>>> Street Pre-Market Indications


RBC PRE-MKT INDICATIONS
ACCOR +1% Q3 sales beat but lower top end of '16 forecasts as expected
AIX/LIGHT -2% CREE (-9.7%) earnings miss/warning after hours
AKSO NOBEL +1% Q3 revenues miss, French paint challenging, but EBIT ahead
ASML 0% Q3 bookings beat, outlook confirmed but EUV units cut again
BHP -1% Production report inline but copper miss, guidance reit.
CARREFOUR +2% Q3 sales & LFL beat, France ahead, Brazil better & supers
ELISA 0% Q3 rev/EBITDA a tad ahead of cons, Estonia better, Finland worse
EUROTUNNEL -1% Q3 revs miss at headline, shuttle traffic know, Eurostar worse
HANDELSBNK +2% Net profit 2% ahead of cons, NII also ahead.
METRO +1% Q4 sales inline, confirms FY guidance - nothing done.
RECKITTS -2% Q3 lfl +2% v +2.5% expected, Revs inline FY target at low end
RENTOKIL +2% Q3 statement, trading inline, reit guidance. Hygiene ahead.
THALES +2% Q3 sales growth ahead and reiterating guidance
TRAVIS P. -5% Mixed earnings, Sales small beat but lower EBITDA guidance
VW +3% FT reports judge in US "strongly inclined" to give final approval
WOLSELEY -1% Lowest ABI in 4 yrs from the US, 48.4 v 49.7 last month
ZALANDO +1% Pre-release Q3. EBIT ahead, Sep. Weak, rev guidance at upper end

.Investec
* ACCOR-Q3 lfl +1.8%(est +0.7%),cuts top end guidance but very weak into.....+2%
* AKZO NOBEL-Q3 clean ebit 2% beat. Analyst comment follows..................+1%
* ASML-Q3 sales 5% ahead but net 3% miss, Q4 guidance unch...................+3%
* CARRERFOUR-Q3 overall sales in line, French supermarkets beat..............+1%
* CASINO-Rallye launches €200m bond, exchangeable into CO FP shares........-0.5%
* ELISA-Q3 sales and ebitda small ahead, keeps FY f/casts....................+1%
* ERICSSON-several candidates have turned down CEO role (DI)...............-0.5%
* FCA-recalls 75k vehicles in US over alternator issue.......................U/C
* INTRUM JUSTITIA-Q3 ebit 10% ahead on revs that were 4% ahead...............+2%
* METRO-Q4 sales in line, confirms f/cast, spin-off preparations on track....U/C
* ROCHE-Tecentriq approved for metastatic lung cancer........................+1%
* SHB- Q3 numbers all look in line/small beat,CET1 ratio 24% (cons 23.6%)...+1%
* THALES-Q3 sales 5% beat, raises FY order intake ests, keeps ebit ests......+2%
* VW-US judge ‘strongly inclined’ to approve $14.7bn settlement............+0.5%
* ZALANDO-Q3 ebit €8m vs expected €12m loss, raises FY op margin guidance....+3%
Other
* EU Co’s reporting later/after close: TEMENOS, MICHELIN

UK
* BILLITON-Q1 Prod.Iron Ore & Petrol ahead. Copper & Coal miss..............-1%
* FOXTONS-Update.Tight cost controls improves margins. FY broadly i/l.....+1-2%
* HARWORTH GRP-Completes plot sale to TAYLOR WIMPEY.......................+2-3%
* HOTEL CHOCOLAT-FY.#'s a small beat.Strategy remains on track.(-5% yday).+2-3%
* INTERSERVE-Hosting CMD in London today...................................unch
* LAIRD GRP-Q3.WARNING..U/L PTP c£50m(Bloomberg £73.6m)....................-20%
* RECKITTS-Q3.LFL Rev +2%(INVe +3.2%)Targets FY lfl 4%(July said 4-5%)......-2%
* RENTOKILL-Q3.Good organic growth, guidance for FY unchanged...............+2%
* SOFTCAT-FY#'s in line, Special Div 14.2p. Well placed.....................+2%
* TAPTICA-Codoon appoints TAP as exclusive mobile advertising partner......unch
* TRAVIS PERKINS-Q3.Sees FY EBITDA slightly below consensus...............-3-5%
* U&I-H1.£11.5m devel & trading gains in 1H (£8m guid)EPRA NAV lower @ 272p.+1%

