>>> What to look at today - 7th of September 2016

Dow +0.25% S&P +0.30% Nasdaq +0.50% Russell+0.12%
US Market Closed higher after weaker ISM and lower expectation of Fed Rate hike. The broader market settled near its best level of the day with seven sectors ending in the green. The defensively-oriented telecom services (+0.9%) and utilities (+1.1%) sectors followed energy (+1.5%) on the top of the board. Conversely, financials (-0.2%) and industrials (-0.3%) led the downside. WTI crude ended its pit session higher by 1.0% ($44.85/bbl; +$0.46). Volume were in line with average at 835mil shares. US After Hours AAOI +20% on raised guidance, CMG +7% on Pershing stake news... CASY -7%, PLAY -7% following earnings/guidance. Asian equity markets are mixed, with modest gains in Korea and Shanghai overshadowed by a larger decline in Nikkei225. Sankei report stated that the BOJ policy board has 3 camps going into the decision - those who support more asset purchases, those who favor deeper negative rates, and those who oppose any further easing - with Gov Kuroda on the side of negative rates. Separately, former BOJ official Momma forecast that the central bank will not expand policy stimulus in September given the steady economic fundamentals. Fed's Williams spoke in Reno, reiterating his support for a rate hike sooner and more gradually rather than later and potentially more rapidly. Williams warned that waiting too long could allow imbalances to grow, adding that economy is on track to achieve Fed's inflation and employment objectives.

Nikkei -0.57% Hang Seng -0.20% CSI +0.35% Shanghai +0.43%

Eur$ 1.1256 CNH 6.6746 CNY 6.6680 JPY 101.43 GBP 1.3414 CHF 0.9686 RUB$ 64.4682 WTI$ 45.11 (+0.62%)

S&P +0.05% EuroStoxx +0.39% Dax +0.31% SMI +0.17%

Macro :
- French Would Elect Macron Over Hollande as President, Poll Finds
- Market Upside Is Possible Amid Fed Uncertainty: Edgehill Letter

Keep an eye on :
- ARCM SS : Arcam CEO Says More Bids Could Come, Dagens Industri Reports
- ATL IM : Atlantia Says Autostrade July-Aug. Traffic in Italy Up 2.9%
- COFB BB : Cofinimmo Sells EU213.9m Convertibles, Buys Back EU166.5m Notes
- FCC SM : FCC Said to Further Push Plan to Open Set-Top Box Market: WSJ
- ITP FP : Interparfums 1H Net Falls 7% to EU13.0m on Tax Provision
- LHA GY : Lufthansa Won’t Touch Brussels Airlines Brand for 2 Years: VRT
- UG FP : PSA Looking to Set Up Factory in Asean Region, CEO Tavares Says
- SYNN VX : Syngenta Says Ramsay to Retire; Patrick Named CFO
- UCG IM : UniCredit Will Likely Raise Capital, Renzi Says: Les Echos
- UCG IM : UniCredit Seeks Non-Binding Pioneer Bids by Sept.20: Messaggero
- VIV FP : Spotify Said to Mull Limiting Free Music Streaming: FT
- VOLVB SS : Autoliv/Volvo JV Clear Positive for Autoliv, Berenberg Says
- VOW3 GY : Bosch Warned VW in 2008 About Illegal Software: NDR, WDR, SZ
- VOW3 GY : VW Will Stick to Diesel-Car Technology, CEO Says
- VOW3 GY : VW Said in Advanced Talks With Jianghuai on Electric Vehicles
- WDI GY : Wirecard Growth Momentum Accelerating, Bankhaus Lampe Says
- WPG LN : Group Placing Upsized to 350m Shares, Terms Show (Range 282p/285p)

>>> Europe : Brokers Upgrades & Downgrades - 7th of September 20

>>> Up
*ATLAS COPCO RAISED TO OVERWEIGHT VS EQUALWEIGHT: MORGAN STANLEY
*AVIVA RAISED TO BUY VS NEUTRAL AT UBS
*EDP RENOVAVEIS RAISED TO NEUTRAL VS SELL AT GOLDMAN
*ENEL RAISED TO BUY, ADDED TO CONVICTION LIST AT GOLDMAN
*IBERDOLA RAISED TO OVERWEIGHT AT MORGAN STANLEY
*NN GROUP RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX
*STANDARD LIFE RAISED TO OUTPERFORM AT BERNSTEIN
*SSE RAISED TO MARKET PERFORM VS UNDERPERFORM AT BERNSTEIN
*SWEDISH MATCH RAISED TO OUTPERFORM VS NEUTRAL AT EXANE
*WEIR RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY

