>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • LOGI +13.6%, STX +12.9%, TEL +4.2%, MKTX +4.2%, ROK +4.2%, CREE +3.9%, USAP +3.3%, NAP +3.3%, SAN +2.7%, AA +2.6%, NVS +2%
  • UCBI +1.9%, ISRG +1.3%, ISRG +1.3%, (also enters into $2.0 bln accelerated share repurchase program), RO; +1.2%,NSC +1.2%, HBAN +1.1%
  • OKSB +0.9%, BA +0.8%, TXN +0.7%, (also promotes Brian Crutcher to COO)
M&A news:
  • ACAT +41.1% (to be acquired by Textron (TXT) for $18.50/share in cash)
  • NEWR +22.4% (peer of AppDynamics (APPD); following CSCO acquisition of APPD)
  • BOBE +12.8% (Bob Evans to sell Bob Evans Restaurants, will acquire Pineland Farms Potato Company; reaffirms FY17 guidance)
  • HK +4.1% (confirms purchase/sale agreement to enter Southern Delaware Basin for $705 mln; offers prelim FY17 guidance)
  • CXO +2.8% (Concho Resources confirms sale of 100% of their respective ownership interests of Alpha Holding Company to Plains All American Pipeline for a combined total of $1.215 billion)
  • CSCO +0.5% (AppDynamics to be acquired by Cisco (CSCO) for approximately $3.7 bln in cash and assumed equity awards)
Select EU financial related names showing strength following SAN earnings:
  • BBVA +3.3%, DB +2.8%, CS +2.3%, ING +1.9%, BCS +1.7%, PUK +1.6%, LYG +1.5%, HSBC +1.4%, .
Select STX/industry peers showing strength after STX earnings:
  • WDC +5.8%, AMD +2.9%, MU +2%, NVDA +1.1%
Other news:
  • CDTI +23.7% (partnered with DENSO to provide its technology to the North American heavy-duty market )
  • TEAR +21.5% (receives approval for the TearLab Osmolarity System from the Comisión Federal para la Protección contra Riesgos Sanitarios in Mexico)
  • XXIA +7.3% (in discussions to be acquired by Keysight Technologies (KEYS), according to Reuters),
  • AHP +3.4% (ticking higher; enters into an amended and restated advisory agreement with Ashford; refinances three mortgage loans with existing outstanding balances totaling approximately $334 million; increases quarterly dividend)
  • QTM +3.3% (following STX earnings/guidance)
  • BLDP +3% (signed an initial Equipment Sales Agreement with Zhuhai Yinlong Energy Group for 10 FCveloCity-MD 30-kilowatt fuel cell engines),
  • ACX +2.7% (CEMEX S.A. and Grupo Cementos de Chihuahua announce offering to sell up to 23% Stake in Grupo Cementos de Chihuahua)
  • TGI +2.4% (Triumph Group will replace LogMeIn in the S&P SmallCap 600; awarded $52 mln contract from Rolls Royce for Trent XWB engine components)
  • MMP +2.4% (increases quarterly distribution to $0.855/unit from $0.8375/unit)
  • RAD +2.3% (slightly rebounding following late volatility y'day on Walgreens merger concerns)
  • GNW +1.7% ( to report Q4 results on February 7; does not plan to host an earnings call due to the pending sale to China Oceanwide)
  • PTEN +1.5% (commences an underwritten public offering of 14,800,000 shares of common stock )
  • ALV +1.5% (continued strength - speculation y'day co may bid on Takata)
  • RH +1.2% (Bioverativ will replace RH in the S&P MidCap 400, and RH will replace Ciber in the S&P SmallCap 600)
Analyst comments:
  • JBLU +2.8% (upgraded to Overweight from Neutral at JP Morgan)
  • ABB +2.2% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • ONVO +1.7% (initiated with a Outperform at Raymond James)
  • FTI +1.4% (initiated with a Outperform at Credit Suisse)
  • BT +0.9% (upgraded to Neutral from Underperform at Macquarie )
  • PSXP +0.8% (upgraded to Buy from Neutral at Citigroup)