FT Alphaville : The game theory inherent in Brexit

The game theory inherent in Brexit

If I were to sit down and play poker with you this morning, I’m not going to show you my cards before we even start playing the game…

So said Priti Patel, the UK’s pro-Brexit international development secretary this past Sunday alluding to the game theory inherent in Brexit negotiations.

The power derived from getting the game theory right, of course, is linked to paying attention to the structure of a problem and abstracting away particular details: if you know what kind of game you are playing you can work out what strategies people will follow.

Despite Patel’s comments, however, Brexit negotiations are not much like poker. Everyone knows everyone else’s hand. What they do not know is what everyone will ask for and what they will give up for it, making it a slightly different kind of problem.

The negotiations fall under cooperative game theory — where the aim is not to beat people but to get them on your side and work to the same purpose.

The UK is essentially involved in a 28-player cooperative game and needs to assemble a coalition to back its aims. The dynamics are closer to those underpinning reality TV game shows or an American high school, where popularity achieves success.

Think of a factory owner and some workers. Combining their labour and capital they can earn some cash. The way in which that cash gets distributed –i.e. whether as profits or wages — depends on the respective strength of the worker’s union, the costs of mothballing the factory for the length of a strike and what they both can earn elsewhere and so on.

You can use the same kind of cooperative strategy to understand Britain’s negotiations with the EU. Both the UK and the remaining 27 countries in the EU profit from cooperation because trade is mutually beneficial to all. Whether a stable outcome exists and allows for the distribution of any surplus, however, depends on who has the bargaining power.

No one yet knows the legal structure of negotiations to leave the EU. For the purposes of this post and to keep it simple I am going to assume the UK government only needs to assemble a qualified majority of member states for a “withdrawal agreement” and ignore the prospect that they could need unanimous consent for a trade deal too.

One of the problems with sustaining cooperation is that it can often be better to have a smaller group and share the gains more narrowly. High school cliques succeed by excluding as much as recruiting — but then the excluded can always get together and make their own group.

Imagine six gangsters break into a bank but then find only four are needed to carry the safe home.

Having all six gangsters work together is unstable as any four could get rid of the other two and each earn more. But a group of four does not work either as the two who are left out could always promise two of the others more and tempt them into their gang.

This new group would not be sustainable as the process can just repeat itself again with two of the others as outsiders.

Call this the Reservoir Dogs scenario: no one trusts each other, so no one gets the money and (nearly) everyone ends up dead.

In cooperative game theory this is referred to as the game having no “core” — meaning there is no feasible and stable coalition where no subset of the coalition have an incentive to leave.

Doing it the Shapley way

Another kind of solution to cooperative games is to pay everyone their expected marginal contribution – in other words weighting their votes by how much they contribute and how likely they are to be the one to make a difference between a deal going ahead and a deal failing.

This is known as the Shapley Value and is often seen as a ‘fair’ way of distributing the gains of cooperation. In the gangster example this would mean just splitting the loot six ways.

The “qualified majority” referred to in Article 50, the law governing how a country can leave the EU, means governments representing about 65 per cent of the EU’s population need to all say yes to a transitional arrangement.

According to Chris Hanretty, a political scientist who is very good at maths, out of the 134m ways in which 27 countries can arrange themselves into coalitions there are 226,670 occasions where just one country could make the difference between a deal failing and a deal going ahead.

These are called the blocking minorities, where countries representing more than 35 per cent of the EU’s population get together to block the deal.