>>> Down
*ARCAM CUT TO HOLD AT NORDEA
*BARCLAYS CUT TO HOLD AT SANTANDER
*CENTRICA CUT TO SELL AT GOLDMAN
*EDF CUT TO SELL VS NEUTRAL AT GOLDMAN
*ENDESA CUT TO SELL VS NEUTRAL AT GOLDMAN
*ENGIE CUT TO NEUTRAL VS BUY AT GOLDMAN
*E.ON CUT TO NEUTRAL VS BUY AT GOLDMAN
*FERROVIAL CUT TO SECTOR PERFORM AT RBC CAPITAL
*MAXIM INTEGRATED CUT TO SECTOR PERFORM AT RBC CAPITAL
*NATIONAL GRID CUT TO MARKET PERFORM VS OUTPERFORM AT BERNSTEIN
*NESTE CUT TO SELL AT NORDEA
*RECKITT BENCKISER CUT TO NEUTRAL VS OUTPERFORM AT EXANE
*RICHEMONT CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*ROLLS-ROYCE HOLDINGS CUT TO ’UNDERPERFORM’ AT EXANE BNP PARIBAS
*SWATCH CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*SIEMENS CUT TO NEUTRAL VS BUY AT UBS
*SLM SOLUTIONS CUT TO HOLD VS BUY AT HSBC

>>> PT Change


>>> Initiation
*BARRICK GOLD RATED NEW SELL AT BERENBERG; PT $15.2
*COCA-COLA EUROPEAN PARTNERS RATED NEW BUY AT CITI, PT EU41
*FORTUM RATED NEW SELL AT GOLDMAN; PT EU12.5
*GOLDCORP RATED NEW HOLD AT BERENBERG; PT $16.5
*JUNGHEINRICH RATED NEW NEUTRAL AT CITI, PT EU31
*KINROSS GOLD RATED NEW HOLD AT BERENBERG; PT $4.6
*KION GROUP RATED NEW BUY AT CITI, PT EU64
*NESTLE RESUMED AT MARKET PERFORM AT BERNSTEIN; PT CHF80, WAS PREVIOUSLY RATED OUTPERFORM AT BERNSTEIN
*POLYMETAL INTERNATIONAL RATED NEW BUY AT BERENBERG; PT 1,200P
*RANDGOLD RESOURCES RATED NEW HOLD AT BERENBERG; PT 7,190P
*SSE RATED NEW NEUTRAL AT GOLDMAN; PT 1,603P

>>> Call
>> Stock
*ENERGIAS DE PORTUGAL EXITS CONVICTION SELL LIST AT GOLDMAN, *ENERGIAS DE PORTUGAL STILL RATED SELL AT GOLDMAN

>>> Asian Update

Asia Mid-Session Market Update: Nikkei, USD/JPY sink after soft US ISM Services and rumors of uncertainty at the BOJ


***Economic Data***
- (AU) AUSTRALIA Q2 GDP Q/Q: 0.5% (1-year low) V 0.6%E; Y/Y: 3.3% (2-year high) V 3.3%E
- (AU) AUSTRALIA AUG AIG PERFORMANCE OF CONSTRUCTION INDEX: 46.6 V 51.6 PRIOR (1st contraction in 3 months)
- (NZ) NEW ZEALAND Q2 MANUFACTURING ACTIVITY Q/Q: +2.2% V -2.0% PRIOR; VOLUME Q/Q: +2.8% V -1.2% PRIOR
- (JP) JAPAN AUG OFFICIAL RESERVE ASSETS: $1.26T v $1.26T PRIOR

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.7%, S&P/ASX +0.2%, Kospi +0.3%, Shanghai Composite +0.4%, Hang Seng -0.1%, Sep S&P500 +0.1% at 2,185

