What’s it all about?
The Italian market, with the upside of being highly underpenetrated and underserved, is providing early signs it is catching up, and TI is starting to deliver on its strategic plan. Momentum is set to continue in Q4 and most of 2017E both in Italy and Brazil, while the risk of Open Fibre (OF) and Iliad are overplayed and manageable (with the potential buffer of a new cost-cutting plan). While EBITDA growth may match the industry over the next three years, the unwinding of capex should allow for a 2016-20E equity FCF CAGR of 26%, above peers and contributing to the derisking of the balance sheet. The c. 35-40% discount to the sector is unwarranted, and the solid execution with a return to EBITDA growth should gradually close the valuation gap.
We raise our TP from EUR0.95 to EUR1.05 (ordinary shares).
Asia Mid-Session Market Update: World Bank cuts global growth forecasts but sees US upside from Trump fiscal stimulus
***US Session Highlights***
- (US) NOV JOLTS JOB OPENINGS: 5.52M V 5.50ME
- (MX) Mexico Central Bank reportedly sold $2B last week to support the peso - press
- (US) Richmond Fed's Lacker (hawk, non-voter) to retire Oct 1, 2017 - press
- (US) Intelligence officials reportedly presented Pres-elect Trump with allegations that Russian operatives have compromising personal and financial information about him - CNN
***US markets on close: Dow -0.2%, S&P500 flat, Nasdaq +0.4%***
- Best Sector in S&P500: Healthcare
- Worst Sector in S&P500: Utilities
- Biggest gainers: ILMN +16.6%, BSX +6.4%, ZBH +6.2%, FCX +5.9%, ALK +5.2%
- Biggest losers: WMB -10.7%, ENDP -6.7%, VTR -3.6%, CF -3.1%, VRSN -3.1%
- At the close: VIX 11.5 (-0.1pts); Treasuries: 2-yr 1.19% (flat), 10-yr 2.38% (flat), 30-yr 2.97% (flat)
***US movers afterhours***
- ICHR: Reports prelim Q4 R$131M v $118Me, FY16 R$405M v $392Me (2 est); +15.5% afterhours
- AKAO: Baker Bros. Advisors LP discloses passive 13.1% stake - 13G filing; +8.0% afterhours
- MRK: FDA accepts Supplemental Biologics License Application for KEYTRUDA (pembrolizumab) in combination with Chemotherapy for first-line treatment of Metastatic Non-Squamous Non-Small Cell Lung Cancer; +3.0% afterhours
- UAL: Reports Dec load factor 83.1%, +0.1ppt y/y; Raises Q4 consolidated passenger unit revenue -1.75% to 1.25% (prior -4% to -3%) y/y; +2.8% afterhours
- SYK: Guides FY16 at high end of $5.75-5.80 v 5.78e, R$11.3B v 11.3Be (prior low end $5.75-5.80, rev +6.0-6.5%) - ahead of JP Morgan conf; +1.0% afterhours
- VECO: Reports prelim Q4 $0.04-0.10 v $0.00e, $91-95M v $91.4Me; Files $200M offering of Convertible Senior Notes due 2023; -3.0% afterhours
***Politics***
- (US) Intelligence officials reportedly presented Pres-elect Trump with allegations that Russian operatives claim to have compromising personal and financial information about him - CNN
***Asia Key economic data:***
- (AU) AUSTRALIA SEPT-NOV SKILLED VACANCIES Q/Q: 2.2% V 4.9% PRIOR
- (NZ) NEW ZEALAND DEC ANZ JOB ADVERTISEMENTS M/M: 1.6% V 3.1% PRIOR; Y/Y: +19% y/y, strongest annual growth since late 2011
- (JP) JAPAN DEC OFFICIAL RESERVE ASSETS: $1.22T v $1.22T PRIOR
- (KR) South Korea Dec Unemployment Rate: 3.4% v 3.6%e (lowest since Oct 2015)
***Asia Session Notable Observations, Speakers and Press***
- Asia equity markets trading mixed, with Hang Seng and Shanghai Composite diverging as a leader and a laggard respectively. Despite the rally in miners on rising metals prices, Australia's ASX200 was flat.
