>>> 3 Italia/Wind merger may be at risk over Iliad refusing to enter Italian mar

3 Italia/Wind merger may be at risk over Iliad refusing to enter Italian market

The proposed merger between Italian mobile phone operators 3 Italia and Wind could be at risk, Italian language daily Il Messaggero reported.
The unsourced article said a draft law by the Italian government asking up-front payments in 2017 to use radio frequencies would cost Iliad [EPA: ILD] EUR 300m. This would put Iliad's business plan at risk. The French teleco is understood to be displeased at the move and could, therefore, decide not to enter the Italian market, it added.
However, as reported, the 3 Italia/Wind merger is contingent on meeting European antitrust requirements to sell some of its frequencies to Iliad. If this proves impossible, the merger could be threatened, it noted.

>>> Street Pre-Market Indications

BOFA-ML
NAT EX - Solid on FX tailwind. Expect cons to move towards our ests (365p)..+3%
NORSK H - Big beat up 9% at underlying EBIT. Reit Aluminium forecast(36.7)+2-3%
MTU - 3Q adjusted EBIT of €139.7mn YoY, +13% vs. cons €124mn (98.62)......+2-3%
LUXOTTICA - Soft Q3 revs up 1.4% cFX & 2017 guidance not confirmed (43.7).+2-3%
STJ - Confident update. Gross sales 5% beat. Biz mix looks unch QoQ (968p)..+2%
COVESTRO - EBITDA +12% v cons & strong vol grwth. EBITDA guide u/graded (54)+2%
DIA - Inline EBITDA with margin flat YoY. Do not expect cons to move (5.6)..+2%
MINERS - Copper +0.85%, Iron Ore +0.9% with BHP OZ +0.4% & RIO OZ +2.4%...+1-2%
RANDSTAD - Solid but unexciting Q3. Org growth beat +4.2% v +3% cons (46).+1-2%
ORANGE - Inline. Q3 rev 0.5% beat driven by Spain & France at €10.32B (14.2)+1%
ANGLO - Small prodn beat with no update on Australian met coal sale (1076)..+1%
SWEDBANK - Ahead on every line. Keeps upwards momentum on track (207.8).....+1%
AIR LIQUIDE - 3Q sales inline. U/lying growth +2% a touch ahead of cons (93)u/c
WHITBREAD - 1H LfLs are slightly soft but EBIT is inline with cons (3843p)..u/c
TOTAL - Gas pipe explosion at Gonfreville refinery said to injure 5 (44)..-0.5%
PEARSON - We DOWNGRADE to U/P. At best an opportunity cost til 3Q17 (754)...-1%
TODS - 3Q sales €260m, 2% light v BAML with retail sales -6.8% at cFX (50)..-1%
NOVARTIS - Low qual beat. Sales inline, op profit +4% & EPS +3% v cons (74).-1%
GKN - Ok with 3-4% rev beat but outlook takes the shine off the nos (317p)-1-2%
UBM - We DOWNGRADE to Underperform; 640p PO (the only sell on stock) (703p).-2%
SYNGENTA - Sales of US$2.5bn, -3.5% y/y, -2% v cons. Vols -7% v -9% (414)...-2%
ALFA LAVAL - Execution ok, but orders weak & cost savings look light (129)-2-3%
SAFRAN - Disappointing aftermkt growth (-1.6% v ML +2%) is risk to 17 (62)-2-3%
WARTSILA - Headlines v weak with orders 3% miss but keeping FY guide (39).-3-5%
DASSAULT SY - EBIT & EPS, 5 & 9% ahead but slightly weak licences (73.5)..-3-5%