As an example, if Belgium, Austria, France and Germany all worked together they could stop any deal and so could a coalition of Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Portugal, Slovakia, Slovenia, Spain and Sweden.

The range of possible coalitions indicates the importance of the larger countries to any deal: of the 508 four-country blocking coalitions 432 feature Germany and 313 include France. These are the smallest possible groups who can block a deal with the UK.

That suggests these bigger countries – as you might expect – have a lot of bargaining power.

For the moment this is all just the product of the maths. It could be that, while Spain is often the deciding vote mathematically it is completely irrelevant to the negotiations as they have already made their mind up and no amount of politicking or money can persuade them to change it.

It could also be that countries’ differing goals mean that no agreement is possible and we end up in the Reservoir Dogs scenario.

The British government wants three things out of the negotiations: minimal barriers to trade with the rest of the EU, maximal restrictions on freedom of movement and to pay as little for it as possible.

The rest of the EU wants lots of freedom of movement and free trade – but would like to hive off some of the UK’s high taxpaying financial services – and for the UK to pay them as much as possible.

But not all countries give each goal the same weight. For example, the Visegrad Four – Czech Republic, Hungary, Poland and Slovakia – are really keen on freedom of movement while France seems a bit more interested in shafting the UK on financial services.

For Germany the big priority might be keeping the EU together so the UK cannot be allowed to have any restrictions on free movement. Greece, on the other hand, might not care too much about freedom of movement or free trade; it just wants debt relief.

So the UK could recruit people to its side by making side-deals and buying them off individually – maybe Poland ends up with a shiny new railway, perhaps Ireland gets some of its debt forgiven.

And the rest of the EU can make their own deals so as to present a united front to the UK. Germany can just as easily forgive debt and provide pork barrel infrastructure spending.

To rephrase Ms Patel’s poker metaphor we can work out everyone’s hands but not the bids they are willing to make. Nevertheless it gives us a surface-level framework to understand the scale of the challenge facing the UK government.

Time as a pressure point

And there are other features of the problem that are important too – the UK will automatically leave the EU after two years whether it can get together a stable coalition or not. That puts the pressure on the UK as they will lose 27 export markets while the rest of the EU will only lose one.

In game theory this is known as the disagreement point – what happens if bargaining fails. Even it is never reached it determines the outcome of the game, as the one who suffers most in the event that negotiations break down should have the most incentive to get everyone to agree.

Putting this all together: the UK needs to recruit 20 other countries to agree with it in a period of two years. Its priorities are likely to be restricting immigration and getting the most access to the single market it can. To achieve its goals it will need to pay people off, with the marginal countries able to extract the highest prices.

Or to cut a long story short: either the negotiations end up a lot like Reservoir Dogs, with no agreement and everyone losing the loot, or there is not going to be £350m a week left over in the UK’s budget to give to the NHS.

>>> What to look at today -19th of October 2016

Dow +0.42% S&P +0.62% Nasdaq +0.85% Russell +0.59% VIX 15.26 -5.90% VXX 33.50 (-3.98%)
US Market closed higher helped by +ve earnings. All eleven S&P 500 sectors finished in the green with health care (+1.1%), materials (+0.9%), utilities (+0.8%), financials (+0.8%), and technology (+0.7%) leading the pack. IBB +1.4%. NFLX +19% on earnings & net subscriber growth. Volume continue to be low with 742mil shares (average 858). US After Hours YHOO +1.2% following earnings... VDSI -19%, MANH -9%, CREE -9%, INTC -6%, ISRG -2% following earnings/guidance, tech and semi names are under pressure. China indices little changed as Q3 GDP, Retail Sales, and Fixed Asset Investment meet expectations. US latest TIC flows data showing China holdings of US treasuries falling for the 3rd straight month below $1.20T - lowest level in nearly 4 years.

