A rebalance in oil markets is on its way, but oil markets will likely remain volatile. The challenge is to find the balance; instead of just focusing on the full field NPV, thereby taking a long term view, it is critical that companies balance this longer term view with a stronger focus on short term cash flow and returns. The Major' share of long duration volumes is rising, therefore capital intensity is falling, but managing/sustaining businesses may thus require a greater portion of short-cycle/flexible assets going forward. In light of this backdrop, we d/g Total to N (limited upside to its shares), while we u/g BP to OP (from N) on valuation grounds.
>>> Up
*BP Raised to outperform at Credit Suisse (Full note attached)
*EUROMONEY Raised to Buy at Peel Hunt
*Legal & General Raised to Overweight at Barclays, PT 276p
*Moncler Raised to Outperform at RBC, PT EU20
*Randgold Raised to Overweight at Morgan Stanley, PT 6640p
*William Demant Raised to Hold at HSBC, PT DKK116
>>> Down
*Aegon Cut to Hold at ING
*Bankia Cut to Neutral at UBS, PT EU0.82
*Heineken Cut to Neutral at JPMorgan, PT EU70
*TalkTalk Cut to Underweight at JPMorgan, PT 150p
*Total cut to Neutral at Credit Suisse (Full note attached)
>>> PT Change
>>> Initiation
*BMW Rated New Outperform at Macquarie, PT EU95
*Daimler Rated New Neutral at Macquarie, PT EU65
*Dixons Carphone Rated New Outperform at Credit Suisse, PT 420p
*DSV Rated New Outperform at Exane, PT DKK361
*Fiat Rated New Underperform at Macquarie, PT EU6
*Hapag-Lloyd Rated New Outperform at Exane, PT EU28
*HMS Group Rated New Outperform at Renaissance Capital, PT $10
*Peugeot Rated New Neutral at Macquarie, PT EU13
*Porsche Rated New Neutral at Macquarie, PT EU53
*Renault Rated New Outperform at Macquarie, PT EU90
*Sixt Rated New Buy at Bankhaus Lampe, PT EU62
*Takeaway.com Rated New Hold at Jefferies, PT EU24
*Vallourec Rated New Underweight at Barclays, PT EU2.50
*VW Rated New Neutral at Macquarie, PT EU128
>>> Call
>> Sector
*EUROPEAN INSURANCE RAISED TO NEUTRAL AT KBW
*METALS AND MINING SECTOR RAISED TO OVERWEIGHT AT UBS
Asia Mid-Session Market Update: China PMIs remain in expansion with SME-focused official prints outperforming; Soft Aussie Capex implies potential growth undershoot
Thu, 01 Dec 2016 0:56 AM EST
***US Session Highlights***
- (US) NOV ADP EMPLOYMENT CHANGE: +216K V +170KE; Oct revised sharply lower
- (US) OCT PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E
- (US) OCT PERSONAL INCOME: 0.6% V 0.4%E; PERSONAL SPENDING: 0.3% V 0.5%E; savings rate jumps to 6.0% from 5.7%
- (US) NOV CHICAGO PURCHASING MANAGER: 57.6 V 52.5E (highest since Jan 2015); new orders and inventories both surge
- (US) OCT PENDING HOME SALES M/M: 0.1% V 0.1%E; Y/Y: 0.2% V 2.0% PRIOR
- (US) Atlanta Fed GDPNow: cuts Q4 GDP forecast to 2.4% from 3.6% on Nov 23rd
***US markets on close: Dow flat, S&P500 -0.3%, Nasdaq -1.1%***
- Best Sector in S&P500: Basic Materials
- Worst Sector in S&P500: Utilities
- Biggest gainers: MRO +20.8%, RIG +17.1%, NFX +15.7%, MUR +15.3%, DO +15.0%
- Biggest losers: VRTX -4.7%, AWK -4.6%, COTY -4.4%, EFX -4.0%, ES -3.9%
- At the close: VIX 13.3 (+0.4pts); Treasuries: 2-yr 1.12% (+1bp), 10-yr 2.37% (+7bps), 30-yr 3.02% (+7bps)
***US movers afterhours***
- LZB: Reports Q2 $0.42 v $0.38e, R$377M v $376Me; raises dividend 10% to $0.11/share (prior $0.10/share); +5.4% afterhours
- SMTC: Reports Q3 $0.37 v $0.36e, R$141M v $139Me; +4.1% afterhours
- SNPS: Reports Q4 $0.77 v $0.77e, R$633.7M v $628Me; -1.9% afterhours
- GES: Reports Q3 $0.11 v $0.14e, R$536.3M v $551Me; -14.0% afterhours
***Politics***
- (DE) Germany Chancellor Merkel: will seek a compromise with President-elect Trump on the Paris Accord - press
***Asia Session Notable Observations, Speakers and Press***
- Nikkei225 and S&P/ASX200 indices outperform amid respective weakness in JPY and post-OPEC surge in energy space; USD/JPY since paring some gains with retreat to ¥114 amid overall USD weakness.
