TheChek News Flow

- Equities: muted $0.5bn inflows (first inflows in 5 weeks) (note divergence between $4.8bn ETF inflows & $4.3bn mutual fund outflows)

- Bonds: $14.4bn inflows (largest since Feb’15)

- Precious metals: $4.1bn inflows (largest on record – data since 2005 – Chart 4) (inflows in 24 of past 26 weeks)

- Money-markets: $14.3bn inflows (largest in 4 weeks)

- Europe: 22 straight weeks of outflows ($4.4bn)

- UK equity funds see $1.1bn outflows (largest since Jan’15) (outflows in 10 of past 11 weeks)

- US: $3.3bn inflows (largest in 13 weeks)

- EM: tiny $0.1bn inflows (first inflows in 4 weeks)

- Japan: tiny $83mn inflows (inflows in 7 of past 9 weeks)

- By sector: largest financials outflows ($1.2bn) in 21 weeks; largest tech inflows ($0.4bn) in 13 weeks

- Largest EM debt inflows ($3.4bn) on record (data since 2004 – Chart 3)

- Largest HY bond inflows ($2.8bn) in 16 weeks

- Largest Govt/Treasury inflows ($3.3bn) in 24 weeks

- 18 straight weeks of inflows to IG bond funds ($3.2bn)

- 42 straight weeks of inflows to Munis ($1.0bn)

- Inflows to TIPS in 19 of past 21 weeks ($0.3bn)

{http://ftalphaville.ft.com/marketslive/2016-07-08/}

BE

Market cap of about $3bn at the moment.

PM

Founded in 1982, Cypress is the leader in advanced embedded system solutions for the world’s most innovative automotive, industrial, home automation and appliances, consumer electronics and medical products. Cypress’s programmable systems-on-chip, general-purpose microcontrollers, analog ICs, wireless and USB-based connectivity solutions and reliable, high-performance memories help engineers design differentiated products and get them to market first.

BE

That's the one. It's an internet-of-things play these days.

BE

Mostly using Arm licences.

BE

Now, we've heard from multiple directions this week that there's Chinese interest in Cypress.

PM

hmmm...

PM

( WICED™ (pronounced “wik-id”) is Cypress IoT platform that enables the rapid development and deployment connected IoT products. )

BE

Clearly, given the sensitivities of China buying semiconductor IP, that would be rather controversial.

PM

Sure would

PM

Doesnt mean they wont try

BE

Cypress does PSoCs built around Arm licences that are absolutely critical in all sorts of industries.

BE

The Chinese firm that tends to be attached to the rumour is Summit View Capital.

BE

One version of the story has Summit View Capital putting in an offer at a fair premium very recently. As in, earlier this month.

BE

However

BE

We've checked this story as much as possible and have no useful guidance on whether it's accurate.

BE

It could be that Chinese firm puts in an offer, has been told to go away, and that's the end of that. In which case no-one needs to say anything.

BE

That would not normally be great corporate governance -- but the politics of China buying semi IP might justify an instant silent rejection. Dunno.

Real time stream connected. New messages will appear here the moment they are published.

BE

Anyway, we note it. We flag it up. The rumour's rife so we wouldn't be doing our jobs if we didn't flag it up.

BE

If anyone needs to say anything, this might prompt them to. If nothing needs to be said, it won't.

11:31AM

PM

Well certainly one to watch Bryce

Shares price reaction today (2%) does not fully price in an enhanced growth/mix profile + solid financials from a WWAV acquisition (~8- 15% Y1-3 accretion, ROIC>WACC (~6.5%) by Y6/7), in our view. We think this reflects market scepticism on several fronts, which, while understandable, we see as overdone.

In this note, we address 3 key concerns that have come up in our conversations with investors today on the proposed Danone/WhiteWave (WWAV) deal. We also publish details of our pro forma model estimates for the combined company.

Emerson Electric's EMR.R alternator unit Leroy Somer is expected to attract firm offers from two Chinese companies as well as one buyout group in a potential 1 billion euro ($1.1 billion) deal, people familiar with the matter said.

Private equity group Clayton Dubilier & Rice (CD&R), as well as Wolong Electric (600580.SS) and another Chinese company are currently conducting due diligence on Leroy Somer and preparing to hand in final bids later this month, the sources said.

Emerson wants to focus its business on process automation as well as heating and air conditioning and in April launched the sale of its Motors and Drives unit, which consists mainly of Leroy Somer. It wants to chose a buyer before the August summer break, one of the people said.

CD&R declined to comment, while Emerson, Wolong and the French government were not immediately available for comment.

