>>> Asian Update

Asia Mid-Session Market Update: China Industrial Profit growth accelerates; Oil prices fall as Saudi min talks down need for output cut; US holiday spending up low double-digits

***Friday US markets on close: Dow +0.4%, S&P500 +0.4%, Nasdaq +0.3%***
- At the close: VIX 12.3 (-0.1pts); Treasuries: 2-yr 1.12% (flat), 10-yr 2.37% (+2bps), 30-yr 3.02% (flat)
- Best Sector in S&P500: Conglomerates
- Worst Sector in S&P500: Basic Materials

***Weekend US Corporate Headlines***
- BA: WTO expected to find Boeing has received illegal state subsidies for its 777X - financial press
- UTX: Said to hold talks with incoming administration of Pres-elect Trump about preserving US jobs and potential tax overhaul discussed by Republican leadership - press

***Politics***
- (US) Clinton campaign says it will join efforts by the Green Party to push for recounts in some battleground states that had close margins of victory for Trump
- (FR) Alain Juppe concedes defeat in French presidential center-right primary; Fillon wins with estimated 68.2% of the vote
- (IT) Italy PM Renzi: Referendum measure to reduce the number of Senate members by 2/3rd (from over 300 to 100) is not to curb democracy but rather reduce bureaucracy - CBS 60 Minutes interview
- (KR) Hundreds of thousands of people marched in Seoul, demanding that Pres Park steps down as the leader of South Korea - press

***Asia Session Notable Observations, Speakers and Press***
- JPY leads in an active FX session as USD falls across the board amid growing uncertainty going into Wednesday OPEC meeting and Sunday referendum in Italy and elections in Austria; US presidential transition wrinkled by potential Clinton challenge of polls in battleground states.
- According to Adobe, Black Friday and Thanksgiving Day shopping totaled $5.27B, +17.7% y/y; Separately, comScore saw 25-days of US holiday spending up 12% at $24.5B.
- Fillon victorious in France center-right primaries; Juppe concedes.
- Crude oil falls as much as 2% on reports Saudi energy min no longer sees the need for production cuts ahead of Wednesday meeting in Vienna; Ministers to hold preliminary talks in Russia on Monday.
- China Industrial Profit growth rises; NBS notes structure of growth not ideal as profit of raw material production increased while tech and equipment profit growth slowed.
- BOE Gov Carney floated a buffer period for companies as part of Brexit process negotiations; Rejected by Brexit leaders.

Energy:
- OPEC attempting last-ditch effort to secure agreement for production cut even as Saudi Arabia is now suggesting reduction of output is not needed; Ministers are flying to Russia for talks ahead of the meeting in Vienna this Wednesday.

China:
- (CN) PBoC Deputy Gov Yi Gang: yuan still a strong currency, should stabilize - financial press
- (CN) Moody's: Outlook for China's residential property market in 2017 is stable
- (CN) China should raise fiscal deficit to 3.5% from 3.0% and rely more on fiscal policy in 2017 - Chinese press op/ed
- (CN) JZ Securities chief economist: PBOC has effectively engineered a 25bp rate increase through the use of money market operations - press
- (CN) Societe Generale SAs chief China economist: China's "gyration of bubbles" has been heating up the commodities market - press

Japan:
- (JP) Japan PM Abe's Council on Economic and Fiscal Policy approves budget guidelines, targeting spending of ¥97T for FY17/18, up form ¥96.7T in FY16/17 - Nikkei
- (JP) Japan PM Abe: Free trade is at a crossroads, want to keep pushing TPP

Australia:
- (AU) JPMorgan: Australia quarterly CAPEX data due out this week will not be as dire as in recent surveys - press
- (AU) Australia Treasurer Morrison: No plans to take advice from former PM Abbott and his budget measures, including a A$7 Medicare co-payment and deregulation of all university fees - AFR

***Asian Equity Markets/Futures (23:30ET)***
- Nikkei225 -0.4%, S&P/ASX -0.6%, Kospi +0.4%, Shanghai Composite +0.5%, Hang Seng +0.7%
- Equity Futures: S&P500 -0.2%, Dax -0.2%, FTSE100 -0.1%

