpart Akzo Nobel [AMS:AKZA] and they indicated “virtually unanimous” support for the two companies engaging in merger talks, the Financial Times reported.
McGarry said Akzo Nobel's shareholders are unhappy that they are the lowest priority.
Akzo’s board has refused to enter into talks with PPG, having rejected two takeover bids from the Pennsylvania-based group.
Akzo Nobel told the paper that it is actively engaging with its shareholders about the best strategy for the company, adding that it will give more details at a strategy announcement on 19 April.
Separately, The Times quoted Akzo CEO Ton Buchner, who said the UK government has concerns about what will happen to 80,000 UK pensioners that could be affected by the deal. Akzo was formed from takeovers of the UK chemicals companies Courtaulds and ICI, the item noted.
Buchner noted that Akzo has made annual contributions of almost GBP 300m (EUR 350m) to the pension schemes.
The CEO added that PPG does not understand Akzo’s corporate culture and that its takeover proposal would lead to the loss of thousands of jobs due to duplication of operations.
PPG and Akzo both hold strong market positions in paints for the automotive sector, while Akzo's Dulux brand competes with PPG’s Johnstone’s and Leyland brands, the item said.
Separately, the Daily Mail quoted McGarry, who said no options have been ruled out, including taking its offer directly to Akzo Nobel shareholders
Akzo Nobel’s market capitalisation stood at EUR 19.97bn at the close of trading in Amsterdam on Wednesday, 5 April.

>>> What to look at today - 6th of April 2017

Dow -0.20% S&P -0.31% NAsdaq -0.58% Russell -1.17%
Stocks started strong out of the gate following an upbeat ADP, but the hawkish tone of the FOMC Minutes prompted an afternoon retreat. lack of buying conviction among small caps pointed to the fact that not all market participants bought into the positive narrative attached to the better than expected ADP reading. Most sectors finished today's session in negative territory with only a couple countercyclical groups--utilities (+0.5%) and real estate (+0.2%)--escaping with wins. worth pointing out that crude oil settled 0.3% higher at $51.14/bbl despite a bearish inventory report from the Energy Information Administration. US After Hours YUMC +10.9%, BBBY +4% following earnings/guidance, URRE +14% on lithium project update... RECN -9% on earnings/strategic initiatives implementation. Asian equity indices are trending lower as risk aversion flows that struck sentiment in the 2nd half of the US trading session reverberate in Asia Pacific. Later in the Asia session, NY Times reported that Pres Trump may try to push through his infrastructure package as part of a bundle with healthcare or tax reform. S&P futures continued to slide to 1-week lows, gold tested $1260, and Treasuries rallied. Nikkei225 is again leading the decliners as USD/JPY fell over 40pips from the highs, while Shanghai Composite remains resilient on support from economic zone speculation. North Korea overnight missile launch related tensions continued to simmer today, as South Korea official said he would discuss the matter with US and Japan. Asia Development Bank releases its latest outlook report for the region, maintaining 5.7% target this year and next. China 2017 GDP view was raised to 6.5% from 6.4% before a 2018 slowdown to 6.2%. ADB noted risks of capital outflows due to US policy tightening.

Nikkei -1.62% Hang Seng -0.58% CSI +0.26% Shanghai +0.37%

Eur$ 1.0671 CNH 6.8900 CNY 6.8992 JPY 110.43 GBP 1.2487 CHF 1.0033 RUB 56.42 WTI$ 50.87 -0.55%

S&P -0.14% EuroStoxx -0.44% FTSE -0.80% Dax -0.53% SMI -0.82%

Macro :
- FOMC Favors Primarily Tapering Reinvestments: March Minutes
- OPEC Extending Cuts Should Send Prices to $55/Bbl: Sheffield

