(Recode.net) The U.S. will be hit worse by job automation than other major econo

The U.S. will be hit worse by job automation than other major economies
A new study from PwC estimates that 38 percent of U.S. jobs could be lost to automation in the next 15 years.

Nearly 40 percent of jobs in the U.S. may be vulnerable to replacement by robots in the next fifteen years, according to a new study by the research firm PwC.

Other major advanced economies have fewer jobs at risk. The study estimates that 30 percent of jobs in the United Kingdom could be threatened by technical advancements in automation from AI and robotics, compared to 35 percent in Germany and 21 percent in Japan.

The U.S. has a higher percentage of jobs under threat by automation because more workers in the U.S. are employed in positions that require routinized tasks, like filling out paperwork.

Jobs most at risk of being done by new technologies are in industries related to transportation, manufacturing and retail.

To arrive at these estimates, PwC broke down the types of tasks of various jobs in different industries. The researchers then applied an algorithm that took into account the “automatability” of those tasks and characteristics of the workers employed to do them.

One example of how jobs in the U.S. may be more susceptible to automation than jobs in the U.K., according to the study, is in the financial services sector. Although both countries have similarly service-dominated economies, financial services jobs in the U.S. are more retail oriented and routinized. Jobs in financial services in the U.K., however, are mostly occupied by professionals working in international banking, whose jobs are harder to automate and require more education.

More of Germany’s workforce is employed in manufacturing than the U.K., which are the types of jobs that could one day be done by robots, according to the report, accounting for its higher percentage of jobs that may potentially be automated.

In Japan, the low percentage of jobs at risk to automation compared to the other major economies examined in the study may, in part, have to do with the fact that jobs that are highly “automatable” in other countries are historically less so in Japan. Retail, for example, requires more training and skills in Japan, where workers have more management and organizing tasks, than similar jobs in the other countries studied, the report notes. (Japan also already utilizes a significant amount of automation, such as vending machines at fast-food restaurants that often handle the job of a cashier.)

The researchers point to a few policy interventions that might be explored to address the effects of broad job loss due to automation, like workforce re-training programs or universal basic income schemes.

But new policies require government action, and in the U.S. — where job loss to automation may reach 38 percent by the 2030s, according to the study — the Trump administration doesn’t seem immediately concerned.

At an event with Axios Friday morning, Treasury Secretary Steve Mnuchin said that job loss to technical advancements in AI and robotics “isn’t even on their radar screen” and that he imagines these changes are more like “50 to 100 more years away.”

>>> AdMacro: US Lending, Autos, the Road to Nowhere and EM Warning Lights

 US Lending, Autos, the Road to Nowhere and EM Warning Lights
Importance: High

 

See piece below, where tactically we expect Risk to fair badly at the start of the week, with commensurate trades, to look to end flat (or even short) fixed income 7yr+ post Thursday’s auction and quarter end.

 

Core Themes for the Week onwards:

 

  • The FOMC acted prematurely
  • Lending contracts at the fastest pace since 2008
  • The auto pile up is well underway
  • Markit PMI suggest the Trump boom euphoria maybe over
  • A white swan: US Housing
  • Political paralysis is a growing risk
  • We don’t believe in the dots
  • EM warning lights are flashing

 

 

A fortnight ago, ahead of the FOMC, we discussed why we thought that a decision to raise rates was unnecessary, even though it was extremely likely. Since then, data and other news has strengthened our view that the Fed may have acted prematurely.

Bank lending has continued to contract with commercial and industrial loans leading the way. More concerning is that the last time we saw them fall at this pace was in late 2008. Some readers have told us that they are not overly concerned by this and question our focus on this area. Our rationale is very simple. C&I loans represent lending to SMEs and they only tend to borrow to invest. In other terms, C&I lending has higher multiplier effects than large scale corporate borrowing which has been disproportionately directed towards buybacks and dividend payments. Moreover,  when bank lending as a whole is not growing it makes increasingly difficult to see nominal GDP rising at the 4% rate that the FOMC is forecasting it to. It’s also worth noting that the FOMC did not have the latest data when it made its policy decision.


Source: Federal Reserve

Bank lending aside we have for some time been flagging the swelling risk to growth of the auto sector. Automakers’ inventory is close to record highs, auto loan delinquencies have been accelerating for the past five quarters and lending standards are tightening sharply. This week’s profit warning by Ford has confirmed our fears with the company announcing that production in Q1 alone will be down 4%. Further out it sees volumes falling this year and in 2018. Where Ford goes, so does the rest of the industry. Moreover, the auto sector represents roughly 4% of GDP so falling production and the reintroduction of “traditional restructuring”, i.e. production cuts and layoffs, will act as another drag on growth.

 

Unsurprisingly, the S&P auto index is down a whopping 7% since last Friday. (Our favourite stock expression still intact)

 

It is also likely that sentiment surveys, which have been providing the bulk of the upside to economic surprise surveys will reverse, particularly the ISM manufacturing PMI. One can’t have the largest manufacturing sector in the US contracting and the PMI being unscathed.