- USD majors also holding narrow ranges in the absence of key economic data and flat US yields. USD/JPY was most volatile in a 60pip range but remaining well contained within the month-long 115-118.60 band as traders await transfer of power in the US and greater visibility for initial policies under the new govt.
- DoubleLine's Gundlach forecast 2-3 rate hikes this year and noted that 3% breach on the 10-year yield would be critical; Earlier, Janus's Gross noted 2.6% as the key threshold that will herald a protracted bear bond market.
- World Bank's Global Economic Prospects report lowers 2017 and 2018 global GDP targets by 0.1pts to 2.7% and 2.9% respectively; Advanced economies target GDP was also cut by 0.1% to 1.8% for both years, Euro area by 0.1pts to 1.5% and 1.4%, while US were maintained at 2.2% and 2.1%. WB warned about protectionist retaliation from Trump's tariff proposals, but also noted the possibility of fiscal stimulus in the US "could lead to stronger-than-expected activity in the near term and thus represent a substantial upside risk to the outlook", providing a "significant boost to the global economy."
- China press citing local economists warning about rising prospects of a trade war under US President Trump, noting his "harsh" stance on China trade and his selection of trade officials. Disruption of Apple supply chain or cancellation of Boeing orders were mentioned as some of the initial steps China could take in retaliation to US tariffs.
China:
- (CN) China Securities Times citing analysts: Trade friction between China and the US may be hard to avoid; the risk of a trade war is increasing after Donald Trump's election victory
- (CN) China MOF to increase debt swap bond sales this year - Chinese press
- (CN) China to allow local govts to sell debt-swap bonds using unfinished quota from 2016 - Chinese press
- (CN) UBS China economist Wang Tao: Dec PPI increase was driven by price increase of raw materials in the ferrous metal, oil processing and chemical industries - Chinese press
Japan:
- (JP) Bank of Japan (BoJ) Exec Dir Amamiya: Markets have digested yield curve control (YCC) in an orderly manner; YCC and negative rates have had considerable effects
- (JP) NHK poll shows that most Japanese see ties with the US getting worse under Trump
Australia:
- (AU) CBA: There is upside potential for Australia growth; Sees GDP rising from 2% at 2016-end to 3% in 2017 - press
- (AU) Deutsche Bank raises S&P/ASX200 target for 2017 to 6,000 from 5,600 - Australian press
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.3%, Hang Seng +0.6%, Shanghai Composite -0.6%, ASX200 +0.1%, Kospi +1.5%
- Equity Futures: S&P500 -0.1%; Nasdaq -0.1%, Dax -0.1%, FTSE100 -0.1%
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0535-1.0565; JPY 115.65-116.25; AUD 0.7350-0.7380; NZD 0.6970-0.7000
- Feb Gold +0.2% at 1,188/oz; Feb Crude Oil +0.3% at $50.97/brl; Mar Copper +0.4% at $2.62/lb
- (US) Weekly API Oil Inventories: Crude: +1.5M v -7.4M prior
- JGB: (JP) Japan MoF sells ¥723B in 0.6% (0.6% prior) 30-yr bonds; Avg yield: 0.745% v 0.617% prior; Bid to cover: 3.33x v 2.85x prior
- (CN) China MoF sells 5-yr bonds at 2.88% v 2.90%e
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9235 V 6.9234 PRIOR
- (CN) PBOC to inject combined CNY120B in 7-day and 28-day reverse repos v CNY120B prior
- (AU) Australia MoF sells A$1.0B v A$1.0B indicated in 2.75% 2027 bonds; Avg yield 2.797%; bid-to-cover 3.01x
***Asia equities / Notables / movers by sector***
- Consumer discretionary: China Southern Airlines Co 1055.HK -2.5% (to push mixed-ownership reform)