Keep an eye on :
- AKZA NA : PPG Offers Listing in Amsterdam in Case Akzo Deal, FC Cites CEO
- AMUN FP : Amundi Completes EU1.4b Rights Offer to Finance Pioneer Buy
- BASLN SW : Basilea Says Data Indicate Tumor-Targeting Properties of Drug
- BAYN GY : MON/Bayer Said to Reach Out to Buyers for EU Remedy: DealRep
- BNP FP : French Banks Deserve Contructive View; BNP, Agricole Best: Citi
- CHR DC : Chr. Hansen 2Q Ebit Broadly In Line With Ests; Keeps FY Outlook
- DENERG DC : DEA Said to Make Bid for Dong’s Oil Assets, Borsen Reports
- DBK GY : Deutsche Bank Said Near Full Takeup for $8.5 Billion Share Sale
- GLPG NA : Galapagos Says Filgotinib Dosing Means $10m Payment From Gilead
- GXI GY : Gerresheimer 1Q Adj. Ebitda Misses Est.
- HSBA LN : Swiss Court Rules France Mustn’t be Helped over HSBC: Figaro
- IIA AV : Immofinanz Reports Settlement in Principle With Investors
- NOVN VX : Novartis to In-License ECF843 for Ophthalmic Indications
- FP FP : Total to Open 110 Natural Gas Stations in France by 2026: Echos
- UNA NA : Unilever to Exit Spreads, Buy Back EU5B Shares, Raise Dividend
- VIV FP : Vivendi To Seek Majority on Telecom Italia Board, Figaro Says
- VOD LN : Vodafone May Consolidate Sub-Saharan Africa Units, B.Day Reports
- WDI GY : Wirecard Proposes Div. Increase to EU0.16, Below BDVD Forecast

>>> Europe : Brokers Upgrades & Downgrades - 6th of April 2017

>>> Up
*Anglo American Raised to Buy at SocGen, PT 1,550p
*BAT Raised to Outperform at Exane
*Countryside Raised to Overweight at JPMorgan, PT 275p
*Fraport Raised to Buy at SocGen, PT EU77
*GEA Group Raised to Outperform at MainFirst, PT EU55
*Genel Energy Raised to Hold at HSBC, PT $13
*Go-Ahead Raised to Buy at Liberum
*Gym Group Raised to Overweight at Barclays, PT 230p
*Inditex Raised to Overweight at Morgan Stanley, PT EU38
*Redrow Raised to Overweight at JPMorgan, PT 600p
*Spectris Raised to Hold at HSBC, PT GBP25
*Swiss Life Raised to Buy at Kepler Cheuvreux, PT CHF360
*Swiss Re Raised to Equal-weight at Barclays, PT CHF90.20

>>> Down
*Bovis Homes Cut to Neutral at JPMorgan, PT 880p
*Bunge Cut to Underweight at JPMorgan, PT $70
*Crest Nicholson Cut to Neutral at JPMorgan, PT 590p
*Exor Cut to Reduce at Kepler Cheuvreux, PT EU44
*Freenet Cut to Sell at Berenberg
*Norsk Hydro Cut to Neutral at Credit Suisse
*Porr Cut to Hold at Kepler Cheuvreux, PT EU35
*Scor Cut to Underweight at Barclays, PT EU32.90
*Skandiabanken Raised to Buy at ABG Sundal, PT NOK85
*Stagecoach Cut to Sell at Liberum
*TF Bank Cut to Hold at ABG Sundal, PT SEK102

>>> Initiation
*Restore New Buy at Berenberg, PT 435p

>>> Call

>>> Asian Update

Asia Mid-Session Market Update: Bearish reversal on Fed minutes reverberates in Asia; China Caixin Services PMI slows to 6-month low; Korea tensions escalate going into Trump-Xi talks

***US Session Highlights***
- (US) MAR ISM NON-MANUFACTURING COMPOSITE: 55.2 V 57.0E (lowest since Oct 2016); new orders 58.9 v 61.2 prior
- (US) MAR ADP EMPLOYMENT CHANGE: +263K V +185KE
- (US) DOE CRUDE: +1.6M V -0.5ME; GASOLINE: -0.6M V -1.5ME; DISTILLATE: -0.5M V -1ME
- Stocks had a bumpy ride today, with a considerable amount of volatility. Major indices rose early in the morning after much stronger than expected ADP jobs data, but then began to fall in the afternoon once March FOMC minutes were released and Speaker Ryan said the road ahead for tax reform may be longer than healthcare. The Dow had rallied 142 points to reach a day high just short of 20,900, before retracing nearly 250 points, the biggest intraday reversal for the Dow and S&P in 14 months.

