Biggest Opportunity for the Global Reflation Trade: Biggest upside to EPS and bull case values are across Japan, Spain, and Italy. We want to own the optionality that global reflation holds and that the policy rates in the two regions may rise sooner than expected.
Japan: Risk to the Upside If NIRP Ends Sooner than Expected. Japanese banks are the most asset-sensitive across regions. MS Japan macro team expects the BoJ to end NIRP in 4Q18. This is reflected in our bull case. More upside to our estimates if bull case migrates into the base case. Way to play: Resona Holding (OW, PT ¥730, 29% upside to base case and 53% to bull).
Spanish & Italian Banks Best Reflation Play in Europe, In Our View. Our NII estimates for 2019 are 3.5% above the Street, suggesting that consensus has not fully baked in reflation expectations. Also, these banks are one of the most asset-sensitive in the group. A 10 bps increase Euribor should boost EPS by 4.3% vs. ~1% European peers. Way to play: CaixaBank (OW, PT €4.80, 14% base case upside).
US Bank Stock Valuations Likely Reflect a Conservative Deposit Beta Assumption, underestimating the full rate benefit. We think consensus is tied to bank disclosure which bakes in a 50% through-the-cycle beta assumption vs. current ~10% beta. US banks beat our NIM estimates by median 0.7% in 1Q17. Expect more EPS upside as deposit betas likely remain lower than 50% over the next 2-3 hikes. Banks with higher consumer vs. corporate deposit skews could see lower betas for longer. Way to play: BAC (OW, PT $26, 13% base case upside).
White House Budget: Key Points
- Budget calls for $800 bln in cuts to Medicaid (this is the same amount in the House version of the AHCA that was passed). Potential Related Stocks: XLV, UNH, MOH, CNC, THC, CYH, LPNT, UHS).
- The Budget calls for $272 bln in cuts to welfare programs such as food stamps which may be negative for: KR, WFM, WMT, SVU
- The Budget calls for $39 bln in cuts to student loan assistance programs which may be negative for: NAVI, SMI, NNI
- The Budget calls for a $54 bln increase in defense spending which may be positive for: LMT, NOC, GD, BA, RTN, LLL.
- The Budget will cut EPA funding by 31% -- Potential Related Stocks: KOL, XLE).
- The budget calls for the US to sell $16.5 bln in US oil reserves from the strategic petroleum reserve (USO, XLE, COMDX).
--> NYT Article :
From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: 05/22/17 22:14:46
To: LAURENT CHEKROUN (MAKOR SECURITIES LO)
Subject: Fwd:>>> White House releases FY18 budget blueprint
Subject: Fwd:>>> White House releases FY18 budget blueprint
Exclusive: U.S. Could Join Coordinated Approach To Oil Markets says Former Russian Energy Minister
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Paul Whitfield
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May 23, 2017 5:01 AM EDT
A new oil market pragmatism will underpin an extension to production cuts at OPEC's meeting on Thursday and is ushering in a new era of cooperation between Russia, OPEC and possibly the US, according to former Russian energy minister Igor Yusufov.
"The supremacy of purely pragmatic economic interest proclaimed by Donald Trump is a very well timed slogan in terms of the development of the oil markets," Yusufov told TheStreet in an exclusive interview. "Oil producers are in the same boat, and if someone is going to destroy a shaky compromise achieved by other passengers, the whole ship can go down."
Yusufov is well versed in OPEC negotiations. He was head of the Russian Energy Ministry from 2001 to 2004, during Vladimir Putin's first Presidential term, and led the Russian delegation that negotiated his country's first ever participation in co-ordinated oil cuts with OPEC.
The spirit of that deal was reprised last year when Russia agreed to trim output by 300,000 barrels per day in support of a total 1.8 million barrel per day production cut by OPEC and non-OPEC oil producers. Ahead of this weeks OPEC meeting Russia and Saudi Arabia proposed extending the cut for another nine-months to help address an oversupply that continues to weigh on oil prices.
"The common declaration made by the Russian and Saudi ministers (last week) on the intention to prolong the OPEC+ production cuts is the best testimony that leading oil producers are capable to striker deals despite political differences," said Yusufov, who is now head of a Russian oil fund, called Fund Energy, which he founded in 2011.
The Saudia and Russian agreement, coupled with support from OPEC's other heavy hitters Iraq and Iran, have pushed oil prices more than 10% higher in the past two weeks as the market priced in an extension to the cuts.
