SWISS WATCHMAKERS: Using our proprietary watch retailer survey, we analyse the industry value chain in this report and reach 3 conclusions. (1) The sell-out in HK could remain double-digit negative in 2H16 and a positive trend in 2017 is highly uncertain. (2) The inventory overbuild is worse than we anticipated. (3) The inventory overbuild is not limited to Asia. We downgrade Richemont to UP. We think watch sales could deteriorate further and earnings risk remains. We downgrade Swatch Group to UP. While a year ago we gave mgmt the benefit of the doubt on its ability to react to the new reality, its decision not to address costs and continue production above replenishment needs leave us concerned
Dow -0.15% S&P -0.13% Nasdaq +0.43% Russell -0.07%
US Market closed mixed as crude oil pressured the market. The energy component finished lower by 3.5% ($40.09/bbl; -$1.47), extending its decline from the June 8th closing high to 21.8%. six sectors ended in the red with materials (-0.7%), telecom services (-1.0%), and energy (-3.3%) leading the downside, Tech (+0.4%) & Health care (+0.6%). Biotechnology demonstrated relative strength in the health care sector (+0.6%), as the IBB jumped 1.6%. Volume were in line with average at 829mil shares. US After Hours CGNX +15.5% WMB +2% on earnings/guidance... IDTI -17%, RAIL -12%, TXRH -8.8%, THC -6% following earnings/guidance. Asian equity markets are softer as investors note the loss of upward momentum and disappointing ISM data stateside along with the slide in oil prices back to $40/brl. Hang Seng is closed due to typhoon and Shanghai Composite is flat in the wake of the mixed PMI data out overnight. Japan is underperforming ahead of the formal release of PM Abe's fiscal package, while Australia index is off its lows after the RBA decision to cut rates (25bps to 1.50%).
Nikkei -1.19% Hang Seng - Closed - CSI -0.17% Shanghai -0.05%
Eur$ 1.1179 CNH 6.6513 CNY 6.6474 JPY 102.25 GBP 1.3193 CHF 0.9671 RUB 66.8219 WTI $ 40.09 (+0.07%)
S&P +0.16% EuroStoxx -0.42% Dax -0.32% SMI -0.32%
Macro :
- Oil Retreats to Bear Market as Global Supply Glut Seen Growing
- Icahn Sees Brett Icahn, David Schechter Managing New Portfolio
- China Willing to Study Free-Trade Agreement With U.K.: Ministry
Keep an eye on :
- ABI BB : Anheuser-Busch Sees Completing SABMiller Deal Oct. 10
- AF FP : Air France Strike Cost ’Dozens of Mlns of Euros’: France Inter
- ASML NA : Added to EuroStoxx 50 - changes effective with Aug. 8 open
- BARC LN : Barclays 2016 Profit Estimates Cut, 2017 Raised, Citi Says
- BMW GY : BMW 2Q Profit Beats Estimate; FY Forecast Confirmed
- CBK GY : Commerzbank Reiterates 2Q Net Drops 32%; Says NII Declines 15%, Cuts FY Forecast, Sees Drop in Operating Profit
- CSGN VX : Deleted from EuroStoxx 50 (fast exit Rule) replace by Vinci & ASML - changes effective with Aug. 8 open
- DBK GY : Deleted from EuroStoxx 50 (fast exit Rule) replace by Vinci & ASML - changes effective with Aug. 8 open
- DBK GY : Deutsche Bank Seeks Higher Market Share in M&A, FAZ Says
- DBK GY : Deutsche Bank Buys Barcelona Mall for EU485m: Expansion
- DSM NA : DSM 2Q Ebitda Beats Estimates; 2016 Outlook Revised Upward
- ERA FP : France’s APE: Eramet Stake Purchase Contract Signed on Aug. 1
- ERF FP : Eurofins Scientific 1H Profit Doubles, Revenue Rises 44%
- EZBG BB : Eckert & Ziegler BEBIG 1H Operating Profit EU223,000; Sales Fall
- FME GY : Fresenius Medical 2Q Basic EPS Beats Estimates (Yday)
