>>> Europe : Brokers Upgrades & Downgrades - 22nd of December 20

>>> Up
*Astaldi Raised to Neutral at MedioBanca, PT EU4.90
*ITV Raised to Outperform at Macquarie
*Nets Raised to Buy at Nordea Securities, PT DKK140
*Outotec Raised to Buy at SEB Equities, PT EU6
*Yara Raised to Outperform at BMO

>>> Down
*Colruyt Cut to Reduce at AlphaValue
*Mediaset Cut to Hold at Berenberg, PT EU4.20
*Sky Cut to Neutral at Credit Suisse, PT 1075p

>>> PT Change


>>> Initiation


>>> Call

>>> US After Hours MU +10%, RHT -13% on earnings

 MU +10%, RHT -13% on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MU +9.6% (Advanced Micro (AMD) higher in sympathy)

Companies trading higher in after hours in reaction to news: PBMD +42.4% (Announced interim data from the AIPAC Phase IIb clinical trial for IMP321 in metastatic breast cancer; initial data confirms previous trial results showing IMP321 is safe and well tolerated ), XOMA +13.5% (Detailed several corporate actions to further streamline its operations; CEO replaced, license agreements signed that have the potential to generate up to $22 mln in revenues, workforce reduced), CVRR +9.9% (Following report that President-Elect Donald Trump is said to be near naming Carl Icahn as a special advisor on overhauling federal regulations), IPDN +9.3% (Cosmic Forward affirms 54.7% active stake, submits letter to the company setting forth a non-binding proposal to acquire 312,500 newly-issued Shares at $9.60/share), CVI +7.3% (Following report that President-Elect Donald Trump is said to be near naming Carl Icahn as a special advisor on overhauling federal regulations)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: RHT -12.9% (Citrix (CTXS) lower in sympathy), MLHR -6.3%, CAMP -5.9%, BBBY -2%

Companies trading lower in after hours in reaction to news: OVAS -32.7% (Provided business update, CEO & COO to step down, company to reduce workforce by 30%), ALXN -1% (Announced top-line results from phase 2/3 protect study of Eculizumab for the prevention of delayed graft function after kidney transplantation; primary endpoint did not reach statistical significance)

>>> Asian Update

Asia Mid-Session Market Update: NZ GDP comes in better than expected; South Korea warns of weaker growth in 2017; Japan passes FY17/18 budget

***US Session Highlights***
- (US) EIA Crude Oil Stockpiles released today showed an unexpected increase of 2.256M barrels, compared to a decline last month of 2.563M barrels and expected figure of -2.515M. WTI crude fell by 1.4% on the day after the number was released.
- (IT) Banca Monte dei Paschi shares fell to record low on fears the institution could fail to raise €5 billion in new shares to save the oldest bank in the world. Markets have previously been concerned on the fall-out from a bank failure and bailout, whereas today's 10-year BTP yield declined as Italian bonds continued to rally.
- US Existing Home Sales reaches levels of 2007 at 5.61 million, compared to last month's 5.57 million. That sales figure was equivalent to an increase of 0.7% M/M and up 15% from year earlier. It is likely that as increasing interest rates make mortgages more expensive and houses begin to be more scarce, sales volumes begin to decrease in 2017.
- Boeing CEO Muilenberg tells Trump that the Air Force One airplanes are to cost less than $4 billion. Muilenberg gave his personal commitment on behalf of Boeing to keep costs under that number.

***US markets on close: Dow -0.16%, S&P500 -0.25%, Nasdaq -0.23%***
- Best Sector in S&P500: Energy
- Worst Sector in S&P500: Real Estate
- Biggest gainers: SWN 5.8%; MNST 4.2%; CNC 3.1%; MHK +1.8%; COG 2.8%; HAL +3.1%
- Biggest losers: BXP -2.1%, KIM -2.2%; CELG -2.3%; FSLR -3.7%; CAN -5%; VRTX -5%; TRIP -5.1%
- At the close: VIX 11.26 (-0.19pts); Treasuries: 2-yr 1.19% (-0.03bps), 10-yr 2.54% (-0.02bps), 30-yr 3.12% (-0.03bps)

