>>> What to look at today -23rd of February 2017

Dow +0.16% S&P -0.11% Nasdaq -0.09% Russell -0.46%
US Market Closed Mixed with Dow higher & S&P, Nasdaq slighlty lower...Russell even more. FOMC minutes showed that many FOMC members see a rate hike "fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations." And while recent hotter than expected ISM Index, Nonfarm Payrolls, PPI, CPI, Retail Sales, Housing Starts, and Existing Home Sales readings met the rate hike prerequisite, the statement's vague "fairly soon" clause gives little indication as to the timeline of said rate hike. fed funds futures market now points to May as the most likely time for the next rate hike to be announced with an implied probability of 52.1%, up from 45.9% yesterday. The implied probability of a March rate hike increased to 22.1% from yesterday's 17.7%. TOL +6.1% on ern. Financials (+0.1%) and telecom services (+0.1%) closed in line with the consumer discretionary sector while technology (+0.2%), materials (+0.3%), and utilities (+0.4%) performed a bit better. Energy (-1.6%) led the five remaining sectors lower with Crude oil -1.4% @ $53.59/bbl. US After Hours SQ +9%, CTRP +5%, OCN +4%, HPQ +2%, TSLA +1.5% following earnings/guidance... TSRA -13.5%, LB -13% following earnings/guidance, ORIG -36.1% on earnings/financing update. Asia equity markets are modestly lower as investors digest the implications of the latest Fed policy minutes. Fed noted it may be appropriate to raise rates "fairly soon", while some members urged going at the upcoming meeting to give FOMC more flexibility. However, traders looked for a more concrete signal as March Fed funds futures probability remained below 20%, even as the odds for May has risen above 50%. The caveat is that May does not have an accompanying press conference while March does, and the Fed has never raised rates in a meeting when the Fed chair did not take the podium. USD weakened in US hours on release of the Fed minutes and remains under pressure in Asian session. Rate decisions from Brazil and South Korea were also on the docket today. Brazil was unanimous to cut for the 4th straight time by 75bps - in line with consensus. After yesterday's property price data from China, Commerce Ministry official said the govt will continue to stabilize housing market and also doing preparation to roll out a property tax, while planning to maintain differentiated curbs across the cities. Japan's pension fund GPIF had raised its holdings of short-term assets due to negative interest rates; Will switch to JGBs when rates rise

Nikkei -0.04% Hang Seng -0.41% CSI -0.77% Shanghai -0.63%

Eur$ 1.0555 CNH 6.8643 CNY 6.8778 JPY 113.25 GBP 1.2435 CHF 1.0106 RUB 57.9088 WTI$54.04 +0.82%

S&P -0.04% EuroStoxx +0.06% Dax -0.03% SMI -0.07% FTSE +0.07%

Macro :
- Don’t Rush to Buy VIX Calls Despite Low Volatility: Weeden
- Mnuchin Says Strong Dollar Reflects Confidence in Economy: WSJ
- FOMC Saw Risks That May Call for Different Policy Path: Minutes