(ZH) Chinese 10Y Bond Yields Set For Biggest Monthly Jump Since 2010

Chinese 10Y Bond Yields Set For Biggest Monthly Jump Since 2010

China's government bond prices and sovereign bond futures fell sharply on Wednesday as benchmark 10-year government bond futures fell 0.8% to 94.62, as yields on China 10-year bonds rising 6bps to 3.355%,
extending January's climb to 33bps, the biggest monthly increase since
since October 2010, following a surprise move by the central bank to raise interest rates on a type of special emergency liquidity loans to certain financial institutions.
In a surprise announcement late Tuesday, the People's Bank of China said it raised the interest rate on loans to 22 financial institutions via the medium-term lending facility, a new liquidity tool in place since 2014. While the central bank effectively injected another 245.5 billion yuan into markets, it also raised the interest rates on the two sets of loans, which are six months and one year in duration, by 10 basis points to 3.1% and 2.95% respectively.
As the WSJ adds, the move was widely viewed by investors as an effective rate increase intended to aid Beijing's efforts to rein in debt-fueled speculative investments, and according to Goldman, the modest rate hike was a telegraphing of an implicit form of tightening. Still, as the chart below shows it is not exactly clear how making a liquidity facility, which has a record notional outstanding, fractionally more expensive is tightening.
According to Reuters, this was the PBOC's first increase in the MLF interest rate since its debuted the liquidity tool in 2014, and first time it has raised one of its policy interest rates since July 2011. The last time the PBOC adjusted interest rates on MLF loans was in February 2016, when it lowered them.


One trader at a Chinese bank in Shanghai reckoned the rate increase was "bad news" because it raised the cost of funding at a time of seasonally tight liquidity heading into the week-long New Year holiday.

"The MLF loans meet market demand for funds, but the cost is going higher... The central bank is still aiming to reduce leverage at financial institutions," she said.

Economists at ANZ said the PBOC will likely maintain generally supportive liquidity conditions, but at higher rates as it looks to prevent potential financial risks. Earlier on Tuesday, some Chinese media had reported credit growth could surge again in January, after higher-than-expected bank lending growth in December.

"With MLF rates moving higher, the market may view this as a signal that either the PBOC wants to have a steeper curve, or a higher curve across the tenors," ANZ said in a note after the rise increase.
While it is unclear if a 0.1% increase in what is effectively an emergency liquidity loan is equivalent to monetary tightening, for now China's traders are selling first and asking questions later. Should the selloff in the bond sector accelerate, it could have significant implications across all Chinese risk assets, and potentially lead to a slowing in China's debt creation machine which for the past two years has been the primary driver behind the global growth impulse.

WSJ : J.P. Morgan to Become Custodian for $1 Trillion in BlackRock Assets

J.P. Morgan to Become Custodian for $1 Trillion in BlackRock Assets
Bank wins chunk of BlackRock Custodial Asset business from State Street

J.P. Morgan Chase & Co. struck a deal to be the custodian for more than $1 trillion of BlackRock Inc.’s assets, poaching the business from State Street Corp., a person familiar with the matter said.

J.P. Morgan will spend around two years bringing the assets into its existing $20.5 trillion platform, this person said. That may elevate the New York bank to the No. 2 player in the business, second to Bank of New York Mellon Corp., which has about $28 trillion assets under custody, according to recent company filings.

State Street’s assets under custody were $21.7 trillion as of Wednesday when it reported fourth-quarter earnings, though it is unclear if the change was reflected in the most recent quarterly numbers. State Street noted in an earnings slide presentation Wednesday that BlackRock had moved some of its assets “as a result of a decision to diversify service providers,” but remains a client of the bank.


J.P. Morgan is likely to garner roughly tens of millions of dollars in annual fees in one of the largest-ever custody deals. The sticky business is becoming rare in banking where firms have been cutting costs to boost revenues in a low-interest-rate environment. These types of contracts usually don’t come up for bid for years.

The custodian business, where banks hold, administer and provide evaluations of money for money managers and other clients, is one J.P. Morgan has been growing. In the bank’s annual Investor Day presentation, corporate and investment bank chief Daniel Pinto said the custody and fund services business is among the most important—and one he has personally spent a lot of time on.

And it helps the bank with its client relationships. There is a 95% overlap its investment banking and market businesses, Mr. Pinto said during the February presentation. The bank’s assets under custody have grown 18% in the past five years, he said.

