EUROPEAN STEEL SUBSECTORS: We publish our forecasts for the calendar Q2 earnings season, along with thoughts on stocks and sectors and the longer-term outlook. The key new risk is the impact of the Brexit vote on the global economy. As we noted at the time, on the positive side, global destocking in carbon steel has happened and is over and spot steel prices are way above consensus forecasts, so the impact on forecasts and equities may be limited if prices do dip. We see the US recovery as more resilient than Europe given the large destock that happened and visibly low inventory in the US and greater immediate risks to Europe. We upgrade Acerinox to OP and downgrade Aperam to N on relative earnings momentum.
TELECOM ITALIA Il Sole 24 ore reports that JP Morgan would have sold its remaining stake (4.5%) of Telecom Italian on the market.
La Repubblica reports that Niel’s plans for discounted mobile services in Italy will be more difficult to implement than in France and that its unlikely that he will be able to offer services until at least next summer.
Consob has banned short selling of Telecom Italia and for July 7.
BMPS Reuters reports that Bmps’s board will meeting today to discuss the ECB requests (on capital strength, NPL’s etc).
Market regulator Consob has extended the short-selling ban on Monte Paschi’s shares for three months until 5 October.
Corriere reports a rescue plan for the bank in two / three steps:1) Bmps could be by bought by another bank (perhaps UBI or by a new Atalnte Fund , 2) BMPS capital increase and 3) sale of NPL’s.
VENETO BANCA / POP VICENZA Corriere reports that four US private equity funds are looking to buy from Atlante , Veneto Banca and Pop Vicenza. The four funds are Atlas Merchant Capital, Warburg Pincus, Centerbridge and Baupost.
INTESASANPAOLO Reuters reports that Intesasanpaolo Chairman Mr Gros Pietro said he does not see any big capital shortfall at Italian Banks apart from Monte dei Paschi and is not interested in M&A in Italy.
CREDITO VALTELLINESE Consob bans short selling of Credito Valtellinese for July 7
Dow +0.44% S&P +0.54% Nasdaq +0.75% Russell +0.69%
US market bounce back today helped by a better ISM for june, a reversal in oil. HEalthcare outperf. helped the mkt too. IBB +2.4%, Celgene (CELG 104.60, +4.35) gained 4.3% after signing a confidentiality agreement with Medivation (MDVN 62.33, +0.57). Additionally, Sanofi (SNY 41.23, -0.13) and Pfizer (PFE 35.86, +0.05) signed similar agreements, indicating that each could be exploring a potential transaction with Medivation. Elsewhere, Valeant Pharmaceuticals (VRX 23.06, +3.11) spiked 15.6% after Walgreens Boot Alliance (WBA 81.55, -1.97) announced during its conference call that it is pleased with its relationship with Valeant. Volume were above average with more than 1bil share traded. US After Hours WDC +4.5% following guidance/CFO news, LEDS +59.1% on purchase agreement news. Asian equities are mixed in the wake of a turnaround on Wall St. Mainland China markets are underperforming due to concerns over the banking sector, but the retreat in Tokyo is more mild than yesterday. Korea is supported by strong prelim Q2 results from Samsung Electronics, while energy names boosted Australia despite the warning from S&P on its sovereign credit rating. WTI crude oil was up over 1% in electronic trade after another big draw in API inventories, and gold consolidated recent gains. In Japan, BOJ Gov Kuroda reiterated the central bank will maintain its QE stance as long as it is needed until 2% inflation target is achieved, but acknowledged CPI is likely to remain negative for the time being. Kuroda added the BOJ will consider additional stimulus, but deemed overall financial system to be stable and moderate recovery trend continuing.
