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

>>> Up
*ALDERMORE RAISED TO BUY VS NEUTRAL AT BOFAML
*FEINTOOL RAISED TO BUY VS HOLD AT BERENBERG
*SHAWBROOK RAISED TO BUY VS NEUTRAL AT BOFAML

>>> Down
*CARILLION CUT TO UNDERWEIGHT AT JPMORGAN
*JUST EAT CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS

>>> PT Change


>>> Initiation
*AEGON RATED NEW SELL AT UBS; PT EU2.75
*ASR NEDERLAND RATED NEW NEUTRAL AT UBS; PT EU18
*DELTA LLOYD RATED NEW NEUTRAL AT UBS; PT EU3.4
*EI TOWERS RATED NEW NEUTRAL AT MACQUARIE
*ENI RATED NEW OUTPERFORM AT MACQUARIE
*FUCHS PETROLUB RATED NEW BUY AT UBS; PT EU46.5
*HUSKY ENERGY RATED NEW NEUTRAL AT JPMORGAN
*IMPERIAL OIL RATED NEW NEUTRAL AT JPMORGAN
*NN GROUP RATED NEW BUY AT UBS; PT EU30
*WD-40 RATED NEW HOLD AT JEFFERIES

>>> Call

>>> US After Hours Summary: GES +14%, WDAY +11%, TLYS +9% higher f

After Hours Summary: GES +14%, WDAY +11%, TLYS +9% higher following earnings / guidance, NFLX +1% on analyst upgrade... HPQ -5% following earnings / guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: GES +14.4%, WDAY +11.1%, TLYS +9.2%, HEI +1.8%, PVH +1.1%, WSM +0.5%,

Companies trading higher in after hours in reaction to news: XCOM +14.8% (continued strength - was up more than 50% higher on the day), BLDP +10.1% (received notification from the U.S. Department of Commerce that its family of fuel cell propulsion systems are now designated as EAR99 compliant, creating a path for commercial export and deployment in a variety of civilian unmanned vehicle applications), NYMX +6.7% (continued strength after closing more than 80% higher on the day), TOPS +4.9% (after 20%+ move higher today), NFLX +0.9% (higher in after hours following upgrade to Outperform at William Blair), CRM +0.9% (following WDAY results), CHK +0.6% (ticking higher - discloses agreement providing for a term loan facility)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: HPQ -5.2%

Companies trading lower in after hours in reaction to news: XGTI -16.4% (files for ~833.3K share common stock offering by selling shareholders), CRC -1.3% (light volume - S&P downgrades California Resources Corp. to 'SD'), KHC -0.5% (ticking lower - files mixed securities shelf offering)

>>> Asian Update

Asia Mid-Session Market Update: Shanghai slumps as PBoC uses 14-day reverse repo again and urges banks to manage liquidity

***Economic Data***
- (JP) JAPAN JULY PPI SERVICES Y/Y: 0.4% V 0.1%E; 10-month high
- (KR) South Korea Q2 Household Credit y/y: 11.1% v 11.4% prior

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.3%, S&P/ASX -0.1%, Kospi flat, Shanghai Composite -1.1%, Hang Seng +0.1%, Sep S&P500 flat at 2,176

***Commodities/Fixed Income***
- Dec gold flat at $1,329/oz, Oct crude oil +0.1% at $46.81/brl, Sep copper +0.4% at $2.09/lb
- (CN) PBOC to inject CNY140B in 7-day reverse repos; CNY80B in 14-day reserve repos (2nd day of 14-day reverse repo injection)
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.6602 V 6.6420 PRIOR
- (JP) Japan investors net buyers ¥433B in foreign bonds v ¥1.29T in prior week; Foreign investors net sellers ¥229.6B in Japan stocks v buyers ¥94.7B in Japan stocks in prior week

***Market Focal Points/FX***
- Asian equity markets are mixed to modestly lower, tracking a more pronounced decline in US indices as investors have turned uneasy over the prospects of Fed Chair Yellen communicating that a September hike is still on the table during Friday's Jackson Hole address. Shanghai Composite is particularly soft, with PBoC using 14-day reverse repo liquidity tool for the 2nd straight day in a potential signal that the Chinese central bank is reluctant to conduct more easing in interest rates and RRR. S&P futures, commodities, and USD majors are all little changed - USD/JPY traded in a 20pip range below 100.60, AUD/USD was up about 25pips above 0.7630, and NZD/USD was up only about 30pips above 0.7330 despite a Fonterra payout forecast hike.