***FX ranges/Commodities/Fixed Income (23:30ET):***
- EUR 1.0595-1.0685; JPY 111.40-113.00; AUD 0.7430-0.7480; NZD 0.7030-0.7090
- Dec gold +1.2% at $1,192/oz, Jan crude oil -0.5% at $45.85/brl, Mar copper +0.4% at $2.69/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 6.6 tonnes to 885.0 tonnes; 11th straight decline; lowest since June 8th
- SLV: iShares Silver Trust ETF daily holdings fall to 10,766 tonnes from 10,796 tonnes prior; 6th straight decline; lowest since July 12th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9042 V 6.9168 PRIOR
- (JP) BOJ offers to buy ¥410B in 5-10yr JGBs, ¥190B in 10-25yr, ¥110B in JGBs with maturity over 25-yr, and ¥25B in inflation-indexed JGBs
- (KR) South Korea sells 3-yr Govt bonds at 1.773%
- (KR) BOK sells KRW300B in 3-month bills at 1.5%

***Key economic data:***
- (CN) CHINA OCT INDUSTRIAL PROFITS Y/Y: 9.8% V 7.7% PRIOR; YTD: 8.6% V 8.4% PRIOR
- (TH) Thailand Oct Customs Trade Balance: $0.25B v $1.9Be

***Asia movers***
- Western Areas WSA.AU: Enters into a 3-yr offtake contract with Tsingshan Group; +5.1%
- Metcash MTS.AU: Reports H1 Underlying Net A$82.8M v A$84Me, EBIT A$128M v A$135Me; Rev A$6.63B v A$6.7Be; +4.3%
- IOOF Holdings IFL.AU: Perpetual may have revised interest in potential takeover of IOOF Holdings - Australian; +4.1%
- Regis Resources RRL.AU: Goldman Sachs Raised RRL.AU to Neutral from Sell; +2.9%
- Tabcorp TAH.AU: Ladbrokes Coral said to be interested in making an offer for Tabcorp; offer expected to be a mix of cash and shares - UK press; +1.9%
- Canon 7751.JP: CLSA Raised CAJ to Outperform from Underperform; +1.6%
- ANZ.AU: In advanced talks with HNA Group to its divest UDC financing business , valued around A$550M - AFR; -1.3%
- Amcor AMC.AU: Credit Suisse Cuts AMC.AU to Neutral from Outperform; -4.1%
- Alco Holdings 328.HK: Reports H1 Net profit HK$46.2M v HK$71.1M y/y, Op profit HK$49.8M v HK$69.4M y/y, Rev HK$931M v HK$1.38B y/y; -13.9%

FT : Cobham directors accused of unlawfully transferring cash

Cobham directors accused of unlawfully transferring cash
Claim by insolvency litigator alleges move left defence group’s subsidiary unable to pay creditors

Millions of pounds in cash was unlawfully transferred from one subsidiary of Cobhamto another, leaving the defence equipment company’s mobile technology unit unable to pay creditors, it is alleged.

Two former directors of MMI Research, a subsidiary of Cobham, have been accused of breaching their fiduciary duties by paying £2.3m in dividends to another Cobham company, leaving it little more than an empty shell.
The claim, brought by insolvency litigator Manolete Partners, alleges that this was done despite the fact that MMI faced a court order to pay costs after losing a legal battle over patent infringement, and unrelated claims from HMRC for more than £1m.
Manolete, which says it is one of the UK’s largest insolvency litigators, acquired the claim from a liquidator at Begbies Traynor in March after a two-year pursuit by creditors to reclaim assets and costs of £1.7m.
The Manolete claim, filed with the High Court last month, alleges that the directors “did not reserve any funds for the liabilities owed to creditors … although they knew or ought to have known that MMI was liable to those creditors for litigation costs and outstanding tax”.
The events are alleged to have taken place between 2012 and 2013, when Cobham, like many defence companies, was under pressure from falling military spending in the US. The group has warned on profits three times in the past year and has changed its chief executive. Last week its chairman, John Devaney, stepped down.
MMI’s alleged liabilities stemmed from a long legal battle with another mobile monitoring company, Cellxion, which began two years before it was acquired by Cobham and when it was owned by property entrepreneur Mark Slatter. MMI twice won its case for infringement of a patent on technology that identifies and intercepts mobile phones, but finally lost to Cellxion’s appeal in 2012.
According to the filing by Manolete, emails were then sent by MMI’s lawyer to directors Stephen Beeching and Christopher Jewell, as well as Cobham’s then vice-president for legal and compliance issues, Mark Thomas, stating that the costs remained to be decided.
Cobham executives were also allegedly advised that they should defer a long-planned transfer of MMI’s assets to a sister company, pending the decision. Nevertheless, in March 2012 assets were transferred and a dividend of £2.3m was paid by MMI to Lockman, another Cobham subsidiary, before the court had fully quantified costs, it is alleged.
MMI, now devoid of assets, was then sold to its previous owner Mr Slatter. Manolete claims that MMI’s parent had made a proposal to pay all liabilities before transferring the company to Mr Slatter. Cobham was also in dispute with the entrepreneur over issues related to its original acquisition of MMI and recovery of costs associated with the Cellxion litigation, the claim alleges. When the final £434,432 costs ordered by the court were not forthcoming, Cellxion petitioned to wind up MMI and a liquidator was appointed.
Manolete is now seeking the restoration of £2.3m plus interest from the directors.
Cobham declined to comment. Neither Mr Beeching nor Mr Jewell, who has since left the company, could be reached for comment. Nor could Mr Slatter be reached for comment. No defence has yet been filed.