Nikkei -0.69% Hang Seng +0.75% CSI -0.51% Shanghai -0.36%
Eur$ 1.1092 CNH 6.6948 CNY 6.6847 JPY 100.72 GBP 1.2976 CHF 0.9749 RUB$ 64.3391 WTI$47.70 +0.57%
S&P -0.04% EuroStoxx +0.76% Dax +0.68% SMI +0.51%
Macro :
- Italian Banks : Four U.S. Funds Seek to Buy Pop Vicenza, Veneto Banca: Corriere
- ESM’s Regling Says ‘Not 100% Sure’ Brexit Will Happen: Les Echos
- API Said to Report U.S. Crude Inventories Fell 6.7M Bbl Last Wk
Keep an eye on :
- ADN LN : Aberdeen Cuts Fund’s Share Price, Temporarily Suspends Trading
- ABLX BB : Ablynx Gets Positive Results From Vobarilizumab Phase 2 Study
- ADS GY : Adidas Aware of Messi Verdict, Remains ’Important’ Ambassador
- AIR FP : Boeing’s Iran Deal Faces Hurdle in U.S. House Panel: Reuters
- ATC NA : Altice Said to Explore Sale of Belgium Unit: FT
- BARC LN : Barclays Wealth Sees Uncertainty, Low Volumes in U.K. Property
- BMPS IM : Italy’s Consob Extends Paschi Net Short-Selling Ban for 3 Months
- BN FP : To buy White Wave (WWAV US ) for $56.25/share - 20% premium - Danone to Buy Whitewave for Enterprise Value of About $12.5b
- DB1 GY : Bats Global Holder Deutsche Boerse Reports 10.2% Passive Stake
- EDP PL : EDP Buys Remaining 5% Stake in Naturgas it Didn’t Already Own
- GATE SW : HNA Extends Gategroup Takeover Offer, Scraps Minimum Acceptance
- GXI GY : Gerresheimer 2Q Revenue Below, Ebitda Ahead; Confirms Guidance
- ILD FP : Wind CEO Sees 3 Italia Merger Approval by Early Sept.: Stampa
- MBTN SW : Meyer Burger Sees New Orders Over CHF 260m for 1H 2016
- MDVN US / SAN FP : Medivation Says Talazoparib Could Be ‘Best in Class’
- MYRT BB : Nyrstar Sets Conversion Premium on EU115m 5% 2022 Notes at 27%
- NOVN VX : Novartis Unit Sandoz Says Egality Meets Endpoint in Psoriasis
- REP SM : Repsol Pays EU149.3 Mln for Rights on New Stock: Filing
- ROG VX : Roche Said to Study Purchase of BioMarin Stake: Betaville
- SCVB SS : Scania Sao Paulo Offices Searched by Police: Dagens Nyheter
- SCMN VX : Swiss Govt Rejects Review of Swisscom State Ownership: HZ
- TIT IM : Wind CEO Sees 3 Italia Merger Approval by Early Sept.: Stampa
- TIT IM : *ITALY MKT REGULATOR HALTS SHORT SELLING FOR TELECOM ITALIA
- LANS NA : FMR Reports Higher Van Lanschot Stake of 5%: Regulatory Filing
- VED LN : Vedanta Chief Says Group Will Invest $1 Billion in Africa: ET
- ZURN VX : Zurich’s Swiss CEO Doesn’t See Big Brexit Impact on Business: HZ
>>> Up
*ACACIA MINING RAISED TO BUY VS NEUTRAL AT UBS
*ACERINOX RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*ACHILLION RAISED TO MARKET OUTPERFORM AT JMP SECURITIES
*BHP RAISED TO HOLD FROM LIGHTEN AT ORD MINNETT; PT A$19
*DAVIDSTEA INC RAISED TO OUTPERFORM AT BMO CAPITAL MARKETS
*GAS NATURAL RAISED TO ’OUTPERFORM’ AT MACQUARIE
*JD WETHERSPOON RAISED TO BUY AT CITI
*LAND SECURITIES RAISED TO ’OVERWEIGHT’ AT BARCLAYS
*METROPOLE TELEVISION SA RAISED TO ’BUY’ AT ODDO & CIE
*MOL RAISED TO BUY AT HSBC
*PARAMOUNT RESOURCES RAISED TO EQUALWEIGHT AT BARCLAYS
*SERCO RAISED TO HOLD AT HSBC
*TECNICAS REUNIDAS RAISED TO BUY AT CITI
*TF1 RAISED TO ’BUY’ AT ODDO & CIE
*WIENERBERGER RAISED TO BUY VS HOLD AT BERENBERG
>>> Down
*APERAM CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
*BAT CUT TO HOLD VS BUY AT BERENBERG
*BROADRIDGE FINANCIAL CUT TO EQUALWEIGHT AT BARCLAYS
*CAPITA CUT TO HOLD AT HSBC
*CNP ASSURANCES CUT TO ’UNDERPERFORM’ AT EXANE BNP PARIBAS
*FRESNILLO CUT TO HOLD AT HSBC
*FRESNILLO CUT TO SELL VS NEUTRAL AT UBS
*HAYS CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*INVESTORS REAL ESTATE CUT TO NEUTRAL AT ROBERT BAIRD