- After using 14-day reverse repos for the first time in 6 months yesterday, PBoC followed up with a 2nd similar injection. Analysts have questioned the move being potentially in response to tighter liquidity, rising leverage in the bond market, and resulting reluctance by the PBoC to undertake more direct response such as RRR or an outright interest rate cut. Subsequently, a press report citing sources indicated that PBoC officials have already met with major banks to discuss closer liquidity management, encouraging them to lend in installments and spread out the loan terms. Chinese central bank said it is trying to add long term funds to the market but also intends to maintain its current monetary policy stance relatively unchanged against expectations of continued easing. Also of note, Shanghai was reportedly looking at additional curbs to reduce the surge in property prices, with consideration of higher down-payments and closer scrutiny over mortgage loan practices.

- In economic data, Japan Services PPI hit a 10-month high of 0.4% y/y. Recall the July Services PMI noted a marginal increase in input prices, even as the figure returned to expansion. Separately, a Nikkei report stated Japan govt has allocated a ¥4.52T sum in FY16/17 injection as part of the ¥28.1T economic stimulus plan, with much of the spending going to infrastructure and disaster relief from the 2011 earthquake/tsunami as well as this year's Kumamoto tremor damage.

- Australia's Treasurer Morrison said the govt's worst case scenario is that gross debt would top A$1.0T in 10 years, but he does not expect that to occur. Australia's retail giant Woolworths also reported results with a wider than expected loss of A$1.23B v A$0.98Be and a big cut final dividend to A$0.33 from A$0.72. Company said it will not provide full year profit guidance due to lack of visibility. After some initial volatility, shares rebounded later in the day as WOW also announced it is exiting its home improvement business, booking A$1.5B in proceeds. New Zealand's Fonterra announced a NZ$0.50 increase in FY16/17 milk price forecast to NZ$4.75/kg amid some of the recent supply reductions bringing more balance to the market. ASX economists noted improving trend in the last two GDT auctions, reiterating expectations of prices reaching NZ$6/kg this year, while Westpac said it may be too early for optimism given a similar surge in buying around the same time last year.

***Equities***
US equities / ADRs:
- GES: Reports Q2 $0.14 adj v $0.06e, R$545M v $555Me; +15.5% afterhours
- WDAY: Reports Q2 -$0.04 v -$0.02e, R$377.7M v $373Me; +12.4% afterhours
- PVH: Reports Q2 $1.47 v $1.28e, R$1.93B v $1.94Be; -0.3% afterhours
- HPQ: Reports Q3 $0.48 v $0.45e, R$11.9B v $11.4Be; -6.3% afterhours

Notable movers by sector:
- Consumer discretionary: BAIC Motor Corp 1958.HK +9.2% (H1 result); Retail Food Group RFG.AU +7.2% (acquisition, FY16 result); Nine Entertainment Co Holdings NEC.AU +1.0% (FY16 result); Flight Centre FLT.AU +1.2% (FY16 result)
- Consumer staples: Mengniu Dairy 2319.HK +8.9% (H1 result); Woolworths WOW.AU +6.2% (FY16 result)
- Financials: CITIC Securities 6030.HK -0.5% (H1 result); Shui On Land 272.HK -1.4% (H1 result)
- Industrials: Sany Heavy Equipment International Holdings Co 631.HK -5.9% (H1 result); RUSAL PLC 486.HK -1.7% (Q2 result); Amcor AMC.AU +4.8% (FY16 result)
- Materials: Iluka Resources ILU.AU -6.9% (H1 result); South32 S32.AU +1.0% (FY16 result)
- Energy: CGN Power Co 1816.HK -1.3% (H1 result); China Coal Energy 1898.HK -3.4% (H1 result); GCL-Poly Energy Holdings 3800.HK -2.6% (H1 result); AWE AWE.AU -8.4% (FY16 result); PetroChina Co 601857.CN -0.8% (H1 result); Kobe Steel 5406.JP +1.1% (JPMoran Chase raised to Neutral)

>>> HP beats by $0.03, beats on revs; guides Q4 EPS below consensus

HP beats by $0.03, beats on revs; guides Q4 EPS below consensus

Reports Q3 (Jul) earnings of $0.48 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $0.45; revenues fell 3.8% year/year to $11.89 bln vs the $11.49 bln Capital IQ Consensus.
Personal Systems net revenue was flat year over year (up 2% in constant currency) with a 4.4% operating margin. Commercial net revenue decreased 3% and Consumer net revenue increased 8%. Total units were up 4% with Notebooks units up 12% and Desktops units down 6%.
Printing net revenue was down 14% year over year (down 10% in constant currency) with a 20.4% operating margin. Total hardware units were down 10% with Commercial hardware units down 2% and Consumer hardware units down 14%. Supplies revenue was down 18% (down 13% in constant currency).
Co issues downside guidance for Q4, sees EPS of $0.34-0.37, excluding non-recurring items, vs. $0.40 Capital IQ Consensus Estimate.
Lowers FY16 EPS to $1.59-1.62 from $1.59-1.65 vs. $1.61 consensus.
"Although the markets remain challenged, we have the innovation and executional rigor needed to continue to take profitable share and invest in the right opportunities to drive long-term success for the company."