Keep an eye on :
- ARL GY : Aareal Bank Raises Dividend, Sees Operating Profit Drop in 2017
- ADP FP : ADP Says Low-Cost Airline Traffic in Paris Grew 13.1% in 2016
- AF FP : Air France Flight Attendants Will Seek to Block New Airline
- CS FP : Axa 2016 Full-Year Net Income EU5.83B; Est. EU5.96B ,Axa Will Keep Developing JV With Monte Paschi: CFO Harlin
- BSLN SW : Basilea Takeover Speculation Lifts Shares on Wednesday: Reuters
- BKIA SM : Bankia Proposes 1-for-4 Reverse Stock Split
- EN FP : Bouygues Sees Improvement in Profitability in 2017
- CO FP : Cnova Filed to De-List From NASDAQ From March 3
- CMBN SW : Cembra Money Bank 2016 EPS Increases, Raises Dividend
- CNP FP : CNP Assurances FY Net Income EU1.2B; Est. EU1.12B
- DAI GY : Daimler to Increase Supervisory Board Member Pay by 20%: BZ
- DECB BB : Deceuninck Sees Further Growth; 2016 Adj. Ebitda Climbs 16%
- DL NA : Delta Lloyd 2016 Solvency Ratio at Lower End of Target Range
- DEXB BB : Dexia CET1 Ratio Drops to 16.2% After AFS Exemption Expires
- DIA SM : DIA 2016 Net EU174m, Misses EU180.2m Average Estimate
- DLG GY : Dialog Semiconductor Sees 1Q Rev. $255m to $285m
- DUE GY : Duerr 4Q Sales Fall 4% to EU965.1m, Order Intake Rises
- EDEN FP : Edenred FY Net EU180m; Est. EU185m
- EDF FP : EDF Said to Hire Santander for Fotosolar Sale: Economista
- EDP PL : EDP Renovaveis Sees Rise in Payment With Spain Regulatory Review
- FGR FP : Eiffage FY Net Jumps 33%; Forecasts Earnings Growth in 2017
- XOM US : Exxon Mobil Cuts Proved Reserves by 3.3B BOE on Oil Rout
- FIE GY : Fielmann Profit Beats Estimates as 2016 Market Share Set to Rise
- G IM : Generali Expects 28% of New Business From Asia by 2020: Il Sole
- HEIJM NA : Heijmans 2016 Underlying Operating Loss Increases to EU66m
- HEN3 GY : Henkel 4Q Adj. Ebit Beats Estimates; Expects 2017 Growth
- INGA NA : ING Belgium Said to Name Erik Van Den Eynden CEO: De Tijd/L’Echo
- IPS FP : Ipsos FY Net Income Climbs 15%; Posts Organic Revenue Growth
- JMT PL : Jeronimo Martins 2016 Net EU593m Vs. Est. EU607m
- KINVB SS : Kinnevik to Sell Half of Its Stake in Rocket Internet (6.60%)
- LUPE SS : Lundin Mining 4Q EPS Beats Highest Est.
- MBWS FP : Marie Brizard Signs China Distribution Accord With Cofco: Echos
- MAU FP : Maurel & Prom Estimates 2016 Total Loss of EU30m
- ORA FP : Orange 2016 Adj. Ebitda EU12.68B; Analyst Est. EU12.59B
- UG FP : May and PSA Have Desire to Protect Jobs at Vauxhall: Statement
- UG FP : France Says Backs PSA Plans to Buy GM’s European Business
- PM US : Philip Morris Boosts 2017 EPS Guidance; Shares Hit Session High
- DPW GY : Postbank Sees Income Gain From Account Management Fees: SZ
- PSM GY : ProSiebenSat.1 Sales Beat Estimates; Proposes EU1.9 Dividend
- RECIB SS : Recipharm 4Q Sales Beat Estimate, Ebitda Misses
- RNO FP : Carlos Ghosn Says He’ll Remain Renault Chief Executive Officer
- ROG VX : Roche Reports Death in ACE910 Study, EU Hemophilia Group Says
- RKET GY : Kinnevik Sold Rocket Internet Shares at EU19.25 a Share
- SIE GY : Siemens CEO Plans Holding Structure for Company: Handelsblatt
- S32 LN : South32 Proposed Buy of Peabody’s Metropolitan Hits Speed Bump
- SREN VX : Swiss RE 4Q Net Income $517M; Plans Up To CHF1B Share Buyback
- SYNN VX : Chemchina Extends Public Tender Offers for Syngenta to April 28
- TEG GY : TAG Immobilien FY Rental Rev. Beats Top Est., Lifts Forecasts
- TECH FP : Technicolor FY Sales Misses Ests., Sees Slide in 2017 Ebitda
- TEF SM : Telefonica 4Q Oibda EU3.2B; Est. EU3.3B
- TEF SM : Telefonica’s O2 Extends Entertainment Venue Sponsorship a Decade
- TEL NO : Telenor Says Transaction With Bharti Will Not Trigger Impairment
- TEN IM : Tenaris 2016 Capital Spending $787m; Est. $863.5m, Tenaris 4Q Has Modestly Positive Impact for Stock: Evercore ISI
- TSLA US : Tesla 4Q Adj. Loss/Share Narrower Than Est.; Shares Rise
- TKA GY : Thyssenkrupp Readies for EU Steel Consolidation: Handelsblatt
- TIF US : higher in after hours on Jana 13D, 4.9% passive stake
- UCB BB : UCB Sees 2017 Revenue at EU4.25b-EU4.35b, Below Estimates
- VRX US : Allergan CEO Says He Has ’No Interest’ in Buying Valeant
- VK FP : Vallourec Sees Signs of Recovery in Energy Industry Demand: FT
- VIE FP : Veolia FY Current Net EU610M; Div. EU0.80/Share
- DG FP : Vinci-Led Group Wins EU926m Paris Region Metro-Tunnel Contract
- VOD LN : SoftBank Denies It’s Looking for a Stake in Merged Vodafone-Idea
- WDH DC : William Demant FY Rev. Matches Est.; Sees Ebit Growth in 2017
- WOOD LN : Wood Group mulls acquisitions