*MARSTONS CUT TO SELL VS BUY AT CITI
*MITCHELLS & BUTLERS CUT TO NEUTRAL VS BUY AT CITI
*UK HOMEBUILDING CUT TO NEUTRAL VS POSITIVE AAT BARCLAYS
*WESTERN UNION CUT TO UNDERWEIGHT AT BARCLAYS
*YUME INC CUT TO UNDERWEIGHT AT BARCLAYS
>>> PT Changhe
>>> Initiation
*ABLYNX RATED NEW BUY AT HSBC
*AGREE REALTY CORP. RATED NEW BUY AT STIFEL
*AUTO TRADER RATED NEW NEUTRAL AT CREDIT SUISSE; PT 350P
*EMPIRE RATED NEW SECTOR PERFORM AT RBC CAPITAL
*ESSILOR REINSTATED AT BUY AT BOFAML; PT EU140
*GENMAB RATED NEW REDUCE AT HSBC, PT DKK613
*GREENYARD FOODS RATED NEW BUY AT BERENBERG; PT EU17.50
*INGEVITY RATED NEW OVERWEIGHT AT KEYBANC
*JUST EAT RATED NEW OUTPERFORM AT CREDIT SUISSE; PT 560P
*LUXOTTICA REINSTATED AT UNDERPERFORM AT BOFAML; PT EU37
*MATADOR RESOURCES RATED NEW OUTPERFORM AT WELLS FARGO
*MORPHOSYS RATED NEW HOLD AT HSBC
>>> Call
>> Sector
*TELECOM STOCKS RAISED TO OVERWEIGHT AT CITI
*CONSUMER STAPLES STOCKS RAISED TO NEUTRAL AT CITI
*CONSUMER DISCRETIONARY STOCKS CUT TO UNDERWEIGHT AT CITI
>> Country
*EUROPE EX UK EQUITIES CUT TO UNDERWEIGHT AT CITI
*JAPAN EQUITIES RAISED TO NEUTRAL AT CITI
Asian Mid-session Market Update: S&P lowers Australia outlook to Negative even as ruling Coalition edges toward election victory; Samsung Electronics rises on prelim Q2 results
***Economic Data***
- (JP) JAPAN JUNE OFFICIAL RESERVE ASSETS: $1.27T v $1.25T PRIOR
- (AU) AUSTRALIA JUNE AIG PERFORMANCE OF CONSTRUCTION INDEX: 53.2 V 46.7 PRIOR; 10-month high
- (NZ) New Zealand June ANZ Truckometer Heavy M/M: +4.7% v -2.7% prior
***Index Snapshot (as of 03:45 GMT)***
- Nikkei225 -0.2%, S&P/ASX +0.4%, Kospi 1.0%, Shanghai Composite -0.5%, Hang Seng +0.8%, Sep S&P500 -0.1% at 2,093
***Commodities/Fixed Income***
- Aug gold +0.2% at $1,369/oz, Aug crude oil +0.5% at $47.65/brl, Sep copper +0.1% at $2.15/lb
- (US) Weekly API Oil Inventories: Crude: -6.7M v -3.9M prior; 3rd straight draw; largest draw since Aug 2015
- GLD: SPDR Gold Trust ETF daily holdings fall 0.3 tonnes to 982.4 tonnes; first decline since June 6th
- SLV: iShares Silver Trust ETF daily holdings rise to 10,620 tonnes from 10,471 tonnes prior; highest since Dec 2014
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6820 V 6.6857 PRIOR
- (CN) PBOC to inject CNY15B in 7-day reverse repos
- (JP) Japan investors bought net ¥428B in foreign bonds v bought ¥400B in prior week; Foreign investors bought net ¥114B in Japan stocks v sold ¥172B in Japan stocks in prior week
***Market Focal Points/FX***
- Asian equities are mixed in the wake of a turnaround on Wall St, where a stronger than expected US ISM Services figure helped reverse some of the recent panic that led to a dash into bonds. Mainland China markets are underperforming due to concerns over the banking sector, but the retreat in Tokyo is more mild than yesterday. Korea is supported by strong prelim Q2 results from Samsung Electronics, while energy names boosted Australia despite the warning from S&P on its sovereign credit rating. WTI crude oil was up over 1% in electronic trade after another big draw in API inventories, and gold consolidated recent gains. In FX majors, AUD/USD was the most active with a 50pip drop to 0.7470 following S&P outlook revision to Negative for Australia, NZD/USD trades in a 30pip range above 0.7120, and USD/JPY is sliding about 60pips below 100.80 after a bounce in US hours. GBP/USD has rallied about 100pips from the lows above 1.2980 with Brexit fears receding again - ESM chief Regling suggested that it is not 100% certain that the Brexit separation will take place.