***US markets on close: Dow -0.2%, S&P500 -0.3%, Nasdaq -0.6%***
- Best Sector in S&P500: Utilities
- Worst Sector in S&P500: Financials
- Biggest gainers: UA +3.0%; CRM +2.9%; SPLS +2.6%
- Biggest losers: CHK -3.3%; BBBY -3.0%; SWN -2.9%
- At the close: VIX 12.9 (+1.1pts); Treasuries: 2-yr 1.23% (-2bps), 10-yr 2.35% (flat), 30-yr 3.01% (+1bps)

***US movers afterhours***
- YUMC: Reports Q1 $0.44 v $0.37e, R$1.28B v $1.29Be; +10.4% afterhours
- KOPN: Enters into partnership agreements to meet coming demand for OLED micro-displays for virtual reality and augmented reality; +8.2% afterhours
- JAZZ: Reaches settlement with Hikma Pharmaceuticals related to Xyrem patent litigation; +5.9% afterhours
- MACK: Declares $140M special dividend in connection with recently completed asset sale; +5.1% afterhours
- BBBY: Reports Q4 $1.84 v $1.77e, R$3.53B v $3.50Be; Guides initial FY17 EPS to decline low single digits to 10%, implies low end $4.12 v $4.56e; +3.8% afterhours
- MDT: Cardinal Health said to be near $6B purchase of Medtronic medical supplies unit - press; +2.2% afterhours
- RECN: Reports Q3 $0.09 v $0.14e, R$143.8M v $146Me; Adj EBITDA margin 5.8% v 8.9% y/y; -8.4% afterhours
- SYNC: Files to sell shares of indeterminate amount through Canaccord and Needham; -10.7% afterhours
- CAFD: Reports Q1 +$0.03 v -$0.18e, R$9.9M v $10.0Me; Guides Q2 R$14-16M v $16.2Me, adj EBITDA $24.0-26.5M; -11.4% afterhours

***Politics***
- (US) President Trump: May include infrastructure in either healthcare or tax reform legislation - NYT
- (US) House Majority Leader McCarthy: Highly confident of Obamacare repeal this year

***Key economic data***
- (CN) CHINA MAR CAIXIN PMI SERVICES: 52.2 (6-month low and 3rd straight sequential decline) V 52.6 PRIOR, COMPOSITE PMI: 52.1 (6-month low) V 52.6 PRIOR
- (HK) HONG KONG MAR COMPOSITE PMI: 49.9 V 49.6 PRIOR; 3rd straight contraction
- (TW) TAIWAN MAR CPI Y/Y: 0.2% V 0.8%E; WPI Y/Y: 1.8% V 2.3%E