S&P Auto Index & ISM Manufacturing PMI



A ‘Markit’ Warning:


The ISM data is looking increasingly out of line, it is the still the benchmark for most people. However, Friday’s Markit US PMI data was noticeably soft. The composite output index fell sharply to a 6-month, pre-election low with the services business activity leading the way.


“Survey respondents noted that a softer increase in new business had acted as a brake on growth in March. Reflecting this, the latest rise in new work received by service providers was only modest and the weakest for 12 months. Some firms commented on greater caution among clients, despite a supportive economic backdrop so far in 2017. Staff hiring continued to ease from the 15-month peak recorded last December. Moreover, the rate of service sector job creation in March was one of the weakest reported over the past three years.”

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The US economy shifted down a gear in March. A slowing in the pace of growth signalled by the PMI surveys for a second straight month suggests that the economy is struggling to sustain momentum. The survey readings are consistent with annualized GDP growth of 1.7% in the first quarter, down from 1.9% in the final quarter of last year. “The employment readings from the survey have also deteriorated, suggesting private sector hiring is running at a reduced rate of around 120,000 per month.”

Current non-farm payroll forecasts are few and thin but according to Bloomberg the limited consensus is around +165k.

One thing that the rates market, nor the FOMC is prepared for is for a downshift in employment growth of this magnitude.

 

A White Swan – Housing

 

While we have our concerns and believe that growth is likely to be softer than expected it is important to keep some perspective. One area that we do see continuing to support growth is housing. Activity remains at very low levels when measured against the population and it is clear to us that there is pent-up demand. The chart below of permits, starts and new home sales relative to population clearly shows that. The sector continues to recover, but activity is only at levels seen in the recessions of the 70s, 80s and 90s. (Best expressed through various REIT products, on request)

 




However, while volumes are picking up it’s worth noting that commercial bank residential real estate loans lending has also been contracting over the past couple of months and gross loans outstanding are at their lowest since September.


Source: Federal Reserve

 

Political paralysis

Returning to sentiment surveys, a significant factor driving business optimism has been the hope of major, business friendly tax reform. That seems increasingly unlikely as policy paralysis descends on Washington.

We have previously frequently voiced our doubts about the likelihood of the Trump Administration achieving any significant fiscal change and current events seem to be confirming our view.

 

The boarder tax, which was supposed to be a significant source of revenue, looks to be a dead duck. Meanwhile healthcare reform  was supposed to reduce expenditure. However, the current turmoil over the AHCA highlights how difficult that will be. Even, it the act is passed by the House, it is extremely unlikely to survive the Senate. End result? No change.

 

Against this background it is vital to consider just how fiscally restricted the Administration is in terms of being able to reallocate monies. The chart below highlights this and the increase in poverty since the great recession. Social benefits as a percentage of GDP, while slightly off the recession high, have barely fallen. It is the same with food stamps with some 17 million more people dependent on them than in 2007. And yet unemployment has plunged.


Social Benefits % GDP, Food Stamps Recipients & Unemployment

 

Leaving the fiscal considerations aside, one cannot ignore the other issues surrounding the Trump Presidency. Largely through his own actions the President is looking ever more isolated and there is the ongoing FBI investigation into the links between his campaign team and Russia, it’s unlikely on global geo-political space this may well survive. Politics is an issue that we prefer to avoid, but with bookmakers offering odds of 10/11 that Trump will not last his full term we cannot. Investors should, at the very least, incorporate a degree of planning should that happen.

 

Furthermore, it seems increasingly obvious that many on the Hill are thinking, but not voicing the same. This also seems to impacting on the President’s ability to attract nominees to the 550 posts that require Senate approval. So far, less than 10% of the positions have been confirmed. The effects on efficiency and policy implementation are obvious.

Meanwhile the issue of the debt ceiling has not been addressed yet. Given the actions of the Freedom Caucus over the AHCA getting the House to pass an increase could prove to be difficult.

 

From a market perspective we obviously see none of the above as positives for equities. In rates space we remain reasonably constructive and view a 2y note at 1.25% as a not unattractive safe haven. By default, it leaves us big doubters about the FOMC’s dots. Indeed we don’t see the fed funds target rate going significantly above 1.5%, making longer dated USTs attractive. We also believe that inflation is peaking, globally. That also means that we remain bearish on the US dollar for the rest of the year and stick with our EUR & GBP upside calls. (though recognise that the former is now a consensus view, see below and EUR$ fx skew and advise taking protective measures for French 1st round.

EM warning lights are flashing

At the beginning of this year we felt that the bearish sentiment towards EM, and China in particular, was overdone. Alongside that we also believed that the “Trump miracle” was an essentially flawed concept. Regular readers will be familiar with our trade recommendations.

More recently we have had an anything but the dollar theme, particularly liking current account surplus currencies.

 

However, in the past week a variety of factors have caused us to become a lot more cautious with regards to the whole EM complex and we now believe that wholesale risk reduction is the order of the day. Further still we increasingly regard EM equity and FX weakness strategies as offering greater optionality.