Nikkei +0.25% Hang Seng -0.15% CSI +0.05% Shanghai +0.16%

Eur$ 1.0977 CNH 6.7451 CNY 6.7398 JPY 103.76 GBP 1.2277 CHF 0.99 RUB 62.5864 WTI $50.75 (+0.91%)

S&P +0.05% EuroStoxx +0.10% Dax -0.02% SMI +0.15% FTSE +0.22%

Macro :
- Brazil Said to See $12b From Privatization, Concessions in 2017
- France Seeks to Lure European Banking Authority From U.K: Echos
- China’s Economy Grows 6.7% in 3Q Y/y; Est. 6.7%

Keep an eye on :
- ABG SM : Abengoa Seen Moving ‘Premium’ Creditors Deadline: Confidencial
- ABG SM : Abengoa Unit Wins U.S. Approval to Join Restructuring Plan: Rtrs
- AC FP : Accor 3Q Sales Beat Ests., Lowers Top End of 2016 Ebit Forecast
- AKZA NA : Akzo 3Q Revenue Below Estimates; Confirms 2016-2018 Guidance
- ASML NA : ASML 3Q Sales Beat, Profit Misses; 4Q Margin Seen Above Ests.
- BAR BB : Barco 3Q Rev. Up 14%, Order Backlog EU330.1m; Affirms FY Outlook
- BLT LN : BHP Q1 iron ore output tops forecasts at 57.6Mt v 56.3e (flat y/y), but copper production falls 6%, energy coal falls 4% and oil output falls 15%; BHP affirms FY17 output and CAPEX forecasts, as CEO sees early signs of markets rebalancing with expectation of improvement in energy market fundamentals.
- BMPS IM : Paschi Advisors to Review Passera’s Proposal After Business Plan
- BNP FP : BNP Paribas, Matmut in French Damage-Insurance JV Talks: Echos
- CA FP : Carrefour 3Q French Hypermarket LFL In Line, Supermarket Beats
- CSGN VX : Credit Suisse Said to Pay EU100m to Settle Italy Tax Case: Rtrs
- DYN US : Avenue’s Lasry Says Dynegy Is ‘Massively Undervalued,’: CNBC
- EDF FP : EDF Maintains Targets as It Plans Reactor Halts for Safety Check
- EDPR PL : EDP Renovaveis Says 9-Month Electricity Production Rises 20% Y/y
- ELI1V FH : Elisa 3Q Ebitda Tops Estimates; Keeps 2016 Forecasts
- ENGI FP : Engie Electrabel, EDF to Pay Extra EU2.73m Tihange-1 Levy: RTBF
- FUR NA : Fugro Issues 3Q Update Early to Support Convertible Bond Launch
- GET FP : Eurotunnel 3Q Revenues Increase 4%; Confirms Positive Outlook
- EVK GY : Evonik Won’t Be Investing in Malaysia’s Oil and Chemicals Hub
- GALP PL : Galp Energia Says It Exercises Call Option on Notes Due 2017
- GLO FP : GL Events 3Q Revenue Rises 1.3%; Co. Predicts FY Sales Growth
- ILMN US : Illumina Not Seen as M&A Target, Investor/Trader Poll Suggests
- RNO FP : Nissan’s Ghosn to Be Mitsubishi Motors Chairman, Nikkei Says
- ROG VX : confirms that the FDA approved Genentech’s cancer immunotherapy Tecentriq for people with a specific type of metastatic lung cancer
- RDSA NA : Shell Said to Hire Deutsche Bank to Sell Martinez Refinery: Rtrs
- GLE FP : France Hesitates to Press SocGen on Tax After Kerviel: Echos
- LOCAL FP : SoLocal 3Q Internet Sales Orders Up; Shareholder Meeting Today
- HO FP : Thales 3Q Sales Beat Ests.; Co. Lifts Outlook for Order Intake
- MEO GY : Metro 4Q Sales In Line With Estimates, Confirms FY Ebit Outlook
- NOVOB DC : Novo Settles Novoeight Patent Case With Baxalta: Berlingske
- VALE US : Vale Says Mid-2017 Restart at Samarco Venture Is Still Possible
- VOW3 GY : VW Judge ‘Strongly’ Leaning Toward Approving Accord
- VOW3 GY : Volkswagen Repaired 10% of Germany Diesel Vehicles: Handelsblatt
- ZAL GY : Zalando’s Raised Guidance More Than Offsets Weak Sales: Goldman