Two weeks on from the UK Brexit vote and uncertainty still dominates both politically and economically. Against this backdrop, we expect investor appetite for risk to remain subdued and for ‘quality’ stocks to continue to trump any call for a shift into ‘value’ for now. This may well support on-going Staples sector out-performance over the next three months; however, having already outperformed substantially since June 23, the associated +4% PE re-rating of European Staples leaves the sector trading on PE multiple (22.4x) last seen in the early 2000s Tech Bubble. Despite on-going yield support, without another macro shock it is tough to argue for a further significant PE re-rating, however with relative earnings support likely to continue we maintain our Neutral sector stances.

RATING CHANGES: UPGRADE Heineken, Nestlé and AG Barr to OW and Reckitt Benckiser to EW. DOWNGRADE Diageo and BAT to EW and Champagne stocks Lanson, Laurent Perrier and Vranken-Pommery to UW.

- Heineken (PT €90): With the naira devalued and margin expansion structurally

supported by the group’s growth-skewed footprint in Asia and Mexico, medium-term

margins may beat guidance of 40bps p.a. and prompt upgrades to F17E in our view.

- Nestlé (PT CHF82): Given the uncertain macro backdrop, the combination of Nestlé’s

geographic/product diversity, dividend yield, new CHF 1.8bn cost saving plan and

prospect for positive strategic change under the new external CEO is appealing. We

expect the shares to re-rate from a discount to premium to the sector.-

- Diageo (PT 2150p): Momentum is improving but the recent re-rating has closed the

stock’s historical PE discount. Although we see reasons for earnings upside from greater

efficiency savings and incremental cash returns, with neither likely until 2017 and without

on-going GBP weakness, the shares lack a catalyst for further out-performance.

- BAT (PT 5100p): Although we remain positive on the tobacco sector and BAT’s ability to

beat EBIT margin expectations over the medium-term (driven by SAP deployment), after

recent out-performance, our upside case fair value is <10% away.

- Other stocks to consider: We re-iterate our OW on Britvic which is now trading at

decade relative lows, Imperial Brands as it should close its relative PE discount to Staples

and Rémy Cointreau, which is enjoying transactional FX support.

Navigating Q2 earnings: We preview Q2 earnings in this report. In the near-term we

prefer Britvic, Carlsberg, Nestlé & Unilever over CCH, Henkel and Reckitts.

* The polls suggest a very close race…

* …and Mr Renzi's leadership of the country could be at risk

We answer ten questions on timeline, prospects, and implications of the referendum:

1. What is the referendum about?

2. When will it take place?

3. How does the referendum work and are there any precedents?

4. What in the event of a YES vote?

5. What happens in the event of a NO vote?

6. Could Mr Renzi cancel the referendum and/or renege on his resignation?

7. What are the opinion polls saying?

8. What could affect the result in the coming weeks?

9. What does it mean for the markets?

10. Would a NO win increase the chances of Italy leaving the euro?

The UK real estate sector has lost 19% post-referendum, taking us close to trough multiples. However, this still fails to fully capture the downside to NAV in our revised forecasts. Neither do valuations compensate investors for a unique combination of cyclical and structural risks in the London office market. We downgrade five UK stocks and now have seven Underperform ratings.

* A domestic, cyclical sector facing structural risks

UK real estate is highly geared to the domestic GDP cycle leaving it vulnerable to Brexit related

uncertainty. An uber low-yield environment and functioning credit markets make a 2008/9 style

blowout in yields unlikely, but falling rental values will still trigger yield expansion. Thankfully,

defensively geared balance sheets stave off the risk of recapitalisations in the sector.

* We forecast a 20% decline in NAV by 2018e

An average 70bp rise in UK yields and varying declines in rental values result in 21% downgrades

to our 2018e NAV forecasts. We see greatest downside in the London office sector due to a

cyclical loss of employment and risk that London suffers disproportionately from Brexit. An average

c.15% correction in office rents for the REITs only unwinds the last two years’ growth.

* Too early to catch a falling knife

UK real estate now trades at 20% discount to spot GAV, comparable to the peak discount applied

to trough valuations in 2008/9. This suggests the worst of the de-rating has taken place, however

valuations still provide an insufficient cushion for the downside risk to values. In our view it is too

early to be buying UK real estate into accelerating NAV declines and we see only limited prospect

of buybacks or M&A coming to the rescue in the short-term.