FT : National Grid to be spared from break-up

National Grid to be spared from break-up
UK power group will be ordered to put in place stricter controls to prevent conflicts of interest

Ministers have backed away from threats to break up National Grid, the FTSE 100 power group, which instead will be ordered to put in place stricter Chinese walls to prevent conflicts of interest in its role operating Britain’s electricity system.

New independent directors will be appointed to a separate board overseeing system operations under a compromise deal to be announced in coming weeks, according to officials briefed on the matter.
However, the operating unit, which has responsibility for balancing supply and demand in the UK electricity network, will remain part of National Grid in defiance of calls from MPs for a split.
A report by the Commons energy committee warned in June that conflicts between the company’s roles as owner and operator of the network were “intractable and growing”.
MPs said National Grid could be influenced by its own commercial interests when deciding where to source power or when advising the government on investment in new energy infrastructure.
But the company has persuaded ministers and Ofgem, the energy regulator, that it would be a mistake to remove its operating role at a time of upheaval in the electricity system, as coal-fired power is replaced with cleaner technologies.
In an interview with the Financial Times, John Pettigrew, National Grid chief executive, declined to comment on the progress of talks with the government over the operator role. But he said he would welcome a decision that kept system operations within the company while making the role more independent.
“Putting in additional controls makes a lot of sense but I’m not convinced that creating a separate system would be beneficial to customers,” he said. “It would be hugely disruptive at a time when security of supply is critical and we need inward investment.”
National Grid makes most of its UK revenues from charging utilities for access to its high-voltage transmission network; its operations role gives it day-to-day control of the system and an influential voice in government energy policy.

The review of these roles comes as Britain heads into winter, the period of highest energy demand, facing tight supply marginsafter the closure of several coal-fired power plants. Mr Pettigrew said National Grid’s expertise was needed to keep power flowing.
Separation of system operations was mooted last year by Amber Rudd, then-energy secretary, who said there was a “strong case for greater independence”.
Concern about conflicts of interest has focused on National Grid’s interconnector business, which imports electricity from France and is building a further link with Norway. This potentially puts it in competition with domestic sources of power generation vying for access to the transmission system.
When the energy committee published its report urging a break-up in June, Angus MacNeil, the SNP MP who then chaired the panel, pointed to the success of the independent operator model in the US. “It is time for it to be brought to these shores,” he said.
Mark Fitch, an energy infrastructure expert at PA Consulting, said a compromise short of full separation looked the right decision for now, but he forecast further scrutiny in years ahead as the shift from big thermal power stations to more decentralised energy becomes clear, changing how electricity is produced and distributed.
The Department for Business, Energy & Industrial Strategy said: “British homes and businesses deserve a secure, flexible and affordable independent energy supply. The government works closely with National Grid and Ofgem to continually review and reform our electricity system and protect the interests of customers.”

FT : Fears mount of multiple bank failures if Renzi loses referendum

Fears mount of multiple bank failures if Renzi loses referendum
Up to eight lenders risk being wound up if No vote triggers prolonged market mayhem

Up to eight of Italy’s troubled banks risk failing if prime minister Matteo Renzi loses a constitutional referendum next weekend and ensuing market turbulence deters investors from recapitalising them, officials and senior bankers say.