***Commodities/Fixed Income***
- Dec gold +0.2% at $1,356/oz, Oct crude oil +0.7% at $45.12/brl, Dec copper +0.8% at $2.11/lb
- GLD: SPDR Gold Trust ETF daily holdings rise to 952.1 tonnes from 937.9; first rise since Aug 22nd
- SLV: iShares Silver Trust ETF daily holdings rise to 11,246 tonnes from 11,184 tonnes prior; multi-year high
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6555 V 6.6676 PRIOR; strongest Yuan setting since Aug 26th
- (CN) PBOC to inject CNY20B in 7-day reverse repos and CNY10B in 14-day reverse repos
- (JP) BOJ offers to buy ¥430B in 5-10yr JGBs, ¥200B in 10-25yr JGBs and ¥120B in JGBs with maturity over 25-yr
- JGB: Japan Finance Ministry (MoF) said to issue ¥400B more in 40-yr JGBs in FY16/17 than planned - Nikkei
- (AU) Australia MoF (AOFM) sells A$1.0B in 4.75% 2027 Bonds; avg yield 1.892%; bid-to-cover 1.59x

***Market Focal Points/FX***
- Asian equity markets are mixed, with modest gains in Korea and Shanghai overshadowed by a larger decline in Nikkei225. Friday's soft non-farm payrolls report had rattled the case for a September FOMC hike, but today's 6-year low print in US Services ISM may have delivered a decisive blow, with Fed funds futures now pricing in less than a 20% chance of a move this month. Probability of a hike before the end of the year is still seen around 50%. US rate expectations are particularly visible in the USD/JPY pair, which fell more than 100pips to ¥102 after ISM and has since extended its drop to a low of ¥101.20 in Asia. In other FX majors, AUD/USD saw its low around 0.7650 after a mixed Australia GDP report, while NZD/USD pushed out to a 15-month high of 0.7435 on USD weakness and another price increase in Fonterra dairy auction. Gold was up over 2% in US hours on broad USD weakness, helping related mining shares in Australia.

- Uncertainty pertaining to the upcoming Bank of Japan meeting and its planned review of policy parameters continued to play out in press speculation. Early in the session, a Sankei report stated that the BOJ policy board has 3 camps going into the decision - those who support more asset purchases, those who favor deeper negative rates, and those who oppose any further easing - with Gov Kuroda on the side of negative rates. Separately, former BOJ official Momma forecast that the central bank will not expand policy stimulus in September given the steady economic fundamentals.

- Notable economic data points were limited to Australia, where Q2 GDP hit a 1-year low on sequential basis but a 2-year high y/y. Final Consumption component edged up to +0.8% v +0.7% prior, income rose to +0.6% v +0.2% prior, and trade terms component spiked up to +2.3% v -1.9% prior. Treasurer Morrison reflected that household consumption growth mirrored that of global economy, while still warning the country has a problem with low earnings growth. Earlier, Aug Construction PMI fell into contraction for the first time in 3 months, while a local press report forecast property prices in top cities falling as much as 15-20% in the next 2 years.

- Fed's Williams spoke in Reno, reiterating his support for a rate hike sooner and more gradually rather than later and potentially more rapidly. Williams warned that waiting too long could allow imbalances to grow, adding that economy is on track to achieve Fed's inflation and employment objectives.

***Equities***
US equities / ADRs:
- CMG: Pershing Square discloses new 9.9% stake; intends to engage in discussions with management - 13D filing; +6.3% afterhours
- AMGN: Loses ruling in Neulasta patent case; judge says Apotex's biosimilar does not infringe Amgen patent on the chemotherapy drug - press; -1.4% afterhours
- PLAY: Reports Q2 $0.50 v $0.44e, R$244.3M v $244Me; -6.6% afterhours
- CASY: Reports Q1 $1.70 v $1.79e, R$1.97B v $2.0Be; -7.4% afterhours