***US movers afterhours***
- RHT: Reports Q3 $0.61 v $0.58e, R$615.3M v $618Me; CFO to step down; -12.8% after hours
- MU: Reports Q1 $0.32 v $0.28e, R$3.97B v $3.78Be; +7.7% afterhours
- OVAS: Announces Business Update; To undergo corporate restructuring and cut workforce by 30%; -0.7% after hours
- MLHR: Reports Q2 $0.54 v $0.55e, R$577M v $594Me; -8.5% after hours
- BBBY: Reports Q3 $0.85 v $1.00e, R$2.96B v $3.02Be; -4.4% after hours
- CAMP: Reports Q3 $0.21 v $0.26e, R$83.4M v $83.5Me; -4.6% after hours

***Asia Key economic data:***
- (NZ) NEW ZEALAND Q3 GDP Q/Q: 1.1% V 0.8%E; Y/Y: 3.5% V 3.6%E
- (NZ) NEW ZEALAND Q3 CURRENT ACCOUNT BALANCE (NZ$): -4.89B V -4.89BE
- (UK) NOV GFK CONSUMER CONFIDENCE: -7 V -8E
- (NZ) New Zealand Nov M3 Money Supply y/y: 5.9% v 7.1% prior

***Asia Session Notable Observations, Speakers and Press***
- Asian markets were widely weaker in quiet pre-holiday trade, volumes remain thin and currencies range bound.
- Icahn confirms he will serve as a special advisor to President Trump and Trump names China critic Peter Navarro chief of newly formed White House Trade Council - a move seen that will put China/USD trade relations on ice.
- New Zealand saw the Kiwi rise 25pips to 0.6917 after Q3 GDP q/q came in at 1.1%, higher than analysts' expectations; y/y also higher than expected.
- McDonald's (MCD) said to sell its Taiwan units to Ambassador Hotel's Lee for a reported $300M and China units expected to be sold to CITIC with a deal announced after the new year.
- (JP) Japan Cabinet approves FY17/18 budget spending plan of ¥97.5T (record high) v ¥96.7T in current year. Also reduced JGB issuance plans to ¥154T from the current ¥162T. They also cut new JGB issuance budget seen at ¥34.37T v ¥34.43T in current year.
- (KR) Bank of Korea Gov Lee: Economy risks slowing down in 2017 lower than projected 2.8%; Govt needs to step up fiscal stimulus to rev up growth; planning to keep its own policy accommodative - parliament comments

China:
- (CN) PBoC said to have ordered cash injection yesterday to suppress sharp declines in bond markets - financial press
- (CN) Said that China Insurance Regulatory Commission (CIRC) is making more difficult for insurers to get new licenses as it seeks to reduce risks resulting from the aggressive business and investment practices of some players
- (CN) China to focus on reducing asset bubble risks in 2017 including limiting speculative activity in the real estate market, high corporate leverage and local govt debt - Chinese press

Japan:
- (JP) Under new voluntary rules after pressure from Govt, Japan automakers will pay subcontractors in cash as a rule and refrain from demanding unwarranted price cuts - Nikkei
- (JP) Based on the BOJ's ~¥10.7T in ETFs and the GPIF's disclosed equity positions the BOJ and Govt Pension Investment Fund account for one of the top 10% shareholders in 96% of listed companies - Nikkei

Australia/New Zealand:
- Focus will be on Cyclone Yyette, which is expected to make landfall this weekend in Western Australia's Pilbara iron ore region, this could impact shipping operations of the big miners.
- (NZ) New Zealand Fin Min Joyce: Will focus on fundamentals to boost growth; starting to see the benefits of a clear and stable focus on economic fundamentals
- (AU) According to data from IBISWorld Australia Dec retail sales are tracking -0.4% - press

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.3%, Hang Seng -0.8%, Shanghai Composite -0.2%, ASX200 +0.6%, Kospi -0.1%
- Equity Futures: S&P500 -0.2%; Nasdaq -0.1%, Dax -0.1%, FTSE100 flat