RBC PRE-MARKET INDICATIONS:
*AAL: 0% Q3 prod mixed, Iron Ore beat, Coal in line, guidance reit except met coal.
*ADIDAS: 0% read BELLE International -2.5% weak H1 earnings.
*ALFA LAVAL: -2% Q3 orders miss, adj EBITDA in line, restructuring program started.
*COVESTRO: +2% Q3 EBITDA beat +22%, FY outlook raised.
*FORTUM: -2% Q3 interim report, profits miss expect., sales in line.
*GKN: -1% trading statement, 9-month org sales +2%, sees lower market growth.
*LUXOTTICA: +4% Q3 revs 1% beat, net sales in line, FY guidance fonrimed.
*MTU AERO: +1% 9-month earnings ahead, raising FY earnings forecasts.
*NEX: +1% Q3 profit +9%, overseas biz leading, continues to "deliver strong growth".
*NHY: +2% Q3 sales +1%, underlying EBIT well ahead, downstream worse.
*NOVARTIS: -1% Q3 revs light, core EPS beat, FY outlook confirmed.
*ORANGE: +2% Q3 rev beat, EBITDA in line, FY outlook confirmed.
*PWTN: +1% Q3 EBIT in line, Ocean vols -9%, Air +9%.
*RANDSTAD: +4% Q3 revs & EBITDA beat, organic growth +4.2% v 3% est..
*SCHINDLER: +2% Q3 orders 6% ahead consensus, rev slightly light, EBIT ahead.
*STJ: +2% Q3 beat across the board, growing biz in line with Q4 objectives.
*SWEDBANK: +2% Q3 strong, pre-tax prof 15% above cons, slight disappointing cost target.
*SYNGENTA: 0% Q3 revs slight miss, ChemChina regulatory process extends to Q1 2017.
*TOD'S: +1% Q3 sales in line, UK, ML China & USA improving in Sept.
*UCB: +2% Q3 revs 4% ahead consensus, FY forecast confirmed.
*WHITBREAD: +2% H1 revs 8.1%, adj pre-tax beat, FY in line.


CS
3I Group M/P Sells debt management business to Investcorp
Adecco +1% Positive read from Randstad numbers
Airliquide +0.5% Revs 1% light but outlook confident
Alfa Laval +1-2% Headline inline, Equipment division better, Process worse
Aldermore -1% CS DOWNGRADE to NEUTRAL (Risk reward)
AMS -3-4% Q3 in line, Q4 guidance weak, large acquisition
Barclays -1% U.S. DOJ said to delay Bank fines for mortgage misselling
CGG +2-3% Large seismic contract win with Pemex
Covestro +2% EBITDA €574m CSe €528m Cons €513m, FY slightly better
Deut Bank -2% U.S. DOJ said to delay Bank fines for mortgage misselling
Fortum -1-2% 9M Adj net of 372mn vs cons 391m, no guidance given
GKN -1% Trading statement inline but reads cautiously
Huber -2% 9M sales 2% light, guidance slightly disappointing
Kemira -2-3% Q3 revs €596.3m vs cons €622.5m, FY guidance inline
Luxottica +4-5% Net sales inline, Sunglasses Hut and online better
Millicom M/P Numbers slightly light but maintain FY guidance
Miners +2-3% Copper +0.85%, Brent +0.30%, Iron Ore +6.00%, China -0.14%
MTU Aero +2-3% 3Q sales EU1.10b vs cons EU1.13b, raises guidance
Nat Express +2% Record passenger growth in Spain and Morocco
Neste -1-2 Net income inline, operating profit slightly light
Norsk Hydro +1% Q3 small beat vs consensus, primary metal division better
Novartis +0.5% Q2 EPS $1.23 vs est $1.2, low quality beat
One Savings +1% CS UPGRADE to OUTPERFORM (Valuation)
Orange +1% Revs 0.5% ahead & EBITDA 0.2% ahead
Panalpina -0.5% Q3 numbers inline with market expectations
Pendragon M/P Numbers and full year expectations inline
Randstad +3-4% Underlying EBITA of €271m, 259M Cons
RBS -2% U.S. DOJ said to delay Bank fines for mortgage misselling
Safran -2% Q3 sales declined -3.7% and -0.7% organically
Schindler +1-2% Orders slightly better, margin ahead, outlook inline
Shawbrook -1% CS DOWNGRADE to NEUTRAL (Risk reward)
St James +1-2% Net inflows slightly better, AUM £71.4b cons ~70b
Swedbank +3% Bottom line 13% beat, NII a 4% beat, fees a 3% beat
Syngenta R Chemchina regulatory process extending into Q1 2017
Tieto -1% Q3 net sales €341m vs cons €351m, maintains outlook
Todds +2-3% No's inline, improvement in October
Trelleborg M/P Q3 Net Sales 1.6% light, Adj Op Profit 1.7% ahead
UCB UNCH Headline Drug sales ahead re-affirms guidance
Wartsila -1-2% 3Q Adj operating profit light, sales E1.08b vs est. E1.16b
Whitbread -1-2% H1 revs £1.56b vs cons £1.55b, pretax slightly better