Mr Renzi, who says he will quit if he loses the referendum, had championed a market solution to solve the problems of Italy’s €4tn banking system and avoid a vote-losing “resolution” of Italian banks under new EU rules.
Resolution, a new regulatory mechanism, restructures and, if necessary, winds up a bank by imposing losses on both equity and debt investors, particularly controversial in Italy, where millions of individual investors have bought bank bonds.
The situation is being closely watched by financiers and policymakers across Europe and beyond, who worry that a mass failure of Italian banks could trigger panic across the eurozone banking system.
In the event of a “No” vote and Mr Renzi’s exit, bankers fear protracted uncertainty during the creation of a technocratic government. Lack of clarity over a new finance minister may lethally prolong market jitters about Italy’s banks. Italian lenders have more than halved in value this year on concerns about their non-performing loans.
Italy has eight banks known to be in various stages of distress: its third largest by assets, Monte dei Paschi di Siena, mid-sized banks Popolare di Vicenza, Veneto Banca and Carige, and four small banks rescued last year: Banca Etruria, CariChieti, Banca delle Marche, and CariFerrara.
Italy’s banks have €360bn of problem loans versus €225bn of equity on their books after successive regulators and governments failed to tackle a bloated financial system where profitability was weakened by a stagnant economy and exacerbated by fraudulent lending at several institutions.
But the market solutions, including a JPMorgan plan to recapitalise Monte Paschi and the efforts of a government-sponsored, private vehicle Atlante to backstop problems at smaller banks, are looking shaky in the face of expected market turbulence if a “No” vote wins, said officials and bankers.
Lorenzo Codogno, a former chief economist at the Italian Treasury and founder of LC Macro Advisors, argued that the “biggest concern” in the aftermath of the referendum is its impact on “the banking sector and implications for financial stability”.
“The capital increases of Italian banks due to be announced right after the referendum may become even trickier than currently perceived in the case of a “No” vote”,” Mr Codogno said.
Monte dei Paschi di Siena is among eight Italian banks known to be in various stages of distress © Bloomberg
Senior bankers and officials said that the worst-case scenario was where a failure of Monte Paschi’s complex €5bn recapitalisation and bad-debt restructuring demanded by regulators would translate into a wider failure of confidence in Italy and imperil a market solution for its ailing banks.
Under this scenario, officials and senior bankers believe that all eight banks could be put into resolution. They fear that contagion from the small banks could threaten a €13bn capital increase at Unicredit, Italy’s largest bank by assets and its only globally significant financial institution, planned for early 2017.
Senior bankers argue that, irrespective of the referendum result, there is little incentive for investors to put fresh capital into Monte Paschi, Carige or the Veneto banks when Italian listed mid-sized banks are on average only trading at about a quarter of tangible book value.
“The issue is whether Siena gets done or not,” said a senior official, reflecting how Monte Paschi has become a proxy for the Italian financial system. “Without Siena on the line, I am not worried. With Siena on the line, I am worried.”
This person added that, should Monte Paschi’s deal fail, “all theories are possible” including “a resolution of the eight banks”, especially if a “No” vote led to Mr Renzi quitting office and a period of protracted political uncertainty.
Spreads on Italian government bonds versus German Bunds rose above 190 points on Friday, a level not seen since October 2014, as markets priced in expectations of turbulence.
The prospectus for the recapitalisation of Monte Paschi, which includes a debt for equity swap that begins on Monday, warns that the vote weighs on its chances of success. The Bank of Italy has warned of market volatility around the vote. Critics of Mr Renzi have accused the central bank of fear-mongering ahead of the vote.
But the threat of resolution has loomed large in his premiership as it has coincided with the advent of the single banking supervisor which has taken a tougher stand on Italy’s non performing loans.
Bankers and officials can envisage a technocratic government agreeing with Brussels and Frankfurt a systemic “bail-in” of vulnerable Italian banks which emerged among Europe’s weakest in stress tests two years ago and again this summer. Under a bail-in, which forces losses on bond holders, Brussels could allow for some compensation for vulnerable retail investors, officials said.
Nicolas Veron, senior fellow at think tank Bruegel argued that “if anything the ECB has been very lenient in addressing the system-wide banking situation [in Italy] that has been very visible since the comprehensive assessment two years ago”.
“It is a very difficult moment but it is not sustainable. The problem of banking fragility is not going away. It is not something that resolves itself with time,” Mr Veron said.