Notable movers by sector:
- Consumer discretionary: Recruit Holdings Co 6098.JP +3.0% (to be added to Nikkei 300)
- Industrials: Asahi Kasei Corp 3407.JP -3.2% (Aug result); Qube Logistics QUB.AU +1.2% (UBS raised to Buy); Hanjin Shipping Co 117930.KR +9.0% (wins order protection); Sumitomo Chemical Co 4005.JP -1.3% (may increase battery production)
- Technology: Rakuten Inc 4755.JP +6.0% (to be added to Nikkei 225); Otsuka Corp 4768.JP +0.8% (Mitsubishi raised to Overweight)
- Materials: Saracen Mineral Holdings SAR.AU +13.3% (drilling result); Resolute Mining RSG.AU +6.4% (affirms guidance); Other gold miners also rise on higher gold prices: NCM.AU +3.7%, EVN.AU +7.6%
- Telecom: NTT DoCoMo Inc 9437.JP -0.6% (to cut costs)
- Utilities: China Longyuan Power Group 916.HK +3.5% (Aug result)

>>> US After Hours Summary: AAOI +20% on raised guidance, CMG +7% on P


After Hours Summary: AAOI +20% on raised guidance, CMG +7% on Pershing stake news... CASY -7%, PLAY -7% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AAOI +20.3%, (raises Q3 guidance), HQY +1.9%, SCWX +1%,

Companies trading higher in after hours in reaction to news: GVP +11.7% (receives contracts to provide updates to nuclear site simulator platforms for customers in the UK and Japan; two projects add over $6 mln to its backlog and include options that could grow backlog significantly further), PGNX +8.8% and VRX +1.9%  (Valeant Pharma and Progenics announce the U.S. commercial launch Of FDA-approved Relistor Tablets; poster presentations to highlight RELISTOR tablets during PAINWeek in Las Vegas, on September 6-10), CMG +6.6% (Pershing Square discloses 9.9% active stake, intends to engage in discussions with management and the Board), FNSR +1.4% (AAOI sympathy), EXEL +0.6% (announces outcome from first planned interim analysis of the Phase 3 CELESTIAl trial of cabozantinib in patients with advanced hepatocellular carcinoma; IDMC determined that the study should continue without modifications), CLCD +0.3% (continued strength after 120%+ move higher today)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CASY -7.4%, PLAY -6.7%

Companies trading lower in after hours in reaction to news: AMD -4% (files mixed securities shelf offering for an undisclosed amount; to commence concurrent public offerings of ~$600 mln of its common stock and $450 mln aggregate principal amount of its convertible senior notes due 2026), SMLP -3.1% (commences an underwritten public offering of 5,500,000 common units), OLLI -2.5% (files common stock shelf offering for an undisclosed amount; announced that affiliates of CCMP Capital Advisors intend to offer 13,725,798 shares of common stock in an underwritten public offering), CPE -2% (to acquire certain undeveloped acreage & producing oil and gas properties for total consideration of $327 mln in cash, provides Howard County operational update; commences 23 mln common stock offering in connection w/ the previously announced Plymouth Acquisition), CTLT -1.1% (announced the launch of 19 mln share common stock secondary public offering by selling stockholders), NVDA -0.6% (files mixed securities shelf offering)

>>> US Close Dow +0.25% S&P +0.30% Nasdaq +0.50% Russell+0.12%


Closing Market Summary: Stocks Rise on Lowered Rate Hike Expectations

The stock market began an abbreviated week on a higher note as a weaker-than-expected reading of the ISM Non-Manufacturing Index for August led investors to dial back rate hike expectations for the year. The Nasdaq Composite (+0.5%) finished the day slightly ahead of the S&P 500 (+0.3%) and the Dow Jones Industrial Average (+0.3%).

The ISM Non-Manufacturing Index for August was a big disappointment, dropping to 51.4 (consensus 54.7) from 55.5 in July. The August reading was the lowest reading for this index since February 2010. The key takeaway from the report is that it appears as if both the manufacturing sector and the non-manufacturing sector experienced a noticeable slowing of activity in August.

The added takeaway is that the slowdown seen on both sides of the economy will likely leave the Fed reluctant to raise the fed funds rate at its September meeting. Recall that it was shown last week that the ISM Manufacturing Index dropped to 49.9 from 52.6 in July. A number below 50.0 denotes a general contraction in manufacturing activity. The U.S. Dollar Index (94.85,-0.99, -1.03%), fed funds futures, and the economically-sensitive financial sector (-0.1%) fell in response while Treasuries and defensively-oriented telecom services (+0.9%) and utilities (+1.1%) enjoyed a bid.