>>> Europe : Brokers Upgrades & Downgrades - 19th of October 2016

>>> Up
*ADECCO RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*BARCLAYS RAISED TO BUY VS HOLD AT INVESTEC
*BELLWAY RAISED TO ADD VS HOLD AT PEEL HUNT
*BNP PARIBAS RAISED TO NEUTRAL AT JPMORGAN
*COMPUTACENTER RAISED TO BUY VS NEUTRAL AT UBS
*IAG RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE note attached
*SSAB RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE note attached
*SKANDINAVISK TOBAKSKOMPA RAISED TO OVERWEIGHT AT JPMORGAN

>>> Down
*SALZGITTER CUT TO NEUTRAL VS OVERWEIGHT AT CREDIT SUISSE
*SWEDISH MATCH CUT TO NEUTRAL AT JPMORGAN

>>> PT Change


>>> Initiation
*AXTEL RATED NEW UNDERWEIGHT AT BARCLAYS
*DCC RATED NEW BUY AT STIFEL

>>> Call
>> Country
*BRAZIL EQUITIES RAISED TO OVERWEIGHT VS NEUTRAL AT HSBC note attached
*TURKEY EQUITIES CUT TO NEUTRAL VS OVERWEIGHT AT HSBC note attached

>>> Asian Update

Asia Mid-Session Market Update: China GDP, Retail Sales, Fixed investment meet estimates while Industrial Output underwhelms

***US Session Highlights***
- (US) SEPT CPI M/M: 0.3% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA INDEX: 241.428 V 241.498E
- (US) Sept Real Avg Weekly Earnings Y/Y: 0.8% v 0.4% prior
- (US) OCT NAHB HOUSING MARKET INDEX: 63 V 63E (mild pullback from a jump in September)
- (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: +1.4% v -3.0% prior

***US markets on close: Dow +0.4%, S&P500 +0.6%, Nasdaq +0.9%***
- Best Sector in S&P500: Healthcare
- Worst Sector in S&P500: Industrials
- Biggest gainers: NFLX +19.0%, HOG +9.0%, UNH +7.0%, NRG +6.7%, FTR +4.6%
- Biggest losers: URBN -4.3%, GWW -4.2%, DLPH -3.5%, EXPD -3.2%, JNJ -2.6%
- At the close: VIX 15.28 (-0.9pts); Treasuries: 2-yr 0.80% (-2bp), 10-yr 1.75% (-2bp), 30-yr 2.51% (-1bp)

***US movers afterhours***
- HPE +2.5%: Affirms FY16 $1.90-1.95 v $1.92e; Sees FY17 adj EPS (combined company) $2.00-2.10 v $2.05e, Rev -1% to 0%
- YHOO +1.4%: Reports Q3 $0.20 v $0.14e, R$857M (ex-TAC) v $861Me
- ISRG -2.5%: Reports Q3 $6.19 (includes $0.40 tax benefit) v $5.13e, R$683M v $648Me
- INTC -5.2%: Reports Q3 $0.80 (adj) v $0.73e, R$15.8B v $15.6Be; Guides Q4 Rev $15.7B, +/- $500M v $15.9Be
- PBYI -5.5%: Offering $150M in common stock (8.8% of market cap) through Citigroup and J.P. Morgan
- ACHC -7.1%: Signs definitive agreement for sale of UK facilities in fulfillment of previously announced undertakings to the CMA for $390M; Guides Q3 $0.58 v $0.62 y/y (adj), R$735M v $480M y/y
- MANH -8.0%: Reports Q3 $0.50 v $0.47e, R$152M v $156Me
- CREE -9.7%: Reports Q1 $0.15 v $0.11e, R$321M v $339Me
- VIVO -11.5%: Reports prelim Q4 R$47M v $48.4Me; Reports prelim FY16 $0.75-0.76 v $0.85 y/y, $196M v $198Me