“It’s a very good, very stable earning business,” Mr. Pinto said at that time.

>>> Freeport-McMoRan misses by $0.08, reports revs in-line; provides update on d

--> -2.88% 1mil shares traded
Freeport-McMoRan misses by $0.08, reports revs in-line; provides update on debt reduction plan, debt cut by $8.4 bln in 2016
  • Reports Q4 (Dec) earnings of $0.25 per share, excluding non-recurring items, $0.08 worse than the Capital IQ Consensus of $0.33; revenues rose 24.5% year/year to $4.38 bln vs the $4.34 bln Capital IQ Consensus.
  • During Q4, co completed $5.2 bln in asset sale transactions, including the sale of its interest in TF Holdings, through which FCX held an interest in the Tenke mine, and the sales of the Deepwater Gulf of Mexico and onshore California oil and gas properties. During 2016, FCX completed its asset divestment program, which generated $6.6 billion in aggregate proceeds.
  • During 2016, FCX took actions to restore its balance sheet strength through a combination of asset sale transactions, cash flow from operations and capital market transactions. During the year, FCX completed $6.6 bln in asset sale transactions and $1.5 billion in ATM sales of its common stock. Consolidated debt, net of cash, was reduced by $8.4 bln during the year.
  • At year end, consolidated debt totaled $16.0 billion and consolidated cash totaled $4.2 billion, compared with consolidated debt of $20.3 billion and consolidated cash of $177 million at December 31, 2015. FCX had no borrowings and $3.5 billion available under its $3.5 billion revolving credit facility at year-end 2016.
  • Capital expenditures totaled $504 mln in Q4 (including $405 mln for mining operations). For all of 2016, it was $2.8 bln (including $1.6 bln for mining operations). Cap-ex for 2017 is expected to approximate $1.8 bln.

FT : Intesa Sanpaolo/Generali: capital buffa Premium

Intesa Sanpaolo/Generali: capital buffa Premium
Combining the bank and the insurer would increase risks on several fronts

In the Italian tradition of opera buffa, a heart-rending farce normally has a happy ending. Shareholders in Italian banks, who have suffered enough tragicomedy, may hope that Intesa Sanpaolo’s disclosure that it is mulling “possible combinations” with insurer Generali, leads to a just such a jolly conclusion. ISP’s share price, down 8 per cent this week, suggests otherwise.

Italy’s second-biggest bank by assets has been relatively insulated from the tumult that has rocked the wider sector. ISP’s core capital ratios are strong. Its non-performing loans are low. And almost alone among peers, rising profits enabled managers to double its dividend last year and pledge a generous increase this year.

Thanks to cross-shareholding rules, ISP would have to make an offer for Generali as a whole rather than building up a stake. Given Generali’s market capitalisation of €24.5bn and ISP’s estimated 2016 net income of €3.2bn, a bid would have to be predominantly in shares.

There are some attractions. Faced with a long period of low interest rates and subdued demand for credit, ISP wants to boost its share of non-interest income such as commissions and fees (presently 42 per cent of operating income) from insurance and wealth management. Banks with a higher proportion of such recurring income — like wealth manager UBS — tend to trade at higher valuations. Acquiring Generali would roughly double ISP’s assets under management. The lender could also leverage its large branch network in Italy to sell insurance (currently a modest 15 per cent of pre-tax profits) and wealth products.

The risks are equally obvious. The first is regulatory. Combining their shares of life premiums would give them a third of the Italian market. Second is credit risk. ISP has €90bn in Italian government bond exposure; Generali has €69bn. Together, they would account for nearly 8 per cent of outstanding Italian government debt. Thirdly, their combined asset bases would almost certainly merit a “globally systemically important bank” designation, raising capital charges and putting payouts under pressure. Lastly, ISP is currently domestic focused bank. Combined, it would derive 42 per cent of operating profit from outside Italy.

In the past, European bankers were rewarded for ambition. These days, investors are more interested in avoiding tragedy.