Further out, we still like EM, though we are increasingly cautious on China. However, the offsetting balance of a less hawkish than currently expected Federal Reserve should be a positive.

Risks

  • On balance we see the weakness in oil prices as an EM negative. But we also believe that much of the commodity complex is overvalued, particularly ore. Inventories are high and Chinese steel production and demand is likely to disappoint.
  • Weakness in credit, particularly in high yield in the US and Asia.
  • Tightening Chinese liquidity. 1y CNY 7 day repo NDIRS are above 3.7% while 3 month Shibor looks to have embarked on a fresh leg higher. We have seen this story many times before, and it rarely ends well.
  • China CDS has also leapt by 10% over the past week.
  • Excessive euphoria in EM equities & S&P.
  • China data is softening. Retail sales at a 15y low. PMIs softening. Excessive supply of commercial real estate. Residential sales falling. (available on request)
  • Asia political risks.


1y CNY NDRIS

 

 

3mth Shibor



EM Equities (VWO ETF, red), FX (JPM EM spot index, blue), Credit(CDX EM, green & inverted)

S&P(blue), US HY(red), Russell 2000 (green) & Transports Index (black) – catch up due

JPM EM FX spot & AUDJPY



CDX EM CDS (inverted) & EMB ETF – gap due to rate move. CDS the better short.

Trade ideas:

 

FX

 

3m USDKRW 1150/1200 Call Spread, offer ~ 0.71%, ref 1118.0 d18% (payout ratio 6.3:1)

 

  • Gamma on the lows in USD/Asia bar INR.

 

 

 

As written, medium term EURO upside is one of our favourites, recommended previously from 1.0550, however,

 

1m EURUSD 1.0650/1.0450 Put Spread, offer ~ 0.32%, ref 1.0803 d16% (payout ratio 5.8:1)

 

  • Tactical EUR downside worth including in the portfolio.
  • Risk Reversals are well priced for positive non LePen outcome, with the 1m dates higher, they include the French 1st round result, hence worth considering a low cost protection play. Additionally, EURUSD seems currently capped at the recent 1.0830 highs, even though there is an increasing divergence between EUR and US PMIs.

 

Equity

 

May17 UKX 7000 Put, offer ~ 68, ref 7264 d25%

 

May17 KOSPI2 275 Put, offer ~ 2.02, ref 282.31 d25%

 


Refreshed ideas from last week which we still hold:

 

12May2017 exp GBPUSD 1.27 Call vs 1.30 RKI 1.33 Call, offer now 0.54% ref 1.2489 d22.5% (entered at 0.40% with ref 1.2372)

 

12May2017 exp EURGBP 0.855/0.835 Put Spread, offer now ~ 0.56% ref 0.8654 (entered at 0.46% with ref 0.8688)

 

Week ahead key Data & Events:

 

Mon: Ger IFO est. higher at 111.1 and expectations at 104.4.
Thu: US Q4 GDP est. revised up at 2.0% q/q. Ger March CPI est. lower at 0.4% m/m and 1.8% y/y. AUD new home sales will be released. MXN Rates meeting est. to hike by 25bps. SA Rates meetingest. unch.

Fri: MONTH/QUARTER-END China Mfg (est. higher at 51.7) and Non-Mfg PMI released. EUR March CPI est. lower at 1.8% y/y with Core at 0.8% y/y. US PCE Core est. at 0.2% m/m and 1.7% y/y. UK Q4 GDP est. unrevised at 0.7% q/q.

Jap CPI est. at 0.3% y/y with Core at 0.1% y/y and IP est. higher at 1.2% m/m & 3.9% y/y. CAD Jan GDP est. at 0.3% m/m.

 

Supply: Germany (€4bn), Italy (est. €9.75bn) and Finland (est. €1bn).

UST $101bn across the 2yr, 5yr and 7yr sectors, and 2yr FRN. £2.5bn of the 0.5% Gilt 2022 Tues.

 

Have a successful week, thoughts on the above/general appreciated.

AdMacro TEAM

 

Tel: +44 207 290 2770

 

 

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2nd Floor

London W1S 3PE UK

 

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FT : US producers build up sales hedges as oil falls

US producers build up sales hedges as oil falls
Cash flows and capital spending protected even if crude price continues to slide

US independent oil companies have used derivatives to protect much more of their expected revenues against a fall in crude prices than they had a year ago, helping them sustain capital spending and production even if the market continues to weaken.

Filings from the leading US exploration and production companies show they have hedged the revenues from about 27 per cent of their expected 2017 oil production, according to Wood Mackenzie, the research firm. This time a year ago, they had protected just 17 per cent of their revenues for 2016.

Crude prices jumped in the final two months of last year as 13 Opec member countries and 11 non-members agreed to cut production, and US companies were quick to take advantage by locking in those levels.

In the fourth quarter of 2016, the 33 small and midsized oil companies surveyed by Wood Mackenzie put on hedges for 648,000 barrels per day of oil production, almost four times as much as they hedged in the equivalent period of 2015.