>>> Europe : Brokers Upgrades & Downgrades - 23rd of February 20

>>> Up
*Airbus Raised to Overweight at JPMorgan, PT EU88.50
*Anglo American Raised to Market Perform at Avior, PT ZAR245
*Banque Cantonale Vaudoise Raised to Neutral at Credit Suisse
*BHP Raised to Market Perform at Avior, PT ZAR235
*CaixaBank Raised to Reduce at AlphaValue
*Drax Raised to Buy at Investec
*Hays Raised to Outperform at Credit Suisse
*Hispania Activos Inmobiliarios SOCIMI Raised to Buy at Deutsche
*Inmarsat Raised to Outperform at Macquarie, PT GBP8.50
*OMV Raised to Buy at Citi, PT EU41
*UniCredit Raised to Buy at Berenberg, PT EU15
*Vidrala Raised to Buy at Ahorro Corporacion, PT EU55.80

>>> Dowm
*Allianz Cut to Market Perform at Bernstein, PT EU165
*Amplifon Cut to Neutral at Main First Bank AG, PT EU10.60
*Beni Stabili SpA SIIQ Cut to Hold at SocGen, PT EU0.60
*Berkeley Energia Cut to Hold at Liberum
*Bravida Holding Cut to Hold at SEB Equities, PT SEK63
*HALFORDS Cut to Sell at Peel Hunt
*PCAS Cut to Hold at Portzamparc, PT EU13.50
*St Galler Kantonalbank Cut to Underperform at Credit Suisse
*SECTRA CUT TO HOLD VS BUY AT NORDEA
*Wallenstam Cut to Sell at DNB Markets

>>> Initiation
*Nexus Rated New Buy at Berenberg, PT EU23

>>> Call

>>> Financiere Turenne Lafayette second round auction attracts more than ten su

Financiere Turenne Lafayette second round auction attracts more than ten suitors – report (translated)
23 FEB 2017
The second round auction of troubled privately owned food processing group Financière Turenne Lafayette has attracted more than ten parties, French daily Le Figaro reported, citing several sources. Turnaround funds, which could later sell the group piecemeal, are among the potential buyers, they added.
However, executor for the estate of Monique Piffaut, the now-deceased owner and head of the France-based company, said that the French government will not allow turnaround funds to acquire the company.
The report went on to say that a sale of Financière Turenne Lafayette by division is likely and could value the group at between EUR 200m and EUR 400m. A sale of the delicatessen and cooked meats division, including the Madrange and Paul Predault brands, is understood to have attracted the interest from competitors Bigard, Cooperl, and Fleury Michon, it added.
The Fresh pasta division, with revenues of about EUR 64m annually, is believed to be eyed by French supermarkets group Intermarché ITM.
The canned food division, which included brands such as William Saurin and could be worth between EUR 120m - EUR 150m if relaunched, is believed to be of interest to competitor D’Aucy (formerly known as Cecab).
Finally, the report said, without citing sources, that Brazilian meat giant JBS [BVMF:JBSS3], a German industrial food group and a consortium from China are also believed to be interested in acquiring the entire group, though they will have to quickly detail their intentions.
The French government and creditor banks have granted Financiere Turenne Lafayette a EUR 66m loan in order to finance the payment of wages and suppliers for a period of one year while the search for buyers goes on, the article said. Rothschild is the financial advisor for the sale while Accuracy is assisting with accounting.
A deal concerning most of the assets could be finalised by summer.
Financiere Turenne Lafayette has 3,200 employees in 21 production sites in France.