>>> Early premarket gappers


Early premarket gappers

Gapping up: ACAT +41.2%, CDTI +23.7%, BOBE +15.7%, LOGI +13.3%, STX +11.4%, WDC +6%, USAP +5%, HK +4.7%, AA +4.1%, FCX +3.5%, AHP +3.4%, QTM +3.3%, CXO +2.8%, SAN +2.7%, MU +2.5%, BBVA +2.5%, AMD +2.5%, CREE +2.5%, TGI +2.4%, CS +2.4%, DB +2.4%, GNW +2.3%, PTEN +2.2%, BLDP +2%, MMP +1.9%, ABB +1.9%, ING +1.9%, UCBI +1.9%, PUK +1.8%, ONVO +1.7%, GM +1.6%, BCS +1.6%, NVS +1.6%, LYG +1.5%, UTX +1.5%, RAD +1.4%, CHK +1.3%, SBGL +1.3%, ISRG +1.3%, RH +1.2%, HSBC +1.2%, ALV +1.2%, CX +1.1%, NVDA +1.1%, GFI +1.1%, SDRL +1%, QGEN +0.9%, BABA +0.8%, MKC +0.7%, ROK +0.7%, TXN +0.5%

Gapping down: HZN -9%, FMBI -6.3%, NCIT -5.9%, NAK -5.7%, MRCY -4.6%, NEWT -4.6%, VOD -2.6%, CA -2.6%, HA -2.5%, VALE -2.3%, MIK -2.2%, AKS -2.1%, RIO -1.5%, OKSB -1.5%, AGN -1.3%, BBL -1.3%, AUY -1.2%, YRCW -1.2%, CLF -1%, SYT -1%, SSI -0.9%, SLV -0.9%, BHP -0.9%, COF -0.9%, DFS -0.9%, TXT -0.8%, ASYS -0.7%, GOLD -0.7%, STLD -0.7%, SC -0.7%, RES -0.7%, ABX -0.6%, HOPE -0.6%, BKU -0.6%, PAA -0.5%, CNI -0.5%

NY Post : Walgreens, Rite Aid to go on with merger if not approved by end of wee

Walgreens, Rite Aid to go on with merger if not approved by end of week



Walgreens and Rite Aid do not expect to terminate their merger agreement Jan. 27 if they fail to get regulatory approval by then, The Post has learned.

“I assume that is correct,” a source with direct knowledge of the situation said on Tuesday.

Back in October 2015, Walgreen reached a $9-a-share deal to buy Rite Aid and has been working for 15 months to get the controversial merger cleared.

Federal Trade Commission Chair Edith Ramirez was expected to approve the deal in the waning days of the Obama administration after Walgreen — led by CEO Stefano Pessina — reached an agreement to sell 865 stores to drugstore chain Fred’s Inc. to ease regulatory concerns.

Still, there have been recent FTC concerns about whether Fred’s has the financial capacity to buy the divested stores, sources said.

Rite Aid’s shares closed up 5 cents, at $6.95, well below the offer price. Its shares could fall below $4 if the deal is blocked, sources said.

>>> Novartis exploring options for Alcon, including separation

Novartis exploring options for Alcon, including separation
25 JAN 2017
Swiss pharma group Novartis [VTX:NOVN] announced on Wednesday that it is considering options for Alcon, its contact lens care company.
In its 2016 financial results, Novartis said the review would consider a range of alternatives, including retaining the business or a separation by way of a spin-off or an initial public offering.
Novartis reported 2016 revenues of USD 48.5bn and core operating income of USD 13bn. Alcon Division net sales were USD 5.8bn.
An excerpt from the announcement follows:
Novartis is considering options for the Alcon Division. The review will explore all options, ranging from retaining the business to separation via a capital markets transaction (e.g. IPO or spin-off), in order to determine how to best maximize value for our shareholders. The review will be conducted during the course of 2017 and in a manner such that Alcon Division associates can fully focus on the unit’s return to growth.
The Alcon Division comprises leading surgical and vision care (contact lens and lens care solution) businesses, both of which are leaders in their respective segments. Novartis believes that the Alcon Division is a highly attractive business, with a strong customer base and led by a strong management team. Novartis is exploring whether there are additional value-maximizing opportunities for the Alcon Division as an independent company or otherwise.
The ophthalmic pharmaceutical portfolio is now fully integrated into our Innovative Medicines Division and will not be part of the review announced today.
Novartis expects to provide a status update on the review towards the end of 2017.