>>> Europe Brokers Upgrades & Downgrades - 8th of December 2016

>>> Up
*Aggreko Raised to Hold at HSBC, PT GBP7.35
*Barclays Raised to Hold at Jefferies, PT 222p
*Berendsen Raised to Buy at HSBC, PT GBP10.70
*Bunzl Raised to Buy at HSBC, PT GBP24
*Elis Raised to Hold at HSBC, PT EU14
*Eurobank Raised to Buy at Citi, PT EU0.95
*FLSmidth Raised to Neutral at UBS, PT DKK290
*Generali Raised to Buy at HSBC, PT EU15.50
*Intertek Raised to Hold at HSBC, PT GBP31.40
*ISS Raised to Buy at UBS
*Kloeckner Raised to Buy at Bankhaus Lampe
*National Bank of Greece Raised to Buy at Citi, PT EU0.30
*Piraeus Bank Raised to Buy at Citi, PT EU0.30
*Prosegur Cia de Seguridad Raised to Buy at HSBC, PT EU7
*TDC Raised to Buy at Kepler Cheuvreux, PT DKK41
*WPP Raised to Buy at Jefferies, PT 1840p

>>> Down
*Axa Cut to Hold at HSBC, PT EU23.50
*Dassault Aviation Cut to Underperform at Main First Bank AG
*Lekoil Cut to Market Perform at Renaissance Capital, PT GBP0.35
*Munich Re Cut to Hold at Jefferies, PT EU156
*OHL Cut to Neutral at UBS, PT EU2.90
*PostNL Cut to Underweight at Barclays, PT EU3.70
*Spar Nord Bank Cut to Hold at Nordea Securities, PT DKK77
*Swiss Re Cut to Underperform at Jefferies, PT CHF78

>>> PT Change


>>> Initiation
*Acacia Communications Rated New Equal-Weight at Morgan Stanley
*Actelion Rated New Buy at Kepler Cheuvreux, PT CHF230
*Ahlsell Rated New Buy at DNB Markets, PT SEK68
*Ahlsell Rated New Neutral at Goldman, PT SEK58
*Ahlsell Rated New Hold at Deutsche Bank, PT SEK55
*Ahlsell Rated New Neutral at UBS, PT SEK53
*Ahlsell Rated New Overweight at JPMorgan, PT SEK61
*Cree Rated New Market Outperform at JMP, PT $32
*Heineken Rated New Hold at Evercore ISI
*J D Wetherspoon Rated New Sell at Deutsche Bank, PT 600p
*Marston's Rated New Hold at Deutsche Bank, PT 145p
*Maersk Rated New Outperform at Davy, PT DKK14000
*Mitchells & Butlers Rated New Hold at Deutsche Bank, PT 245p
*Restaurant Group Rated New Sell at Deutsche Bank, PT 290p

>>> Call
>> Sector
*GREEK BANKS RAISED TO BUY AT CITI

>>> Asian Update

Asia Mid-Session Market Update: China trade components with surprise increase in both Imports and Exports; Japan final Q3 GDP revised lower on soft CAPEX

***US Session Highlights***
- (CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED; slack remains
- (US) OCT JOLTS JOB OPENINGS: 5.53M V 5.50ME
- (US) DOE CRUDE: -2.4M V -1ME; GASOLINE: +3.4M V +1.5ME; DISTILLATE: +2.5M V +1.5ME
- Assoc of American Railroads sees third straight week of gains y/y in carloads and intermodal traffic
- Tech sector joins the rally with new all-time highs for the Dow, S&P and the Russell 2000

***US markets on close: Dow +1.6%, S&P500 +1.3%, Nasdaq +1.1%***
- Best Sector in S&P500: Technology
- Worst Sector in S&P500: Healthcare
- Biggest gainers: WDC +8.3%, MU +7.2%, DLPH +6.8%, BWA +6.2%, LOW +5.4%
- Biggest losers: UA -12.6%, UHS -11.9%, ENDP -4.9%, MNK -4.4%, CELG -4.0%
- At the close: VIX 12.2 (+0.4pts); Treasuries: 2-yr 1.10% (-2bps), 10-yr 2.35% (-5bps), 30-yr 3.03% (-5bps)