- Consumer staples: Bellamy's Australia BAL.AU -26.2% (guidance)
- Financials: Future Land Development Holdings 1030.HK -1.1% (profit alert); CITIC Securities 6030.HK +1.4%, Haitong Securities 6837.HK +1.4%, Poly Property Group Co 119.HK +6.7% (Dec result); Westpac Banking Corp WBC.AU -1.2% (Shaw and Partners cuts to hold)
- Industrials: BBMG Corp 2009.HK +3.3% (profit alert); China State Construction Holdings H-Shares 3311.HK +6.1% (2016 result)
- Technology: Toshiba Corporation 6502.JP +4.2% (lenders to maintain financing); Hon Hai Precision Industries 2317.TW -0.1% (Dec result); Taiwan Semiconductor Manufacturing Co 2330.TW -0.8% (Dec result)
- Materials: EVA Precision Industrial Holdings 838.HK +1.2% (profit warning); Saracen Mineral Holdings SAR.AU +2.7% (Q2 result), Ramelius Resources RMS.AU -5.6% (Q2 result); Fortescue FMG.AU +4.2%, Rio Tinto RIO.AU +4.1%, BHP Billiton BHP.AU +3.0% (Iron ore price rises); China Steel Corp 2002.TW +1.8% (Dec result)
After Hours Summary: ICHR +11% and UAL +2% higher following guidance... NVDQ -16.3% lower following guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ICHR +11.2% (sees Q4 revs $131 mln vs $117.90 mln Capital IQ Consensus Estimate, expects Q1 sales to be higher than Q4), SYK +1% (sees FY16 EPS at high end of $5.85-5.80 vs $5.78 Capital IQ Consensus Estimate; sees revs $11.3 bln vs $11.30 bln Capital IQ Consensus Estimate), MX +0.8% (MagnaChip Semi reports prelim Q4 sales at high end of guidance / above consensus; announces proposed $65 mln private offering of exchangeable senior notes and stock repurchase), SNX +0.3%
Companies trading higher in after hours in reaction to news: BIOC +21% (continued momentum), ENPH +14.2% (announces a $10 mln private placement of its common stock to T.J. Rodgers and John Doerr, chairman of Kleiner Perkins Caulfield & Byers), CTSO +10.3% (light volume; CytoSorbents and the U.S. Air Force determine to close the Company-sponsored, 30 patient, single site, randomized controlled human pilot study of the CytoSorb product to evaluate patients with severe trauma and rhabdomyolysis), AKAO +6.9% (Baker Bros discloses 13.1% passive stake), CUR +6.4% (continued strength), MRK +3.5% (receives FDA acceptance of supplemental biologics license application for Keytruda in combo with chemotherapy for first-line treatment of metastatic non-squamous non-small cell lung cancer), UAL +1.7% (expects Q416 consolidated passenger unit rev to decline 1.25-1.75% prior 3-4%)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: NVDQ -16.3% (sees Q4 rev below consensus; sees FY17 rev below consensus), VECO -3% (reports prelim Q4 results with upside adj EPS guidance and in-line revs; announces public offering of $200 mln of convertible senior notes due 2023), LMNR -1.6%
Companies trading lower in after hours in reaction to news: BRG -4.3% (commenced a public offering of 4,000,000 shares of its Class A common stock), PE -4% (announces Midland Basin and Delaware Basin acquisitions and introduces 2017 capital program and operating guidance; expects ~60% annual production growth in 2017; commenced an underwritten public offering of 20,000,000 shares of Class A common stock), JNPR -2.4% (downgraded to Sell from Hold at Deutsche Bank), PFGC -1.5% (announces secondary offering of 10 mln shares of common stock by stockholders, including affiliates of The Blackstone Group)
Closing Market Summary: Stock Market Closes Tuesday's Session FlatThe major averages ended Tuesday's session on a mixed note. The Nasdaq (+0.4%) finished out front, followed by the S&P 500 (unch) and the Dow (-0.2%).