- Election gridlock in Australia continues, even though local press reports suggest that the ruling Conservative coalition is edging toward the 76 Parliament seat threshold required to form a govt. Counting of absentee ballots continued, with Coalition seen at 72 to Labor's 66. And while Fitch and Moody's had offered a calmer assessment of the situation after the inconclusive polls earlier this week, S&P fired a warning shot today with revising Australia's sovereign outlook to Negative from Stable. Accompanying commentary noted the country's high level of external indebtedness requiring fiscal action, with concern that political gridlock could produce budget deficits for several years. S&P did acknowledge strong Australia banking system and a recent decline in Australia unemployment from cyclical highs. Australia Treasurer Morrison spoke after the S&P warning, stating it was a reminder for the govt to maintain fiscal trajectory and keep the spending "within means", urging Parliamentary response to budget in the next 6-12 months.
- China banking sector was back in focus after comments from regulator CBRC noting continued pressure from bad assets. China NPLs as of May-end have now topped 2%, reaching 2.15%, as CBRC's Yu called for banks to be weary of asset bubble burst risks. Chinese press commentary also addressed the renewed overheating in the property space. China Academy of Social Science (CASS) researcher called for implementation of a property tax in tier-1 cities, while another CASS report noted declining housing inventory in H1 and also attributing less tight markets in tier-3-4 cities to more land supply and investment.
- In Japan, BOJ Gov Kuroda reiterated the central bank will maintain its QE stance as long as it is needed until 2% inflation target is achieved, but acknowledged CPI is likely to remain negative for the time being. Kuroda added the BOJ will consider additional stimulus, but deemed overall financial system to be stable and moderate recovery trend continuing. Separately, BOJ, Finance Ministry, and FSA are once again expected to meet tomorrow to discuss financial markets as they previously pledged to do on a more frequent basis given the recent volatility.
- Samsung Electronics may have posted its best quarter in 2 year. Q2 preliminary op profit topped KRW8T, beating consensus by about 10%, while Rev was just shy of estimates. Q2 final results with all relevant industry and financial metrics will be released at the end of the month. Shares traded up over 1.5% on the results.