MF
*NOVARTIS-Q3 Sales 12.1b(12.2),EPS 1.23(1.20),NI 2.94b(2.85)..........+1% 
*COVESTRO-Rev 3.022b(2.98),Ebitda 574m(524),Net 259m(205),FY up.......+2% 
*PANALAPINA-Gross Pft 1,091.7m,Net Forwarding Rev 3.86b...............-2% 
*DIA-Ebitda 161.7m(161),Net 61.1m(56.5),Adj Ebitda Margin stable......+2% 
*RANDSTAD-Rev 5.35b(5.32),Asj Pft 193m,Ebita 271m,Margin 5.1%.........+2% 
*LUXOTTICA-Net Sales 2.23b(2.22),Co confirms 2016 outlook.............+4% 
*ALSTOM-France wants Alstom to buy Thales Signalling Unit.............-2% 
*EUROFINS-Unit Cited by FDA Over Marketing Unapproved Zika Tests......-1%
*TODS-Q3 Sales 260.1m(260.9),Saleas store sales -14.6%................-2% 
*ALFA LAVAL-Restructuring Costs SK1.5b,700 redundancies...............-4%
*SAFRAN-Q3 Rev 3.99b(4.02),Organic Grth -0.8%,Civil -1.6%.............-2% 
*ORANGE-Restated Ebitda 3.6b(3.59),Rev 10.323b(10.3),o/l unch.........+1% 
*KWS SAAT-Sales 1.04b(1.06),Ebit 112.8m(114),Divi 3(3),o/l ok.........-1% 
*SCHINDLER-Orders 2.59b(2.46),Sales 2.4b(2.41),Ebit 277m(270).........+1% 
*AMS-Rev 146.7m(149.9),Ebit Excl 28m(29.2),Q4 Ebit -50% vs Cons.......-5% 
*MTU AERO-Ebit 139.7m(124.9),Net 97.3m(84.8),Sales 1.1b(1.13).........+1.5% *NESTE-Rev 3.03b(2.9),Adj Net 206m(211.7),Refining margin $9.4........+1.5% 
*AIR LIQUIDE-Q3 Rev 5.077b(5.13)Oragnic 2%(1.9),ToughQ4 comps.........+1%
*SYNGENTA-Q3 Sales 2.5b(2.61),Guidance unch,Chemchina Extended........-1% 
*DASSAULT SYS-Rev 735.5m(729.4),EPS 63c(57.6),Raises EPS Target.......-2% 
*NORSK HYDRO-Rev 20.2b(19.9),NI 1.12b(1.35),Ebit 1.48b(1.35)..........+2%

Jefferies first thoughts:
GKN -3% sales org growth of 2% 
Pendragon unch in line statement, though used car margins a concern 
Whitbread +1% adj PTP better, Costa ok, has been weak
Air Liquide +1% Q3 revs sl light, confirms guidance 
Dia +1% Q3 sales growth +0.8% in line, margin pressures reducing 
Orange +1% EBITDA in line, French mobile service revs sl better 
Luxottica +3% Q3 org sales growth +1.4% in line, maintain guidance, relief 
MTU +1% EBIT better, raises FY guidance 
Norsk Hydro +2% Q3 EBIT 10% beat, maintains FY16 alu outlook 
Novartis -1% sales in line, EPS 3c beat, but not great quality 
Safran -2% Q3 revs weak, due to 1.6% decline in Civil Aftermkt in $ 
Swedbank +2% PTP 14% above cons, better NII, financial income, credit quality 
UCB +1% Q3 revs 5% better, guidance upper end, low quality beat though

Barclays : TomTom NV : Better mix saves 3Q, but 2017?

TomTom NV : Better mix saves 3Q, but 2017?
A revenue mix less reliant on hardware allowed TomTom to report gross margins of
>60% last week, supporting the company’s decision to keep its FY16 EPS guidance
of 23c unchanged despite the lower revenue outlook (€980m vs. €1.05bn).
Addressing the key culprit of 3Q weakness – the faster-than-expected PND declines
within Consumer – we do not foresee an imminent rebound and question whether
growth within the sports category will ever provide a full offset given tough
competition. Momentum within Telematics and Automotive (although lower than
what consensus was expecting) shows management are massaging the revenue mix
well, and should support continued gross margin expansion. However, there is also
the need for continued investments to accelerate TomTom’s value proposition for
the Automotive industry. This is where we differ from the market – we do not
penalize the need for additional R&D, but we do question the rate at which such
investments will translate into operating leverage, forecasting more moderate EBIT
margin growth in 2017/18. Beyond the question of timing, we still believe TomTom
has a key part to play in digital map making and autonomous driving, and look
forward to the Technology Day next month for deeper insight into such innovation.
We continue to believe our PT of €6.25 is fair, placing shares on a more reasonable,
but still premium multiple of 25x/22x 2017/18e P/E. We remain Underweight.

Barclays : Eur. Eq. Strat. : Is the Low Vol bubble bursting?