Today's session got off to a flat start after some retailers and restaurants issued disappointing guidance. The cautions comments were shrugged off swiftly, as buyers pushed Chipotle Mexican Grill (CMG 414.48, +19.42), Papa Murphy's (FRSH 4.54, +0.29), and Express (EXPR 10.78, +0.47) higher despite their negative guidance. The three names added between 4.6% and 6.8%, while the SPDR S&P 500 Retail ETF (XRT 44.33, +0.51) added 1.2%. Consumer discretionary (+0.4%) finished in line with financials (+0.4%) and just ahead of health care (+0.3%) atop the leaderboard. However, strength in those sectors could not prevent the S&P 500 from reversing off its high in the afternoon. The index returned to its flat line after a brief appearance above Friday's record close.
Health care marked its session high alongside the broader market around noon, but maintained that level while the rest of the market faced an afternoon retreat. The health care sector had some help from biotechnology, evidenced by the 0.8% increase in the iShares Nasdaq Biotechnology ETF (IBB 286.48, +2.18).
Industrials (+0.3%) also outperformed, aided by an uptick in in airlines after Alaska Air (ALK 92.00, +4.53) reported better-than-expected December traffic data. The sector also received a boost from automakers, with General Motors (GM 37.35, +1.34) adding 3.7% in reaction to upside guidance for 2017.
Materials (+0.1%), telecom services (+0.1%), and the top-weighted technology (-0.1%) sector finished the trading day flat. The tech space ended with a slight loss even though strength in chipmakers sent the PHLX Semiconductor Index higher by 0.5%. The sector couldn't overcome lackluster performances from top components like IBM (IBM 165.52, -2.13) and Oracle (ORCL 38.66, -0.37). The two names finished lower by 1.3% and 1.0%, respectively.
Energy (-1.0%) was the only other cyclical sector to finish in negative territory. The space couldn't overcome crude oil's 2.2% retreat as the commodity finished its trading day at $50.82/bbl. Real estate was the only sector to finish below the energy sector, with a loss of 1.2%. Consumer staples (-0.6%) finished slightly better, while the utilities sector (-0.3%) ended closer to its flat line.
The Treasury market remained relatively flat throughout today's session. The 2-yr yield closed unchanged at 1.19%, while the 10-yr yield finished up one basis point at 2.38%.
Today's trading volume finished above the 50-day moving average as 1.17 billion shares changed hands at the NYSE floor.
Reviewing today's economic data:
- November Wholesale Inventories increased 1.0%, which was above the consensus of 0.9%. The prior month's reading was revised to -0.1% from -0.4%.
- November Job Openings and Labor Turnover Survey showed that job openings decreased to 5.198 million from a revised 5.451 million (from 5.534 million) in October. For more on these economic releases, be sure to visit economic calendar
Tomorrow's lone economic report is the MBA Mortgage Applications Index, which will be released at 7:00 ET.
- Russell 2000 +1.0% YTD
- Dow Jones Industrial Average +0.5% YTD
- S&P 500 +1.3% YTD
- Nasdaq Composite +3.1% YTD
Phase 3 Study results published in the Journal of the American Medical Association show Parsabiv (Etelcalcetide) significantly reduced Serum Parathyroid Hormone in adults with Secondary Hyperparathyroidism on Hemodialysis
Announced the Journal of the American Medical Association (JAMA) publication of findings from three Phase 3 studies of Parsabiv (etelcalcetide), an investigational intravenous calcimimetic agent in the U.S. The studies evaluated Parsabiv in more than 1,700 adults with secondary hyperparathyroidism (sHPT) on hemodialysis and showed that the drug produced statistically significant and clinically meaningful reductions in serum parathyroid hormone (PTH) levels, a key marker of sHPT. sHPT is a chronic and serious condition that is often progressive among patients with chronic kidney disease (CKD) and is associated with significant clinical consequences.