***Asia Session Notable Observations, Speakers and Press***
- China indices little changed as Q3 GDP, Retail Sales, and Fixed Asset Investment meet expectations; AUD/USD slightly softer on a miss in industrial output; Retail Sales growth was the highest in 8 months as economy continues its rebalancing - NBS says 71% of GDP was consumption. Industrial production components were mixed - power generation grew by 6.8% but down from 7.8% prior, steel output rose 3.9%, and coal production declined over 12%. Fixed asset investment showing more appreciation and growth in the property sector - investment rose 5.8%, sales value up 41%, and construction up 6.8%. NBS saw data indicative of economic performance better than expected, maintaining 2016 growth target, but also warned there are still uncertainties. Stats bureau also cited supply-side reform behind rising prices of industrial products and profits.
- Australia treasurer Fraser confident can sustain AAA sovereign rating and also warns about the high cost of housing depressing demand and pricing out first time buyers.
- BHP Q1 iron ore output tops forecasts at 57.6Mt v 56.3e (flat y/y), but copper production falls 6%, energy coal falls 4% and oil output falls 15%; BHP affirms FY17 output and CAPEX forecasts, as CEO sees early signs of markets rebalancing with expectation of improvement in energy market fundamentals.
- Australia gambling sector saw a high-profile merger of Tatts and Tabcorp with enterprise value of A$11.3B; TTS rises 15% on acquisition by TAH.
- Intel beats on top and bottom line but shares fall on soft Q4 Rev guidance; Yahoo rises afterhours despite the miss on ex-Tac Rev after raising FY16 EBITDA and declaring company is busy ahead of integration with Verizon; Recall recent press reports suggesting VZ could seek a discount due to recent hacking incidents.
- US latest TIC flows data showing China holdings of US treasuries falling for the 3rd straight month below $1.20T - lowest level in nearly 4 years.

***Asia Key economic data:***
- (CN) CHINA Q3 GDP Q/Q: 1.8% V 1.8%E; Y/Y: 6.7% V 6.7%E
- (CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 6.1% V 6.4%E; YTD Y/Y: 6.0% V 6.1%E
- (CN) CHINA SEPT FIXED URBAN ASSETS YTD Y/Y: 8.2% V 8.2%E; 3-month high
- (CN) CHINA SEPT RETAIL SALES Y/Y: 10.7% (8-month high) V 10.7%E; YTD Y/Y: 10.4% V 10.3%E
- (CN) CHINA SEPT M2 MONEY SUPPLY Y/Y: 11.5% (3-month high) V 11.6%E; M1 MONEY SUPPLY Y/Y: 24.7% V 24.5%E
- (CN) CHINA SEPT NEW YUAN LOANS (CNY): 1.22T (3-month high) V 1.00TE
- (CN) CHINA SEPT AGGREGATE FINANCING (CNY): 1.72 T V 1.390TE
- (CN) China Sept Fiscal Balance (CNY) -860B v -429.3B prior
- (AU) AUSTRALIA SEPT SKILLED VACANCIES M/M: -1.2% V -1.3% PRIOR
- (AU) AUSTRALIA SEPT WESTPAC LEADING INDEX M/M: 0.1% V 0.0% PRIOR
- (KR) South Korea Sept PPI Y/Y: -1.1% v -1.8% prior (26th consecutive decline)
- (CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED

***Asian Equity Markets (23:30ET)***
- Nikkei +0.1%, Hang Seng -0.1%, Shanghai Composite +0.1%, ASX200 +0.4%, Kospi +0.3%