The hedges, which include swaps and collars using options, typically have strike prices of $50-$60 per barrel of benchmark Brent crude, and an average price of $54. That compares with an average strike price of $42 per barrel for new contracts in the first quarter of last year.

Anadarko Petroleum and Apache, two of the larger independent oil producers that have assets offshore as well as in US shale reserves, were the most active in the fourth quarter, accounting for about 28 per cent of the oil hedges taken on in the quarter.

Andrew McConn of Wood Mackenzie said that if oil prices continued to decline after their $5-a-barrel drop this month, companies that had hedged would be better placed to stick to their capital spending plans.

The number of rigs drilling the horizontal wells used in shale oil production has more than doubled from its low point last May, and recorded another strong increase last week, rising 13 to 543, according to Baker Hughes, the oilfield services group. Many companies have been telling investors that they plan to increase production this year.

The US government’s Energy Information Administration estimates that December was the low point in onshore oil production for the “lower 48” states of the US, and it expects that output to grow steadily through 2017.

Companies producing in the shale oil regions of the US have cut their costs sharply since the crude price slide that began in the summer of 2014.

Hess, for example, said last month that it had slashed the average cost of drilling a well in the Bakken formation of North Dakota from $7.5m in the first quarter of 2014 to $4.6m in the final quarter of 2016.

However, Wood Mackenzie still says the US industry needs oil at about $55-$60 per barrel to sustain the increase in capital spending and production.

Mr McConn identified EOG Resources and Pioneer Natural Resources as “outliers” that could continue to increase production even with prices at lower levels.

WSJ : You don’t need a fancy degree in petroleum engineering to figure out what

Oil Exporters Nearly Back to Square One on Deal
OPEC, Russia could feel pressure to cut output further now that most of the post-November gains have faded

You don’t need a fancy degree in petroleum engineering to figure out what has been weighing on oil prices—grade school math will do the trick.
U.S. benchmark prices rallied from around $47 a barrel before the late November meeting of oil exporters to more than $54 a month ago on two perceived successes: First, Saudi Arabia and Iran, rivals in the Organization of the Petroleum Exporting Countries, managed to make a compromise while others, notably Russia, pitched in. Second, compliance within OPEC is surprisingly good.
But if one subtracts the number of barrels taken off the market since the November meeting and adds back growth in output from the U.S. and elsewhere, the market is hardly being squeezed. Prices have nearly fallen back to their pre-agreement level.

Russia’s oil production is down by a little over 150,000 barrels a day since November, about half of the amount it agreed to cut by June. But it set the starting bar as high as possible, at a post-Soviet record for output. A year ago Russian output was around 150,000 barrels a day lower than today, or right around the level it has pledged to reach as part of the agreement.
Meanwhile, U.S. oil output is rising rapidly, led by shale producers that responded to last year’s price recovery. Production most recently was about 440,000 barrels a day higher than in mid-November. Meanwhile, Nigeria and Libya, OPEC members exempted from cuts, also have seen output rebound.
By the time the agreement’s renewal is debated at OPEC’s annual meeting in May, the celebratory mood may have shifted to a debate over more and deeper cuts.

>>> Pre-Market Indications

CSFB
BT -1-2% Negative Ofcom update, to pay GBP300m to comms providers
Exova R Has received a cash offer, says in talks
Faurecia M/P Agrees to buy 20% of Parrot Automotive, EV of EU100m
Generali +1 Market likely to speculate possible M&A post Zurich story
Miners -2-3% Copper -1.05%, Brent +0.20%, Iron Ore -3.45%, China UNCH
Oils UNCH US rig count +20 from 789 to 809. Brent +20bps to $50.7
South32 UNCH Announces $500m on market share buyback
Stroeer UNCH FY results in line with prelims
Teliaconera M/P May issue a hybrid bond of EU1b-2b
Thyssen M/P Steel Pioneer Thyssenkrupp Is Getting Out of Steel (DGM)
Zodiac +1% CS UPGRADE to OUTPERFORM (revised deal can be reached)
Zurich -2% Said to seek backing for up to Eur13b capital raise

Shore
BT - Openreach fined £42m by Ofcom,sets aside £300m compensation provision..-5%
EXOVA - confirms has received proposals regarding possible cash offers....+tive
YOUGOV - rev +24% £51.4m,op.profit +33% £5.7m,EPS +21%,H2 starts positively.+1%
WOOD GROUP - awarded $50m North Sea contract with Premier Oil.............+0.5%
INSPIRED ENERGY - rev +42% £21.5m,PBT +38%,procurement order book +14%.....UNCH
K3 BUSINESS TECH - H1 trading in line,profits impacted by sales slippage...UNCH
FIRSTGROUP - Welcome DFT intention to award Rail franchise to JV...........UNCH