***Asia Session Notable Observations, Speakers and Press***
- Asian equity indices are trending lower as risk aversion flows that struck sentiment in the 2nd half of the US trading session reverberate in Asia Pacific. Fed's meeting minutes were the perceived culprit behind the biggest bearish reversal in US stocks this year, with US central bank officials expressing concern over stretched valuations, questioning the timing of US fiscal stimulus being stretched out to 2018, and also signalling impending policy change of balance sheet adjustment as soon as this year. Worries about the "Trump trade" pro-business agenda were also on display as House Speaker Ryan said White House and Congress are still not on the same page in terms of tax reform. Later in the Asia session, NY Times reported that Pres Trump may try to push through his infrastructure package as part of a bundle with healthcare or tax reform. S&P futures continued to slide to 1-week lows, gold tested $1260, and Treasuries rallied.
- Nikkei225 is again leading the decliners as USD/JPY fell over 40pips from the highs, while Shanghai Composite remains resilient on support from economic zone speculation. In other FX majors, AUD/USD is also notably lower on risk aversion and also softer China Caixin PMIs, sliding to 3-week lows below 0.7540. CNY weakened offshore on more reports that Pres Trump may alter Obama-era criteria on what it means to be a currency manipulator and avoid labeling China as such despite his strong campaign rhetoric on the issue.
- North Korea overnight missile launch related tensions continued to simmer today, as South Korea official said he would discuss the matter with US and Japan. PM Abe reiterated that the launch was provocative, while a US commander in the region went as far as to state that economic measures against North Korea have not had expected results, with any possible pre-emptive attack against Pyongyang being the decision of US president Trump.
- In economic data, China Caixin Services and Composite PMIs hit 6-month lows with both manufacturers and service providers noting slower expansions in output. Markit economists also noted weaker growth in composite new orders, weakest expansion of employment in 2017, flat work backlogs after 2 months of increases, and slowing input price inflation. Hong Kong composite PMI remained in contraction for 3rd straight month, though hit slightly higher levels thanks to first growth in output in 2 years and another increase in total input costs during March. Expectations for output over the next 12 months in Hong Kong however remain subdued amid economic downturn, political uncertainty, and higher housing rental costs.
- Asia Development Bank releases its latest outlook report for the region, maintaining 5.7% target this year and next. China 2017 GDP view was raised to 6.5% from 6.4% before a 2018 slowdown to 6.2%. ADB noted risks of capital outflows due to US policy tightening.

China
- (CN) China Housing Ministry calls for reasonable residential land supply - financial press
- (CN) China will take more active measures to increase jobs - Chinese press
- (CN) China SAFE: China FX market relatively stable, cross-border capital flow gradually tends to balance - Chinese press
- (CN) Former PBoC advisor Li Yang: China should control housing loans - Chinese press

Japan
- (JP) Japan PM Abe: Agreed with Trump that North Korea missile launch is provocative; interested in how Trump will talk about it China President Xi

Australia/New Zealand
- (AU) Moody's: Home loan arrears are rising in all Australia states; expects delinquencies to continue to increase over 2017
- (AU) Australia Treasurer Morrison: Economic growth is the starting point of 2017 budget
- (AU) RBA's Debelle: Increase in mining profits, reflecting coal and iron ore price spikes, will partly go to foreign owners as dividends, increasing net income deficit
- (AU) Australia govt said to see A$4B budget increase from higher iron ore and coal prices - Australian press
- (NZ) China-New Zealand free trade talks to be held in Beijing on Apr 27th - press
- (NZ) New Zealand Treasury reports 8-month Budget Surplus NZ$1.41B v NZ$498M expected

Korea
- (KR) US Navy Pacific Commander: Diplomatic and economic measures against North Korea have not had expected results; Any preemptive attack is up to Pres Trump - - press
- (KR) South Korea presidential candidate Ahn Cheol-soo: Korea’s next leader should continue to allow the US to install the Thaad missile-defense system
- (KR) South Korea envoy to discuss North Korea missile with US and Japan - Korean press

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -1.4%, Hang Seng -0.6%, Shanghai Composite +0.1%, ASX200 -0.6%, Kospi -0.5%
- Equity Futures: S&P500 -0.2%; Nasdaq -0.3%, Dax flat, FTSE100 -0.2%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0660-1.0685; JPY 110.30-110.75; AUD 0.7530-0.7575; NZD 0.6960-0.6985
- June Gold +0.1% at 1,255/oz; May Crude Oil -0.5% at $50.91/brl; May Copper -0.2% at $2.67/lb
- SLV iShares Silver Trust ETF daily holdings fall to 10,237 tonnes from 10,242 tonnes prior; 5th straight decline
- (CN) PBOC SETS YUAN MID POINT AT 6.8930 V 6.8906 PRIOR
- (CN) PBoC skips open market operations for 9th straight session; Drains CNY10B
- (JP) Japan MoF sells ¥3.979T 3-month bills; avg yield -0.1431% v -0.1612% prior; bid-to-cover 4.44x v 5.30x prior