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0423-1.0448; JPY 117.40-117.71; AUD 0.7226-0.7257; NZD 0.6894-0.6923
- Feb Gold -0.1% at 1,132/oz; Jan Crude Oil +0.3% at $52.64/brl; Mar Copper -0.2% at $2.49/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 3.6 tonnes to 824.5 tonnes; 23rd straight decline; Lowest since Apr 29th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9435 V 6.9489 PRIOR
- (CN) PBOC to inject CNY100B in 7-day reverse repos, CNY70B in 14-day reverse repos and CNY50B in 28-day reverse repos
- (CN) China 10-yr bond yield falls 9.24bps to 3.28%

***Asia equities / Notables / movers by sector***
- Consumer discretionary: Bega Cheese BGA.AU +7.3% (continues recovering from losses); Seven West SWM.AU -0.3% (plans further inquiry re: CEO); Olympus Corp 7733.JP -5.0%; Cabcharge Australia CAB.AU -2.6% (Moringstar cuts to sell); PMP Ltd PMP.AU -15% (ACCC concerned about merger with IMG)
- Financials: Chiba Bank 8331.JP -1.9% (Credit Suisse cuts to underperform); Resona Holdings 8308.JP -2.4% (JPMorgan cuts to underweight)
- Industrials: Nissan Motor Co 7201.JP +1.1% (Nov result); NHK Spring Co. 5991.JP +5.0% (Morgan Stanley raised to equal weight); Kawasaki Kisen Kaisha 9107.JP -3.2%(reports on container tie up)
- Technology: LG Display Co 034220.KR +1.6% (Shinhan top picks); Reffind RFN.AU -7.7% (to cut cash burn in FY17); Oracle Corp Japan 4716.JP +3.0% (H1 result)
- Materials: Heemskirk Consolidated HSK.AU +50.0% (receives proposal)
- Energy: Caltex Australia CTX.AU -1.9% (acquisition); China Singyes Solar Technologies Holdings 750.HK +4.3% (contract award)
- Healthcare: Primary Health PRY.AU +0.9% (Bateman family may make bid);Ono Pharmaceutical Co 4528.JP -2.6% (cuts guidance)

FT : Johnson & Johnson and Actelion disclose ‘exclusive’ deal talks

Johnson & Johnson and Actelion disclose ‘exclusive’ deal talks
Drug groups renew negotiations one week after discussions broke down

Johnson & Johnson has entered exclusive talks over a deal with Actelion, the Swiss biotech group, just a week after negotiations between the two drugmakers abruptly broke down.

J&J, the world’s largest healthcare company, and Actelion said in separate statements that they had rekindled discussions surrounding a potential transaction but cautioned that there was no certainty that a deal would be reached.

Actelion, Europe’s biggest biotech company, with a market value of $22.5bn, has long been coveted by larger pharma groups for its record of discovering lucrative treatments for rare diseases, such as pulmonary arterial hypertension.

The company’s top-selling drug, Tracleer, generated $238m in revenues in the third quarter, while two other drugs, Opsumit and Uptravi, have been tipped as “blockbusters” by analysts, meaning that they are expected to generate sales in excess of $1bn a year.

Just last week, talks between the two companies ended abruptly after a disagreement over price that prompted J&J to walk away from negotiations.

At that point, J&J was discussing an all-cash acquisition that would value Actelion at about $250 a share, two people briefed on the talks said. That would give the Swiss company’s equity a value of about $27bn.

Jean-Paul Clozel, the Actelion chief executive who founded the company in 1997, would prefer a complex deal that would leave him with some degree of control over some early-stage drugs in Actelion’s pipeline, several people briefed on his thinking said.

When talks with J&J broke down, Actelion continued to discuss a possible transaction with Sanofi, the French drugmaker, fuelling speculation among investors that those two companies were nearing an agreement.

But the new statements from J&J and Actelion on Wednesday, which described the talks as “exclusive”, suggested that the Sanofi talks had failed.

Sanofi, which earlier this year lost out to Pfizer in the $14bn race to acquire Medivation, a US biotech company, declined to comment.

“It’s not like J&J walked out because they didn’t like [the company],” said one person briefed on the negotiations. “It was purely about the price.”