- IFX GY : Infineon 3Q Segment Result Misses Ests.; Sees 4Q Rev. Rising 3%
- LHA GY : Lufthansa to Reduce Capacity, Sees 2H Unit Rev. Down 8%-9%
- MB IM : Mediobanca Makes Changes to Financials Long/Short Portfolio
- MEO GY : Metro 3Q Ebit Before Special Items Misses Ests., Keeps Outlook
- NOVN VX : Novartis Gets FDA Approval for CyPass Micro-Stent for Glaucoma
- OML LN : Cinven Said to Start Talks for Old Mutual Italy Unit: Reuters
- PFV GY : Pfeiffer Vacuum 2Q Ebit Unchanged, Sales Slip, Keeps Outlook
- REC IM : Family-Owned Recordati Said to Weigh Options Amid Asian Interest
- UBERIPO : Lyft to Evaluate Didi Partnership After Uber Deal: Recode
- UCG IM : UniCredit May Consider EU7b-EU8b Capital Increase: Messaggero
- RIN FP : Vilmorin FY Rev. Beats; Sees FY Current Operating Margin Growth
- VASTN NA : Vastned 1H Direct Result EU1.21/Share; Co. Repeats 2016 Forecast
- VNA GY : Vonovia Raises Guidance Again as Synergies Bigger Than Expected
- DG FP : Added to EuroStoxx 50 - changes effective with Aug. 8 open
- VOW3 GY : Audi VW Korea Fined 17.8b Won; 32 Model Sales Banned
>>> Up
*BAE SYSTEMS RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
*CEMENTIR RAISED TO OUTPERFORM VS NEUTRAL AT MEDIOBANCA
*DUNELM RAISED TO BUY VS ADD AT PEEL HUNT
*GLENCORE RAISED TO BUY VS HOLD AT SOCIETE GENERALE
*LOGITECH RAISED TO ADD VS REDUCE AT ALPHAVALUE
*SOLVAY RAISED TO STRONG BUY AT RAYMOND JAMES
>>> Down
*ACCOR CUT TO ADD VS BUY AT ALPHAVALUE
*CIE AUTOMOTIVE CUT TO HOLD VS BUY AT SOCGEN
*COOR CUT TO NEUTRAL VS BUY AT UBS, REMOVED FROM MIDCAP KEY CALLS LIST AT UBS
*INTERTEK CUT TO SELL VS HOLD AT SOCGEN
*JOHNSON MATTHEY CUT TO HOLD VS BUY AT BERENBERG
*MEDIASET CUT TO ADD VS BUY AT ALPHAVALUE
*RICHEMONT CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE (Note attached)
*SARAS CUT TO HOLD VS BUY AT KEPLER CHEUVREUX
*SARTORIUS CUT TO NEUTRAL VS BUY AT UBS
*SHELL CUT TO HOLD VS BUY AT LIBERUM
*SIMON PROPERTY CUT TO SECTOR PERFORM AT RBC CAPITAL
*SWATCH CUT TO UNDERPERFORM VS OUTPERFORM AT CREDIT SUISSE
*VISCOFAN CUT TO HOLD VS BUY AT SOCGEN
>>> PT Change
>>> Initiation
*AXA RATED NEW UNDERPERFORM AT MACQUARIE, PT EU15.3
*BRITVIC RATED NEW EQUALWEIGHT AT MORGAN STANLEY; PT 650P
*HEXPOL RATED NEW BUY AT UBS; PT SEK100
*IMMOBEL RATED BUY IN NEW COVERAGE AT ING; PT EU59
*POSTNL RATED BUY VS NOT RATED AT GOLDMAN; PT EU4.5
*STEINHOFF INTERNATIONAL RESUMED AT BUY AT CITI; PT EU6.45
*TEMENOS RATED NEW ’BUY’ AT KEPLER CHEUVREUX
>>> Call
>> Stock
*COOR REMOVED FROM MIDCAP KEY CALLS LIST AT UBS
After Hours Summary: CGNX +15.5% WMB +2% on earnings/guidance... IDTI -17%, RAIL -12%, TXRH -8.8%, THC -6% following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: HBP +19%, CGNX +15.5%, AMKR +13.5%, NLS +9.2%, OMEX +8.8% (thinly traded), MCEP +8.6%, GKOS +6.8%, TSE +5%, AEIS +4.9%, ATW +4%, RYAM +3.9%, WPZ +3.8%, CHGG +2.9%, GAIN +2.7%, AVGR +2.4%, WMB +2.1%, DNB +1.9%, DAC +1.7% (ticking higher)
Companies trading higher in after hours in reaction to news: TRXC +26.9% (announces the first global sale of its ALF-X Surgical Robotic System to Humanitas Hospital in Milan, Italy), WSTL +5.5% (Cove Street Capital discloses 16.3% active stake, has entered into confidentiality agreement with the company), DRQ +1.1% (Dril-Quip discloses discloses amendment to its four-year contract with Petrobras)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: BCEI -26.7% (also plans to suspend asset sale process; elects not to make interest payment on 5.75% Senior Unsecured Note), IDTI -16.8%, RAIL -11.6%, TTOO -9.1%, TXRH -8.8%, THC -5.9%, FTR -3.5%