MF
*ZURICH INS-To seek backing for up to €13b Capital raise - Sole.......-1%
*DAIMLER-Acquires 15% in Lei Shing Hong(Merc Dealer) - Press...........-0.25%
*AURUBIS-Doesn't rule out large takeovers says CEO - Sonntag...........-0.5%
*DBK-To sell ite Renewable Assets in Spain,no fins - Expansion.........-1%
*FAURECIA-May buy all of Parrot Auto by 2022,taking 20% now............-0.25%
*DANONE-Seeks to fully-own Brookside Dairy Tanzania(owns 40%)..........U/C
*BT-Openreach Unit fined £42m by the UK Regulator-high speed cable.....-2%
*RICHEMONT-Sees growth in all segments in China,HK/Macau slow..........-0.5%
*ACCOR-AccorHotels in talks to buy 40% of Potel & Chabot,sales €100m...-0.25%
*STADA-Platow-Brief says PE will bid more than €60 this week..........+2%
*LVMH-Tag Heuer CEO sees Swiss watch inds improving in 2017............+0.5%

(CS) Zodiac Aerospace : Upgrade to Outperform : Attractive Risk/ Reward

* Deal success not priced in: We think the current price for Zodiac is factoring in a 50/50 chance of a deal with Safran going through, while we continue to believe it is likely that a revised deal can be reached. We upgrade Zodiac to Outperform and change our target price to EUR27.5 per share to align it with our scenario analysis of a potential revised offer.

* Earnings revisions: We have tried to assess the three factors that have triggered Zodiac's 10th profit warning (on March 14). Part of it is probably non-recurring and nearly solved (A350 lavatories). The Seats UK issue is likely to be more persistent. The lack of rebound in the bizjet / helicopter markets requires a rebasing of expectations. As a result, we have cut organic growth in Aircraft Interiors and reduced the operating margin to account for the latest disappointment. We cut 2017/18E operating income by -26% (in line with new guidance) and reduce 2019/20E by -6% (still c.20% above consensus), with a 13.7% operating margin.

* A revised offer appears the most probable outcome: We believe that both companies still want a deal to happen. We think that 1/ Zodiac's controlling shareholders will lower their expectations enough to reflect the
unexpected deterioration of the business and satisfy Safran and 2/ that Safran will seek a price cut and new conditions which will meet Zodiac's shareholders expectations while securing enough guarantees to reassure some of its own shareholders.

* Valuation: Based on the issues discovered on March 14th, our scenario analysis indicates a potential revised offer price of EUR27.5 per share (vs EUR29.47 for the current offer). Our grey sky scenario would take the valuation to EUR18. At the current level, the market is effectively pricing in a 50/50 chance of a deal being found. We find this an attractive risk / reward and we upgrade the stock to Outperform (vs Neutral). We continue to rate Safran Neutral, as its shares are roughly in line with our TP of EUR70.

>>> What to look at today - 26th of March 2017

Risk-off sentiment is heating up as S&P500 emini futures fell nearly 20 handles, USD/JPY came in by over 100 pips, and Gold rallied over $15 from Friday close. Political risk is the primary culprit as investors worry that GOP failure to get the healthcare bill across the finish line will dampen other pro-business reform agenda items for the Trump White House, namely tax reform and fiscal spending measures. Pundits suggest that the rift between POTUS and GOP congressional leadership may still widen, considering that Trump promised to lower individual middle class taxes and has remained ambivalent on border adjustment tax, while House Speaker Ryan and Ways and Means chair Brady view tax reform as a catalyst for growth and could prioritize tax cuts for the top 1% as well as considering border adjustment as essential. Nikkei225 is the worst peforming index, dragged down by stronger JPY weighing on exports. Dollar decline against EUR is also noteworthy, with single currency hitting a 3-month high, helped by constructive result for the European Union in German regional elections. Chancellor Merkel's CDU party took 41% of the vote in Saarland, up from 35% in 2012 elections and above 29.5% for SPD and 6% for euro-skeptic AfD.

Nikkei -1.55% Hang Seng -0.45% CSI -0.14% Shanghai +0.02%

Eur$ 1.0847 CNH 6.8524 CNY 6.8723 JPY 110.29 GBP 1.2529 CHF 0.9878 RUB 56.98 WTI$ 47.44 -1.10%

S&P -0.80% EuroStoxx -0.72% FTSE -0.62% DAX -0.63% SMI -0.57%

Macro :
- U.K. Said to Eye Law to Block Online Extremist Videos: Telegraph
- Trump Says Tax Reform Up Next, Warns Obamacare Will ‘Explode’
- Italy in Talks With EU Over 2018 Deficit Flexibility: La Stampa
- Iran Sanctions 15 U.S. Companies Over Human Rights Abuses: Mehr
- U.K.’s May to Give Details of Law Changes for Brexit: Telegraphmut