The person said that Alex Gorsky, chief executive of J&J, would remain disciplined on the price he was willing to pay, citing how the company lost out in the hotly contested auction of cancer specialist Pharmacyclics in 2015.

Several of J&J’s US have rivals declined to participate in any Actelion sale, preferring to delay investment decisions until Donald Trump becomes US president and proposes a much-anticipated plan to cut corporate taxes.

Such a plan could allow US companies to bring home tens of billions of dollars of cash trapped overseas, providing them with the firepower to pursue deals in the US, which is home to a much larger number of biotech groups.

However, J&J is under significant pressure to build up its pipeline quickly because its best-selling drug, the arthritis injection Remicade, now faces tough competition in the US. Remicade generated $5.3bn of sales in the first nine months of this year.

Last month, Pfizer launched a “biosimilar” version of the medicine, which is deemed by regulators to be as effective as the original product.

Zurich-traded shares in Actelion had finished 6.4 per cent higher at SFr215, before the disclosure of the renewed J&J talks. Shares in J&J were slightly lower at $115.5 in late New York trade, giving it a market value of $313bn.

Reuters - Brazilian firms to pay record $3.5 billion penalty in corruption case

Brazilian firms to pay record $3.5 billion penalty in corruption case

Brazil-based construction colossus Odebrecht SA and affiliated petrochemical company Braskem SA agreed on Wednesday to pay at least $3.5 billion, the largest penalty ever in a foreign bribery case, to resolve international charges involving payoffs to Brazil's state oil company and others.

Odebrecht and Braskem pleaded guilty in U.S. federal court in Brooklyn to conspiring to violate a U.S. foreign bribery law after an investigation involving political kickbacks at Brazil's Petrobras unearthed the bribery scheme.

The huge penalty was negotiated as part of a broad settlement with U.S., Brazilian and Swiss authorities.


Some of the hundreds of millions of dollars used in bribes to secure lucrative business deals flowed through the American banking system and some of the schemes were planned in the United States, enabling U.S. authorities to claim jurisdiction in the case.

Odebrecht is Latin America's biggest engineering firm. Braskem, the region's biggest petrochemical producer, is jointly owned by Odebrecht and Petrobras.

Their guilty pleas were the first in the United States following a nearly three-year investigation in Brazil dubbed "Operation Car Wash" into corruption at Petrobras, which has led to dozens of arrests and political upheaval in Brazil.

The total fines and penalties to be paid out by the companies exceeded a 2008 agreement in which German engineering company Siemens paid $1.6 billion to U.S. and European authorities for paying bribes to win government contracts.

Odebrecht and Braskem were charged with conspiring to violate the U.S. Foreign Corrupt Practices Act, which is aimed at deterring companies from bribing officials overseas.

"Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit - a 'Department of Bribery,' so to speak - that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents," U.S. Deputy Assistant Attorney General Suh said in a statement.

From 2001 to 2016, Odebrecht paid approximately $788 million in bribes in association with 100 projects in 12 countries, including Brazil, Argentina, Colombia, Mexico and Venezuela, according to the U.S. charging papers.

The companies hid the bribes through carefully disguised payments routed through a network of shell companies as well as suitcases of cash left at preset locations, Suh said.

The U.S. Justice Department said the penalty to be paid by the two companies amounted to at least $3.5 billion, including $2.6 billion from Odebrecht and $957 million from Braskem. Brazilian authorities gave a lower figure for the overall deal but did not explain the discrepancy.

U.S. officials said most of the money would go to Brazilian authorities.

Both companies also agreed to continue to cooperate with authorities, implement compliance improvements and become subject to oversight by external monitors.

Odebrecht's former CEO Marcelo Odebrecht is already serving a 19-year sentence after being found guilty on corruption charges last year in Brazil, Latin America's biggest country. He turned state's witness and is expected to be freed by the end of 2017.

'TURNING THE PAGE'

"The company is glad to be turning the page and focusing on its future," William Burck of U.S. law firm Quinn Emanuel Urquhart & Sullivan, which represented Odebrecht, said in a statement.

Fernando Musa, Braskem CEO since May, said his company also was pleased to be settling the matter.

"We are implementing more robust practices, policies and processes across the organization," Musa said in a statement.