***FX ranges/Commodities/Futures/Fixed Income (23:30ET):***
- EUR 1.0975-1.10; JPY 103.65-103.95; AUD 0.7660-0.7690; NZD 0.7190-0.7235
- Dec Gold +0.1% at 1,264/oz; Crude Oil +0.9% at $50.75/brl; Copper +0.1% at $2.10/lb
- (US) Weekly API Oil Inventories: Crude: -3.8M v +2.7M prior
- Equity Futures: S&P e-mini +0.1%, Dax +0.4%, FTSE100 +0.1%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.7326 V 6.7303 PRIOR
- (CN) PBOC to inject CNY65B in 7-day reverse repos, CNY50B in 14-day reverse repos and CNY35B in 28-day reverse repos
- (CN) China MoF sells 5-yr bonds at 2.394%; bid-to-cover 3.33x
- (KR) South Korea sells KRW2.0T 2-yr monetary stabilization bonds; avg rate 1.36% v 1.33% prior
- (AU) Australia MoF (AOFM) sells A$900M in 2.25% 2028 Bonds; avg yield: 2.405%; bid-to-cover: 2.39x

***Asia movers***
- Consumer discretionary: 361 Degrees International 1361.HK +1.7% (Q3 result); Ansell ANN.AU +1.3% (Q1 result); Sydney Airport SYD.AU +3.0% (Credit Suisse raised to Neutral); Tatts Group TTS.AU +15.3%, Tabcorp TAH.AU +1.9% (Tabcorp and Tatts confirm merger)
- Financials: China Life Insurance 2628.HK -2.2% (profit warning)
- Industrials: CIMIC Group CIM.AU +2.1% (Q3 result)
- Technology: Sharp Corp 6753.JP +9.3% (Fy16 result speculation)
- Materials: Saracen Mineral SAR.AU +5.7% (gold prices rise); St Barbara SBM.AU +5.3% (reaffirms guidance); Galaxy Resources GXY.AU +4.6% (reaffirms Mt Cattlin restart ahead of schedule); LG Chem 051910.KR +1.4% (Q3 result); BHP Billiton BHP.AU -1.2% (Q1 result); Western Areas WSA.AU +4.7% (Q1 result)
- Energy: Origin Energy ORG.AU -0.8% (affirms guidance); Beach Energy BPT.AU +2.0% (affirms guidance)

>>> US After Hours Summary: YHOO +1.2% following earnings... VDSI -19%


After Hours Summary: YHOO +1.2% following earnings... VDSI -19%, MANH -9%, CREE -9%, INTC -6%, ISRG -2% following earnings/guidance, tech and semi names are under pressure

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: YHOO +1.2%, NAVI +0.3% (light volume)

Companies trading higher in after hours in reaction to news: RLJE +2.5% (thinly traded; AMC Networks shows 79.8% active stake), BLDP +0.9% (light volume; announced the commissioning and deployment of 10 fuel cell-powered buses in the City of Yunfu, in the Province of Guangdong, China), TMH +0.4% (following late move higher on Reuters report that Blackstone is top bidder)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: VDSI -19.2%, (offers light prelim Q3 results, lowers FY16 guidance), MANH -8.6%, CREE -8.5%, ACHC -7.1% (signs definitive agreement for sale of U.K. facilities in fulfillment of previously announced undertakings to the CMA; issues downside Q3 prelim results), INTC -5.8%, UFPI -3.6%, ISRG -2%, LLTC -1.5% (light volume), IBKR -0.5%, HA -0.2%

Companies trading lower in after hours in reaction to news: SNSS -6.9% (intends to offer and sell shares of its common stock and Series C Convertible Preferred Stock in underwritten public offerings), PBYI -5.8% (commences underwritten public offering of $150 mln of shares of its common stock), ASND -4.3% (commences underwritten public offering of $100 mln of American Depositary Shares), LKSD -1.6% (light volume- announces a strategic agreement that expands its relationship with The United Methodist Publishing House; will provide book fulfillment and distribution services for UMPH), WFC -0.2% (light volume-S&P revises ratings outlook to Negative from Stable on potential elevated business risks)