***US movers afterhours***
- TLRD: Reports Q3 $0.68 v $0.55e, R$846.9M v $836Me; +23.6% afterhours
- LULU: Reports Q3 $0.50 v $0.43e, R$544.4M v $543Me; To repurchase up to $100M (1.2% of market cap) in common stock; +14.1% afterhours
- HRB: Reports Q2 -$0.67 v -$0.68e, R$131.3M v $126Me- adj EBITDA -$161M v -$169M y/y; +7.1% afterhours
- TGI: The Gores Group to acquire Triumph Air Repair unit; terms not disclosed; +5.2% afterhours
- GLW: Announces $4B share repurchase (17.1% of market cap); +1.5% afterhours
- COST: Reports Q1 $1.17 (ex $0.07 benefit from legal settlement) v $1.19e, R$28.1B (including member fees) v $28.4Be; +1.4% afterhours
- JCAP: Files to offer $50M in Common Stock (41.5% of market cap); -4.9% afterhours
- VRNT: Reports Q3 $0.59 v $0.71e, R$260M v $271Me; -12.0% afterhours

***Politics***
- (US) President-elect Trump to appoint Oklahoma Attorney General Scott Pruitt as head of EPA - press
- (IT) Italy President: have asked Renzi to stay on as caretaker PM during consultations on forming new govt, which will begin tomorrow
- (NZ) New Zealand Fin Min English: Steven Joyce will be Fin Min if I am elected PM
- (NZ) New Zealand Finance Minister Bill English is set to be confirmed as the next PM after rivals have dropped out of contention - NZ press

***Asia Session Notable Observations, Speakers and Press***
- Australia's ASX200 leads regional indices higher as rising price of iron ore continues to benefit miners; S&P/ASX at 3-month high above 5,500
- Nikkei225 also with a meaningful advance despite the retreat in USD/JPY amid lower US Treasury yields; In other USD majors, NZD/USD rises to 4-week high as New Zealand Treasury half-year economic and fiscal update (HYEFU) raises FY16/17 and FY17/18 GDP targets while cutting jobless rate forecast.
- Moody's lowers Italy rating outlook to Negative from Stable after Sunday's NO referendum vote, citing concerns with slow progress on economic reform and risk of postponement in addressing debt burden.
- Japan Q3 final GDP revised lower, though the quarter is the 3rd straight of expansion; Annualized lowered to 1.3% from 2.3% and q/q to 0.3% from 0.5%, with CAPEX the most notable downward revised component at -0.4% vs 0% prelim.
- China Nov Trade Balance showing smaller than expected surplus in both USD and CNY terms, but Export and Import components top expectations in both formats: USD Exports Y/Y: +0.1% v -5.0%e, Imports +6.7% v -1.9%e; In CNY, Exports +5.9% (8-month high) v -1.0%e; and Imports at 3-year high of +13.0% v +3.6%e; China Stats Bureau more upbeat on 2017 trade conditions despite worries over protectionism from Trump cabinet.
- Aussie trade deficit wider than expected, but smaller than in recent months. Export growth slows to 1% from 2% and Imports rise 2% after falling 1% prior. Crude oil shipments component most notable with a 15-month high value.

China:
- (CN) PBoC chief economist Ma Jun: China housing investment to slow down in 2017 due to recent property purchase curbs - Chinese press
- (CN) China Customs: Pressure on China's exports likely to ease early 2017
- (CN) NDRC said to consider revising guidance for foreign investment in China - Chinese press

Japan:
- (JP) According to a survey, 37% of Japan corporate leaders see the election of Donald Trump as a negative for business, while 25% see him as a positive force - Nikkei
- (JP) Japan Upper House of Diet will not vote on Casino bill today - Japan press