We believe that the recent underperformance of Low Volatility stocks has further to
run. With valuations at historical extremes, and positioning still overweight, a turn in
inflation could prompt a further rotation from Low Vol stocks into Value stocks.
Low Vol – Anomaly or Bubble? While many have suggested that Low Vol investing
represents an anomaly that consistently delivers alpha, our work suggests otherwise. The
post-2000 outperformance of Low-Vol appears more driven by these stocks getting
expensive (multiple re-rating) rather than superior earnings growth or other behavioural
factors. Longer term data highlights that like most other strategies, Low Vol stocks too
have suffered periods of significant underperformance, especially when valuations have
been as extremely expensive as is the case today.
It’s not just a call on Staples: The expensiveness of Low Vol stocks persists even after we
control for sector weightings. Within several sectors, particularly Discretionary, Financials,
Telecoms, Staples and Healthcare, we find that investors are paying a high premium for
Low Vol stocks. We have provided sector level charts in the Appendix.
Pricing in deflation: Capital structure effects have seen Low Vol stocks rerate as bond
yields have declined. Diving deeper, we find that inflation (and not real interest rates) has
been the dominant driver of Low Vol performance. Today Low Vol stocks appear to be
pricing in deflation in developed economies. However, the spectrum of factors we analyse
suggests a recovery in inflation in 2017.
Prefer Value to Low Vol: Both on the Passive and the Active side, investors appear to be
heavily exposed to Low Vol stocks. Therefore, with inflation potentially accelerating, the
rotation out of Low Vol stocks into Value stocks could be severe (baskets in the
Appendix). Sectorally, Banks, Autos and Insurance stocks continue to trade near P/E lows
despite positive EPS revisions. We add UBS to our European Recommended Portfolio.

>>> What to look at today - 25th of October 2016

Dow +0.43% S&P +0.47% Nasdaq +1% Russell +0.69%
US Markeg Closed higher as M&A activity picked up (AT&T/TWX, COL/BEAV,...), A downturn in crude oil futures contributed to the mid-morning pullback as investors assessed the state of OPEC's proposed supply freeze agreement. Iraq made headlines this morning after indicating that it will seek an exemption from the previously discussed agreement. However, selling remained in check after Iran stated that it would encourage other members to join the output freeze. Crude oil briefly broke below $50.00/bbl before settling at $50.52/bbl (-0.7%; -$0.33). Eight sectors ended in the green with technology (+1.2%), consumer staples (+0.7%), and consumer discretionary (+0.7%) outperforming. On the other hand, telecom services (-0.8%) and energy (-0.2%) finished at the bottom of the board. AMZN +2.3% on GS upgrade of PT $1,050 from $920. Volume were below average 853mil as 779mil shares. US After Hours CR +9%, RMBS +7%, ALSN +2.5% following earnings/guidance, SAEX +37% on tax credit certificate news, CWEI +8% on asset sale/COO news... SONC -11% and V -1% following earnings/guidance. China NDRC spokesperson sees economy ahead of schedule in meeting 2016-end overcapacity cuts in the steel sector, achieving the milestones in November. China Yuan fix set at record low for 3rd straight session as continued strength in US economic data solidifies the case for a FOMC rate hike in Dec. PBoC Dep Gov Yi responds that there is no basis for a persistent depreciation in CNY. Japan press speculates the BOJ will hold off on further easing at its upcoming policy meeting on Nov 1st despite expected downward revision in CPI projections; Report sees BOJ once again pushing back its forecast for reaching 2% inflation to FY18 from FY17 while still maintaining assessment that the trend in inflation is improving.

Nikkei +0.76% Hang Seng -0.03% CSI -0.11% Shanghai +0.0%

Eur$ 1.0885 CNH 6.7831 CNY 6.7750 JPY 104.39 GBP 1.2226 CHF 0.9939 RUB$ 62.0931 WTI$ 50.57 +0.10%

S&P +0.17% EuroStoxx +0.13% Dax +0.17% FTSE +0.27% SMI +0.15%

Macro :
- New York’s Latest Must-Have Luxury Apartment Craze Is Driveways
- Fed Hike Would Provide Chance for BOJ to Weaken Yen: Takenaka