According to U.S. prosecutors, Odebrecht said it was able to pay $2.6 billion although it agreed the appropriate criminal fine would be $4.5 billion. The judge scheduled sentencing for April, when the deal would become finalized.

Braskem also agreed to more than $632 million in criminal penalties and fines as well as additional money to the U.S. Securities and Exchange Commission and Swiss and Brazilian authorities, the SEC said.

In the sprawling "Car Wash" investigation, named for a Brasilia gas station where some of the money-laundering took place, prosecutors in Brazil have said more than $2 billion in bribes were paid over a decade, mainly to Petrobras executives, from construction and engineering companies.

As part of the deal, Odebrecht agreed that 77 of its executives and employees would cooperate with the investigation, and they have already provided testimony expected to implicate upward of 200 Brazilian politicians.

U.S. prosecutors want to use testimony from Odebrecht employees to pursue more criminal cases that fall under their jurisdiction, according to two sources with direct knowledge of the Odebrecht deal.

Former Brazilian President Luiz Inacio Lula da Silva, who Brazilian prosecutors say oversaw a scheme in which Odebrecht paid 75 million reais ($22.18 million) in bribes to win eight Petrobras contracts, is among those already charged in Brazil.

The scandal also contributed to the downfall of Brazil's former president, Dilma Rousseff. She was ousted by Brazil's Senate in August, ending an impeachment process that polarized her country amid the massive corruption scandal and a brutal economic crisis.

Michel Temer, Rousseff's vice president, then took over, but Temer himself has been cited in recently leaked testimony that Odebrecht officials have given, reportedly accused of accepting illegal campaign donations, allegations he has denied.

>>> US Close Dow -0.16% S&P -0.24% Nasdaq -0.23% Russell -0.63%

Closing Market Summary: Influential Sectors Lead Slight Pullback

The stock market endured a quiet pre-holiday session that was confined to negative territory. The S&P 500 shed 0.3% while small caps underperformed, leading to a 0.7% retreat in the Russell 2000.

All in all, the Wednesday affair had all the hallmarks of pre-holiday trade as the S&P 500 spent the day in a six-point range. which widened into the close. Intraday NYSE floor volume was below average, but a spike in activity during the final minutes brought the total up to 850 million shares, shy of the 200-day average (933 million). A handful of heavily-weighted sectors spent the day in negative territory, which offset gains in smaller groups and prevented the market from turning positive.

Cyclical sectors like technology (-0.2%), financials (-0.2%), and industrials (-0.4%) spent the day in negative territory while the health care sector (-0.6%) retreated into the afternoon. Biotechnology contributed to the weakness in the health care sector, sending the iShares Nasdaq Biotechnology ETF (IBB 267.85, -3.07) lower by 1.1%.

The top-weighted technology sector was restrained by a mixed showing from large cap names. Accenture (ACN 117.90, -6.20) lost 5.0% after missing estimates and lowering its full-year guidance. Chipmakers had a better showing than the broader sector, as the PHLX Semiconductor Index settled just above its flat line.

For its part, the industrial sector (-0.4%) struggled throughout the day after FedEx (FDX 192.12, -6.62) reported disappointing results. The stock lost 3.3% while the broader Dow Jones Transportation Average surrendered 0.9%.

Staying on the earnings front, Nike (NKE 52.30, +0.51) added 1.0% after reporting above-consensus results. Other apparel names did not follow Nike higher, likely due to some caution related to weak results and guidance from Finish Line (FINL 21.00, -2.01), which surrendered 8.7%. Homebuilders outperformed, helping the consumer discretionary sector (-0.1%) stay near its flat line. The iShares Dow Jones US Home Construction ETF (ITB 28.28, +0.18) gained 0.7%.

Two other cyclical groups—energy (+0.2%) and materials (+0.1%)—spent the day atop the leaderboard, with energy advancing despite a 1.3% slide in crude oil to $52.55/bbl. The energy component retreated after the release of bearish inventory data from the Department of Energy.

Treasuries spent the day inside narrow ranges, climbing into the afternoon. The 10-yr yield slipped two basis points to 2.54%.