Australia/New Zealand
- (AU) Australia PM Turnbull: Q3 GDP figures were a "bump in the road" - press
- (AU) Moody's: Australian Banks' Funding Stability Improving; Asset Quality Metrics Gradually Deteriorating But Buffered By Strong Capital Levels
- (AU) UBS: Australia trade data shows stalling in the narrowing of trade deficit trend - SMH
- AUD/USD: Goldman Sachs economist: There is a massive wedge between AUD and commodity prices, which is unprecedented - SMH
- (NZ) New Zealand Treasury half-year economic and fiscal update (HYEFU): Raises FY16/17 GDP target to 3.5% from 3.3%; Raises FY17/18 GDP target to 3.4% from 3.0%
- (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: +3.5% v +4.5% prior; 4th straight increase
- FCG.NZ: Westpac raises FY16/17 forecast milk price to NZ$6.20/kg

***Asia Key economic data:***
- (CN) CHINA NOV TRADE BALANCE (CNY): 298B V 320BE; USD denominated: $44.6B V $46.9BE
- (JP) JAPAN Q3 FINAL GDP Q/Q: 0.3% V 0.5%E; ANNUALIZED GDP: 1.3% V 2.3%E (3rd straight expansion both quarterly and annualized)
- (JP) JAPAN OCT CURRENT ACCOUNT BALANCE: ¥1.72T V ¥1.55TE; ADJUSTED CURRENT ACCOUNT: ¥1.93T V ¥1.72TE; TRADE BALANCE: ¥588B V ¥603BE
- (AU) AUSTRALIA OCT TRADE BALANCE (A$): -1.5B V -0.6BE; 30th consecutive trade deficit

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +1.0%, Hang Seng +0.6%, Shanghai Composite -0.1%, ASX200 +1.2%, Kospi +1.2%
- Equity Futures: S&P e-mini +0.1, Dax +0.1%, FTSE100 flat

***FX ranges/Commodities/Fixed Income (00:00ET):***
- EUR 1.0750-1.0785; JPY 113.10-113.90; AUD 0.7475-0.7505; NZD 0.7160-0.7220
- Feb Gold +0.1% at 1,179/oz; Jan Crude Oil +0.2% at $49.88/brl; Mar Copper +0.1% at $2.65/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 6.2 tonnes to 863.7 tonnes; 15th straight decline; lowest since May 19th
- JGB: (JP) Japan MoF sells ¥724B in 0.6% (0.5% prior) 30-yr bonds; Avg yield: 0.617% v 0.511% prior; Bid to cover: 2.85x v 3.50x prior (weakest demand in 5 months)
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8731 V 6.8808 PRIOR

***Asia equities / Notables / movers by sector***
- Consumer discretionary: Television Broadcasts 511.HK -3.0% (profit warning); Fairfax Media FXJ.AU +1.7% (confirms third party interest in NZ business); Nine Entertainment Co Holdings NEC.AU +2.0% (Morgan Stanley raises PT); APN News APN.AU +1.2% (ACCC not oppose News' proposed acquisition)
- Financials: Insurance Australia IAG.AU +4.5% (guidance)
- Industrials: Sumitomo Chemical Co 4005.JP -0.7% (JPMorgan cuts to neutral)
- Technology: Advantech Co 2395.TW +1.6% (Nov result); Fujitsu 6702.JP +6.1% (CEO outlook)
- Materials: Baoshan Iron & Steel Co 600019.CN +3.8%, Wuhan Iron and Steel 600005.CN +5.6% (merger approval); Fortescue FMG.AU +1.8%, Rio Tinto RIO.AU +3.2% (iron ore gains); Saracen Mineral Holdings SAR.AU +3.6% (Macquarie raises to outperform); New Hope Corporation NHC.AU +4.0% (Credit Suisse raised to neutral)
- Energy: Karoon Gas Australia KAR.AU -9.8% (Joined Proceedings against Petrobras); Xinjiang Goldwind Science & Technology 2208.HK +6.0% (work plan with Apple); Santos STO.AU -2.4% (production guidance)
- Utilities: Tokyo Electric Power Co 9501.JP +16.2% (Japan govt may expand credit)

>>> ACCC clears Syngenta/ChemChina transaction



----- Original Message -----
Subject: ACCC clears Syngenta/ChemChina transaction


The ACCC considered the effects of the proposed acquisition on national markets for the supply of various crop protection products (including insecticides, herbicides and fungicides) supplied by the merger parties.