WSJ : The Next Fashion Trend: Weather Forecasting

The Next Fashion Trend: Weather Forecasting
As temperature fluctuations catch designers and retailers off-guard, a major fashion school wants students to learn more about predicting what’s ahead

At a recent class at the Fashion Institute of Technology in New York City, students were asked—and promised a Dunkin’ Donuts gift card for the right answer to—the question: When should a Los Angeles store stock swimsuits?
Sarah Corcoran, a senior, explained she would use a “maximum temperature metric” to figure out the problem. “Yes,” cheered her professor, Calvin Williamson. And she earned the gift card.
FIT, one of the largest and best-known fashion schools, with alumni including Calvin Klein, Norma Kamali and Brian Atwood, this semester launched a new, 15-week course called “Predictive Analytics for Planning and Forecasting: Case Studies with Weatherization.” The course, geared toward students interested in retail and merchandising careers, is part of a broad overhaul of FIT’s curriculum to include more topical business issues, and weather is a prime one.

Weather fluctuations have increasingly been putting fashion designers and clothing retailers on the defensive. Merchandise is often ordered months in advance based on what the weather typically is at that time of year. But when temperatures are different from what was predicted—milder-than-usual winters, cold springs or otherwise inconsistent weather—clothes that are all wrong for the climate stay on racks and get discounted, hurting sales.
Last winter was the warmest on record for the contiguous U.S., says Jake Crouch, a climate scientist at the National Oceanic and Atmospheric Administration’s National Centers for Environmental Information. The average temperature was 36.8 degrees Fahrenheit, 4.6 degrees above average, with some parts of the country even higher above average. That led to less demand for heavy winter coats.

J.C. Penney Co. Chief Executive Marvin Ellisonrecently told analysts warm weather hurt apparel sales for the quarter that ended Oct. 29. He cited the “warmest September ever on record” as a factor. Some mass retailers hire or consult climatologists to help them make such predictions.
Designer Michael Kors makes a point of including a range of fabric weights for his resort collections, instead of limiting them to the lightweight clothing and beachwear those collections have historically featured. Mr. Kors has cited the reality of unexpectedly chilly days or nights and unpredictable weather.

Some designer labels, such as Vince, are promoting seasonless clothing, or clothing that is neither too heavy or too light, with pieces that can be layered on or taken off depending on how cool or warm it gets.

“Because of the extreme weather changes, there’s no real separation between spring, fall, winter and summer,” says fashion designerJason Wu, who is best known for the 2009 and 2013 inaugural gowns he created for Michelle Obama. Mr. Wu used wool, a fabric normally associated with autumn and winter, for a number of runway looks in his latest spring collection.
“People aren’t really used to seeing wool in spring,” he says. “We wanted to highlight the idea of cool wool. Extremely light wool.” Mr. Wu partnered with the Woolmark Company, the group representing Australian wool growers that promotes the use of wool, on those looks. As an ambassador for Woolmark, he receives support from the group.

FIT’s predictive weathering class is co-taught by Prof. Williamson and Gary Wolf, an assistant professor of fashion business management in the college’s Jay and Patty Baker School of Business and Technology.
At FIT, the predictive class is advanced, with terms like “linear regression” (a statistical method that examines the relationships between a number of variables) freely tossed out. Charts, graphs, equations and formulas are scribbled on white boards as students follow the lesson and plug numbers into Excel spreadsheets. Prof. Williamson teaches the statistics portion of the course, while Prof. Wolf teaches merchandising and marketing.
In one exercise, students worked to forecast which weeks a retailer in Chicago would have to stock more fleece by incorporating weather data into their calculations.
Melissa Weilacher, a senior majoring in international fashion business management, hadn’t considered the need to learn about weather as important to her education. “The idea that business is so affected” by a few changes in temperature surprised her, she says. “It can make you one step ahead of a competitor who is just looking at what happened last winter. You can’t just rely on what happened last year because things like that don’t happen all the time.”
The school also brings in industry professionals. A guest instructor, Mohan Anand, visited from Planalytics, a Berwyn, Pa.-based firm that helps retail companies metrically assess how weather impacts their business. Mr. Anand, director of research and analytics, came with his colleague, Evan M. Gold, executive vice president of global services. Among its clients: Dunkin’ Donuts. It helps the chain determine when to promote certain menu items.

WSJ : How Much Bank Stocks Can Gain From Higher Rates

How Much Bank Stocks Can Gain From Higher Rates
The longer superlow rates persist, the worse off banks’ profits

Why have bank stocks shot up so fast in the wake of Donald Trump’s electoral victory? There are 250 billion reasons.
Over the past six or so years, superlow interest rates, combined with far more stringent regulation, have taken a heavy toll on banks. By one measure, they have potentially cost banks about $250 billion in foregone income.
So rising long-term bond yields and the prospect the era of superlow rates generally is winding down have investors salivating over a windfall. Their euphoric reaction underscores just how painful the low-rate era has been for banks, even if there is still much debate over the Federal Reserve’s extraordinarily accommodative policies.