Keep an eye on :
- ABN NA : Hedge Fund Parvus Reports Smaller ABN Amro Stake of 2.87%
- ABN NA : Julius Baer, DBS Said to Mull Buying ABN Amro Asia Private Bank
- AI FP : Air Liquide 3Q Rev. Slightly Misses Ests.; Confirms 2016 Outlook
- AIXA GY : Germany Indicated Security Concerns in Aixtron Bid: Grand Chip
- ARM LN : ARM CEO Warns Hard Brexit May Seriously Damage Business: FT
- BMPS IM : Monte Paschi Board Approves Business Plan: Ansa
- BMPS IM : Monte Paschi Plans Capital Increase EU5b Excluding Option Rights, Monte Paschi Targets Over EU1.1b Net for 2019, ROTE Above 11%
- BMPS IM : Paschi Got Offer From ICBPI for Merchant Acquiring for EU520m
- BUR FP : Burelle 3Q Economic Rev. Climbs 22%
- 1COV GY : Covestro 3Q Adj. Ebitda Rises 22%, Beats Estimate; Outlook Up
- DSY FP : Dassault Systemes 3Q Non-IFRS Sales, EPS beat; Raises EPS Target
- DIA SM : Dia 3Q Adj. Ebitda In Line, Sees Stable 2016 Adj. Ebitda Margin
- GAM SM : Gamesa-Siemens Will Be World-Leader, Martin Tells Expansion
- GBT FP : Guerbet 9m Rev EU568.4m, in Line With Targets
- ILMN US : Illumina, LabCorp Say German Court Issued Preliminary Injunction
- LHA GY : Lufthansa Plane Leasing Rates Won’t Cover Air Berlin Costs: HB
- LUX IM : Luxottica 3Q Adj. Net Sales In Line With Ests., Confirms Outlook
- NEX LN : National Express Says Continues to Deliver Strong Growth
- NHY NO : Norsk Hydro Underlying Ebit Beats; Maintains Global Demand View
- NOVN VX : Novartis 3Q Core EPS Beats, Net Sales in Line; Keeps FY Outlook ,Novartis 3Q Sales of Entresto, Cosentyx Slightly Below Estimates
- NOVN VX : Novartis CEO Says There’s Nothing to Disclose on Roche Stake
- ORA FP : Orange 3Q Revenue, Ebitda In Line With Ests.; Keeps Outlook
- RAND NA : Randstad Reports Resilient Trends in 3Q; Revenue Beats Estimate
- SAF FP : Safran 3Q Sales EU3.99b; 2016 Income Forecast Confirmed
- SAF FP : Safran CEO Sees ‘No Big Change for Europe’ on Rockwell-B/E Deal
- SESL FP : Store Electronic 3Q Revenue Climbs 38%; Repeats FY Outlook
- SHP LN : Shire Loses Kyle Bass Challenge to Patent Claims on Gattex
- SYNN VX : Syngenta: ChemChina Regulatory Process Extending Into 1Q 2017
- SYNN VX : Syngenta Sees Improved LatAm Performance in 4Q, Confirms Goals
- HO FP : France Wants Alstom to Buy Thales Signalling Unit: BFMTV
- TODS IM : Tod’s 3Q Sales in Line, Says Confident on Performance
- TIE1V FH : Tieto 3Q Sales, Ebit Miss Estimates, Keeps FY Outlook
- WTB LN : Whitbread 1H Adj. Pretax Beats Estimates

>>> Europe : Brokers Upgrades & Downgrades - 25th of October 2016

>>> Up
*Assa Abloy Raised to Buy at Jefferies, PT SK190
*Cobham Raised to Neutral at Exane BNP Paribas, PT 130p
*Segro Raised to Overweight at Barclays, PT 520p

>>> Down
*BURBERRY CUT TO NEUTRAL AT MAINFIRST
*Ericsson Cut to Neutral at JPMorgan, PT $5.40
*Ericsson Cut to Add at AlphaValue, PT SK49.80
*Just Eat Cut to Neutral at Macquarie, PT 560p
*Pearson Cut to Underperform at BofAML, PT 680p
*Premier Foods Cut to Hold at Jefferies, PT 50p
*Shawbrook Group Cut to Neutral at Credit Suisse
*VALEO CUT TO HOLD AT HSBC

>>> PT Change


>>> Initiation*
Elia Rated New Buy at Citi, PT EU56

>>> Call
>> Stock
*UBS ADDED TO EUROPEAN RECOMMENDED PORTFOLIO AT BARCLAYS

>>> After Hours Summary: CR +9%, RMBS +7%, ALSN +2.5% followin

After Hours Summary: CR +9%, RMBS +7%, ALSN +2.5% following earnings/guidance, SAEX +37% on tax credit certificate news, CWEI +8% on asset sale/COO news... SONC -11% and V -1% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: CR +8.6%, RMBS +7.1%, LFUS +6.7%, CLGX +4.3% (also raises 2016 buyback target; expands full-year 2017 cost reduction program), CMRE +4%, BLKB +3.5% (reaffirms FY16 EPS, sales; raises OCF guidance; adopts stock compensation accounting standard early), PRK +2.7% (light volume), ALSN +2.5%, SWFT +2.2%, FRGI +1.5% (closes 10 Pollo Tropical Restaurants; will rebrand up to three restaurants as Taco Cabana Restaurants; Q3 comparable restaurant sales at Pollo Tropical decreased 1.0%, comparable restaurant sales at Taco Cabana decreased 4.1%), VASC +1.3%, WASH +1.1% (ticking higher), ZION +1.1%