AMGN - Study Results Published in the Journal of the American Medical Association Show Amgen's Parsabiv™ (Etelcalcetide) Significantly Reduced Serum Parathyroid Hormone in Adults With Secondary Hyperparathyroidism on Hemodialysis
Rebound in commodity-exporting nations set to boost global growth
World Bank warns of political uncertainties as it forecasts 2.7 per cent growth
The pace of global growth will increase this year, fuelled by a rebound in commodity-exporting emerging economies and further recovery in advanced economies such as the US, according to the World Bank.
However, the bank’s latest forecasts released on Tuesday included a warning that the arrival of the Trump administration and elections this year in Europe raised questions about the direction of economic policy and a potential new wave of protectionism.
Global growth is expected to accelerate to 2.7 per cent this year after growing 2.3 per cent in 2016, its worst performance since the 2008 crisis. Advanced economies as a group are expected to grow at a slightly faster rate of 1.8 per cent this year, up from 1.6 per cent in 2016.
“After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” said Jim Yong Kim, World Bank president.
“The good news is that there is a recovery and that this recovery is coming after a bottom, if you think of 2016 as that bottom,” said Ayhan Kose, lead author of the bank’s annual Global Economic Prospects.
“But there are significant downside risks . . . including political uncertainty.”
The US economy was expected to expand 2.2 per cent in 2017, up from an estimated 1.6 per cent last year, the bank said. That forecast increase comes before tax cuts, infrastructure spending and deregulation that incoming US president Donald Trump has promised will boost growth. Both the euro area (1.5 per cent) and Japan (0.9 per cent) are expected to grow at a weaker pace this year.
The expected acceleration in the US is likely to help lift other parts of the global economy. “What happens in the US does not stay in the US,” Mr Kose said.
But a strengthening dollar, higher US interest rates and their impact — particularly on corporate debtors in emerging economies — posed risks, he said.
Fast US growth is likely to be accompanied by a surge in commodity-exporting emerging and developing economies, which are expected to expand 2.3 per cent this year, after two years of stagnation.
Recessions in countries such Brazil and Russia that followed the collapse in commodity prices were likely to end this year thanks to a modest recovery in prices, the bank said. Both economies contracted in 2016 and are expected to grow modestly this year.
The same applies to Nigeria, Africa’s largest economy, which the World Bank expects to grow 1 per cent in 2017 after contracting 1.7 per cent last year.
That would bring relief for countries that many last year saw as the potential source of a new wave of emerging market crises.
But Mr Kose said that while many commodity-exporting developing economies were on a better footing than they had been a year ago, most still remained vulnerable to swings in international prices and another downturn.
The World Bank said it remained concerned about a slowdown in global investment growth, which had fallen from 10 per cent in 2010 to below 3.5 per cent in 2016.
It was more optimistic, however, about global trade, the slowdown in which has plagued the world economy for the past five years.
World trade volumes grew 2.5 per cent in 2016 but are expected to expand by 3.6 per cent — or 1.3 times global GDP — this year, thanks mainly to the changing fortune of commodity-exporting countries and a rebound in other large developing economies.
François Fillon perd la pole position dans l’enquête Ifop-Fiducial pour Paris Match, iTélé et Sud-Radio. Marine Le Pen repasse devant l’ancien Premier ministre et Emmanuel Macron se rapproche du duo de tête.