>>> US Close Dow -0.35% S&P -0.52% Nasdaq -0.81% Russell -0.92%


Closing Market Summary: Stocks Slip as Oil and Biotech Weigh

The stock market ended the midweek affair on a lower note as a weaker-than-expected reading of existing home sales for July and a downturn in crude oil pressured the broader market. Other focal points impacting today's trade included a rebound in the dollar, caution ahead of Friday's speech from Fed Chair Yellen, and relative weakness from the heavily-weighted technology (-0.5%) and health care (-1.6%) sectors. The Nasdaq Composite (-0.8%) finished behind the S&P 500 (-0.5%) and the Dow Jones Industrial Average (-0.4%).

The major averages slipped at the beginning of the session as investors responded to a downturn in crude oil and a weaker-than-expected Existing Home Sales Report for July. Crude oil futures were under pressure overnight after the American Petroleum Institute reported a larger-than-expected build in crude oil stockpiles. Separately, existing home sales for July came in at an annualized rate of 5.39 million units (consensus 5.54 million), declining 3.2% from June's unrevised 5.57 million units.

Crude oil extended its loss after the Department of Energy confirmed API's disappointing inventory data. The EIA disclosed that crude oil stockpiles rose by 2.50 million barrels (consensus: -0.45 million) while gasoline inventories increased by 0.03 million barrels (consensus: -1.66 million). As a result, WTI crude ended its day lower by 2.9% ($46.76/bbl; -$1.39), extending its week-to-date loss to 4.7%.

The benchmark index extended its loss near midday as a downturn in the biotechnology sub-group pressured the heavily-weighted health care (-1.6%) sector. The S&P 500 (-0.5%) violated its 20-day simple moving average (2177.84) in the final hour, finding support near the 2170 price level. Nine sectors ended in the red with materials (-1.2%) and health care (-1.6%) acting as noticeable laggards. Conversely, the utilities (UNCH) sector finished the day flat. 

Biotechnology weighed on the health care space (-1.6%), evidenced by the 3.4% decline in the iShares Nasdaq Biotechnology ETF (IBB 286.23, -9.95). In the ETF, Mylan Labs (MYL 43.15, -2.47) led to the downside after a White House spokesperson and the American Medical Association each voiced concerns regarding the company's drug pricing practices. Several U.S. lawmakers have criticized Mylan for excessive costs associated with the company's EpiPen device. The stock has declined 11.3% this week, which compares to a loss of 1.4% in the broader sector.

In the technology sector (-0.5%), large cap components Facebook (FB 123.48, -0.89) and Apple (AAPL 108.03, -0.82) underperformed, losing 0.7% and 0.8%, respectively. Top-weighted Apple was under pressure after reports indicated that co-founder Steve Wozniak is cautious about the notion of removing a headphone jack from the upcoming model of the iPhone. Intuit (INTU 109.85, -3.99) declined 3.5% as cautious first-quarter guidance overshadowed above-consensus fourth-quarter results.

The consumer discretionary space (-0.5%) displayed relative weakness as retail names pressured the sector. The SPDR S&P Retail ETF (XRT 45.62, -0.54) ended lower by 1.2% as quarterly results from La-Z-Boy (LZB 24.24, -3.96) and Express (EXPR 11.94, -4.09) weighed on the sub-group. 

The U.S. Dollar Index (94.76, +0.22, +0.24%) ended higher as the yen and euro lost ground to the greenback. The dollar gained 0.2% against the safe-haven yen (100.47) while the single currency slipped 0.4% against the buck (1.1266).

Treasuries ended on a mixed note as the long end of the curve displayed relative weakness. The yield on the benchmark 10-yr note finished higher by one basis point at 1.56%.

Today's participation was below the recent average as fewer than 737 million shares changed hands at the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, the FHFA Housing Price Index for June, and the Existing Home Sales Report for July: 

  • The MBA Mortgage Index showed that mortgage applications fell 2.1% in the week ending August 20 after a 4.0% decline in the prior week.
  • The FHFA Housing Price Index for June rose 0.2%, which followed an increase of 0.2% in May.
  • Existing home sales in July declined 3.2% to a seasonally adjusted annual rate of 5.39 million (consensus 5.54 million) from June's unrevised sales pace of 5.57 million
    • June's sales pace was the highest since February 2007.
    • Existing home sales are being crimped due to limited inventory and high prices, both of which are leading to reduced buyer traffic in general and the tepid involvement of first-time buyers specifically.

Tomorrow's economic data will include weekly initial claims (consensus 265k) and Durable Goods Orders for July (consensus 3.5%), which will each cross the wires at 8:30 ET. 