Keep an eye on :
- AIR FP : China’s C919 Passes Aviation Tests; Nears First Flight: Xinhua
- AKZA NA : PPG Fails to Get Meeting With Target Akzo During Dutch Trip
- AKZA NA : Akzo Nobel investor Elliott Advisors discloses 3.25% stake
- NDA GY : Aurubis Doesn’t Rule Out Large Takeovers, Euro am Sonntag Says
- BKIA SM : Bankia Wins Iberdrola Claim Relating to 2011 IPO: Expansion
- BMED IM : Market Concern on Banca Mediolanum Exaggerated, Citi Says
- BAYN GY : Monsanto India Says Unaware of Rejection of Bayer Deal by CCI
- BLVN LN : BowLeven Holder Crown Ocean Opposes ‘Fire-Sale’ of Company
- BT/A LN : BT’s Openreach Unit Fined GBP42m by U.K. Regulator
- CO FP : Casino intends to continue process to sell CBD's 43.3% stake in Via Varejo
- MPIO PL : Caixa Montepio’s Full-Year Loss Narrowed to EU80m, Expresso Says
- DAI GY : Daimler to Acquire 15% of Lei Shing Hong: Automobilwoche
- DBK GY : BOE Asks Deutsche Bank to Draw Up Plans for Co-Op Bank: S. Times
- DBK GY : Deutsche Bank to Sell Its Renewable Assets in Spain: Expansion
- EEFT US : MoneyGram Enters Confidentiality Pact With Euronet Worldwide
- EXO LN : Exova Confirms It Has Received a Cash Offer, Says in Talks
- FB US : U.K. Tells WhatsApp to Open Up to Intelligence Services
- GLPG NA : Galapagos wants to remain as stand-alone business
- GOOG US : Google Faces Demands for Ad Discounts After YouTube: FT
- HUR LN : Hurricane Energy makes oil discovery west of Shetland Islands, Find adds to series of wells that may be biggest beneath UK waters this century - FT
- ISP IM : Intesa Board to Weigh Plan to Divest EU15b of NPLs: Sole
- IG IM : Italgas CEO says interested in Gas Natural Italian assets
- LSCC US : Lattice Semi, Canyon Refile to Allow More Discussion With Cfius
- LIN GY : Praxair Named New Best Idea Long at Hedgeye on Linde Merger View
- LSE LN : LSE Investors Seek to Keep Xavier Rolet as CEO: Sunday Telegraph
- MC FP : TAG Heuer CEO Sees Swiss Watch Industry Improving in 2017: T-A
- MGI US : MoneyGram Enters Confidentiality Pact With Euronet Worldwide
- NYR BB : Och-Ziff Mgmt Europe Expands Nyrstar Short Position to 1.24%
- OCI NA : OCI Reports 2016 Profit; Year Revenue, Adj. Ebitda Fall
- OML LN : HNA Capital to Buy 25% Stake in Old Mutual’s OMAM for $446m
- PLT IM : Lactalis Owned 89.6% of Parmalat Shares After Buy-Out Offer
- CFR VX : Richemont’s Rupert Says China Situation Has Normalized: FuW
- SIE GY : Dong, Siemens May Sell Offshore Installer A2Sea, Berlingske Says
- SKY LN : Fox-Sky Deal Said to Stay With EU After U.K. Skips Deadline
- SN/ LN : Smiths Group may consider selling uncompetitive businesses
- SNAP US : Snap Shares Slip Ahead of Analyst Quiet Period Expiration
- TSCO LN : Tesco Said to Face ‘Large’ Fine as U.K. Probe Nears End: Sky
- TSLA US : Tesla to Start Taking Solar Roof Orders in April, Musk Says
- HO FP : Thales Canada In: Thales to sell identity management business to Imprimerie Nationale Group - 24.03.2017
- TCG LN : Thomas Cook Won’t Separate Condor, CEO Says: FAZ
- TOM2 NA : TomTom Options Volume at 2015 High With Stock at 10-Week Peak
- FP FP : Total Emerges From Oil Slump in Growth Mode, company has been restructuring and cutting costs. Now it’s cherry-picking productive projects from still-struggling rivals. - Barron's
- VOW3 GY : Volkswagen’s Internal Probe by Jones Day Has Ended, Bild Reports
- VOW3 GY : Volkswagen Diesel Probe by Jones Day Continues, Company Says
- WFT US : Weatherford Venture is ‘Innovative’ Move by Schlumberger: Piper
- ZURN VX :Zurich Sets Stage for $8.6 Billion Capital Increase, Sole Says

>>> Europe : Brokers Upgrades & Downgrades - 26th of March 2017

>>> Up
*Lamprell Raised to Buy at Canaccord
*SGL Raised to Buy at Bankhaus Lampe, PT EU13
*Tryg Raised to Hold at HSBC, PT DKK121
*Tullow Raised to Neutral at Goldman, PT 200.60p
*Zodiac Aerospace Raised to Outperform at Credit Suisse

>>> Down
*Berendsen Cut to Underperform at RBC, PT 660p
*EON Cut to Hold at SocGen, PT EU7.80
*Lloyds Cut to Sell at Berenberg
*RWE Cut to Neutral at JPMorgan, PT EU13.30

>>> Initiation
*Pearson Assumed Underperform at Jefferies, PT 540p
*Snap Rated New Buy at Goldman, PT $27
*Snap Rated New Overweight at Morgan Stanley, PT $28
*Snap Rated New Outperform at RBC, PT $31
*Snap Rated New Hold at Stifel, PT $24
*Unilever Reinstated Hold at Liberum, PT 3870p

