>>> Europe : Brokers Upgrades & Downgrades - 27th of February 20

>>> Up
*Adidas Raised to Outperform at RBC, PT EU180
*Eramet Raised to Buy at AlphaValue
*Essentra Raised to Buy at Deutsche Bank, PT 600p
*Mail.Ru Group Raised to Neutral at Credit Suisse, PT $20
*Staffline Group Raised to Neutral at Credit Suisse, PT 1050p
*TechnipFMC Raised to Overweight at JPMorgan, PT $44

>>> Down
*Faurecia Cut to Hold at HSBC, PT EU47
*Merlin Cut to Hold at Peel Hunt
*Nordex Cut to Sell at Deutsche Bank, PT EU14
*Smith & Nephew Cut to Neutral at Goldman, PT 1270p
*Solvay Cut to Sell at Citi, PT EU98
*Terna Cut to Underperform at Credit Suisse
*Veolia Cut to Add at AlphaValue

>>> PT Change


>>> Call
>> Stock
*GRIFOLS REMOVED FROM CONVICTION BUY LIST AT GOLDMAN; STILL BUY
*PHILIPS ADDED TO CONVICTION BUY LIST AT GOLDMAN

>>> Asian Update

Asia Mid-Session Market Update: Australia Q4 corporate profits rise as wages fall; GBP slides on speculation of another Scotland referendum

***Friday US markets on close: Dow +0.1%, S&P500 +0.2%, Nasdaq +0.2%***
- Best Sector in S&P500: Utilities
- Worst Sector in S&P500: Energy
- Biggest gainers: FL +9.4%; INTU +6.1%; JWN +5.7%
- Biggest losers: SWN -12.0%; HPE -6.9%; RRC -4.5%
- At the close: VIX 11.5 (-0.2pts); Treasuries: 2-yr 1.16% (+2bps), 10-yr 2.32% (-7bps), 30-yr 2.96% (-7bps)

***Weekend US/EU Corporate Headlines***
- BRK.A: Reports Q4 Operating EPS (Class A) $2,665 v $2,843 y/y
- KATE: Michael Kors and Coach said to be among the suitors to reach second round of bidding for Kate Spade - press

***Politics***
- (UK) UK govt said to be preparing for the new independence vote by Scotland - UK press
- (US) Treasury Sec Mnuchin: Pres Trump's first budget will not include any cuts to social welfare programs such as Social Security and Medicare - press
- (US) Former Labor Secretary under President Obama, Tom Perez, elected as the new chairman of Democratic Party - press
- (US) President Trump nominee for Navy Sec, Philip Bilden, said to withdraw his own nomination - financial press

***Key economic data:***
- (AU) AUSTRALIA Q4 COMPANY OPERATING PROFIT Q/Q: 20.1% (multi-year high) V 8.9%E; INVENTORIES Q/Q: 0.3% V 0.5%E
- (NZ) New Zealand Jan Net Migration: 6.5K (record high) v 6.0K prior

***Asia Session Notable Observations, Speakers and Press***
- Asia equities down slightly again as divergence from modest increases in US indices continues; Nikkei225 the biggest decliner on stronger JPY.
- USD was under added pressure on Friday while yields on the longer-end of the curve come in more notably; GBP also falls by as much as 80pips on UK press report that Scotland is preparing to call for another referendum when PM May triggers article 50 next month. AUD briefly rises after Q4 corporate profits data.
- Australia's corporate profits hit multi-year high as inventories growth comes in below ests; Expectations for higher GDP tempered by decline in the Wages component.
- Ahead of US President Trump's address in front of Congress on Tuesday, Treasury Sec Mnuchin says the cabinet will not call for social spending program cuts but will seek sharp increase in defense funding.