>>> Asian Update

Asia Mid-Session Market Update: Austalia CapEx falls more than expected; BOK on hold; Fed minutes lift likelihood of a May hike

***US Session Highlights***
- (US) JAN EXISTING HOME SALES: 5.69M V 5.55ME (highest since Feb 2007)
- OPEC Committee reports sees Jan OPEC cuts compliance at above 90%, sees non-OPEC cuts compliance near 60% - press
- (US) Pres Trump: to submit a healthcare reform plan by mid-March
- (US) Minutes from the previous FOMC meeting showed the committee said it would be appropriate to raise rates “fairly soon” should jobs and inflation come inline with expectations

***US markets on close: Dow +0.2%, S&P500 -0.1%, Nasdaq -0.1%***
- Best Sector in S&P500: Utilities
- Worst Sector in S&P500: Energy
- Biggest gainers: GRMN +7.3%, DOW +4.0%, DD +3.4%, VFC +2.1%, AET +1.9%
- Biggest losers: FSLR -8.3%, NFX -8.1%, CXO -6.8%, NEM -3.9%, MRO -3.8%
- At the close: VIX 11.7 (+0.2pts); Treasuries: 2-yr 1.22% (-2bps), 10-yr 2.42% (-1bp), 30-yr 3.04% (flat)

***US movers afterhours***
- UCTT: Reports Q4 $0.36 v $0.27e, R$174.5M v $173Me; Guides Q1 adj $0.40-0.45 v $0.26e, R$190-197M v $165Me; +13.8% afterhours
- SQ: Reports Q4 $0.05 v -$0.09e, R$452M v $453Me; Guides Q1 adj 0.00-0.02 v -$0.10e; EBITDA $14-18M, adj Rev $440-452M v $450Me; +8.6% afterhours
- CTRP: Reports Q4 $0.17 v -$0.01e, Total Rev $746M v $734Me; +5.0% afterhours
- HPQ: Reports Q1 $0.38 v $0.37e, R$12.7B v $11.8Be; +2.4% afterhours
- TSLA: Reports Q4 -$0.69 v -$0.13e, R$2.28B v $2.20Be; Model S and Model X K deliveries 22.3K units, -10% q/q, +27% y/y; +1.5% afterhours
- FIT: Reports Q4 -$0.56 v -$0.48e, R$573.8M v $576Me; +1.2% afterhours
- CAKE: Reports Q4 $0.67 v $0.67e, R$603.1M v $594Me; announces $100M share repurchase plan (3.6% of market cap); -0.5% afterhours
- NVDA: Nomura Cuts NVDA to Reduce from Buy, price target: $90; -2.4% afterhours
- SAM: Reports Q4 $1.75 v $1.19e, R$219.4M v $226Me; Guides initial FY17 $4.20-6.20 v $6.35e; -7.7% afterhours
- JACK: Reports Q1 $1.18 v $1.24e, R$487.9M v $498Me; -9.7% afterhours
- ARRS: Reports Q4 $0.79 v $0.70e, R$1.76B v $1.69Be; Guides Q1 $0.36-0.40 v $0.67e, R$1.44-1.49B v $1.66Be; -10.4% afterhours
- LB: Reports Q4 $2.03 v $1.90e, R$4.49B v $4.50Be; Guides Q1 $0.20-0.25 v $0.50e; Guides initial FY17 $3.05-3.35 v $3.70e; -13.1% afterhours
- TSRA: Reports Q4 $0.45 v $0.61e, R$70.1M v $72.0Me; changes name and stock symbol; -13.6% afterhours

***Asia Key economic data:***
- (BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 12.25%; AS EXPECTED
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
- (AU) AUSTRALIA Q4 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -2.1% V -0.5%E
- (JP) JAPAN JAN PPI SERVICES Y/Y: 0.5% V 0.5%E

***Asia Session Notable Observations, Speakers and Press***
- Asia equity markets are modestly lower as investors digest the implications of the latest Fed policy minutes. Fed noted it may be appropriate to raise rates "fairly soon", while some members urged going at the upcoming meeting to give FOMC more flexibility. However, traders looked for a more concrete signal as March Fed funds futures probability remained below 20%, even as the odds for May has risen above 50%. The caveat is that May does not have an accompanying press conference while March does, and the Fed has never raised rates in a meeting when the Fed chair did not take the podium.
- USD weakened in US hours on release of the Fed minutes and remains under pressure in Asian session. USD/JPY is down over 30pips from the highs below 113.10, EUR/USD up 30pips above 1.0570, while NZD/USD is up 40pips at 0.7215. AUD/USD is the only exception among the majors, trading unchanged on the day around $0.77 after falling some 30pips on soft headline Q4 Australia Capex data below $0.7670.
- Australia Q4 capex declined for the 4th straight quarter, and while the decline was bigger than expected, it was also the smallest decline of the past four. Components are typically more critical for this release, and here the picture was more mixed. Economists found the 0.4% rise in Plant/Machinery spending vs decline of 1.9% prior especially noteworthy and shrugged off the initial estimate for next year's spending slowing to A$80.6B from the revised A$112.2B for this year. AUD/USD initially fell on the headline and then recovered all of its lost ground toward the market close.
- Rate decisions from Brazil and South Korea were also on the docket today. Brazil was unanimous to cut for the 4th straight time by 75bps - in line with consensus - citing mixed economic activity signs and affirming next year's inflation outlook. BOK stood pat for its 9th straight time and also voted unanimously, though policymakers pledged to monitor external risks of protectionism and US-China policy along with domestic factors such as rising household debt.
- After yesterday's property price data from China, Commerce Ministry official said the govt will continue to stabilize housing market and also doing preparation to roll out a property tax, while planning to maintain differentiated curbs across the cities.