But nerves remain. Oil prices slipped Tuesday after US President Donald Trump proposed selling about half of the US's strategic oil reserve over the next ten years. Brent Crude futures for delivery in July slid just over half a percent Tuesday morning to trade at $53.54 per barrel. West Texas intermediate futures for delivery in July where also down over half a percent at $50.84.
US shale production, which is on target to rise by 440,000 barrels this year, has proven the fly in the ointment of OPEC and Russia's efforts to boost the oil price. A sharp increase in onshore well number has cut into US demand for imported oil, condemning prices to oscillate between the low $50s and high $40s.
Yusufov believes that Russian producers are "comfortable" with those levels. "The Russian state budget is calculated (on) the basis of a $40 price - so everything high than this mark would be a success," he noted.
The former oil minister also sees potential, and early hints of a willingness, for the US to play a more cooperative role in the global oil market. "The visit of the American President...to Riyadh and his speech before the Islamic states could be seen as a sign of the American readiness to negotiate...about a common approach to oil markets. And since Russia has a considerable dialogue potential both with US and OPEC, different formats of this bright energy dialogue are possible."
Sony chief executive outlines long-term profit strategy
Group grapples with question of where it will find its next big source of growth
With Sony closing in on its highest profit in two decades, Kazuo Hirai, its chief executive, said he will aim to do what his predecessors have consistently failed to do in the past: making sure the profitability sticks.
Analysts say Mr Hirai faces a challenge as he tries to position the Japanese entertainment and electronics group to capture new markets for autonomous cars, robotics and internet of things, while ensuring volatility in its film and electronics businesses do not jeopardise its recovery.
Investors have so far backed Mr Hirai’s turnround strategy with Sony’s shares rising 36 per cent over the past 12 months. In the final year of its three-year business plan through March 2018, the company expects its operating profit to hit ¥500bn ($4.5bn), which would mark its best income since the 1997-98 fiscal year.
“The operating profit target of ¥500bn for fiscal 2017 will mark our highest level in 20 years, but not once have we been able to sustain this profit level over several years in Sony’s 71-year history,” Mr Hirai said at a news conference in Tokyo on Tuesday.
“For Sony to be able to continue generating high profits, each of our group’s divisions needs to strengthen their efforts to build new businesses rather than maintaining the status quo,” he added.
Despite stemming losses from its television, smartphone and other electronics businesses, however, Sony has yet to restore its ailing movie studio after a dismal run at the box office which has left it trailing its Hollywood rivals.
Earlier this month, Mr Hirai named Tony Vinciquerra, a former 21st Century Fox executive, as the chairman and chief executive of Sony Pictures Entertainment, which includes Sony’s movie studio, television production business and global television networks unit.
The film business will aim to achieve an operating profit margin of 3.8 per cent in the current financial year, well below the 7-8 per cent margin Sony had originally targeted when it released its three-year plan in 2015.
To rebuild its film business, Mr Hirai said the company will aim to make better use of its intellectual property portfolio such as Spider-Man, which will be released this summer as a co-production with Walt Disney’s Marvel Studios, while continuing cuts in production and marketing costs.
Following a decade-long restructuring phase, Mr Hirai also said it was time to start capturing a bigger market share in certain regions for its TV and other electronics businesses. In the smartphone business, for example, Sony has said it will aim to increase sales volume by 13 per cent this year.
Analysts are concerned such a move may hurt margins.
“We see the first signs of risks re-emerging,” Jefferies analyst Atul Goyal wrote in a client note. “Why must Sony target higher volumes? If it needs higher volumes to stay profitable, then that is not a good sign.”
Atsushi Osanai, a former Sony employee who is now professor at Waseda Business School, said Sony’s turnround up till now had been a textbook case of offloading unprofitable businesses and focusing on higher-end products rather than pursuing scale — standard management strategy for restoring margins.
Mr Hirai has said Sony will aim to find new growth by expanding the sale of its image sensors in smartphone cameras to cars and strengthening its medical business.
“It is not only stable management that is required from Sony’s president but people have hopes that Sony would do something fun every now and then,” Mr Osanai said. “Mr Hirai may be venturing into an area that will require something different from his previous management style.”