China
- (CN) China Securities Regulatory Commission (CSRC) chairman Liu Shiyu: Since capital market recovery from 2015 slump has been stronger than expected, China is ready for larger supply of IPOs - press
- (CN) China National People's Congress (NPC) leaves corporate tax rate unchanged at 25% - SCMP
- (CN) Chinese press citing researchers from State Information Center (SIO) forecast Q1 GDP at 6.6%
- (CN) China said to ramp up its naval defense budget due to uncertainty about Trump's plans for South China Sea - press

Japan
- (JP) Nearly 60% of poll respondents in Japan had a favorable view of PM Abe's meeting with US Pres Trump - Nikkei

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.7%, Hang Seng +0.1%, Shanghai Composite -0.3%, ASX200 -0.3%, Kospi -0.3%
- Equity Futures: S&P500 +0.2%; Nasdaq +0.1%, Dax +0.1%, FTSE100 +0.2%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0550-1.0575; JPY 111.90-112.30; AUD 0.7660-0.7710; NZD 0.7185-0.7210; GBP 1.2390-1.2470
- Apr Gold -0.1% at 1,257/oz; Apr Crude Oil +0.6% at $54.31/brl; May Copper -0.3% at $2.69/lb
- (IR) Iran Navy Rear Admiral Habibollah Sayyari announces annual exercises to be held in the Strait of Hormuz - press
- (CN) PBOC SETS YUAN MID POINT AT 6.8814 V 6.8655 PRIOR
- (CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos
- (KR) South Korea sells 20-yr bonds; avg yield 2.215% v 2.195% prior

***Asia equities / Notables / movers***
Australia
- QBE Insurance QBE.au +2.9% (FY16 result)
- Lend Lease LLC.AU +3.9% (FY16 result)
- Austal ASB.AU -2.6% (H1 result)
- MacMahon MAH.AU -3.3% (H1 result)
- Japara JHC.AU -6.2% (H1 result)

Hong Kong
- Fortunet 1039.HK -3.4% (profit warning)
- Boer Power 1685.HK -4.6% (profit warning)
- BYD Electric 1211.HK +3.4% (FY16 result)
- Futures Land Development 1030.HK -7.1% (FY16 result)

>>> What to look at this Week End 25th & 26th of February 2017

Weekly Update
Dow +0.98% S&P +0.86% Nasdaq +0.17% Russell -0.33% Nikkei +0.25% (+0.90% in $) Hang Seng -0.28% CSI +1.53% Shanghai +1.60% Mexico -1.60% (+2.35% in $) BRazil -1.60% EuroStoxx -0.14% FTSE -0.77% Cac -0.46% Dax +0.40% Ibex -0.49% MIB -2.16% SMI +0.22%
Early on this week, US stocks looked poised for a fifth consecutive week of record high closes. The economic data generally remained robust globally. A hotter than expected print for US CPI figures and a FOMC minutes release that pointed to a committee inclined to pull the trigger sooner rather than later kept the reflation narrative intact. President Trump continued to meet with high-profile business leaders and talk up his soon-to-be-announced tax and regulatory reforms. By Friday, the Dow was riding a 10-day winning streak.
The second half of the week though, saw the tone reach an inflection point, and investor appetite for risk began to wane. Polls out of Europe drummed up populism/nationalism concerns ahead of key elections in France and Germany later this year. President Trump doubled and tripled down on many of his most controversial campaign promises/tactics, while his Treasury Secretary laid out a timeline for growth reforms that underwhelmed. The narrative shifted its focus onto the growing number of obstacles that stand in the way of his administration and Congress reaching a deal on substantial fiscal reforms. The markets seemed to reflect this in rising bond and gold prices, while stock gains were notably more subdued. Trading may have also hit a bit of a dead spot; with earnings season nearing an end and a relatively sparse economic calendar, markets have become beholden to headlines out of Washington ahead of Trump's congressional address next week. The Dow S&P and the NASDAQ finished a fifth consecutive week at all-time highs, but the Russell 2000 lost ground. For the week the Dow rose 1%, the S&P added 0.7% and the NASDAQ eked out a gain.