Also of note, the U.S. Dollar Index (103.00, -0.26) pulled back from a fresh 13-year high, giving up ground to the euro (1.0426) and the yen (117.50). The euro backed off its intraday high of 1.4050 after the Financial Times reported that Italy's Banca Monte dei Paschi di Siena is expected to be nationalized as part of a newly-approved EUR20 billion bank rescue fund after failing to attract private investors.

Today's economic data was limited to November Existing Home Sales, which increased 0.7% from October to an annualized rate of 5.61 million units while the consensus expected a reading of 5.50 million.

Tomorrow will be busy on the data front with weekly initial claims (consensus 256,000), the third estimate of Q3 GDP (consensus 3.3%), and November Durable Orders (consensus -4.5%) set to be released at 8:30 ET. The October FHFA Housing Price Index will be released at 9:00 ET while November Leading Indicators (consensus 0.1%), November Personal Income (consensus 0.3%), Personal Spending (consensus 0.4%), and core PCE Prices (consensus 0.1%) will be reported at 10:00 ET.

  • Russell 2000 +21.1% YTD
  • Dow Jones Industrial Average +14.4% YTD
  • S&P 500 +10.8% YTD
  • Nasdaq Composite +9.3% YTD

FT : Worries over complacency as Vix slips to year low

Worries over complacency as Vix slips to year low
Fall below 11 is uneasy reminder that traders can get it wrong as in August 2015

Wall Street’s measure for expected equities market volatility has fallen below 11 for the first time since August 2015, a month remembered not for its calm but for the turbulence that followed.

The CBOE’s Vix index, a widely tracked measure of implied volatility, fell on Wednesday by as much as 0.52 to 10.93 points, according to Bloomberg data. That is the first time it has slipped below the 11 mark since August 5 2015.
The Vix has plunged from as high as 23 in the days leading up to the presidential election as Donald Trump’s shock victory has sent stocks zooming higher on a fairly smooth path despite initial expectations that exactly the opposite would happen.
The S&P 500 has tacked on 6 per cent since election day and has on only two occasions closed with a gain of greater than 1 per cent.
The benchmark US equity barometer has not closed down more than 0.81 per cent over the period.
The move lower for the Vix “is an indication that investors have virtually eliminated the prospect of market turmoil from the investing equation over the near term” and points to a “very high level of investor confidence for the prospects of higher equity prices”, said Peter Kenny, senior market strategist at Global Markets Advisory Group.
Still, the fall below 11 is an uneasy reminder that traders sometimes get it wrong. On August 20 2015, just over two weeks after the Vix slipped below 11, the US markets were roiled by a jolt in China’s financial markets.
The S&P dropped 2.1 per cent that day, then 3.2 per cent the following day. A 3.9 per cent slide followed on Monday of the following week, sending the Vix surging as high as 53.29.
There have been signs that a rise in volatility could be on the horizon this time round as well.
The difference between anticipated fluctuations in the Vix and realised ones climbed this week to a one-year high “in a sign volatility may pick up significantly in the new year”, according to research by Mandy Xu, a derivatives strategist at Credit Suisse.
Mr Kenny echoed that sentiment, saying that “it is precisely at these depressed levels that smart money picks up cheap insurance” against an uptick in volatility.
At the same time, investors may have grown too optimistic in their confidence in Mr Trump’s ability to stoke economic growth through a mixture of government spending, lower taxes and less regulation, said David Kelly, chief global strategist at the JPMorgan Funds.
The S&P 500 has catapulted to fresh record highs since the election while the Dow has flirted with surpassing the 20,000 mark for the first time in history.
But the rise has brought to the fore worries that stock prices could be bubbling ahead of profitability.
The forward 12-month price-to-earnings ratio for the S&P 500 has ticked up to 17.2-times, from 16.4 on election day, and 16.1 at the end of last year, according to data from FactSet Research Systems.
“It seems that global equity markets are pricing in everything that could go right in the US and everything that could go wrong overseas,” Mr Kelly said.

FT : Meggitt jettisons ballast in bid to lift shares

Meggitt jettisons ballast in bid to lift shares
Chief executive Stephen Young thinks the company might be at the turning point

Meggitt knows a lot about what keeps aircraft in the air. It has been in the aviation business since 1860, when it supplied altimeters to hot-air balloonists.