Companies trading lower in after hours in reaction to news: ANGO -4.6% (commences 2.25 mln common stock offering by selling shareholdders, Avista Capital Partners, LP and affiliated investment funds ), GLOP -4.3% (commences public offering of 2.75 mln common units), FELP -4.2% (Foresight Energy launches numerous transactions in connection with its proposed global restructuring ), AQMS -3.5% (files ~4.431 mln share common stock offering by selling stockholders), BRX -2.7% (announces secondary offering of 30,000,000 shares of common stock ), ELLI -1.1% (commenced an underwritten registered public follow-on offering of 2,750,000 shares of its common stock)
Deutsche Bank & Credit Suisse Deleted From Stoxx Europe 50 Index
- Stoxx cites fast-exit rule;
- adds Vinci, ASML
All changes effective with Aug. 8 open
Asian Mid-session Market Update: RBA cuts to 1.50% as expected amid deteriorating trade and housing data; Japan Fin Min signals FX focus in response to recent JPY strength
***Economic Data***
- (AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.50% (record low); AS EXPECTED
- (AU) AUSTRALIA JUNE TRADE BALANCE (A$): -3.2B V -2.0BE; 26th consecutive deficit; biggest deficit in 6 months
- (AU) AUSTRALIA JUNE BUILDING APPROVALS M/M: -2.9% (2nd straight decline) V +0.8%E; Y/Y: -5.9% (2nd straight decline) V -2.4%E
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 118.0 v 115.5 prior
- (NZ) NEW ZEALAND Q3 2-YEAR INFLATION EXPECTATION SURVEY Q/Q: 1.65% V 1.64% PRIOR (3-quarter high)
- (NZ) NEW ZEALAND JULY QV HOUSE PRICES Y/Y: 14.1% V 13.5% PRIOR (4th consecutive increase)
- (JP) JAPAN JULY MONETARY BASE Y/Y: 24.7% v 25.4% PRIOR; MONETARY BASE END OF PERIOD: ¥403.9T v ¥403.9T PRIOR
- (KR) SOUTH KOREA JULY CPI M/M: 0.1% V 0.2%E; Y/Y: 0.7% V 0.8%E; CPI CORE Y/Y: 1.6% V 1.7%E
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.7%, S&P/ASX -0.4%, Kospi -0.5%, Shanghai Composite flat, Hang Seng closed, Sep S&P500 +0.2% at 2,168
***Commodities/Fixed Income***
- Dec gold -0.3% at $1,355/oz, Sep crude oil +0.3% at $40.19/brl, Sep copper +0.3% at $2.20/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 5.9 tonnes to 964.0 tonnes; highest since July 20th
- SLV: iShares Silver Trust ETF daily holdings rise to 10,915 tonnes from 10,877 tonnes prior; multi-year high
- JGB: (JP) Japan MoF sells ¥2.18T in 10-yr 0.1% JGBs; Avg yield: -0.047% v -0.243% (record low) prior; bid to cover: 3.16x v 3.64x prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6451 V 6.6277 PRIOR; first weaker setting in 6 sessions
- (CN) PBOC to inject CNY60B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equity markets are softer as investors note the loss of upward momentum and disappointing ISM data stateside along with the slide in oil prices back to $40/brl. Hang Seng is closed due to typhoon and Shanghai Composite is flat in the wake of the mixed PMI data out overnight. Japan is underperforming ahead of the formal release of PM Abe's fiscal package, while Australia index is off its lows after the RBA decision to cut rates. In FX majors, AUD/USD fell around 50pips to 0.75 following RBA, NZD/USD traded in a 30pip range below $0.72, and USD/JPY rose about 40pips to session-high of 102.80 after Fin Min Aso warned the govt is monitoring FX volatility.