Macro :
- Banks Near Decision on Post-Brexit EU Hubs: Boersen-Zeitung
- Sweden Aims to Propose New Bank Tax Before 2018 Elections
- Italy Backs Brexit Talks Once U.K. Assures on Exit Bill: FT
- London-Shanghai Stock Connect May Start Soon: Global Times
- Moody's affirms German credit rating at AAA

Keep an eye on :
- AZA IM : Alitalia to Cut Up to 4,000 Jobs as Part of New Plan: Messaggero
- AAPL US : Berkshire’s Average Purchase Price for Apple Was $110.17
- ARAMCO IPO : Mitusbishi Fin. Said to participate in underwriting Saudi Aramco IPO - Nikkei
- BRK/b US : Berkshire Hathaway 4Q Oper EPS $2,665, Est. $2,717
- CLN VX : Clariant Isn’t a Takeover Target, CEO Tells FUW
- DBK GY : Deutsche Bank to Conclude Most Large Legal Cases in 2017: FAS
- DOW US : Berkshire Booked $1.2 Billion Gain on Dow Conversion, Sold Stake
- EDF FP : EDF Closed Hinkley Point B Unit for Maintenance Yesterday
- EDL FP : Disneyland Added EU68b to French Economy in 25 Years: Figaro
- FCA IM : Fiat Chrysler Says U.S. Unit Prepaid $1.8b Term Loan
- FCT IM : French Industry Minister says Fincantieri must have less than 50% stake in STX France
- KATE US : Michael Kors, Coach Seen in Kate Spade 2nd Round Auction: Rtrs
- LHN VX : LafargeHolcim Shares Could Rally 25%, The cement giant has been a roll, thanks to cash generation and stronger markets. Returning cash to shareholders could help, too. - Barron's
- LMN SW : Lastminute.com Sees Plenty of Acquisition Options in Europe: FUW
- LIFE SW : Lifewatch in talks with alternative buyers in attempt to prevent takeover by Aevis Victoria
- NESN VX: Nestlé Shares Could Rise by 16%, It’s a high-quality company that is trading cheaply because of political and economic worries in Europe - Barron's
- NOKIA FH : Nokia to Supply Xiaomi With Fiber Optic Network
- NOKIA FH : Nokia’s Suri Says Network Gear Demand May Pick Up This Yr: Rtrs
- PLT IM : Parmalat offer by Lactalis ruled unfair to minority shareholders by advisor
- PRS SM : Amber Seeks Support to Replace Prisa’s Cebrian: El Economista
- RYA LN : Ryanair in Advanced Talks With Aer Lingus, Norwegian: NZZ
- SAX GY : Stroeer Can Spend Up to EU1b on Acquisitions: Euro Am Sonntag
- SAZ GY : Stada Starts ‘Structured Bidding Process’ for Company
- TEC FP : TechnipFMC 2016 Pro Forma Net Income $457.9 Million
- UCG IM : UniCredit’s CIB Can Generate Growth Organically: Papa to Sole
- UNA NA : Dijsselbloem Says Unilever Shouldn’t Abandon Long-Term View

>>> French Industry Minister says Fincantieri must have less than 50% stake in S

French Industry Minister says Fincantieri must have less than 50% stake in STX France (translated)
26 FEB 2017
Christophe Sirugue, the French Industry Minister, has said in an interview with Italian language daily La Stampa that Italian ship builder Fincantieri [BIT:FCT] should hold less than a 50% stake in French shipbuilder STX France.
The item noted that Fincantieri has reached an agreement to acquire 66.7% of STX France from bankrupt South Korean ship builder STX Offshore & Shipbuilding. However, Sirugue said that the French government wanted to restrict Fincantieri to less than a 50% stake because Fincantieri was a direct competitor of STX France and that there was a danger that the synergies rising from the deal could weaken the French shipmaker.
Sirugue added that there were no plans to nationalise STX France. He added that he was also open to the idea that a second Italian company could ally with Fincantieri so that collectively they held a majority stake in STX France. However, Sirugue noted that the second company would have to be privately owned.
As reported, the sale of a 66.7% stake in STX France is expected to raise EUR 100m-EUR 200m.