>>> Call

>>> Asian Update

Asia Mid-Session Market Update: Stocks and Dollar fall, Gold rises as investors question reflation Trump trade after healthcare reform bill failed

***Friday US markets on close: Dow -0.3%, S&P500 -0.1%, Nasdaq +0.2%***
- Best Sector in S&P500: Utilities
- Worst Sector in S&P500: Materials
- Biggest gainers: FTR +7.7%; MU +7.4%; CNC +5.2%
- Biggest losers: MLM -2.9%; FLR -2.5%; NUE -2.5%
- At the close: VIX 12.9 (-0.2pts); Treasuries: 2-yr 1.24% (-4bps), 10-yr 2.40% (-2bps), 30-yr 3.00% (-3bps)

***Politics***
- (US) On Saturday, President Trump tweeted to "Watch @JudgeJeanine on @FoxNews tonight", whose opening segment called for House Speaker Ryan to step down because of failed healthcare bill vote
- (US) Rep Ted Poe (R-TX) resigns from House Freedom Caucus because of its opposition to healthcare legislation - CNN
- (HK) Hong Kong electoral committee picked pro-China candidate Carrie Lam over John Tsang to be the next leader - financial press
- (DE) Chancellor Merkel's CDU party was victorious in Saarland state regional election with 41% of the vote vs 29.5% for SPD; Far-right AfD party received 6% - press

***Weekend US/EU Corporate Headlines***
- MGI: Enters into confidentiality agreement with Euronet Worldwide to further consider Euronet's unsolicited proposal

***Key economic data:***
- (CN) CHINA JAN-FEB INDUSTRIAL PROFITS Y/Y: 31.5% V 2.3% PRIOR
- (JP) JAPAN FEB PPI SERVICES Y/Y: 0.8% V 0.5%E (2-year high)

***Asia Session Notable Observations, Speakers and Press***
- Risk-off sentiment is heating up as S&P500 emini futures fell nearly 20 handles, USD/JPY came in by over 100 pips, and Gold rallied over $15 from Friday close. Political risk is the primary culprit as investors worry that GOP failure to get the healthcare bill across the finish line will dampen other pro-business reform agenda items for the Trump White House, namely tax reform and fiscal spending measures. Pundits suggest that the rift between POTUS and GOP congressional leadership may still widen, considering that Trump promised to lower individual middle class taxes and has remained ambivalent on border adjustment tax, while House Speaker Ryan and Ways and Means chair Brady view tax reform as a catalyst for growth and could prioritize tax cuts for the top 1% as well as considering border adjustment as essential.
- Nikkei225 is the worst peforming index, dragged down by stronger JPY weighing on exports. Dollar decline against EUR is also noteworthy, with single currency hitting a 3-month high, helped by constructive result for the European Union in German regional elections. Chancellor Merkel's CDU party took 41% of the vote in Saarland, up from 35% in 2012 elections and above 29.5% for SPD and 6% for euro-skeptic AfD.
- BOJ Summary of Opinion from the most recent meeting underscored entrenched policy stance for the central bank. Despite progress on growth and inflation, BOJ said there is still a long way to go to achieve the price stability target of 2%. Separately, PM Abe also remarked that it was too early to consider monetary stimulus exit strategy.
- In notable economic data, China Jan-Feb industrial profits rose a healthy 31.% v just 2.3% in Dec. Stats Bureau said the growth in profits was mostly due to faster growth in prices of coal, steel, and crude oil, though the overall trend is still one of recovery in the industry. Among top corporates, China's property developer Vanke posted strong profit and sales growth, but also noted some housing price cooling due to govt curbs.

China
- (CN) China State Information Center research fellow Fan Jianping: Chinese govt must target badly run financial institutions, or will only make things go from bad to worse
- (CN) PBoC Gov Zhou: monetary policy may have reached an end to the quantitative easing path - Boao Forum panel discussion
- (CN) China may start carbon trading in July - Chinese press
- (CN) China approved 10 IPOs on Friday worth CNY6.1B - Chinese press

Japan
- (JP) Japan PM Abe: Too early to consider monetary stimulus exit strategy

Australia
- (AU) According to Australia Bureau of Stats, underemployment in 15-24 year old range is at 31.5%, highest in 40 years - Australian press
- (NZ) New Zealand PM English: Signed agreement on the Belt and Road Initiative with China; FTA to start in April

Korea
- (KR) Bank of Korea (BOK) Q4 regional survey shows South Korean manufacturers are expected to spend more on capital investment this year than they did last year, although those expenditures will be conservative and mostly geared towards maintaining facilities than expansion