RTRS - PPG CEO: WOULD CONSIDER NEW PROPOSAL FOR AKZO NOBEL TO RESOLVE ISSUES OTHER THAN PRICE, IF NEEDED
RTRS - COMPAGNIE DES ALPES CDAF.PA CEO SAYS HOPES TO REACH A DEAL ON SELLING STAKE TO POTENTIAL PARTNERS THIS YEAR
BofAML EMEA Indications
SWATCH - Swiss watch export data -5.4%, cFX 8.2% & 14.28% adj for days (398)+2%
GREENCORE - Results inline & outlook reassuring. Stock has been weak (232)..+2%
RICHEMONT - Swiss export data -5.4%, cFX 8.2% & 14.28% adj for days (82.9)..+2%
SEVERN TRENT - Ahead at EBIT/EPS and £100m new cost savings announced (2473)+1%
VIVENDI - CEO says the co could float a minority stake in Universal (19.2)..+1%
PARAGON - PBT 1% ahead of BAML & bad debts £2.3m better. Income inline (476)+1%
MERLIN PROPS - We UPGRADE to Neutral, with new PO of EU11.60/ share (11)..+0.5%
BIG YELLOW - FY rev/pretax inline. Trading been small better than exp (798).u/c
ROCHE - Gets FDA approval for Actemra/Roactemra. Won't move dial today (267)u/c
ASSURA - 21% increase in investment property, 7.6% growth in EPRA NAV (59)..u/c
ASTRAZENECA - Co says diabetes drug meets primary safety objective (5130)...u/c
ELECTROCOMPONENTS - FY pretax a 1% beat but may struggle to kick on (538.5).u/c
AVEVA - FY results look bang inline with ests. Won't move the dial (2043)...u/c
VIENNA INS - Results inline with combined ratio of 96.9% v 97.3% cons (24.5)u/c
MINERS - Copper -0.35%, Iron Ore fut -1.8% & BHP OZ -1.26%, RIO OZ -0.44%.-0.5%
SHAFTESBURY - NAV +2.7% to 912p net of 24p refin effects, EPS +12.3% (957)-0.5%
HISPANIA - We DOWNGRADE to U/P. Valn analysis suggest price is too full (14)-1%
IP GROUP - Raising capital but are also bidding for Touchstone Group (140)..-2%
Investec
Euro
* EURONEXT-buys Fastmatch to expand into global FX, earnings enhancing......+2%
* KLEPIERRE-buys shopping mall in Murcia for €233m.......................+0.5%
* RICHEMONT-Swiss watch exports -5.7% April(-1.9% adj) vs +7.5% in March....-1%
* ROCHE-gets FDA approval for Actemra/RoActemra...........................+1.5%
* SWATCH-Swiss watch exports -5.7% April (-1.9% adj) vs +7.5% in March......-1%
* VIVENDI-could float Universal Music stake, no immediate plans-CEO(WSJ)....+1%
* VW-to spend €10bn on improving combustion engines efficiency.............U/C
Other news
* EMAK-Yama sold 10% stake at €1.71 (closed €1.849), now owns 65.1%
* KION-places 9.3m new shares (8.55%) at €64.83
* MEDICOVER-starts trading today, priced SEK56(range SEK49-63) mkt cap SEK7.5bn
* SRP GROUPE-Accel sells 2.835m shares (8.3%) at €25 (closed €26.20)
* VOLVO-Cap Mkts Day
UK
* ABERDEEN/S.LIFE-CMA launches Phase 1 merger inquiry(deadline 18/7).......unch
* ANGLO'S-Said to receive new bid for its New Largo project(Bloomberg).....-½%
* ASSURA-FY-NAV +7.6%,EPS +20%,strong pipeline,9.8% divi increase...........+2%
* AVEVA-FY-Inline,strong cash gener'n.Confident on strategy delivery.......unch
* AVON RUBBER-Wins contract to supply 37k FM50 respirators.No £ mentioned..+½%
* BT-Facing potential tax bill of £232m in Brazil (FT)....................-½%
* BIG YELLOW-FY-LFL occupancy +2.8%,+11% EPS,FCF +10%,current trading ahead.+1%
* CRANSWICK-FY-Rev/PBT ahead, margin light.Circa 5% EPS/PBT upgrade........+2%
* DE LA RUE-FY-EPS 7.1% ahead,debt i/l,div maintained,cotton price headwind.+2%
* EASYHOTEL-H1 small ahead Board exp's,strong like for like rev' perf'......+1%
* ELECTROCOMPS-FY-Rev/PTP beat est's, FY div +4.8%, +tive outlook..........+2%
* ENT.ONE-FY-TV/Family strong,Film flat yoy,debt rises,3% FY18/19 D/G......-2%
* GEM DIAMONDS-Q1.Recovers 98.2 ct diamond.Prod behind,hoping to catch up...+2%