  • Russell 2000 +8.9% YTD
  • S&P 500 +6.4% YTD
  • Dow Jones  +6.1% YTD
  • Nasdaq Composite  +4.2% YTD

Canal+, Telecom Italia... Le deal secret entre Vivendi et Orange

*ORANGE TO TAKE STAKES IN CANAL PLUS, TELECOM ITALIA: CHALLENGES


EXCLUSIF L’opérateur télécoms ferait son entrée à la fois dans Canal Plus et dans Telecom Italia, deux sociétés dont le principal actionnaire est Vincent Bolloré (Vivendi).


Bolloré qui s’allège en partie du fardeau Canal Plus et Orange qui prend enfin pied en Italie. C’est une opération "win win" qu’a imaginée cet été le banquier d’affaires Jean-Marie Messier. Orange participerait à une recapitalisation de Canal Plus, filiale de Vivendi, pour se retrouver avec environ 20% du capital aux cotés de Vincent Bolloré. Et ce dernier, céderait des actions Telecom Italia à Orange qui prendrait enfin pied dans ce pays. Le deal est loin d’être bouclé. Mais Vincent Bolloré, principal actionnaire et président du conseil de surveillance de Vivendi et le PDG d’Orange Stéphane Richard en ont bien discuté. Leurs équipes se sont même rencontrées récemment sous prétexte d’une renégociation de contrat de diffusion.
Un porte-parole d’Orange, qui ne confirme ni n’infirme ces informations, admet qu’il "n’est pas absurde de réfléchir à ce genre de schéma". Derrière l’entrée dans Canal Plus, ce sont bien entendu les contenus qui intéressent Orange, qui pourrait par exemple recalibrer et distribuer une partie des formats proposés par le groupe audiovisuel pour les smartphones. L’opérateur regarde d’ailleurs de près un autre dossier: la société de production Banijay Group détenue à hauteur de 26% par…Vivendi. Pas question pour l’instant de parler de "convergence" chez Orange, qui avait arrêté en 2012 sa chaîne sport après y avoir englouti 1,6 milliard d’euros. Mais la stratégie décomplexée du concurrent SFR (Altice), qui s’est notamment payé les droits du football anglais, pourrait faire bouger les lignes. Devant quelques journalistes, le 21 juin à New York, Patrick Drahi, l’actionnaire de SFR a d’ailleurs raillé son concurrent: "Je vous parie que si je produis des séries, dans un an, Orange s’y met aussi." Une alliance avec Vivendi serait une alternative intéressante à cette perspective.
Orange n'a pas les mains libres
Quant à l’autre volet de l’opération, qui se solderait par une entrée d’Orange au capital de Telecom Italia, dont Vivendi est le principal actionnaire avec 24,9% du capital, elle correspond à une stratégie industrielle de déploiement international affichée par Stéphane Richard, qui ne cache guère son appétit pour l’Italie. Même s’il est finalement resté à l’écart de la bataille livrée par Iliad Free et Vivendi pour le contrôle de l’opérateur transalpin, le PDG d’Orange connaît parfaitement ce dossier et sait que la capitalisation de Telecom Italia s’est effondrée de plus de 30% depuis le début de l’année. Un proche de Stéphane Richard, tout en considérant qu’une entrée au tour de table de l’italien serait un "investissement évident", dément le fait que cette initiative puisse être liée à une alliance avec Vivendi et à fortiori à une entrée au capital de Canal Plus. Le message est clair: les deux volets du deal sont disjoints. Ce qui rend l’opération un peu plus digeste.
Car Orange n’a pas les mains libres, surtout lorsqu’il s’agit de choisir un partenaire. L’ex-France Telecom n’est pas un opérateur comme les autres du fait de la présence de l’Etat à son capital. Ce dernier est minoritaire (13,4% en direct et 9,6% via Bpifrance), mais suffisamment présent pour détenir une forme de droit de veto, comme l’a montré l’échec de l’alliance avec Bouygues sur laquelle avait travaillé pendant des mois Stéphane Richard et son ami Jean-Marie Messier. Alors que le gouvernement avait mis des conditions inacceptables à Martin Bouygues, imagine-t-on qu’il puisse mieux traiter Vincent Bolloré qualifié entre autres de "catho intégriste" et de "pirate" par le président de la République dans un récent livre de confessions? C’est pourquoi les acteurs de ce projet d’alliance redoublent de prudence: Bercy n’est pour l’instant pas dans la boucle, les opérations Telecom Italia et Canal sont "étanches" et Messier Maris, la boutique de fusion et acquisitions de l’ex-patron de Vivendi Universal, n’a aucun mandat formel. Cette période de stricte confidentialité est désormais révolue.