***Asia equities notable movers***
Australia
- JBH.AU JB Hi-Fi +3.7% (Q3 result)
- RIO.AU Rio Tinto -2.1% (income tax assessments)
- ASX.AU ASX -3.2% (Credit Suisse trims FY17 earnings estimates)
- EHE.AU Estia Health +3.7% (Sentinel has bought 4.988% stake and is exploring purchase of a controlling interest)

Japan
- 2678.JP Askul Corp +5.5% (discloses fire damage)
- 6502.JP Toshiba Corporation -0.4% (seeks additional aid)
- 3632.JP Gree Inc +2.7% (SMBC Nikko upgrades)
- 9984.JP Softbank Corp -1.3% (rework snapdeal plan)
- 6857.JP Advantest Corp +2.0% (Daiwa raises PT)
- 4565.JP Sosei Group Corp +5.1% (Heptares receives milestone payment)
- 4208.JP Ube Industries +0.8% (Jefferies upgrades)

Hong Kong
- 762.HK China Unicom -1.5% (mixed ownership reform)
- 1918.HK Sunac China Holdings +7.3% (quarterly result)
- 2238.HK Guangzhou Automobile Group -1.4% (March result)
- 813.HK Shimao Property +4.2% (Mar result)
- 576.HK Zhejiang Expressway -5.4% (to issue bond)
- 1970.HK IMAX China Holding -9.7% (investors’ divestment)

China
- 000709.CN Hebei Iron & Steel Co +10.1%, 600550.CN Baoding Tianwei Baobian Electric +10.0%, 000401.CN Tangshan Jidong Cement Co +10.0% (new special economic zone momentum)

>>> After Hours Summary: YUMC +10.9%, BBBY +4% following earnings/g


After Hours Summary: YUMC +10.9%, BBBY +4% following earnings/guidance, URRE +14% on lithium project update... RECN -9% on earnings/strategic initiatives implementation

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: YUMC +10.9%, BBBY +3.7% (also increases dividend)

Companies trading higher in after hours in reaction to news: TENX +19.8% (announces review of strategic alternatives - engaged Ladenburg as advisor; CEO John Kelley resigned), LEDS +19.1% (still checking; confirmed earnings release date will be April 12), URRE +14% (reports positive geophysical results at its Columbus Basin lithium project; plans for drilling to commence in July of this year), WYY +11.9% (very thinly traded; Nokomis Capital affirms 15.4% active stake, has engaged, and intend to continue to engage, in discussions with the management and the Board), KOPN +9% (announces two agreements w/ 'two leading global OLED companies' as part of its manufacturing strategy for its OLED displays introduced at CES in January 2017), SCON +6.8% (after closing near highs - up 14% on the day), PLUG +5.8% (continued strength), MACK +4.8% (announces a special cash dividend of $140 million on the company's common stock), JAZZ +5.2% (resolves patent litigation w/ Hikma Pharma related to Xyrem / sodium oxybate oral solution), MDT +1% (Reuters reporting that Medtronic medical supplies business could fetch $6 bln in sale to Cardinal Health), CBIO +1% (modestly rebounding after closing at lows)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: RECN -9% (also announced that it has implemented three strategic initiatives)

Companies trading lower in after hours in reaction to news: CAFD -11.3% and FSLR -1% (First Solar says reviewing alternatives for the sale of its interests in 8point3 Energy Partners), SYNC -8.4% (to offer shares of its common stock in an underwritten public offering), VII -7.3% (after surging 150% higher), INNL -6.4% (modestly pulling back), GPRO -2.7% (to offer $150 mln aggregate principal amount of convertible senior notes due 2022 in a private placement), BSBR -2.5% (continued weakness following reports that Qatar Investment Authority said to be pressured to price offering near $8/share), WGO -2.2% (commences secondary offering of 2,293,277 shares by funds affiliated with Summit Partners), CLNS -2% (attributed to block trade pricing)

>>> US Close Dow -0.20% S&P -0.31% NAsdaq -0.58% Russell -1.17%

Closing Market Summary: Stocks Squander Early Gains After Hawkish FOMC Minutes

Stocks started strong out of the gate following an upbeat ADP Employment Change Report on Wednesday morning, but the hawkish tone of the FOMC Minutes prompted an afternoon retreat. The S&P 500 settled lower by 0.3% while the Dow (-0.2%) performed slightly better and the Nasdaq (-0.6%) finished slightly worse.