Companies trading higher in after hours in reaction to news: SAEX +37% (received approx $24.4 mln of tax credit certificates from the state of Alaska's Department of Revenue; says received sooner than expected), GBT +13% (agrees w/ the FDA on the design of its pivotal trial for GBT440 in adults and adolescents with sickle cell disease; expected to begin screening patients by December; decides to discontinue its research and development activities related to GBT18713; Chief Medical Officer retires), WINT +10.2% (releases data from lung deposition study in non-human primates demonstrating uniform distribution of aerosolized KL4 surfactant in all regions of the lung), CWEI +8.1% (Clayton Williams announces agreement to sell Giddings area assets for $400 million; names Patrick Cooke as COO), IMMU +2.3% (light volume; engages Greenhill & Co to serve as a strategic advisor primarily to assist in its ongoing efforts to out-license sacituzumab govitecan), MTL +1.9% (following Monday's 35% move higher)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: OPGN -11.9%, SONC -10.8%, WNC -6.4%, PRA -5% (ticking lower; sees Q3 EPS below estimates), NMFC -3.8% (guides Q3 in-line; commences 5 mln common stock offering), EFII -3.7%, BPL -3.7% (also announced plans to acquire 50% interest in VTTI B.V.'s global marine terminal business for $1.15 bln; commences public offering of 7.5 mln limited partnership units representing limited partner interests), GHL -3.4%, KN -2.8% (ticking lower), CDNS -0.9%, V -0.7%

Companies trading lower in after hours in reaction to news: PLG -10.4% (will raise $40 mln through bought deal financing of 22,230,000 common shares at $1.80/share), HHS -2.6% (ticking lower; Guess? will replace Harte-Hanks Inc. in the S&P SmallCap 600), SGY -2.5% (S&P downgraded Stone Energy to 'CC' on proposed Chapter 11 restructuring; Outlook Negative), CRZO -1% (Carrizo Oil & Gas to acquire Eagle Ford Shale properties from Sanchez Energy for $181 mln in cash and provides Q3 production guidance; commences underwritten public offering of 5 mln shares of its common stock), BANC -0.2% (slightly lower after seeing late spike when PL Capital Advisors discloses 6.7% active stake)

>>> Asian Update

Asia Mid-Session Market Update: South Korea GDP tops consensus; Yuan fix set at new multi-year lows

***US Session Highlights***
- (US) OCT PRELIMINARY MARKIT MANUFACTURING PMI: 53.2 V 51.5E (along with new orders highest since Oct 2015)
- (UK) PM May: there will be a series of parliamentary debates on Brexit, including on high level negotiating principles
- (CA) Bank of Canada and Canada govt renew 2% inflation target regime for 5 more years through 2021
- (US) Fed's Bullard (FOMC voter, Dovish): sees single rate increase as all that is necessary for the time being; jobless rate is close to the Fed's long-term target level
- (US) Fed's Evans (dove, non-voter): sees less headroom to raise rates; overshooting inflation target might be appropriate - comments in Chicago

***US markets on close: Dow +0.4%, S&P500 +0.5%, Nasdaq +1.0%***
- Best Sector in S&P500: Technology
- Worst Sector in S&P500: Healthcare
- Biggest gainers: QRVO +4.7%, NVDA +4.7%, SYMC +3.4%, ADS +3.3%, GM +3.0%
- Biggest losers: COL -6.2%, CHK -4.8%, KMB -4.8%, DVA -4.6%, RIG -3.8%
- At the close: VIX 13.20 (-0.2pts); Treasuries: 2-yr 0.84% (+2bp), 10-yr 1.77% (+2bp), 30-yr 2.53% (+3bp)