In the earliest days of ultralow rates, banks benefited as their securities portfolios rose in value, loan defaults declined and funding costs dropped. Indeed, policy makers viewed low-rate policies as supporting banks and the broader economy.
Yet those benefits faded as loans refinanced at lower rates and one-time boosts to bond and loan portfolios ran their course. Over time, gains dissipated and lower rates remained, squeezing bank profit margins.
“I think the problem here is that the low-rates policy has been so prolonged,” saidRichard Fisher, a so-called monetary-policy hawk who as president of the Federal Reserve Bank of Dallas until last year sometimes favored a less accommodative policy.
Supporters of ultralow rates note costs to banks would be worse if, absent strong Fed action, economic growth was even more anemic than in recent years. And the big fear around superlow rates—that they would spur rampant inflation—hasn’t materialized.
Fed Chairwoman Janet Yellen defended the Fed’s policies in an August speech, saying that studies have shown that these “helped spur growth in demand for goods and services, lower the unemployment rate, and prevent inflation from falling further below our 2 percent objective.”
Even so, the longer superlow rates persist, the worse off banks’ profits. “Low rates have led to the lowest bank net interest margins in six decades and lowest revenue growth in eight decades,” said CLSA banking analyst Mike Mayo.

A bank’s net interest margin measures the difference between its interest income and interest expense expressed as a percentage of its average earning assets.
There is no exact way to know how much low rates have cost banks. For a rough idea, look at banks’ return on assets, a broad measure of profitability. Between 1996 and 2006, U.S. banks had an average return on assets of 1.23%, according to Federal Deposit Insurance Corp. data. Since 2010, the average has been just 0.94%, the data show.
If U.S. banks had earned the precrisis average return, cumulative earnings from 2010—when the Fed launched its bond-buying program—through the fourth quarter of 2015—when the Fed raised its interest-rate target for the first time since the financial crisis—would have been around $1.07 trillion. Actual earnings were around 27%, or around $250 billion, less, according to FDIC data.
Jeff Davis, managing director of Mercer Capital’s financial institutions business, said this is “not the scenario investors want, much less contemplated” from the Fed’s policies.
The impact on banks of lower-for-longer rates is especially evident in net interest income, the money generated by the difference between the interest a bank receives on its assets and pays on its liabilities. After growing at a steady clip from 1985 to 2010, net interest income at U.S. banks has stagnated—going to $432 billion at the end of 2015 from $430 billion at the start of 2010, according to FDIC data.
At the same time, total assets at banks in the U.S. rose around 22% to $15.97 trillion.
This growth of assets without growth in interest income is “particularly damning,” said Mr. Davis. “The assets require capital. Shareholders provide the capital. A lot of additional capital has been provided in which the return at the margin is minimal.”

Adding to the pressure: Regulators have required banks to hold more equity. That, combined with lower returns on assets, has led to far lower returns on equity. Between 1996 and 2006, the return on equity for U.S. banks averaged 13.65%, according to FDIC data. Since 2010, the average has been 8.40%.
The Fed’s policies have been doubly painful because near-zero rates suppress the short end of the yield curve, while its bond buying has pulled down longer rates. The yield curve depicts the difference between short-term and long-term interest rates.
“A lot of the buildup in assets post crisis has been a result of monetary policy which has injected more than $2 trillion of cash assets on bank balance sheets,” said Goldman Sachsbank analyst Richard Ramsden. “This has the effect of blowing up bank balance sheets with cash and deposits with minimal to zero net income.”
The shape of the yield curve amplifies the impact of superlow rates. Looking at data from 1995 to 2012, researchers from the Bank for International Settlements found banks lose more from very low rates and flat yield curves than they gain from rising rates and steeper curves. “This indicates that the impact of interest rates on bank profitability is particularly large when they are low,” the researchers concluded.
This is because banks use deposits with short maturities and low rates of interest to fund loans with longer maturities and higher rates of interest, said New York University Stern School of Business professor Lawrence White. “When the yield curve flattens—as it has, because interest rates generally are quite low and zero is the lower bound for deposits—bank profitability generally suffers,” he added.
That shows up in banks’ net interest margins. At the start of 2010, these averaged 3.84% for U.S. banks. By the second quarter of 2016, they had fallen to 3.08%, FDIC data show.