However, it seems to have lost the knack of keeping its own shares aloft. After a series of profit warnings, Meggitt shares are at 468p, way below the early 2015 heights of 550p. That is despite activist Elliott Advisors arriving on the share register this summer.

Meggitt, which supplies parts and materials for new aircraft, spares to old ones and systems to the energy industry, has been knocked off course by the oil price fall and customers cutting budgets just as its own spending peaked.

Last year, the group spent more than $500m on acquisitions and a tenth of its £1.6bn revenues on research and development. By the half-year to June its net debt had risen to 2.6 times earnings before nasties.

This year, Stephen Young, Meggitt’s boss, has been tipping out the ballast. He has cut costs, reduced debt, rationalised plants, and pushed further into faster growing areas in civil aviation and sold noncore divisions.

On Wednesday, he sold Meggitt Target, which makes smart missile targets, for £57.5m in cash to rival Qinetiq.

Now he thinks Meggitt might be at the turning point. End-of-year net debt will be comfortably between 1.5 and 2.5 times earnings before tax, interest, depreciation and amortisation.

The number of new aircraft coming into service is above trend, pressure on defence spending is lifting, cash generation is strong and returns from acquisitions are accelerating. Meggitt hasn’t had to warn on profits since October last year. Hurrah.

Mr Young has more to do to cut costs and improve the efficiency of supplies. The energy division is still a drag on performance. The shares are unlikely to rocket into the air. But, at about 14 times next year’s forecast earnings, they should drift up.

Bigger, better British pay

For the 51 Footsie chief executives who publicly backed the “Britain Stronger In Europe” campaign, it is perhaps just as well that its successor group, Open Britain, is not holding a Christmas party, writes Matthew Vincent.

Its website lists only a get-together at the Fox & Firkin in High Street, Lewisham, but this seems likely to be about as festive as the group’s “victory” party in June.

Since that fateful summer night, the 51 — and, indeed, the other 49 — have also seen their holiday spending power hit by a slump in sterling, with those from overseas most exposed.

Three weeks ago, this column calculated the biggest currency-related pay “cuts” since the Brexit vote: €230,000 for Kingfisher’s Véronique Laury; NZ$1.1m for RBS’s Ross McEwan, $2.3m for Prudential’s Mike Wells; and Rs300m for Reckitt Benckiser’s Rakesh Kapoor.

However, a new pan-European study at least offers some tidings of joy. From research taking in 701 companies in six countries, Xavier Baeten and Said Loyens of Belgium’s Vlerick Business School have drawn two conclusions.

UK chief executives earn more than their continental counterparts, and their pay is driven by one overriding factor: not margins, not profit, not price change, just relative company size.

Last year, FTSE 100 chief executives enjoyed the highest total remuneration of those studied: on average, €4.4m.

Gender, age and nationality, as any Open Briton would hope, played no part in this. These factors had standardised beta coefficients — a measure of their predictive powers, out of 1 — of 0.005, 0.038 and minus 0.082, respectively. But nor was profit a driver: earnings margin had a coefficient of minus 0.045. By contrast, market capitalisation was everything: at 0.783.

Conveniently, change — rather than ranking — of market cap had little effect: a coefficient of just minus 0.018. All of which may explain why Footsie CEO pay rose 9.6 per cent in 2015 while the index was down 4.9 per cent.

Perhaps those 51 captains of industry should have gone with a simpler rebrand: Stronger Than, not Stronger In.

Ace manager aced

Mark Lyttleton, ace fund manager at BlackRock, has just been given a jail term for insider dealing. But he was not as ace has he seemed. He lost money buying call options in Cairn Energy, having heard that the oil group had struck oil in Greenland.

It turned out that Cairn hadn’t found oil of a quality or quantity to be worth recovering. Mr Lyttleton lost £10,000 on the punt.

He made a classic rookies’ error — assuming it is enough to find oil to make out like a bandit. As Molesworth would say, any fule kno’ that the way to make it rich is to tap investors for the millions needed to extract oil and take a cut.