***US movers afterhours***
- GBT: Announces pivotal study for GBT440 in Sickle Cell Disease with Primary Hemoglobin endpoint; top-line data anticipated in 1H19; +12.7% afterhours
- CWEI: To sell Giddings Area assets for $400M; Names Patrick Cooke new COO; +8.0% afterhours
- RMBS: Reports Q3 $0.16 v $0.15e, R$89.9M v $86.5Me; +6.7% afterhours
- BLKB: Raises FY16 operating cash flow guidance $147-157M (prior $135-145M); +3.5% afterhours
- CLGX: Reports Q3 $0.73 v $0.65e, R$524M v $504Me; Updates 2017 share repurchase program; increases cost reduction program; +2.8% afterhours
- SWFT: Reports Q3 $0.34 v $0.32e, R$1.01B v $1.04Be; +2.2% afterhours
- V: Reports Q4 $0.78 v $0.73e, R$4.26B v $4.24Be; -1.1% afterhour
- EFII: Reports Q3 $0.58 (ex-items) v $0.58e, R$245.6M v $248Me; Guides Q4 $0.71-0.76 v $0.76e, gross margin approx 50-51% - earnings slides; -3.7% afterhours
- PRA: Reports prelim Q3 op earnings $0.43-0.47 v $0.60e, gross premiums written $230M; -5.0% afterhours
- SONC: Reports Q4 $0.45 adj v $0.44e, R$162.1M v $168Me; -5.0% afterhours

***Asia Session Notable Observations, Speakers and Press***
- China NDRC spokesperson sees economy ahead of schedule in meeting 2016-end overcapacity cuts in the steel sector, achieving the milestones in November. Separately, Dalian spot iron ore prices spike by over 4%, helping AUD outperform other major currencies.
- China Yuan fix set at record low for 3rd straight session as continued strength in US economic data solidifies the case for a FOMC rate hike in Dec. PBoC Dep Gov Yi responds that there is no basis for a persistent depreciation in CNY.
- Japan press speculates the BOJ will hold off on further easing at its upcoming policy meeting on Nov 1st despite expected downward revision in CPI projections; Report sees BOJ once again pushing back its forecast for reaching 2% inflation to FY18 from FY17 while still maintaining assessment that the trend in inflation is improving.
- South Korea Q3 prelim GDP tops q/q and y/y consensus by a decimal, with Construction investment rising by +3.9% q/q and private consumption up just 0.5%. BOK notes Q3 would have been much better if Samsung Electronics did not experience Galaxy Note 7 manufacturing scandal and Hyundai Motors workers did not wage a strike. BOK still sees FY16 GDP target achievable if Q4 growth comes in positive.

***Asia Key economic data:***
- (CN) China urban registered jobless rate declines to 4.0% by end of Sept v 4.5% annual target
- (KR) SOUTH KOREA Q3 PRELIMINARY GDP Q/Q: 0.7% V 0.6%E; Y/Y: 2.7% V 2.6%E
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 113.6 v 117.8 prior

***Asian Equity Markets (23:30ET)***
- Nikkei +0.6%, Hang Seng -0.2%, Shanghai Composite -0.1%, ASX200 +0.6%, Kospi -0.7%

***FX ranges/Commodities/Futures/Fixed Income (23:30ET):***
- EUR 1.0868-1.0882; JPY 104.15-104.50; AUD 0.7590-0.7625; NZD 0.7110-0.7150
- Dec Gold +0.1% at 1,265/oz; Dec Crude Oil -0.1% at $50.49/brl; Copper +0.9% at $2.11/lb
- Equity Futures: S&P e-mini +0.1%, Dax +0.2%, FTSE100 +0.1%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.7744 V 6.7690 PRIOR; lowest CNY setting since 2010
- (CN) PBOC to inject CNY115B in 7-day reverse repos, CNY85B in 14-day reverse repos, and CNY35B in 28-day reverse repos
- JGB: (JP) Japan's MoF sells ¥1.0T in 0.5% (0.5% prior) 20-year JGBs; Avg yield: 0.364% v 0.437% prior; bid-to-cover: 3.49x v 3.33x prior

***Asia movers***
- Consumer discretionary: Gome Electrical Appliances Holdings 493.HK -1.0% (profit warning); SA SA International Holdings 178.HK +7.5% (profit warning); Bega Chees BGA.AU -13.9% (guidance); Shimano Inc 7309.JP +3.7% (Credit Suisse raised to outperform)
- Financials: Dexus Property Group DXS.AU +1.6% (affirms guidance); ClearView Wealth CVW.AU +8.3% (Sony Life to acquire stake); Mirvac Group MGR.AU +1.0% (affirms guidance)
- Industrials: Automotive Holdings AHG.AU +4.2% (confirms to restructuring certain business); GUD Holdings GUD.AU +1.5% (guidance); Nidec Corp 6594.JP +4.9% (H1 result); Mazda Motor Corp 7261.JP +3.1% (may miss profit targets)
- Technology: Hynix Semiconductor 000660.KR +2.4% (Q3 result); NavInfo Co 002405.CN +4.3% (to acquire MediaTek unit); Aconex ACX.AU +9.8% (guidance)
- Materials: Fortescue +5.0% (AGM comments, iron ore prices); Saracen Mineral Holdings SAR.AU -2.1% (Q1 result)
- Healthcare: Greencross GXL.AU +5.1% (on track to hit FY17 network targets); Sirtex Medical SRX.AU +2.2% (guidance)