China:
- (CN) Morgan Stanley raises CNY forecast for 2017-end to CNY7.1 from CNY7.3 - press
- (CN) China Deputy Housing Minister: China has the ability and methods to stabilize housing market

Japan:
- (JP) Japan's pension fund GPIF had raised its holdings of short-term assets due to negative interest rates; Will switch to JGBs when rates rise - press
- (JP) Bank of Japan (BOJ) Member Kiuchi (dissenter): Must make 2% inflation target a medium to long term target
- (JP) BOJ considering dates of planned JGB buying operations ahead of time to avoid a jump in yields due to market uncertainty - Nikkei

Australia/New Zealand:
- (AU) Economists with AMP, ANZ, and JPMorgan note today's Australia Q4 CAPEX data looks worse than it is given the rise in Plant/Equipment spending - SMH

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.2%, Hang Seng -0.5%, Shanghai Composite -0.4%, ASX200 -0.3%, Kospi flat
- Equity Futures: S&P500 -0.1%; Nasdaq flat; Dax -0.1%; FTSE100 -0.2%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0540-1.0565; JPY 113.10-113.45; AUD 0.7665-0.7700; NZD 0.7175-0.7210
- Apr Gold +0.4% at $1,238/oz; Apr Crude Oil +0.9% at $54.08/brl; Mar Copper -0.6% at $2.72/lb
- (US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks
- JGB: (JP) Japan's MoF sells ¥1.0T in 0.6% (0.6% prior) 20-year JGBs; Avg yield: 0.669% v 0.589% prior; bid-to-cover: 4.05x (highest since 2014) v 3.54x prior
- (CN) PBOC SETS YUAN MID POINT AT 6.8695 V 6.8830 PRIOR; first stronger Yuan setting in 4 sessions
- (CN) PBOC to inject combined CNY50B v CNY120B prior in 7-day, 14-day and 28-day reverse repos
- SWIFT: CNY use in international transactions: 1.68% of total in Jan v 1.68% prior

***Asia equities / Notables / movers by sector***
- Consumer discretionary: 493.HK Gome Electrical Appliances Holding +3.7% (profit warning); 2020.HK Anta Sports Products -2.3% (FY16 result); QAN.AU Qantas Airways +5.1% (H1 result); CWN.AU Crown Resorts +8.3% (H1 result); Invocare +9.0% (FY16 result); FLT.AU Flight Centre -2.6% (cuts guidance)
- Consumer staples: AHY.AU Asaleo Care +7.4% (FY16 result)
- Financials: AAD.AU Ardent Leisure -21.1% (H1 result); MMS.AU McMillan Shakespeare +3.2% (Citi raises rating)
- Industrials: 7201.JP Nissan Motor Co -0.6% (names new CEO); RCR.AU RCR Tomlinson +7.2% (H1 result)
- Technology: ISD.AU iSentia Group -7.5% (Deutsche Bank cuts rating); XIP.AU Xenith IP Group -19.3% (H1 result)
- Materials: ILU.AU Iluka Resource -2.1% (FY16 result); AWC.AU Alumina -1.2% (FY16 result); AGO.AU Atlas Iron -9.3% (H1 result); ABC.AU Adelaide Brighton +4.3% (FY16 result)
- Healthcare: EHE.AU Estia Health +12.6% (affirms guidance)
- Utilities: EPW.AU ERM Power +5.4% (H1 result)