- Feb WTI contract adds another 1% to gains, testing $50/brl for the first time in a month.
- China PMI data mixed; Official (large SME-focused) manufacturing and non-manufacturing prints at highest level since mid-2014, with notable flip to expansion in New Export Orders and sharp rise in Input prices juxtaposed against multi-month lows in inventories; Conversely, Caixin PMI retreats to 50.9 from 50.2, albeit in expansion for 5th straight month; Caixin economist notes ongoing staff reductions containing costs while input price inflation intensifies at sharpest rate since early 2011.
- Australia Q3 private capex undershoot expectations, adding to growth concerns already building from disappointing Construction and Building Permits data in recent days, as more analysts anticipate RBA policy easing next year. Japan Q3 Capex also misses estimates, though corporate profits and sales in Q3 improve as Yen rally subsides; Recall Japan's CAPEX component in the latest prelim GDP data was flat for its first non-negative print in 3 quarters.
Energy
- Goldman Sachs: Oil market to move into deficit in 2017; WTI to rise to $55/brl - press
- (ID) Indonesia confirms OPEC membership temporarily suspended; Claims can only cut output by 5.0K bpd v requested 37K bpd
China
- (CN) PBoC adviser Huang Yiping calls for 2017 GDP target to be set at 6-7% range - Chinese press
- (CN) UBS China economist chief Wang: Do not see room for China to cut interest rate next year - conf call comments
- (CN) PBOC has told some local banks to cut short term borrowing - Chinese press
Japan
- (JP) BOJ Sakurai: BOJ to continue purchasing large amounts of JGBs to control interest rates; no change in stance
- (JP) Japan Abe Adviser Honda: JPY currency (Yen) could weaken to test the 120 level during 2017 under Trump stimulus plan
- (JP) Japan Chief Cabinet Sec Suga: Closely watching the effect of higher oil prices on markets and Japan economy
Australia
- (AU) Credit Suisse analyst sees material downside to RBA and consensus Australia GDP forecasts; Expect a rate cut next year and a downward revision of GDP targets.
***Asia Key economic data:***
- (CN) CHINA NOV MANUFACTURING PMI (Gov't official): 51.7 V 51.0E (4th consecutive expansion and highest since July 2014)
- (CN) CHINA NOV CAIXIN PMI MANUFACTURING: 50.9 V 51.0E; 5th consecutive expansion
- (HK) Macau Nov Casino Rev 18.8B Patacas v 18.4B m/m, +14.4% y/y (4th consecutive increase, largest gain since Feb 2014) v 8.8% prior
- (JP) JAPAN Q3 CAPITAL SPENDING Y/Y: -1.3% V -0.4%E; EX-SOFTWARE Y/Y: -1.4% V -0.6%E
- (JP) JAPAN NOV FINAL PMI MANUFACTURING: 51.3 V 51.1 PRELIM
- (AU) AUSTRALIA Q3 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -4.0% V -3.0%E
- (AU) AUSTRALIA NOV AIG MANUFACTURING INDEX: 54.2 V 50.9 PRIOR (2nd straight expansion, 4-month high)
- (KR) SOUTH KOREA NOV PMI MANUFACTURING: 48.0 V 48.0 PRIOR
- (KR) SOUTH KOREA NOV TRADE BALANCE: $8.0B V $8.6BE
- (KR) SOUTH KOREA NOV CPI M/M: -0.1% V 0.1%E; Y/Y: 1.3% V 1.4%E; CPI CORE Y/Y: 1.4% V 1.6%E
- (KR) SOUTH KOREA OCT CURRENT ACCOUNT BALANCE: $8.7B V $8.3B PRIOR; GOODS BALANCE: $9.8B V $10.8B PRIOR
- (NZ) NEW ZEALAND NOV QV HOUSE PRICES Y/Y: 12.4% V 12.7% PRIOR
- (NZ) NEW ZEALAND Q3 TERMS OF TRADE INDEX Q/Q: -1.8% V 0.0%E (2nd straight decline)
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +1.9%, Hang Seng +0.6%, Shanghai Composite +0.5%, ASX200 +1.1%, Kospi +0.2%
- Equity Futures: S&P e-mini +0.1%, Dax +0.2%, FTSE100 +0.3%
***FX ranges/Commodities/Fixed Income (00:00ET):***
- EUR 1.0585-1.0610; JPY 114.10-114.80; AUD 0.7380-0.7410; NZD 0.7070-0.7100
- Dec Gold +0.1% at 1,174/oz; Jan Crude Oil +1.0% at $49.91/brl; Mar Copper +0.2% at $2.64/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 1.1 tonnes to 883.9 tonnes; 12th straight decline; lowest since June 8th