The scope of the individual product markets was determined according to how the products were used by farmers, and was considered on a case by case basis. The ACCC considered that, in general, products with the same active ingredients were likely to be close substitutes. However, in many cases, there were alternative products based on other active ingredients that could be used for the same purposes. 

This analysis was informed by many factors, including:
- the pest or disease targeted, or the range of different pests or diseases against which a product can provide protection
- the crop
- the stage in the growing season at which protection is required
- the growing conditions in which the crop protection is applied
- the application method, and
- consideration of environmental impact (including impact on beneficial insects), health and safety, and residues remaining on the crop after treatment.

The ACCC also analysed the extent to which generic products compete with patented products. Syngenta is an originator company which develops new patent chemicals, whereas ChemChina (through its subsidiary, Adama) is focused more on generic, off-patent chemicals.

The ACCC considered that the significant price premium on patented chemicals indicated that cheaper generic products based on off-patent chemicals were often not likely to be an effective substitute.


The ACCC concluded that the proposed acquisition would not substantially lessen competition in any relevant market.

The parties overlap in the supply of a wide range of crop protection products with the same active ingredients. However, all of these overlaps related to chemicals which are off patent. 

The ACCC's review paid particular attention to overlaps where Adama and Syngenta had significant shares of Australian sales. In particular, at the time of the review, Syngenta and Adama were the only suppliers of products based on active ingredients Cyprodinil and Emamectin.

The ACCC did not consider that the proposed acquisition would raise significant concerns in relation to these products, due to the continued availability of substitutes (with the same and/or different active ingredients) and/or the credible threat of new entry.

Cyprodinil: The parties are the only two suppliers of Cyprodinil-based products in Australia. Cyprodinil is a fungicide used to control botrytis fungi on grapes and other crops (such as black spot on apples and pears). In some circumstances (for e.g. wine grape growers located in areas which are cool and wet or in a wet season), Cyprodinil-based products may have few substitutes. However, Cyprodinil is off patent and the ACCC determined that there was a credible threat of new entry which would constrain the actions of the merged firm. 

Emamectin: Adama and Syngenta are the only two suppliers of Emamectin-based products in Australia. Emamectin is an insecticide which, in various mixes, is used to control various moths on crops including cabbage, apple and grapes. However, the ACCC determined that there were a number of alternative products produced by other suppliers with different active ingredients which were close substitutes.

>>> US After Hours Summary: TLRD +22%, LULU +14%, HRB +6% following ea

After Hours Summary: TLRD +22%, LULU +14%, HRB +6% following earnings/guidance, VYGR +35.1% on trial update news... CMTL -11.8%, VRNT -10.6% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: TLRD +21.6%, LULU +14.3%, HRB +5.7%, COST +1%

Companies trading higher in after hours in reaction to news: VYGR +35.1% (announces 'positive' interim results from phase 1b trial of VY-AADC01 for advanced parkinson's disease), TGI +5% (Gores Group to acquire Triumph Air Repair, the APU Overhaul Operations of Triumph Aviation Services -- Asia, and Triumph Engines), NWSA +2.7% (ACCC will not oppose News Corporation's proposed acquisition of APN's Australian Regional Media Division -- ARM), GLW +1.3% (authorizes new $4 bln share repurchase program), UHS +1.2% (following late sell-off amid negative report highlighting its psychiatric facilities)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CMTL -11.8% (also announces that its Board completed its previously announced assessment of capital needs and lowered the quarterly dividend to $0.10/share from $0.30/share), VRNT -10.6%, UNFI -5.3%, CASY -2.6%, OLLI -1.1%

Companies trading lower in after hours in reaction to news: OHRP -18.8% (announces a public offering of common stock & warrants), JCAP -5% (commences an underwritten public offering of $50 mln of shares of its common stock), CODI -3.1% (commences public offering of 5.6 mln common shares and files mixed securities shelf offering), ECC -2.1% (commences 1.15 mln share common stock offering), TSN -0.5%, (light volume; reiterates from its recent earnings call that the company's chicken and prepared foods margins have returned to their normalized ranges; denies Georgia Dock manipulation allegations)

>>> US Close Dow +1.55% S&P +1.32% Nasdaq +1.14% Russell +0.88%

Closing Market Summary: Stocks Climb Despite Weakness in Biotechnology

The stock market enjoyed its fourth consecutive day of gains with the S&P 500 rising 1.3% to a fresh record high. The benchmark index settled ahead of the Nasdaq Composite (+1.1%), which lagged since the start.