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -1.3%, Hang Seng -0.3%, Shanghai Composite +0.1%, ASX200 -0.2%, Kospi -0.5%
- Equity Futures: S&P500 -0.7%; Nasdaq -0.7%, Dax -0.5%, FTSE100 -0.6%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0825-1.0850 (3-month high); JPY 110.25 (4-month low) -111.05; AUD 0.7615-0.7635; NZD 0.7025-0.7050; GBP 1.2490-1.2530
- Apr Gold +0.6% at 1,256/oz; May Crude Oil -0.3% at $47.85/brl; May Copper -1.6% at $2.60/lb
- OPEC and non-OPEC producers agree to review whether oil output cuts should be extended by 6 months - press
- SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 832.6 tonnes
- (CN) PBoC skips open market operations for 2nd straight session; Bank liquidity is high
- (CN) PBOC SETS YUAN MID POINT AT 6.8701 V 6.8845 PRIOR; strongest Yuan setting since Feb 24th
- (AU) Ausatralia MoF sells A$500M in 3.0% 2047 bonds; bid-to-cover 2.65x
- (KR) South Korea sells KRW0.84T v KRW0.84T offered in 20-yr govt bonds; avg yield 2.3% v 2.215% prior

***Asia equities / Notables / movers***
Australia
- FXJ.AU Fairfax Media +2.5%; TPG Capital could make a bid for Fairfax Media's Domain business as early as this week - AFR
- SGP.AU Stockland Corp +1.9; Affirms FY17 FFO +6-7% y/y
- BHP.au -2.8%, RIO.au -2.0%, FMG.AU -2.6%; Iron ore falls over 4%

Japan
- 6502.JP Toshiba -3.5%; Largest creditors are torn over its future strategy as pressure builds for a swift Chapter 11 bankruptcy protection filing by Westinghouse - FT
- 9602.JP Toho Gas -1.1%; May report FY net profit ¥50B, +23% y/y (prior guidance ¥47B) - Nikkei
- 1801.JP Taisei +1.0%; Expected to report FY16/17 net profit of ¥100B, +30% y/y and above ¥76B prior forecast; May boost dividend or share buyback program - Nikkei

Hong Kong
- 1638.HK Kaisa Group Holdings; +62.8%; Resumes trading; Reports FY16 net loss CNY1.29B v profit CNY2.17B y/y; Rev CNY19.6B v CNY19.5B y/y
- 0842.HK Leoch International Technology +7.0%; Reports FY16 Net CNY232M v CNY106M y/y; Rev CNY6.26B v CNY4.33B y/y
- 0551.HK Yue Yuen Industrial +5.6%; Reports FY16 Net $534.6M v $390.2M y/y, Rev $8.48B v $8.43B y/y
- 1114.HK Brilliance China Automotive Holding +4.9%; Reports FY16 Net CNY3.39B v CNY3.28B y/y, Rev CNY5.13B v CNY4.86B y/y
- 3866.HK Bank of Qingdao Co Ltd +2.5%; Reports FY16 Net CNY2.09B v CNY1.81B y/y; Rev CNY6.0B v CNY5.0B y/y
- 2202.HK China Vanke -3.3%; Reports FY16 Net CNY21.0B v CNY18.1B y/y, Rev CNY228.9B v CNY184.3B y/y
- 1072.HK Dongfang Electric Corp -2.4%; Reports FY16 net loss CNY1.8B v profit CNY439M y/y; Rev CNY33.3B v CNY36.0B y/y
- 0816.HK Huadian Fuxin Energy Corp -4.8%; Reports FY16 Net CNY2.0B v CNY1.9B y/y, Rev CNY15.9B v CNY15.4B y/y
- 819.HK Tianneng Power International Limited -9.0%; Reports FY16 Net CNY905.5M v CNY627.8M y/y; Rev CNY21.5B v CNY17.8B y/y
- 951.HK Chaowei Power Holdings Limited -9.1%; Reports FY16 Net CNY619M v CNY488M y/y; Rev CNY21.5B v CNY18.9B y/y
- 3900.HK Greentown China Holdings -9.9%; Reports FY16 Net CNY1.92B v CNY0.81B y/y; Rev CNY28.9B v CNY26.0B y/y

>>> Casino intends to continue process to sell CBD's 43.3% stake in Via Varejo -

Casino intends to continue process to sell CBD's 43.3% stake in Via Varejo

French company Casino will continue the sale process of CBD’s 43.3% stake in Via Varejo, the blog from Brazilian journalist Lauro Jardim reported without citing any source. The blog is published in O Globo. The process is said to have been suspended on 24 March, after no offers were presented, as reported.
Casino is the controlling shareholder of CBD, as reported. Via Varejo and CBD are two Brazil-based retailers.
Last week, the Klein family informed Casino that it will participate in the sale process in partnership with two undisclosed funds, the brief Portuguese-language blogpost noted.
The Klein family is a shareholder of Via Varejo with 27.3% stake, as reported.
Brazilian daily O Estado de Sao Paulo has also reported that Casino and CBD still have the intention to sell the stake. However, there is no timeframe of when the new period to present offers will be opened, the item added without citing any source. The last period to present offers expired on 24 March, the item added.
Advent, Alibaba, Carlyle, Steinhoff, Lojas Americanas in partnership with 3G Capital, and Best Buy have been mentioned as potential interested bidders for the stake, as reported.
Via Varejo has a market value of nearly BRL 4bn (USD 1.3bn), as reported.