- Reserve Bank of Australia heeded expectations of a 25bp rate cut to 1.50%, though traders already fret that little change in the accompanying statement suggests this may a one-and-done easing. RBA reiterated global economy continues to grow, Australia growth remains at moderate pace, and near term indicators for employment show modest expansion. Inflation is also deemed to be "quite low" and stay that way for some time. RBA did add that growth in lending for housing has slowed this year, which suggests that "the likelihood of lower interest rates exacerbating risks in the housing market has diminished." Note that earlier released Australia building approvals was worse than expected, showing 2nd straight month of decline on both m/m and y/y basis. Australia terms of trade also registered a bigger deficit as exports fell 1% after 1% rise previously, while shipments of iron ore hit a 4-month low.
- Ahead of PM Abe's official unveiling of the ¥28T stimulus package today, early indications suggest the plan will include ¥6.2T for infrastructure, ¥2.7T for disaster relief, ¥1.3T to manage Brexit risks and help SMEs, and ¥3.4T to improve demographics. Soft US data has added to pressure in USD/JPY pair following underwhelming BOJ decision last week, and today Fin Min Aso had to prop up the yen rate by noting the govt is uncomfortable with "nervous movements" in FX markets, sending USD/JPY up over 40pips. Separately, a Nikkei report today citing a govt official expressed skepticism that the BOJ 2% inflation target can be achieved anytime soon, underscoring the optimistic CPI projections in the latest central bank statement (1.7% in FY17) relative to less rosy cabinet estimates.
- In China, state planner NDRC expressed confidence in reaching the official annual targets even though the economy is still facing many challenges. Reports on the property sector have also been more upbeat as China Index Academy saw avg price of new residential properties in 100 major cities in July rising 1.6% m/m v 1.3% in June.
***Equities***
US equities / ADRs:
- AMKR: Reports Q2 +$0.02 v -$0.08e, R$917.3M v $875Me (1 est); +14.4% afterhours
- TEX: Reports Q2 $0.64 adj v $0.53e, R$1.30B v $1.60Be; +0.2% afterhours
- THC: Reports Q2 $0.38 adj v $0.49e, R$4.87B v $4.80Be; -5.9% afterhours
- IDTI: Reports Q1 $0.36 v $0.36e, R$192.1M v $191Me; -16.4% afterhours
Notable movers by sector:
- Consumer discretionary: Seven West Media SWM.AU -15.5% (FY16 prelim result); Japan Tobacco Inc 2914.JP +1.1% (H1 result); Navitas NVT.AU +0.3% (Fy16 result)
- Financials: Credit Corp CCP.AU +11.3% (guidance); Mitsubishi UFJ Financial Group 8306.JP -3.1% (Q1 result)
- Industrials: Qube Logistics QUB.AU +1.0% (acquisition); Ibiden 4062.JP -3.7% (Q1 result); NSK 6471.JP +6.8% (Q1 result); Teijin 3401.JP -0.3% (cuts guidance)
- Technology: Itochu Techno Solutions 4739.JP +4.4% (Q1 result); GMO internet 9449.JP +2.8% (Q1 result); Otsuka Corp 4768.JP -10.1% (H1 result); Sumitomo Electric Industries 5802.JP -3.2% (Q1 result); Asahi Glass Co 5201.JP +4.4% (H1 result)
- Materials: Nippon Soda Co 4041.JP+4.2% (Q1 result); Resolute Mining RSG.AU -4.3% (FY16 result); BC Iron BCI.AU +7.1% (FY16 result)
- Energy: Sundance Energy Australia SEA.AU -3.5% (Q2 result)
ITALIAN BANKS: Italian banks’ CS sample (ISP, UCG, UBI) reported 277bp CET1 consumption in the adverse scenario (293bp including Banco Popolare, Not Covered) at the aggregated level in the 2016 EBA Stress Test results. ISP and UBI were clear 'winners' with FL CET1 above the SREP (excluding P2G). In our view, the results should help to remove the higher systemic risk perception of Italian banks, which has been significantly higher after the small banks resolution in November 2015. This note highlights and measures next potential risk for Italian banks.
Deutsche Bank & Credit Suisse Deleted From Stoxx Europe 50 Index
- Stoxx cites fast-exit rule;
- adds Vinci, ASML
All changes effective with Aug. 8 open