The benchmark index erased its opening loss by midday as heavily-weighted health care (+0.4%) and technology (+0.5%) demonstrated relative strength. The broader market settled near its best level of the day with seven sectors ending in the green. The defensively-oriented telecom services (+0.9%) and utilities (+1.1%) sectors followed energy (+1.5%) on the top of the board. Conversely, financials (-0.2%) and industrials (-0.3%) led the downside.

The commodity-sensitive energy space (+1.5%) demonstrated relative strength amid a string of M&A news and a rebound in dollar-denominated oil. EOG Resources (EOG 94.83, +5.92) rallied 6.7% after announcing a deal to merge with Yates Petroleum. The deal to merge is valued at approximately $2.5 billion. Spectra Energy (SE 41.00, +4.85) surged 13.4% after announcing a stock-for-stock merger with Enbridge (ENB 43.06, +2.07). For its part, WTI crude ended its pit session higher by 1.0% ($44.85/bbl; +$0.46).

In the technology sector (+0.5%), Facebook (FB 129.73, +3.22) outperformed, notching a fresh all-time high (129.94). Conversely, top-weighted Apple (AAPL 107.68, -0.05) ended lower by 0.1% ahead of tomorrow's special event. The company is expected to introduce the iPhone 7 at 13:00 ET. The PHLX Semiconductor Index (-0.2%) underperformed as iPhone suppliers weighed. Skyworks (SWKS 73.01, -1.61) and Qorvo (QRVO 56.02, -1.58) rounded out the price-weighted index.

The health care space (+0.4%) finished ahead of the broader market as biotechnology outperformed. In the group, Gilead Sciences (GILD 77.88, +0.99) jumped 1.3% after being upgraded to "Buy" from "Hold" at Jefferies. Separately, health care plan names underperformed with Cigna (CI 127.58, -0.60) losing 0.5% after reaffirming its full-year adjusted net income guidance.

The financial sector (-0.2%) underperformed amid diminishing rate hike expectations for the year and a downturn in Treasury yields. The fed funds futures market estimates the implied probability of a rate hike at the September meeting at 18.0%, falling from the prior session's estimate of 21.0%. Money center banks and life insurance names underperformed with Prudential (PRU 78.59, -0.90) and Wells Fargo (WFC 49.99, -0.56) declining 1.1% apiece. 

Treasuries ended on a higher note with yields dropping through the curve. The yield on the 2-yr note ended lower by seven basis points (0.72%) while the yield on the 10-yr note settled lower by seven basis points (1.54%).

Today's participation was above the recent average as more than 835 million shares changed hands on the NYSE floor.

Today's economic data was limited to ISM Services for August: 

  • The ISM Non-Manufacturing Index for August was a big disappointment, dropping to 51.4 (consensus 54.7) from 55.5 in July.
    • This was the lowest reading for this index since February 2010.

Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index. Separately, the Job Openings and Labor Turnover Survey for July and the Fed's Beige Book for September will cross the wires at 10:00 ET and 14:00 ET, respectively.

Re/code.net : This self-driving startup wants to change the way robot cars make

This self-driving startup wants to change the way robot cars make decisions and communicate

This robot car is brought to you by deep learning.

From consumers to the experts, there’s still a lot of uncertainty about self-driving cars.

Is the public ready for two-ton automobiles driven by software? Is Lidar — an expensive and often unwieldily technology used to calculate distances using lasers — even necessary? (Elon Musk says no.) And how will self-driving cars communicate with other cars and pedestrians?

This new self-driving startup — like many others before it — purports to have the answers. Drive.ai, co-founded by Carol Reiley and Sameep Tandon, came out of stealth just last week with one basic premise: The answer to all these questions lies within deep learning.

What’s the difference between deep learning and other machine learning systems? At the risk of oversimplifying it, deep learning is a machine learning system that is mirrored closely after the human brain, whereas other machine learning systems often require rules and human programming.