Tech and Semi names are under pressure following NVDA/CREE earnings/guidance - Semiconductor Hldrs ETF (SMH -1.4%) / iShares Semiconductor (SOXX -0.5%): AMD -2.1%, ADI -1.9% (lower with tech names - Linear Tech also released its Q1 results), MU -1.4%, QCOM -0.5%

>>> Notable post-earnings movers

Notable post-earnings movers

  • Post-earnings gainers: YHOO +1.3%, ISRG +1.2%
  • Post-earnings losers: MANH -11.9%, VDSI -10.9% (offers light prelim Q3 results, lowers FY16 guidance), CREE -7.9%, INTC -2.5%, IBKR -2%

>>> Intel beats Q3 estimates after raising revenue, gross margin guidance on Sep

--> -2.5% in after hours

Intel beats Q3 estimates after raising revenue, gross margin guidance on Sept 16; guides Q4 revs in-line, gross margin lower Q/Q at midpoint
  • Reports Q3 (Sep) earnings of $0.80 per share, excluding non-recurring items, $0.08 better than the Capital IQ Consensus of $0.72; revenues rose 9.1% year/year to $15.78 bln vs the $15.61 bln Capital IQ Consensus; adj. gross margin 64.8%. GAAP EPS $0.69 vs. $0.67 consensus.
  • On September 16, co raised Q3 rev guidance to $15.3-15.9 bln from $14.4-15.4 bln; raised non-GAAP gross margin to 63% from 62%.
  • Q3 results by segment:
    • Client Computing Group revenue of $8.9 bln, up 21 percent sequentially and up 5 percent yearover-year
    • Data Center Group revenue of $4.5 bln, up 13 percent sequentially and up 10 percent yearover-year
    • Internet of Things Group revenue of $689 mln, up 20 percent sequentially and up 19% Y/Y
    • Non-Volatile Memory Solutions Group revenue of $649 mln, up 17 percent sequentially and down 1% Y/Y
    • Intel Security Group revenue of $537 mln, flat sequentially and up 6% Y/Y
    • Programmable Solutions Group revenue of $425 mln, down 9 percent sequentially
  • Co issues in-line guidance for Q4, sees Q4 revs of $15.2-16.2 bln vs. $15.88 bln Capital IQ Consensus; gross margin 63% +/- a couple percent. This revenue forecast is lower than the average seasonal increase for the fourth quarter.

>>> Cree misses by $0.01, reports revs in-line; guides Q2 EPS below consensus, r

--> -8.7% in after hours

Cree misses by $0.01, reports revs in-line; guides Q2 EPS below consensus, revs below consensus (numbers excluding sale of WolfSpeed)

  • Reports Q1 (Sep) earnings of $0.09 per share, excluding non-recurring items, $0.01 worse than the Capital IQ Consensus of $0.10; revenues fell 15.8% year/year to $321.3 mln vs the $322.77 mln Capital IQ Consensus.
  • Co issues downside guidance for Q2, sees EPS of $0.04-0.10 vs. $0.13 Capital IQ Consensus Estimate; sees Q2 revs of $310-330 mln vs. $336.73 mln Capital IQ Consensus Estimate.
  • Gross margin from continuing operations increased from 26.4% in Q4 of fiscal 2016 to 26.9% on a GAAP basis and decreased from 28.2% to 27.7% on a non-GAAP basis.
  • Wolfspeed Sale Update: As previously announced, Cree reached an agreement to sell the Wolfspeed business to Infineon Technologies (IFNNY). The parties are continuing to work together to obtain the customarily required regulatory approvals in various jurisdictions, including foreign and domestic antitrust approvals, as well as CFIUS approval. The parties received a second request for additional information from the United States Federal Trade Commission in late September. Cree and Infineon continue to target closing the transaction around the end of calendar 2016.