Dow -0.13% S&P -0.09% Nasdaq +0.36% Russell +0.21%

US MArket closed on a flat note after a reversal in Oil and ahead of tomorrow's release of the Employment report. EIA reported that crude oil inventories declined by 2.22 million barrels (consensus: between -2.3 million and -2.6 million barrels), which fell roughly in-line with expectations. WTI crude ended its day lower by 4.6% ($45.19/bbl; -$2.18). Five sectors ended in the red with utilities (-1.8%), telecom services (-1.6%), and energy (-1.1%) rounding out the leaderboard. On the flipside, consumer discretionary (+0.4%), industrials (+0.3%), and technology (+0.3%) led the pack. would acquire the company for $56.25 per share. Volume were in line with volume with 851mil shares. US After Hours JUNO -30% on news of death of 2 patients on Cancer trial, CUDA +15.5% on earnings/guidance, GPS +4% on SSS... PSMT -5.5%, WDFC -3%, HELE -2.1% on earnings/guidance/SSS. Asian equity markets are modestly lower and sentiment is subdued with key risk events out of the US and regionally headed into the weekend. China released its June foreign reserves overnight that showed the biggest increase in 14 months to $3.21T, leading to speculation that PBoC has exited its regular currency market intervention and allowing Yuan to weaken. USD/JPY was back within 30pips of the psychological 100 handle, which was briefly breached 2 weeks ago on Brexit Leave vote panic and subsequently held unchallenged. Nintendo +9.1% on new pokemon app.Danone (WWAV 56.23, +8.80) surged 18.6% after announcing that WhiteWave Foods

Macro :

- Gross: U.K. Funds Lowering NAVs to Stop Withdrawals ‘Incredible’

- ECB’s Constancio Sees Need for ‘Reflection’ on State Aid on NPLs

- China June Retail Auto Sales Rise 19.4% on Year: PCA

- U.K. Has Worst June LFL Sales in Over Decade on Brexit, BDO Says

Keep an eye on :

- AAL LN : Coronado May Bid for Anglo American Coal Assets: Australian

- AIR FP : FARNBOROUGH AIR SHOW PREVIEW: Concern Commercial Orders to Slow

- AF FP : Air France-KLM Total June Passenger Traffic Rises 1% to 8.3m

- AKE FP : Arkema Opens Bostik Plant in Helsingborg, Sweden

- BP IM : Banco Popolare: Outcome of EU-Wide Stress Test Set for July 29

- BMPS IM : Monte Paschi Says Working to Resolve Bad Loan Burden

- BMPS IM : Monte Paschi Seeks to Deal With EU10B Bad Loans in 2 Wks: Sole

- BLND LN : British Land Invests in Commercial Property Exchange IPSX: FT

- BLND LN : British Land Sells Debenhams Store on Oxford Street for GBP400m

- BN FP : JPMorgan, BNP Paribas Said to Help Fund Danone’s WhiteWave Deal

- DB1 GY : Deutsche Boerse Said to Push Frankfurt Clearing in Case for LSE

- ENEL IM : Enel Confident About Concluding Metroweb Deal: CEO to La Stampa

- ENI IM : Eni Receiving Interest for Stake in Egyptian Gas Field Zohr: FT

- HER IM : Hera Shares Said to Be Priced at EU2.35 Each in Placing

- KUD SW : Kudelski Buys Watermarking Leader Nexguard, Terms Not Disclosed

- LHN VX : Lafarge India Unit Purchase Race Narrows to Local Companies: ET

- LIN GY : Linde Unit Lincare Says Allegations Are Vague, Without Merit

- MC FP : Fendi Says It May Review U.K. Prices If Pound Weakens Further

- NOVN VX : Novartis: FDA Approves Expansion of Age Range for Xolair

- UG FP : PSA Said to Reach Agreement With Labor Unions, AFP Reports

- PAH3 GY : *PORSCHE FAMILY BUYS 200,000 PORSCHE PREF. SHRS: HANDELSBLATT

- RCS IM : RCS Board Says Cairo’s Increased Offer Still ‘Not Fair’

- ROG VX : Roche Gets FDA Approval for Cobas HPV Test

- SIE GY : Siemens to Get Gas Turbine Order From Saudi Arabia: Tagesspiegel

- SW FP : Sodexo 9-Month Rev. In Line, Confirms FY Targets, Sodexo In Line, Catering Growth Better Than Expected: Berenberg

- UBER IPO : Lyft Adds Luxury Service to Rival UberBlack: CNBC

- UBER IPO : *UBER RAISES $1.15B FR NEW HIGH-YIELD LEVERAGED LOAN: DJ ON CNBC

- VOW3 GY : Audi to Restrict Hiring to Save Costs: Heilbronner Stimme

- VOW3 GY : Volkswagen to Pay California $86m in Added Civil Penalties