Le mois de janvier est rarement favorable pour les favoris de l’élection présidentielle; cela se confirme avec François Fillon. Selon le sondage Ifop-Fiducial pour Paris Match, iTélé et Sud-Radio, le candidat de la droite perd la pole position au profit de Marine Le Pen. La patronne du FN se retrouve pour la première fois en tête des intentions de vote au premier tour dans une enquête réalisée pendant une année présidentielle. Vainqueur de la primaire en novembre, l’ancien Premier ministre recule déjà de trois points en moyenne dans notre premier baromètre présidentiel de l’année. Suivant l’identité de l’adversaire socialiste (quatre scénarios ont été testés, voir ci-dessous), le député de Paris recueille entre 24 et 25% des voix. Un resserrement attendu. En 2012, François Hollande, candidat victorieux de la primaire de la primaire de la gauche avait connu pareil reflux et vu remonter Nicolas Sarkozy.
Exclusif :Coulisses et indiscrétions de la présidentielle 2017
En janvier 2017, François Fillon connaît les même déboires. Il perd des suffrages dans les catégories actives : -12 points chez les ouvriers (8%) et -11 dans les couches populaires (11%). Sa base de droite s’érode aussi parmi les électeurs qui avaient voté Nicolas Sarkozy en 2012. François Fillon paie probablement ses hésitations sur sa réforme de la Sécurité sociale et peut être aussi son relatif silence médiatique. Marine Le Pen profite de ce trou d’air. Elle gagne, selon les scénarios testés, en moyenne deux points et remonte à 26,5% avec une pointe à 50% chez les ouvriers! Au second tour, en revanche, François Fillon serait très largement vainqueur face à Marine Le Pen : 64% des voix contre 36 pour la candidate d'extrême droite (c'était 65/35 lors de notre dernière enquête fin novembre).
La dynamique Macron
Emmanuel Macron semble poussé par des vents porteurs à cent jours du premier tour de la présidentielle. L’ex-ministre de l’Economie de François Hollande poursuit sa marche en avant. La bataille des candidats socialistes à la primaire de gauche n’enraye pas sa progression. Le fondateur d’En marche! remplit les salles dans des bastions socialistes (Nevers et Clermont-Ferrand le week-end dernier) tandis que ses rivaux sont à la traîne dans les sondages. Selon les scénarios, il recueille de 17% (en cas de victoire de Manuel Valls à la primaire) à 19% (avec Benoit Hamon ou Arnaud Montebourg) et jusqu’à 20% (avec Vincent Peillon). Bref, une progression de trois points par rapport à une enquête similaire publiée par Match avant Noël. Emmanuel Macron écrase ses rivaux socialistes en particulier chez les électeurs qui avaient voté François Hollande en 2012. Candidat attrape-tout, il marque des points à gauche, séduit un quart des sympathisants MoDem et 11% des sarkozystes! L'Ifop a également testé des hypothèses de second tour prenant en compte une présence d'Emmanuel Macron. Il battrait Marine Le Pen (65/35) et surtout François Fillon (52/48); des scénarios «à prendre avec grande précaution», selon Frédéric Dabi, directeur général adjoint de l'Ifop.
Valls à... 10,5%
Parmi les quatre principaux prétendants socialistes à la candidature présidentielle, aucun d’entre eux ne parviendrait à se qualifier au second tour. Pire, ni Manuel Valls, ni Arnaud Montebourg, ni Benoît Hamon ou Vincent Peillon ne sont en mesure de prendre la tête des candidats de la gauche alternative. Ils finiraient au mieux cinquième derrière Emmanuel Macron et Jean-Luc Mélenchon. Le candidat du Parti de gauche reste à son étiage (entre 11,5 et 12%) malgré sa percée sur Internet et YouTube. Manuel Valls, lui, doit se contenter de 10,5% ce qui fait de l’ancien Premier ministre le meilleur des candidats socialistes. Une piêtre consolation qui prouve que les sympathisants de gauche ne croient pas aux chances du PS en 2017 surtout depuis le renoncement de François Hollande. Il faut dire que les performances de Hamon (6%), Montebourg (5,5%) et Peillon (2,5%) sont humiliantes.