***Equities***
US equities / ADRs:
- EYES: CMS said to propose to cover full cost of Second Sight Argus II for 2017 - press; +43.5% afterhours
- WDC: Raises Q4 $0.72 v $0.68e, R$3.46B v $3.41Be (prior $0.65-0.70, R$3.35-3.45B), affirms Q4 gross margin 31%; +4.7% afterhours
- BMRN: Roche said to have rekindled its interest in Biomarin - financial blog; +2.8% afterhours
- ZUMZ: Reports June SSS -4.5% v -3.3% y/y
- WWAV: Danone said to be close to $10B deal to acquire Whitewave Foods - financial press
- COST: Reports June SSS (ex-gas) 3% y/y; US SSS (ex-gas) 2% y/y
Notable movers by sector:
- Consumer discretionary: Intime Department Store Group Co 1833.HK +1.3% (H1 result); Stanley Electric Co 6923.JP +2.9% (Q1 result speculation); Aeon Co 8267.JP -7.6% (Q1 result)
- Industrials: Geely Automobile Holdings 175.HK +3.7% (June result)
- Technology: LG Display Co 034220.KR +3.4% (CLSA raises to outperform); Samsung Electronics +1.7% (Q2 prelim result); Regis Resources RRL.AU +3.2% (Ord Minnett raises to Hold)
- Energy: Sinopec Shanghai Petrochemical 338.HK +6.0% (H1 guidance); Santos STO.AU +3.3%; Oil Search OSH.AU +2.5% (oil price rises); AGL Energy AGL.AU -4.4% (guidance)
- Healthcare: Askul Corp.2678.JP +2.3% (Mitsubishi raises to overweight)
- Material: Ramelius Resources RMS.AU +6.9% (Q4 result); Resolute Mining RSG.AU -2.3% (FY16 prelim result); Zijin Mining 2899.HK +4.6% (plans A-share private issuace)
After Hours Summary: WDC +4.5% following guidance/CFO news, LEDS +59.1% on purchase agreement newsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: WDC +4.5% (Western Digital sees Q4 EPS $0.72 vs $0.68 Capital IQ Consensus Estimate; revs $3.46 bln vs $3.41 bln Capital IQ Consensus Estimate; Mark Long Appointed EVP, Finance; will succeed Olivier Leonetti as CFO on Sept 1)
Companies trading higher in after hours in reaction to news: LEDS +59.1% (SemiLEDs enters into definitive purchase agreement with Dr. Peter Chiou under which he will purchase 577,000 shares of the Company's common stock at $5.00 per share), EMKR +9.3% (Emcore completes strategic review, announces a special dividend of $1.50/share), CC +1.9% (modest rebound following late sell-off; after hours Chemours comments on Freeman PFOA trial outcome-verdict will be appealed), STX +1.8% (WDC sympathy)
After Hours Losers:
Companies trading lower in after hours in reaction to news: GPL -10.8% (arranges $20 mln bought deal financing)
Danone nears $10bn deal for health-focused WhiteWave Foods
Danone the world’s biggest yoghurt maker, is nearing an agreement to acquire WhiteWave Foods, the natural and health-focused food group, in a deal that is expected to value the US company at about $10bn.
A deal could be announced as early as Thursday, according to two people informed about the talks. It would be the French group’s largest acquisition in a decade and the first big transaction by Emmanuel Faber, the company veteran who took over as Danone chief executive in late 2014.
Those informed about the deal cautioned that the timing of an announcement could slip and that the transaction was still being finalised.
A Danone takeover of WhiteWave Foods would add an array of upmarket grocery store products such as milk brand Horizon Organic and Silk, the plant-based soya milk label.
Shares in WhiteWave Foods closed at $47.43 on Wednesday, giving it a market value of $8.34bn. Applying a typical deal premium of 30 per cent, the value of a takeover would be in excess of $10.5bn.
WhiteWave Foods, which is backed by investors and former JPMorgan dealmakers Douglas Braunstein and James Woolery of Hudson Executive Capital, has enjoyed strong sales growth in recent years, as it has focused on offering lucrative organic and health products including almond- and other nut-based beverages.
The Denver, Colorado-based company has long been considered a potential takeover target for rivals such as Campbell Soup, Kellogg Company and General Mills.
The company has forecast solid organic sales growth this fiscal year that would be among the strongest in the industry.
“WhiteWave has one of the strongest portfolios in our coverage and should continue to grow sales at a mid- to high single-digit rate and EPS in the mid-teens over the long-term driven by burgeoning health and wellness trends,” said Alexia Howard, an analyst at Bernstein in a note in May.
Emmanuel Faber, Danone CEO: on the alert for blind spots
3 March 2016 – Paris, France Danone CEO Emmanuel Faber poses for portraits at the Danone HQ in Central Paris.
The head of the French foodmaker says the discipline of rock climbing improves his judgment
Demand for more healthy fare has transformed the US food industry, forcing older companies to slash costs, reformulate recipes and invest in smaller, faster-growing companies with offerings better suited to today’s American consumer.
Some bigger companies such as Kellogg are investing in venture capital funds as a way to access innovative developments in food.
Danone, once the darling of growth investors, has struggled in recent years to drive growth, grappling with headwinds in emerging markets as well as in Europe due to volatile economic conditions.
However, since Mr Faber took the helm the group has managed to better ride out external economic factors.
It recently raised its 2016 guidance, projecting a full-year margin expansion of 50-60 basis points.
Neither Danone and nor WhiteWave Foods immediately responded to a request for comment.