The ADP National Employment Report, which showed an increase of 263,000 in March (consensus 175,000), provided an encouraging signal for the domestic labor market and future economic growth. However, the domestically-oriented Russell 2000 (-1.0%), which is closely tied to the performance of the U.S. economy, struggled to keep pace with the broader market. The lack of buying conviction among small caps pointed to the fact that not all market participants bought into the positive narrative attached to the better than expected ADP reading.

That narrative was tested during the afternoon session with the release of the FOMC Minutes from the March meeting. In the report, the committee revealed that it would like to start reducing the Fed's balance sheet later in the year. In addition, the Minutes showed that some Fed officials are worried about high equity valuations. Stocks held steady immediately following the report, but the hawkish tone eventually seeped in, sending the cash market into the red.

It's also important to note that investors have been on edge all week amid a cloud of uncertainty; it's unclear what will come from President Trump's upcoming meeting with Chinese President Xi Jinping, what the resurgence of health care reform will mean for tax reform, and how the U.S. will deal with the ongoing tensions in Syria and North Korea, among a host of other concerns. With all of these narratives playing in the background, it would be unfair to attribute today's slip to any one factor.

On that note, House Speaker Paul Ryan added to the market's anxiety on Wednesday afternoon, acknowledging that tax reform will take longer than repealing and replacing the Affordable Care Act. Mr. Ryan said that the House currently has a tax reform plan, but the Senate is still working on its version.

Most sectors finished today's session in negative territory with only a couple countercyclical groups--utilities (+0.5%) and real estate (+0.2%)--escaping with wins. The financial sector (-0.7%) settled at the bottom of the day's leaderboard with the remaining sectors closing modest lower with losses no greater than 0.4%.

It's worth pointing out that crude oil settled 0.3% higher at $51.14/bbl despite a bearish inventory report from the Energy Information Administration. The EIA reading showed a build of 1.6 million barrels while the consensus called for a modest draw. Nonetheless, the energy sector (-0.3%) performed in line with its cyclical peers throughout the majority of today's action.

In the Treasury market, Treasuries experienced increased demand in the wake of the FOMC Minutes. The benchmark 10-yr yield finished four basis points lower at 2.33%.

On the data front, investors received March ADP Employment Change, March ISM Services, and the weekly MBA Mortgage Applications Index:

  • The ADP National Employment Report showed an increase of 263,000 in March (consensus 175,000) while the February reading was revised lower to 245,000 from 298,000.
    • The ADP reading precedes Friday's more influential Employment Situation Report for March, which the consensus expects will show the addition of 180,000 nonfarm payrolls. The Employment Situation Report for February indicated that nonfarm payrolls increased by 235,000.
  • The ISM Services Index for March declined to 55.2 from an unrevised reading of 57.6 in February while the consensus expected a downtick to 57.0.
    • The key takeaway from the report is that growth in the services sector, which accounts for a much bigger slice of economic activity than the manufacturing sector does, persisted for the 87th straight month.
  • The weekly MBA Mortgage Applications Index decreased 1.6% to follow last week's 0.8% decline.

Tomorrow, March Challenger Job Cuts will be released at 7:30 ET while Initial Claims (consensus 245,000) will cross the wires at 8:30 ET. 

  • Nasdaq Composite +8.9% YTD
  • S&P 500 +5.1% YTD
  • Dow Jones Industrial Average +4.5% YTD
  • Russell 2000 -0.4% YTD