>>> Bozzetto attracts interest of Sanofi - report

Bozzetto attracts interest of Sanofi - report (translated)

Bozzetto, an Italian chemicals company being sold off by private equity firm Synergo, has attracted the interest of Sanofi[SAN:EN], Italian-language daily Il Sole 24 Ore reported. The report cited unspecified rumours claiming that SK Capital Partners, Koch and Mandarin are also believed to be interested.
The item said that Alantra is advising Synergo on the sale.
Management is projecting to reach 2016 revenues of EUR 120m, EBITDA of EUR 13.5m and debt in the region of EUR 16.5m, as previously reported.
According to Synergo’s website, Bozzetto has three business units: Textile Chemicals, Building Chemicals, and Performance Chemicals.

>>> E.ON appoints team to fend off hostile takeover attempts (translated)

E.ON appoints team to fend off hostile takeover attempts (translated)

German energy conglomerate E.ON [ETR:EOAN] has appointed a team consisting of banks and law firms to fend off potential hostile takeover attempts, ARD reported.
The German TV channel said that E.ON itself confirmed a report to that effect published by local magazine Der Spiegel.
Following the spin-off of Uniper, the E.ON’s power plant subsidiary, and the downward trend caused by the energy transition in Germany, the firm is valued at EUR 12bn on the stock exchange. This valuation could make E.ON attractive for hedge funds, the report noted.

>>> What to look at this Week End - 26th & 27th of November 2016

Weekly Performance
Dow +1.31% S&P +1.20% Nasdaq +1.22% Russell +2.88% Brazil +2.66% Nikkei +2.90% Hang Seng +1.70% CSI +3.04 Shanghai +2.66% EuroStoxx +0.91% FTSE +0.96% CAC +1.02% Dax +0.33% Ibex +0.60% MIB +1.53% SMI -0.29%

Macro :
- Even If OPEC Gets a Deal, It Risks Reviving Battered Oil Rivals
- Carney in Talks on ‘Brexit Buffer’ for U.K. Companies: S. Times
- Russia Says OPEC Needs Internal Consensus Before It Joins Deal
- EU Commission Accelerates Fight Against Online Tax Fraud: Welt
- Japan PM Abe's Council on Economic and Fiscal Policy approves budget guidelines, targeting spending of ¥97T for FY17/18, up form ¥96.7T in FY16/17 - Nikkei - Social security spending said to account for much of the increase, rising about ¥500B
- IMF Indecision on Bailout Criticized by Greek Economy Minister
- Spain Govt to Approve 2017 Spending Cap of About EU118b: EP

Keep an eye on :
- ALO FP : French Industry Secretary to Meet Alstom CEO on Belfort Center
- AAL LN : Anglo American Los Bronces Mine Occupied: Co. Statement
- BARC LN : Barclays to Revamp Stockbrokers, Rename as Direct Investing: FT
- BPE IM : Popolare Emilia Approves Transformation Into Joint-Stock Company
- BMPS IM : Qatar Fund Cuts Possible Paschi Investment to EU750m: Repubblica
- BMW GY : BMW Raises Venture Capital Unit to EU500m: Handelsblatt
- BARN SW : Barry Callebaut CEO Wants to Make Sustainability Norm: Blick
- DBK GY : Deutsche Bank Owes Over EU30m in Bonuses to Ex-Managers: Welt
- DPW GY : Deutsche Post CEO Sees 10% Increase in Holiday Deliveries: BamS
- DNLM LN : Dunelm Said to Be in Talks to Buy Retailer WorldStores: Sky
- EMS SW : EMS CEO May Move Activity Abroad If Corp. Tax Reform Fails: SZ
- ENGI FP : Odebrecht Sells Project in Peru to Brookfield Asset, Suez: Valor
- IFX GY : Infineon has not been approached by potential bidders from China
- LCL LN : Ladbrokes Planning Bid for Australia’s Tabcorp: Mail on Sunday
- LSE LN : CME Group Tables Bid for LSE’s Clearing Ops in France: S. Times
- LHA GY : Pilots Discussed Lufthansa Strike Extension Until Nov. 30: Bild
- MC FP : LVMH’s Biver Says 2017 Will Be Better for Watchmakers: SZ
- MC FP : LVMH Said to Be in Talks to Buy Cyclewear Company Rapha: Mail
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WSJ : Oil Industry Anticipates Day of Reckoning