>>> US Close Dow +0.43% S&P +0.47% Nasdaq +1% Russell +0.69%

Closing Market Summary: M&A Deals and Earnings Boost Stocks

The major averages began the week on an upbeat note as an upswing in M&A activity and sector leadership from the top-weighted technology (+1.1%) space bolstered the broader market. The Nasdaq Composite (+1.0%) finished ahead of both the S&P 500 (+0.5%) and the Dow Jones Industrial Average (+0.4%). 

A recent wave of M&A chatter materialized this weekend when several high-profile deals were announced after Friday's close. AT&T (T 36.86, -0.63, -1.7%) and Time Warner (TWX 86.78, -2.70, -3.0%) made headlines on Saturday after the telecom giant agreed to pay $107.50 per share for Time Warner. The deal is valued at $85.4 billion and marks a premium of 20.1% over Friday's closing price. Meanwhile, Rockwell Collins (COL 79.21, -5.25, -6.2%) agreed to acquire BE Aerospace (BEAV 58.89, +8.28, +16.4%) for $62.00 per share, which will amount to $8.3 billion in total consideration. The size and scope of the deals stoked risk appetite as investors looked for further consolidation.

The benchmark index notched a high at the start of the session and inched off that level throughout the morning. 

A downturn in crude oil futures contributed to the mid-morning pullback as investors assessed the state of OPEC's proposed supply freeze agreement. Iraq made headlines this morning after indicating that it will seek an exemption from the previously discussed agreement. However, selling remained in check after Iran stated that it would encourage other members to join the output freeze. Crude oil briefly broke below $50.00/bbl before settling at $50.52/bbl (-0.7%; -$0.33).

The Treasury complex pulled back today as an upswing in equities and above-consensus economic data weighed on the group. Bond prices extended their decline after U.S. Manufacturing PMI for October came in ahead of estimates. The yield on the 2-yr note finished higher by two basis point (0.84%) while the yield on the benchmark 10-yr note rose three basis points to 1.76%. The spread between the 2-yr and 10-yr yields expanded to 92 basis points from September's 83 basis point differential. 

The benchmark index finished in the upper end of today's trading range, locking in the bulk of today's gain. 

Eight sectors ended in the green with technology (+1.2%), consumer staples (+0.7%), and consumer discretionary (+0.7%) outperforming. On the other hand, telecom services (-0.8%) and energy (-0.2%) finished at the bottom of the board.

The heavyweight technology space (+1.2%) outperformed as participants continued to assess influential quarterly reports from the sector and looked ahead to a busy week on the earnings calendar. Dow component Microsoft (MSFT 61.00, +1.34) jumped 2.3%, extending its post-earnings gain to 6.6%. The name beat analysts' estimates last Thursday. Meanwhile, Alphabet (GOOG 813.11, +13.74) gained 1.7% ahead of releasing its quarterly results Thursday evening. 

In the consumer discretionary sector (+0.7%) Amazon (AMZN 837.71, +18.72) gained 2.3% after Goldman Sachs raised its price target on the stock to $1050 from $920. The name is also scheduled to release its quarterly report this Thursday. Conversely, media company underperformed as investors looked ahead to potential regulatory hurdles that AT&T and Time Warner will face in their merger attempt.

Aerospace and defense names outperformed in the industrial sector (+0.3%) as the sub-group drafted higher alongside BE Aerospace (BEAV 58.89, +8.28). Dow component Boeing (BA 137.45, +1.82) finished ahead of the price-weighted average. Conversely, rail names underperformed as Union Pacific (UNP 89.88, -0.49) fell 0.5%. 

Today's trading volume was below the average of 853 million as 779 million shares changed hands at the NYSE floor.

There was no economic data of note released today.

Tomorrow's economic data will include the 9:00 ET release of the Case-Shiller 20-city Index for August (consensus 5.1%) and the FHFA Housing Price Index for August. Separately, Consumer Confidence for October (consensus 100.8) will cross the wires at 10:00 ET.

  • Russell 2000: +8.0% YTD
  • Nasdaq Composite: +6.0% YTD
  • S&P 500: +5.3% YTD
  • Dow Jones: +4.6% YTD