>>> Unilever shareholders urge disposal of food division - reports

Unilever shareholders urge disposal of food division - reports
26 FEB 2017
Unilever [LON:ULVR] [AMS:UNIA] shareholders quoted in reports in The Sunday Times and The Sunday Telegraph have separately urged the FTSE-100 consumer goods company to offload its food division. The Sunday Times quoted one of the top 10 shareholders who urged Unilever to sell all or part of its GBP 10.6bn (EUR 12.51bn) food division, while The Sunday Telegraph reported that the 14th biggest investor in Unilever’s Amsterdam-listed shares, Allianz, considers spinning off the Anglo-Dutch group’s food business is the most acceptable option.
The Kraft Heinz Company [NASDAQ: KHC], a Chicago, Illinois-based food company, announced on 17 February that it had made an offer for Unilever and that the Anglo-Dutch company had rejected the bid. Kraft Heinz, which is backed by Warren Buffett and the private equity firm 3G Capital, said on 19 February that it had withdrawn its offer.
Unilever Chief Executive Paul Polman last week said the company will conduct a wide-ranging review, The Sunday Times item said, adding that the results of the review will be disclosed in April.
The review is likely to lead to a sale of some Unilever brands, including Hellmann’s mayonnaise, Marmite and Flora, the report continued.
The top 10 shareholder agreed with Unilever’s rejection of Kraft Heinz’s GBP 115bn (EUR 135bn) takeover bid on the basis that it was not high enough, with the stock component of the offer deemed by the shareholder to be lacking in value.
The shareholder added that Unilever should turn its attention to making large acquisitions for its personal care division. The report noted previous speculation of a Unilever takeover bid for the toothpaste companies Church & Dwight [NYSE:CHD] and Colgate-Palmolive [NYSE:CL].
Unilever refused to comment, the item said.
The Sunday Telegraph report said Unilever is believed to be thinking about spinning off its food division into a separately-listed company.
The newspaper went on to quote Aviva Investors fund manager Giles Parkinson, who said the firm is happy that Unilever’s review will consider all options.
Unilever’s personal care business comprises about 60% of the group and has a sales growth rate of 4.2%, while the company’s food division’s sales are only half that of the personal care arm, the item continued. Unilever’s food division has sales of EUR 10bn, according to the report.
Top shareholders canvassed by The Sunday Telegraph voiced support for Polman, noting that the CEO is under pressure at present.

>>> Parmalat offer by Lactalis ruled unfair to minority shareholders by advisor

Parmalat offer by Lactalis ruled unfair to minority shareholders by advisor (translated)
26 FEB 2017
Intermonte, the advisor commissioned by activist investor Amber and minority shareholders association Azione Parmalat, has ruled in its fairness option that Lactalis’ bid for Parmalat [BIT:PLT] undervalues the company, Italian language daily Il Messaggero reported.
The article cited a statement by Intermonte noting the EUR 2.8 per share being offered by Lactalis is unfair, and estimated Parmalat's shares to be worth between EUR 3.02 and EUR 3.52 a share based on market multiples and EUR 2.9 and EUR 3.58 a share based on actual cash flows.
In December, privately owned Lactalis announced it would launch a voluntary tender offer for all outstanding ordinary shares of Parmalat at EUR 2.80 per share, or EUR 636.7m in total.

FT : Dealmaker Michael Klein helped kill Kraft Heinz bid for Unilever

Dealmaker Michael Klein helped kill Kraft Heinz bid for Unilever
Financier called Warren Buffett to explain political hurdles

Warren Buffett was persuaded to drop Kraft Heinz’s $143bn takeover approach for Unilever by the corporate financier Michael Klein, making the dealmaker the unlikely executioner of what would have been the second-largest merger in corporate history.

Earlier this month, Kraft Heinz, which is backed by Mr Buffett and Brazil’s 3G, revealed that it was seeking to acquire the Anglo-Dutch company behind brands such as Dove soap and Ben & Jerry’s ice cream.

Two days after the proposal became public on Friday February 17, Mr Buffett, the billionaire head of Berkshire Hathaway, awoke to a letter from Paul Polman, Unilever chief executive, explaining his hostility to the deal.