Equity indices started the day near their flat lines, which masked gains in just about every sector. In turn, those early gains were masked by the underperfomance of the health care space (-0.8%), which was down more than 2.0% at the start.

The initial weakness in health care developed after President-elect Donald Trump told TIME Magazine that he wants to lower drug prices. This sent the iShares Nasdaq Biotechnology ETF (IBB 266.28, -8.06) lower by 2.9%. Recall that the Clinton campaign took aim at high drug prices, which contributed to an 11.3% October dive in the biotech ETF. With today's retreat, the ETF is back near the middle of its range from October.

The opening slide in biotechnology placed the Nasdaq below its flat line, but the index recovered as biotechnology climbed off its low and the top-weighted technology sector (+1.9%) surged into third place on the sector leaderboard. High-beta chipmakers had an even better showing than the sector as the PHLX Semiconductor Index jumped 2.2%. Micron (MU 20.45, +1.39) was a standout, soaring 7.3%, after Western Digital (WDC 69.15, +5.30), who acquired Micron's competitor SanDisk, raised its guidance, citing a favorable market environment. Seagate (STX 40.27, +1.12) climbed 2.9% following Western Digital's guidance, but it is worth noting that Western Digital sells consumer solid-state drives after the acquisition of SanDisk while Seagate remains focused on the mechanical hard drive market.

Similar to technology, four of the remaining five cyclical sectors posted gains while energy (+0.7%) lagged, but still ended in the green even though crude oil fell 2.3% to $49.77/bbl. The energy component slumped into the close after the government's inventory report confirmed last night's bearish reading from the American Petroleum Institute. In addition to showing an inventory build, today's EIA report revealed large increases in gasoline and distillate inventories.

Two countercyclical sectors—telecom services (+2.4%) and real estate (+2.2%)—settled atop the leaderboard thanks to daylong demand for Treasuries, which resulted in a five-basis point downtick in the 10-yr yield (2.34%).

The U.S. Dollar Index (100.18, -0.31) shed 0.3%, returning to its Monday low. The euro gained 0.4%, climbing to 1.0764 against the greenback ahead of tomorrow's policy announcement from the European Central Bank. Judging by the action in European and U.S. equities leading up to the meeting, participants are not worried about ECB President Mario Draghi hinting at reducing asset purchases. Instead, the market is positioned for the central bank to extend or maintain its current purchase program, which is set to end early next year.

Today's participation was above average as more than a billion shares changed hands at the NYSE floor.

Economic data included JOLTS, Consumer Credit, and MBA Mortgage Index:

  • The October Job Openings and Labor Turnover Survey showed that job openings decreased to 5.534 million from a revised 5.631 million (from 5.486 million) in September
  • The Consumer Credit report for October showed an increase of $16.0 billion while the consensus expected growth of $18.7 billion
    • September credit growth was revised up to $21.8 billion from $19.3 billion
  • The weekly MBA Mortgage Index declined 0.7% after falling 9.4% one week ago

Tomorrow's economic data will be limited to weekly initial claims (consensus 255K), which will be released at 8:30 ET.

  • Russell 2000 +20.6% YTD
  • Dow Jones Industrial Average +12.2% YTD
  • S&P 500 +9.7% YTD
  • Nasdaq Composite +7.7% YTD

FT : Italy demands more time from ECB to rescue Monte dei Paschi

Italy demands more time from ECB to rescue Monte dei Paschi
Bank’s board wants until mid-January to pull off €5bn equity injection


Italy is demanding the European Central Bank give it more time to rescue Monte dei Paschi di Siena and is preparing to blame the bank for losses imposed on bondholders if Rome is forced into an urgent state bailout.