- (CN) China said to have tightened gold import quota - FT
- JGB: (JP) Japan MoF sells ¥2.20T in 10-yr 0.1% JGBs; Avg yield: +0.032% (first positive yield since Feb) v -0.056% prior; bid to cover: 3.78x v 4.35x prior
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.8958 V 6.8865 PRIOR; first weaker setting in 4 sessions
***Asia equities / Notables / movers by sector***
- Consumer discretionary: Ajinomoto Co 2802.JP +2.9% (Nomura raises to buy); Recruit Holdings Co 6098.JP +3.1% (Credit Suisse raises to outperform)
- Industrials: Nufarm NUF.AU +5.4% (guidance); Bridgestone Corp 5108.JP -0.9% (Goldman Sachs cuts to neutral)
- Technology: Gree Electric Appliances 000651.CN +8.3% (discloses large shareholder); Renesas Electronics Corp 6723.JP +2.2% (Morgan Stanley raises PT)
- Materials: Newcrest Mining NCM.AU -2.5%, Regis Resources RRL.AU -2.3% (gold declines)
- Energy: CNOOC 883.HK +6.3% (China raises fuel prices); Santos STO.AU +12.6%, Beach Energy BPT.AU +10.3%, WorleyParsons WOR.AU +9.3%, Oil Search OSH.AU +9.9%; Origin Energy ORG.AU +8.5%; Woodside Petroleum WPL.AU +6.7% (OPEC deal)
- Healthcare: Askul Corp.2678.JP -1.0% (H1 result)
- Utilities: China Water Affairs Group 855.HK -1.1% (H1 result); Transurban Group TCL.AU -3.8% (Morgan Stanley cuts to equalweight)
After Hours Summary: TLYS +17%, LZB +5%, SMTC +3.4% following earnings/guidance, BLUE +23% on CAR-T update... GES -14%, NQ -7%, BL -5%, SNPS -2% following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: TLYS +17%, LZB +5.4% (also increases quarterly dividend by 10% to $0.11 per share), SMTC +3.4%
Companies trading higher in after hours in reaction to news: BLUE +23.1% (announces interim Phase 1 dose escalation data for Anti-BCMA CAR T product candidate in patients with relapsed/refractory multiple myeloma; 100% of patients in second and third dose cohorts achieved objective response; two patients MRD-negative; overall response rate 78%), FF +6% (ticking higher; declares a special cash dividend of $2.29/share), SKX +3.1% (light volume; CEO disclosed purchase of 500K shares worth more than $5.5 mln), PNLYY +2.9% (thinly traded ADR; PostNL acknowledges receipt of revised final proposal from bpost; is reviewing and considering bpost's revised conditional offer), COL +2.7% (reports that Starboard may push for Rockwell to reconsider its pending merger with BEAV)
CAR-T related names higher in sympathy with Bluebirdbio: ZIOP +1.9%, KITE +0.7%After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: GES -13.7%, NQ -6.7%, BL -5.3% (light volume), SNPS -2%
Companies trading lower in after hours in reaction to news: HTBX -58.2% ((presents topline HS-410 Phase 2 bladder cancer results; responses did not translate into clinical outcomes, there was no statistically significant difference in the primary endpoint between the vaccine and placebo arms), PTN -26.5% (to issue and sell shares of its common stock and warrants to purchase shares of its common stock), BEAV -3.4% (lower on report that Starboard may push for Rockwell to reconsider its pending merger with BEAV), PENN -3.2% (attributed to block trade sale), RXN -2.3% (commences public offering of 7 mln depositary shares, each of which represents a 1/20th interest in a share of its Series A Mandatory Convertible Preferred Stock)
Closing Market Summary: Strong Month Ends on Weak NoteThe stock market closed a strong month on a sloppy note as the S&P 500 (-0.3%) spent the day in a retreat from its opening high. The benchmark index narrowed its November gain to 3.4% while the Nasdaq Composite (-1.1%) underperformed, but still added 2.6% for the month. The Dow Jones Industrial Average (UNCH) outperformed today, staying true to its November (+5.4%) form.