Mr Klein, a former Citigroup executive who has worked alongside Tony Blair, former British prime minister, on some deals, then telephoned Mr Buffett to explain political sensitivities around the deal, according to people briefed on the discussion.

In the UK, Theresa May’s Conservative government has been pushing for stronger industrial policy that safeguarded jobs, and MPs had already voiced opposition to the deal. In the Netherlands, home of half of Unilever, parliamentary elections are scheduled for March 15.

The Big Read
The $143bn flop: How Warren Buffett and 3G lost Unilever
The story behind the failure of Kraft Heinz to win over the Anglo-Dutch giant
Mr Klein then put Mr Buffett on the line with Mr Polman. Within hours, Kraft Heinz had pulled its bid.

Mr Klein is better known as a consummate dealmaker. He helped to organise peace talks between Ivan Glasenberg, Glencore chief, and Mick Davis, Xstrata chief, which paved the way for an $90bn merger of the two commodities groups in 2013.

Representatives at M Klein & Company, Mr Klein’s advisory group, could not be reached for comment.

The failure of the Kraft Heinz approach for Unilever is a rare stumble for Mr Buffett and his partners at 3G.

The latter is known for adopting aggressive cost-cutting tactics that are upending the consumer goods industry. They have taken stakes in the beverages group Anheuser-Busch InBev and Restaurant Brands International, the owner of the Burger King and Tim Hortons restaurant chains.

Last week, Unilever said the aborted bid had been a “trigger” for it to work harder and faster on delivering better returns to investors. It has launched a review of its business to be concluded by early April.

This article has been amended to clarify the relationship between Tony Blair and Michael Klein. They worked together on deals rather than founding a firm.

FT : Deutsche Bank cuts bonus pool by ‘almost 80%’

Deutsche Bank cuts bonus pool by ‘almost 80%’
Executive announces figure as German lender looks to shore up its finances
Deutsche Bank has cut its 2016 bonus pool by “almost 80 per cent”, one of its top managers has said, as Germany’s biggest bank battles to shore up its financial position in the wake of heavy fines.

Karl von Rohr, chief administrative officer at Germany’s biggest bank, acknowledged in an interview with the Frankfurter Allgemeine Sonntagszeitung newspaper that bonus reductions were “frustrating” for staff, but said that the decision had been taken “very consciously, also bearing in mind our shareholders”.

Deutsche’s investors have not received a dividend for the past two years, as the bank has slipped deep into the red, posting a record €6.8bn net loss for 2015, and a €1.4bn loss for 2016 amid a raft of litigation and restructuring charges.

In late December, the bank reached a $7.2bn deal with the US Department of Justice to settle allegations that it mis-sold mortgage-backed securities before the financial crisis, and in January it agreed to pay $630m to settle US and UK investigations into alleged mirror trades used to launder $10bn out of Russia.

In the wake of the settlement with the DoJ, John Cryan, chief executive, said Deutsche’s management board had decided to waive their bonuses for 2016. He also said employees with the titles vice-president, director and managing director would receive no individual bonuses for 2016, although they would still be eligible for a group-wide bonus linked to the bank’s overall performance.

Deutsche said in January that the move would affect about 25 per cent of its staff but did not spell out how big the reduction to the bonus pool would be in monetary or percentage terms.

In 2015, the bank’s bonus pool was €2.4bn. Precisely how much this number declines in 2016 will depend on share awards from previous years, as well as the cut in new awards mentioned by Mr von Rohr.

The cut in Deutsche’s bonus pool comes amid a broader debate over the level of executive pay in Germany, which is home to some of Europe’s biggest companies and is gearing up for a general election later this year.

The centre-left Social Democrats, which govern the country in coalition with Angela Merkel’s centre-right Christian Democrats, last week proposed draft legislation that would limit the tax deductibility of the salaries of top managers at public companies to €500,000.

On Friday, the carmaker Volkswagen, which came under fire last year after board members received big payouts despite the company suffering its worst ever financial year, said it would introduce a new pay system that would cap the salary of its chief executive at €10m and limit other management board members’ pay to €5.5m.