Oil Industry Anticipates Day of Reckoning
Prospect of ‘peak demand’ prompts debate and long-term planning by global producers

This month, European oil company MOL Group delivered a stark message to investors: Demand for fuel in its key markets is bound to fall.
So-called peak oil demand is a mind-bending scenario that global producers such as Royal Dutch Shell PLC and state-owned Saudi Aramco are beginning to quietly anticipate. But MOL has a transformation plan that is among the most explicit responses to the trend, indicating how the landscape may change for big energy providers over the next decade.
The Hungarian company is rethinking its traditional focus on fuel supply and shifting investment to petrochemicals, the key ingredient of everyday plastic products and a sector where MOL believes growth will continue even when its fuel business falters.

Although there will still be customers for its fuel, the company reckons demand will soon flatten and then start falling in its Eastern European markets around 2030. “We see that as an inevitability,” MOL Chief Financial Officer Jozsef Simola said.
Big oil players such as Exxon Mobil Corp, BP PLC and Saudi Arabia—which is leading recent efforts by the Organization of the Petroleum Exporting Countries to boost oil prices—are also anticipating significant shifts in demand, though there is no consensus on the timing and their moves have been gradual. They are increasing their investment in petrochemicals, pumping more natural gas, driving down costs and even diversifying into alternative energy sources like solar power.
Last month Shell finance chief Simon Henry caused a stir when he said the company sees oil demand peaking in five to 15 years. Shell’s latest published forecasts have consumption flattening toward the end of that period.
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State-owned China National Petroleum Corp. quietly issued a report in the summer predicting that China’s oil consumption—a major driver of growth in recent decades—will begin to fall by 2030, if not sooner. Global demand is expected to follow suit.
The International Energy Agency, which advises industrialized countries on energy policy, says consumption will continue to rise for decades in its most likely scenario. But that picture shifts radically if governments take further action to limit global warming to less than 2 degrees Celsius with more stringent policies like carbon pricing, strict emissions limits and the removal of fossil-fuel subsidies. If that happens, oil demand could peak within the next 10 years, the IEA says.
“The question is more a question of when, rather than if,” Dominic Emery, BP’s vice president for long-term planning and policy, told the Economist Energy Summit in London this month. BP says oil demand could fall by the late 2020s if tougher emissions laws are enacted.
Others don’t see peak demand coming so quickly. Exxon expects consumption to grow through 2040, though at a decelerating pace. Likewise, OPEC sees demand continuing to grow beyond 2040, but acknowledges new technologies and efforts to curb climate change could mean consumption peaks within the next three decades.
Still, OPEC mainstay Saudi Arabia, the world’s largest exporter of oil, is pushing its state oil company to invest heavily in petrochemical plants around the world. The kingdom is trying to diversify away from oil, publicly list Aramco to raise money for other industries, and build a new base of renewable energy.

Peak demand “will be later than the common dates that are being thrown around, but if it does happen, because we’re building multiple engines for the economy and we’re planning for an economy beyond oil, we’ll be ready,” Saudi Arabia’s energy minister,Khalid al Falih, told a conference in Istanbul last month.
Timing and preparing for peak demand are critical to companies’ fortunes. Energy producers could move too fast to adapt to shifts that are still years away. Or new technologies and policies could leave them vulnerable to changes that happen sooner than expected.
“There’s risks on both sides,” said Paul McConnell, research director of global trends at Edinburgh-based consultancy Wood Mackenzie.
Shell, Exxon and others are pouring money into natural gas—a less-carbon-intensive fossil fuel they bet will benefit from efforts to curb global emissions. In China, where growing oil demand has supported global markets for years, the state-owned energy giants are aggressively embracing natural gas as a fuel for use in everything from power generation to running cars.

Several of the world’s biggest oil companies are also increasing their focus on alternative energy sources like solar and biofuels. France’s Total SA has said it wants 20% of its portfolio to consist of low-carbon businesses within the next 20 years. The company hasn’t commented on the prospect of peak demand.
Peak demand is already arriving in some regions. In Europe, for instance, the IEA sees consumption most likely falling to 10.8 million barrels a day by the end of the decade from 11.7 million barrels a day in 2015.
Those numbers are driving big changes at companies like MOL.
“To come to a point to say that, wow, maybe the future will be different and maybe we have to prepare ourselves for a different world…that was not easy for guys like myself,” said Ferenc Horvath, head of the Hungarian company’s refining and petrochemicals business.