* HOMESERVE-FY-Rev beats,Op prof +22%,div +20%,rapid N.Amer' expansion......+3%
* JUST EAT-STM Fidecs sells 17m shs at 600p (closed 613p)...................-1%
* PARAGON-H1.#'s in line.Buy to let pipeline & lending volumes v strong.....+2%
* PREMIER VET-H1.Reassuringly in line(post recent upodate)No chg to FY......+1%
* SCAPA GROUP-FY.Rev sml beat.Div +14%. Swiss facility closed (i/l).........+1%
* SEVERN TRENT-FY.Rev ahead of est.upgrades dividend policy (RPI +4%).......+2%
* SHAFTESBURY-H1.#'s ahead.West End properties 'resilient'..................+1%
* STOCK SPIRITS-Update.Trading broadly i/l. Poland remains an issues........-1%
* TOPPS TILES-H1.Sees weaker H2,FY PTP to be at bottom end of range.........-5%
* UDG HC-H1.Strong #'s, increases guidance for FY.........................+1-2%
Macq UK Indications:
* Anglo American AAL- Receives a bid for New Largo project in South Africa. Unch
* Gem Diamonds GEMD-Recovers 98.42 Carat Stone at Letseng Mine, will be sold in June. +2%
* Just Eat JE/-Largest shareholder STM Fidecs places 17m shs at 600p, 90 day lock up (613p close). -1%
* NEX Group NXG- Co. will unveil its year-long project to restructure post-trading division on Tuesday (FT) .+1%
* Paragon PAG-Numbers inline with est’s, buy-to-let pipeline exceeding expectations. +3%
* Severn Trent SVT- Big beat at EPS & upgrades Dividend policy. +3%
* Shaftesbury SHB- West End trading well, Net property income up 4%. +1%
* Stock Spirits STCK-Trading inline, FY Expectations remain unchanged. Unch
RBC PRE-MKT INDICATIONS
*AAL: 0% received bid for New Largo project in SA, small positive.
*BIG YELLOW: +3% trading better than expected, occupancy over 80% this summer.
*ECM: +2% FY revenue beat, EPS on track, upbeat outlook.
*ETO: +1% FY revenue beat, dividend better, growth targets on track.
*FRESNILLO: 0% on track to achieve FY'17 production guidance in AGM statement.
*GEMD: +1% Q1'17 IMS mixed, costs poor, better stone recovery & sales.
*GREENCORE: 0% H1'17 revenues in line, confident in FY'17 expectations.
*HOMESERVE: +2% FY results in line with April guidance, UK & US strong.
*JUST EAT: -2% placing of 15M shared @ 600p per share.
*PARAGON: +1% H1 numbers small miss, lending volumes exceeding expectations.
*NOSTRUM: +1% Q1'17 revenues beat, strong set of numbers.
*SEVERN TRENT: +3% FY revenue beat, dividend policy upgraded.
*SHAFTESBURY: +1% H1 net property income £43.8M, dividend better.
*SPORTS DIRECT: +1% increase stake in FINISH LINE from 9.2% to 13.6%.
*SOUND ENERGY: +1% increase in discovered resource estimate for Tendrara Discovery.
*TOPPS TILES: -1% 26 weeks ended 1st April rev -1.3%, LFL -1.9%.
*UHR/CFR: -1% Swiss Watch Exports for April -5.7% v +7.5% in March.
CSFB
Anglo Am M/P Received a bid for its New Largo project in South Africa
Bakkafrost -2-3% Q1 EBIT light and harvest guidance reduced
Clariant -1-2% Huntsman closed down 2.1%
Electrocomp M/P FY Revenues 1.5% ahead, PBT 1% ahead
Euronext +1% To Buy FastMatch for Initial $153m
Forterra M/P FY expexctations remain unchanged
Homeserve +1-2% FY revs 1.5% ahead, PBT inline, dividend better
Lem Holdings +1-2% Q4 sales 1% ahead, EBIT 2.5% ahead
Miners -0.5% Copper -0.15%, Brent -0.75%, Iron Ore -1.40%, China +0.20%
Richemont +0.5-1% Swiss watch exports -5.7% y/y on three fewer working days
Severn Trent +2% EBIT 2% ahead, increased the divi guidance
Shaftsbury M/P NAV slightly light vs CS est, commentary good
Swatch +0.5-1% Swiss watch exports -5.7% y/y on three fewer working days
TGS +2% Ups investment guidance to $260m from $220m
UCB M/P CS DOWNGRADE to NEUTRAL (CV concerns from Evenity)