So why do Reiley and Tandon think deep learning is the key to unlocking the true potential of self-driving cars?

Consider this: If you had to give a machine a set of rules that would help it recognize a chair, what would those rules be? Maybe: This chair stands on four legs and is brown.

But what happens when you flip that chair upside down? Or if you introduce a different colored chair? Based on the given rules, that machine may not be able to recognize the object.

But give a person a chair — just a chair — and they’ll be able to recognize chairs everywhere.

Unlike other computer vision and machine learning systems, deep learning systems can roughly think and make decisions like a human brain.

“Other systems use a lot of rules, but autonomous driving is a hard and complicated problem,” Tandon, who is also Drive.ai’s CEO, told Recode. “Deep learning systems are the most effective in a practical, real-world application because it can capture more nuance and different variations than other machine learning algorithms.”

Drive.ai
After launching out of stealth early last week, Drive.ai joined the growing fray of self-driving startups with plans to integrate with commercial fleets in an effort to acquire more driving data. Eventually, like the self-driving startups before them, Reiley and Tandon hope to work directly with automakers and have already secured a few fleet partners, though they declined to say who they were.

Drive.ai isn’t alone in its ambitions. Many of the freshman class of self-driving startups that have recently launched fall into one of two buckets: They have either been created in the hope of eventually being acquired by an automaker or, like Drive.ai, they want to be vehicle-agnostic and hope to avoid being restricted to a single legacy automaker.

Think Cruise, which was acquired by General Motors, versus MobileEye, which has become an industry standard. But as the self-driving market gets more competitive, there may be a shift away from automakers working with technology companies that are standard across the industry in order to secure a competitive advantage over its rivals.

For now, the team is focused on its commercial fleet partnerships in order to ensure their technology is safe and reliable. Tandon, who was studying artificial intelligence at Stanford along with several other of the team’s engineers before halting his studies to start Drive.ai, and Johns Hopkins Ph.D. candidate Reiley have so far raised $12 million from undisclosed investors and have a total of 20 employees.

The company also announced that General Motors veteran Steve Girsky joined its board — a move that may bolster its relationships with carmakers (or even hint at an existing one).

Admittedly, Drive.ai isn’t the only company using deep learning algorithms in their self-driving cars, Tandon said. Mobileye, for example, recently announced they would use deep learning for their camera systems.

But Drive.ai is the only one using deep learning to drive the entire system, he said. That means deep learning is powering everything — from the sensors and cameras, to the vehicle’s decision-making, to the way the car communicates with people and things around it.

Communication, like deep learning, is crucial, according to Reiley and Tandon.

Cars, regardless of what system they’re operating, will need to be able to communicate with one another just as people will need to be able to understand the cars’ intentions. As the self-driving space becomes increasingly crowded with the entrance of legacy and new transportation players, standardizing that communication becomes trickier.

Communication, according to Tandon, is also an important method of gaining the trust of the public. After all, consumer trust — like the reliability and legislative approval of the technology — can either be the ultimate impediment to the deployment of self-driving or it can be what expedites it.

“We believe [a standard] needs to exist,” Tandon said. “Cars today have break lights, horns, rear-view mirrors, side-view mirrors — but all those standards developed over time. Our belief with the self-driving car is that a similar transformation will have to occur. For example, we may have to replace the human hand signals, like the wave.”

Already, Tandon and his team have been discussing implementing a standard method of communication with his existing partners.

“We’re still trying to figure out what that standard even is,” he said. “But to me, it’s just a fundamental part of the problem of self-driving cars.”

To that end, the company’s “kit,” which can be retrofitted to existing vehicles, includes LED signs that sit atop the car and speakers that relay the car’s intentions to pedestrians and human drivers around it. (Naturally, the kit is also equipped with sensors like radar, GPS, cameras and Lidar, though Reiley said the team considers Lidar to be more of a redundancy than a necessary part of the system.)

The company is still testing different methods of communication to measure things like how quickly and how well people respond to the audio-visual cues. For example, do pedestrians notice the LED sign that says that it’s safe to cross, or do they need an extra sound or voice?

Using deep learning to power that part of the system, Tandon said, allows it to learn how to communicate in a way that a pedestrian and another human driver might understand.