>>> US After Hours Summary: SQ +9%, CTRP +5%, OCN +4%, HPQ +2%, TSLA


After Hours Summary: SQ +9%, CTRP +5%, OCN +4%, HPQ +2%, TSLA +1.5% following earnings/guidance... TSRA -13.5%, LB -13% following earnings/guidance, ORIG -36.1% on earnings/financing update

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: CBMX +19.5%, UCTT +13.8%, TGB +10.7%, SQ +8.6%, DOOR +6.6% (light volume), TRNC +5.8%, CTRP +5%, OCN +3.7%, COTV +3.3%, GDOT +2.7%, OAS +2.6%, HPQ +2.4%, RGR +2.3%, SXL +2.2%, ETP +1.8%, TSLA +1.5% (also CFO stepping down to pursue position in public policy), FIT +1.2%, RRC +1.2%

Companies trading higher in after hours in reaction to news: NAK +30.9% (modestly rebounding; comments on US House Committee on Science, Space and Technology letter to EPA to withdraw Pebble Project veto), PTX +27.7% (attributed to favorable court ruling), URRE +11% (reports 'favorable' lithium concentrations at the Columbus Basin Project), ASPS +8% (continued strength after the CEO disclosed purchase of 5,250 shares), DNR +4.8% (still checking), SHPG +2.2% (higher in extended trade as media outlets recirculate release from the European Haemophilia Consortium regarding a patient death in Roche's [RHHBY] HAVEN 1 clinical trial evaluating Emicizumab), TIF +1% (JANA Partners filed a 13D confirming its 4.9% active stake)

Companies trading lower in after hours in reaction to earnings/guidance: ORIG -36.1% (continues to explore alternatives-will consider all options including restructuring plan through schemes of arrangement or under Chapter 11), TSRA -13.5%, LB -13.1%, HBM -12%, ARRS -10.4% (also to acquire Brocade Communication Systems Ruckus Wireless and ICX Switch business for cash consideration of $800 mln), JACK -9.7%, SAM -7.7%, ELGX -5.8%, CSGP -5.5%, FMI -5.3%, SBLK -4.1%, LGCY -2.4%, CHSP -1.2%, WB -1.2%

Companies trading lower in after hours in reaction to news: NGD -7.2% (announces bought deal financing for 53.6 mln common shares at $2.80/share), CLD -6.7% (prices offering of 13,500,000 shares of common stock at $5.10 per share), MYSZ -5.2% (discloses entry into Securities Purchase Agreement with an accredited investor), NVDA -2.4% (attributed to analyst downgrade), APAM -1.6% (commences 5,626,517 common stock offering)

>>> Apple scouting for acquisitions to fill portfolio gaps, accelerate product r

Apple scouting for acquisitions to fill portfolio gaps, accelerate product roadmaps — CFO

  • Original media content driving conversion rates, store transactions
  • Repatriation would provide more flexibility, allow company 'to move more quickly'

Apple [NASDAQ:AAPL] looks to obtain technologies that fill gaps in its portfolio or that accelerate its product roadmaps, CFO Luca Maestri said.
Even though the technology juggernaut has historically purchased smaller private companies, it would acquire a large public company if the target was the right strategic fit, Maestri said on the sidelines of the Goldman Sachs Technology and Internet Conference in San Francisco, California last week.
The issue is not whether a target is public or private, he said, but whether it can be acquired at the right price to create value for shareholders.
The only public company Apple has ever bought is Melbourne, Florida-based fingerprint sensor technology developer AuthenTec for USD 356m in 2012, according to Mergermarket’s database and research team.
Apple typically buys between 15 and 20 businesses a year, Maestri said.
The company reported USD 246bn in cash holdings as of 31 January.
During the investor presentation, Maestri noted that music is one of the most important use cases for Apple devices, which is why its largest acquisition to date was privately held Los Angeles, California-based streaming service Beats Music and Beats Electronics for more than USD 3bn in 2014.
Through its music business, he said Apple has discovered that ownership of exclusive content makes a meaningful difference in the number of transactions that occur at Apple stores and the conversion rates of its software subscription trials.
Now Apple is working to apply the same strategies it has deployed in music to video. The Cupertino, California-based giant is experimenting with the production of original television shows, such as “Carpool Karaoke,” which it purchased the first-window rights to last year for its streaming service.
Apple plans to see how these initial TV shows are received by consumers and “go from there,” Maestri said. Apple is already a large distributor of video through its computer, smartphone, tablet and television platforms.
Despite the enormous success of its iPhone business, the company still sees plenty of growth and innovation ahead as smartphones increasingly become more ingrained in consumers’ lives, Maestri said. Apple wants to gain market share in emerging markets, such as China and India, where penetration is low, he said. The company also continues to work on advancing key foundational technologies that go into the product, including processors, sensors, batteries, displays and cameras, the CFO said.
To that end, the amount it spends on research and development is higher than in the past, Maestri said, because its portfolio of products and services is larger. Developing technologies in-house allows it to push the envelope of innovation and have better control of costs, time and quality, he said.
The US tax code was also a topic of discussion.
The existing corporate tax rate of 35% is punitive for companies, he said, and creates tensions around the world. Apple has long championed tax reform, Maestri said, noting that Congress is expected to make changes this year.
If companies are allowed to repatriate capital held overseas, he said it would provide Apple additional flexibility to allow it “to move more quickly.”
The Trump administration’s proposed border tax, however, would harm tech companies and the economy, Maestri contended, because the financial burden would be passed on to consumers. Not only are the majority of its products manufactured overseas but Apple’s suppliers are also there.