The board of MPS, which has the Italian Treasury as its largest shareholder, is asking the ECB’s supervisory arm to give it until mid-January to pull off a €5bn equity injection and try to avoid forcing losses on some debtholders as required under new EU bailout rules, say four people close to the process.

In a letter to the ECB, MPS says political instability unleashed by the resignation of prime minister Matteo Renzi following his defeat in Sunday’s referendum has made it impossible to get the deal done until a new government is formed, these people say.


If the ECB fails to approve the extension, MPS could be heading for a recapitalisation by the Italian state in the next few days, said a person close to the issue. At stake is the stability of the Italian banking system and the potential wider repercussions on Europe’s financial system, which continues to struggle to recover from the eurozone debt crisis of 2010.

A so-called precautionary recapitalisation would involve imposing losses on subordinated debtholders and the indemnification of retail bondholders, the people said. The ECB is due to review the request as early as Thursday.

The ECB is understood to be unwilling to reveal its position until a letter is received. But bankers argue the supervisor is under pressure to take a tougher stance on MPS, which failed the European banks’ healthcheck in 2014 and 2016, potentially paving the way for the latest stand-off between Italy and EU authorities.

“If they don’t give the extension, the ECB must take responsibility. They will be pushing the button,” said one person. “We are only asking for five more weeks.”

Italy has been emboldened to ask for an extension for MPS — which emerged as the weakest lender under European bank stress tests in 2014 and 2016 — after investors shrugged off Mr Renzi’s defeat, reducing the sense of urgency, say senior bankers.
Officials in Brussels have signalled they are willing to support Rome, suggesting that relatively calm markets after the vote have given Italy two months to come up with a solution for MPS with a new government in place. Nonetheless, they say they expect the Siena-based bank will ultimately require a state “bail-in” of some debt holders.

MPS had placed its hopes on a deal with Qatar’s sovereign wealth fund, which would have involved injecting up to €2bn of equity into MPS as a way of securing influence with Mr Renzi over the purchase of more desirable assets, insiders say. The departure of Mr Renzi — who refused a deal struck with Brussels in July to recapitalise the bank and bail-in bondholders, fearing it would lose him votes at the referendum — has thrown the Qatari deal into doubt.


According to people close to the talks, other potential investors, such as US hedge funds, are asking for the new government — preferably led by finance minister Pier Carlo Padoan — to be in place before proceeding. They also want clarity on when national elections may take place. Potential investors would prefer a technocratic government to remain until the end of the legislature in spring 2018, said one person.

MPS and Italy’s Treasury are relying on anchor investors, with senior bankers admitting there is scant market interest in a lender that has already burnt through €8bn in new equity in the past four years.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance
:
  • SIGM -20.6%, OXM -8%, SEAC -5.4%, NUS -4.5%, (guidance at investor day) HQY -4.4%, AVAV -2.7%, POWL -1.5%
Other news:
  • RPRX -24.1% (provides highlights of yesterday's Bone, Reproductive and Urologic Drugs Advisory Committee Meeting)
  • OHAI -12.9% (provides update on two of is legacy portfolio companies that will likely have a negative impact on the fair value of those investments )
  • LADR -10.2% (prices underwritten secondary public offering of 10 mln shares of Class A common stock by selling shareholders at $13.60/share)
  • PES -9.7% (upsizes offering by 1.5 mln shares and prices 10.5 mln shares of common stock at $5.75 per share)
  • ESV -7.3% (prices offering of $750 mln of 3.00% Exchangeable Senior Notes due 2024)
  • BBG -3.9% (upsizes offering by 2 mln shares and prices 13.5 mln shares of its common stock for gross proceeds of $99.9 mln)
  • IBN -3.2% (reaction to RBI leaving key interest rates unchanged, expected to cut)
  • BLUE -2.3% (prices offering of 3,289,473 shares of its common stock at a public offering price of $76.00 per share)
  • NDRM -1% ( launches a follow-on offering of ordinary shares)
Analyst comments:
  • NTAP -1.4% (downgraded to Underperform from Neutral at Credit Suisse)
  • UL -0.5% (downgraded to Neutral from Overweight at JP Morgan)