Equity indices entered the day with an assortment of positive headlines to rally behind, but what we saw instead, was a continuation of the selling that showed up during the last hour of yesterday's session.
The positive headlines from this morning included:
- An official OPEC agreement to lower oil production to 32.5 million barrels per day
- Better than expected economic data, which supports the narrative that a December rate hike makes sense and is not being rushed
- News that Steve Mnuchin, who is known to be business-friendly, was nominated as Secretary of the Treasury
- Report that the European Central Bank is likely to extend its quantitative easing program past March
In the end, only the OPEC-related news stuck, preventing the S&P 500 from ending well below its flat line. The energy sector (+4.8%) extended its November gain to 7.9% while crude oil soared 9.3% to $49.44/bbl, ending the month higher by 5.5%. The big rally in crude began in overnight action, before the results of the OPEC meeting were known. A short squeeze likely played a part in the rally, especially when taking into account yesterday's bearish headline flow. On a side note, today's OPEC deal will put monthly supply back at levels from the start of the year, when hopes for a supply cut were already driving daily price action.
Energy was one of just four pockets of relative strength on the sector leaderboard. Financials (+1.3%) and materials (+1.1%) also posted solid gains while industrials (-0.1%) ended just ahead of the S&P 500 thanks to strength in transport stocks after rail carrier CSX (CSX 35.83, +1.03) raised its guidance.
The financial sector extended its November gain to 13.7%, as the month-long theme of yield curve steepening continued. Selling in the 10-yr note sent its yield higher by eight basis points to 2.37% while the 2-yr yield rose two basis points to 1.11%. For the month, the 10-yr yield spiked 54 basis points while the 2-yr yield jumped 26 basis points.
Today's sharp uptick in Treasury yields weighed on rate-sensitive sectors. Utilities (-3.2%) retreated throughout the day while telecom services (-2.1%), consumer staples (-1.7%), and real estate (-1.2%) were under significant pressure from the start.
Elsewhere, the consumer discretionary sector (-0.9%) was pressured by losses in apparel retailers and homebuilders. The iShares Dow Jones US Home Construction ETF (ITB 27.34, -0.59) fell 2.1% after a disappointing Pending Home Sales report (+0.1%; consensus +0.7%), which made for a soft spot in today's batch of economic data. On the retail side, American Eagle Outfitters (AEO 16.56, -2.35) plunged 12.4% in reaction to disappointing guidance for the holiday period.
Two other influential sectors—health care (-1.0%) and technology (-1.2%)—kept the market under pressure throughout the day, and their underperformance was most notable when looking at the Nasdaq. Biotechnology was particularly weak, sending the iShares Nasdaq Biotechnology ETF (IBB 274.07, -6.24) lower by 2.2%. The biotech ETF narrowed its November gain to 6.8%.
Month-end flows led to increased participation as more than 1.5 billion shares changed hands at the NYSE floor.
Economic data included MBA Mortgage Index, ADP Employment, Personal Income/Spending, Chicago PMI, and Pending Home Sales:
- The ADP National Employment Report showed an increase of 216,000 in November (consensus 160,000) while the October reading was revised down to 119,000 from 147,000.
- Personal income increased 0.6% in October (consensus +0.4%), bolstered by a 0.5% increase in compensation of employees and a 1.8% jump in personal interest income.
- Personal spending was up 0.3%, and while that was below the consensus estimate calling for 0.5% growth, it was essentially in-line with expectations when taking into account that personal spending growth in September was revised up to 0.7% from 0.5%.
- Core PCE Prices increased 0.1%, in-line with the consensus.
- The MNI Chicago Business Barometer checked in at 57.6 for November (consensus 52.0) versus 50.6 in October. The November reading marked the highest reading for the barometer since January 2015.
- New Orders increased to 63.2 from 52.5
- Pending Home Sales ticked up 0.1% in October (consensus 0.7%) and the September reading was revised down to 1.4% from 1.5%.
- The weekly MBA Mortgage Index fell 9.4% after rising 5.5% last week.
Tomorrow, weekly initial claims (consensus 253K) will be reported at 8:30 ET while October Construction Spending (consensus 0.6%) and the November ISM Index (consensus 52.1) will cross the wires at 10:00 ET.
- Russell 2000 +16.3% YTD
- Dow Jones Industrial Average +9.8% YTD
- S&P 500 +7.6% YTD
- Nasdaq Composite +6.3% YTD
Street Insider: Actelion's CEO Said to Reject Full Takeover by Johnson & Johnson (JNJ), May Sell Unit - Source