>>> US Close Dow +0.16% S&P -0.11% Nasdaq -0.09% Russell -0.46%

Closing Market Summary: Averages Close Wednesday Mixed

Investors tapped the brakes on Wednesday, displaying slight caution amid a wave of potentially influential economic reports. The Nasdaq (-0.1%) closed in line with the S&P 500 (-0.1%) while the Dow outperformed (+0.2%), recording its ninth consecutive gain.

The major averages started today's session with modest losses, but they ticked up following Existing Home Sales for January. The report came in better than expected, showing an annualized rate of 5.69 million units while the Briefing.com consensus expected a reading of 5.57 million. 

Equity indices then slid slowly into the next event on Wednesday's calendar, a speech from Fed Governor Jerome Powell. However, the speech turned out to be a non-event as Mr. Powell provided little to no new information, stating that a gradual tightening of policy is appropriate as long as the economy continues to behave roughly as expected.

Finally, the last major event on the calendar, the FOMC Minutes, was met with a muted response from investors. The minutes showed that many FOMC members see a rate hike "fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations."

And while recent hotter than expected ISM Index, Nonfarm Payrolls, PPI, CPI, Retail Sales, Housing Starts, and Existing Home Sales readings met the rate hike prerequisite, the statement's vague "fairly soon" clause gives little indication as to the timeline of said rate hike.

In summary, after all the noise, the fed funds futures market now points to May as the most likely time for the next rate hike to be announced with an implied probability of 52.1%, up from 45.9% yesterday. The implied probability of a March rate hike increased to 22.1% from yesterday's 17.7%.

On the earnings front, Toll Brothers (TOL 33.93, +1.94) spiked 6.1% after the luxury homebuilder reported better than expected top and bottom lines and issued upbeat delivery guidance. More notably, Toll Brothers' bullish disposition lifted the iShares U.S. Home Construction ETF (ITB 30.04, +0.12) to its highest level in over a decade. The consumer discretionary sector (unch) capitalized on hombuilders' solid showing, outperforming the benchmark index. 

Financials (+0.1%) and telecom services (+0.1%) closed in line with the consumer discretionary sector while technology (+0.2%), materials (+0.3%), and utilities (+0.4%) performed a bit better. 

Energy (-1.6%) led the five remaining sectors lower, succumbing to a 1.4% loss in crude oil. The energy component trades in the red for the week after squandering all of Tuesday's gain in Wednesday's session. WTI crude closed its trading day at $53.59/bbl.

Treasuries closed Wednesday's session slightly higher. The benchmark 10-yr yield finished one basis point lower at 2.42%.

Today's economic data included January Existing Home Sales and the MBA Mortgage Index:

  • Existing home sales for January increased 3.3% from December to an annualized rate of 5.69 million units while the consensus expected a reading of 5.57 million.
    • The key takeaway from the report is that high prices and limited inventory continue to compress the affordability factor for prospective buyers, and have prevented existing home sales from being even stronger.
  • The weekly MBA Mortgage Index decreased 2.0% to follow last week's 3.7% decline.

Tomorrow's economic data will include Initial Claims (consensus 242,000) and December FHFA Housing Price Index (Consensus 0.4%). The two reports will cross the wires at 8:30 am ET and 9:00 am ET, respectively.

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