>>> Asian Update

Asian Mid-session Market Update: Cable crashes below 1.28 for new 31-year lows after BOE warning as Bonds and Gold continue to rally

***Economic Data***
- (HK) HONG KONG JUNE PMI: 45.4 V 47.2 PRIOR (16th consecutive month of contraction; lowest level since Aug 2015)
- (UK) JUNE BRC SHOP PRICE INDEX Y/Y: -2.0% V -1.8% PRIOR (38th month of decline)

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -3.0%, S&P/ASX -1.4%, Kospi -2.0%, Shanghai Composite -0.3%, Hang Seng -1.9%, Sep S&P500 -0.5% at 2,071,

***Commodities/Fixed Income***
- Aug gold +0.9% at $1,370/oz, Aug crude oil -0.7% at $46.28/brl, Sep copper -0.1% at $2.18/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 28.8 tonnes (3.0%) to 982.7 tonnes; Highest since June 2013
- SLV: iShares Silver Trust ETF daily holdings rise to 10,471 tonnes from 10,374 tonnes prior
- (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: -0.4% vs. 0.0% (unchanged) prior; first decline in 2 months
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6857 V 6.6594 PRIOR (lowest setting since Nov 2010, 2nd consecutive multi-year low)
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- (JP) BOJ offers to buy ¥375B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥430B in 5-10yr JGBs, and ¥25B in floating-rate JGBs
- (AU) Australia MoF (AOFM) sells A$700M in 2.25% 2028 Bonds; avg yield: 2.021%; bid-to-cover: 3.54x

***Market Focal Points/FX***
- Asian equity markets are tracking the losses in US hours, tumbling across the board as investors flee to the safety of bonds and gold. Brexit fears are fully blown yet again after the latest BOE financial stability report released overnight underscored risks from Brexit beginning to materialize, with worries over deterioration in demand for UK assets becoming more acute. GBP/USD extended its losses with an even steeper plunge in Asian hours as Cable pierced the 1.30 handle on its way to session low of 1.2790 - down about 250pips from session's highs. The safe haven demand of bonds took Australia 10-year yield to record low below 1.85% and the yield on Japan's 20-yr JGB to negative territory for the first time. In other dollar majors, USD/JPY was down over 100pips below 100.70, dragging Nikkei225 down by over 3%. Gold is also bid up by nearly $15 in Aug contract above 1,370 - a 2-year high. Cautious sentiment is exacerbated by Fed-speak unwilling to pivot toward a more accommodative - Fed's Williams said his personal view of US economy has not changed based on Brexit, adding that a hike this year may still be appropriate if economic forecasts hold.

- In Australia, the election uncertainty may drag on until next week as absentee ballot counting to determine the victor of Saturday's polls continues. NSW premier Baird noted that the threat to Australia's AAA rating is a real prospect on concerns over budget gridlock, calling for the new govt to make it a priority. A note from Morgan Stanley also estimated that systemic risk in domestic banking industry could force Australia's top-4 banks to raise about A$17.5B to reach CET1 ratio of 15%. AUD/USD was down about 50pips around 0.7410.

- In economic data, Hong Kong PMI contracted for the 16th straight month as conditions deteriorated to their worst level since Aug 2015. Markit saw sharp reduction in purchasing activity and a big drop in inputs and backlog. New orders decline was also faster, with clients said to be more unwilling to commit to spending. Elsewhere, despite recent evidence to the contrary, China's PBoC adviser Fan Gang said the economic downturn has stabilized, even as Dep Gov Chen called for a closer look into companies' leverage ratio to facilitate changes in corporate debt structure.

***Equities***
US equities / ADRs:
- MDVN: Confirms confidentiality agreements, including with Sanofi; +1.2% afterhours
- TWTR: Appoints Bret Taylor (CEO of Quip) to Board of Directors; effective immediately; +0.1% afterhours
- VTR: To acquire life science and medical real estate leased by leading universities, academic medical centers and research companies for $1.5B in cash; -1.2% afterhours

Notable movers by sector:
- Consumer discretionary: Kewpie Corp. 2809.JP +8.5% (H1 result); Fantastic Holdings Ltd FAN.AU -4.9% (operations changes); Lawson 2651.JP -2.5% (Q1 result speculation)
- Financials: China Vanke Co 000002.CN -3.1% (Baoneng increased its stake); China New Energy Power Group 1041.HK -8.8% (profit warning)
- Industrials: Great Wall Motor 2333.HK -1.2% (June result); Boer Power Holdings 1685.HK -7.0% (profit warning); Hubei Aviation Precision Machinery Technology Co 002013.CN +7.5% (raises guidance); Virgin Australia VAH.AU +3.5% (guidance)
- Technology: i-Cable Communications 1097.HK +11.4% (statement on CME segment); Largan Precision Co.3008.TW -1.0% (June result)
- Materials: St Barbara SBM.AU +5.7% (Q4 result); Evolution Mining EVN.AU +7.6%, Newcrest Mining NCM.AU +3.3% (gold price rises)

FT : Medivation agrees to $10bn takeover talks

Medivation agrees to $10bn takeover talks

An employee gives informations to visitors at the stand of French drugmaker Sanofi as a screen bearing informations on the stock market is seen during the Actionaria shareholders fair in Paris on November 21, 2014. AFP PHOTO ERIC PIERMONT©AFP
Medivation, the US biotech company, has agreed to hold talks about a $10bn sale with large global pharmaceutical groups including France’s Sanofi, ending a multi-month hostile pursuit that saw the latter attempt to replace its target’s entire board.
Medivation, the maker of the world’s best-selling prostate cancer drug, said on Tuesday that it had rejected the latest takeover overture from Sanofi, which is actively trying to bolster its position in oncology.

Sanofi’s most recent offer valued the California-based company at $58 a share along with certain contingent value rights for future sales of Medivation’s portfolio worth up to an additional $3 a share. In April Sanofi offered $52.50 a share in cash, or $9.3bn.
One person close to the deal talks said that Medivation rejected Sanofi’s $58 offer last week, but offered the French company the opportunity to sign a confidentiality agreement after striking similar arrangements with two other suitors, Pfizer and Celgene.
Xtandi, Medivation’s blockbuster prostate cancer drug, is forecast to generate roughly $5.7bn in global revenues by 2020 and the company also has two pipeline drugs for the treatment of breast cancer and blood cancer.
Kim Blickenstaff, chairman of the Medivation board, said that the biotech company had “significant scarcity value as one of the only profitable, commercial-stage oncology companies”. He added that the Medivation board “remains committed to objectively considering all avenues that may enhance our ability to deliver superior value”.
Shares in Medivation closed 2.7 per cent higher in New York at $61.76, giving it a market value of more than $10bn.
Sanofi, which had a market value of €96bn at the close of trading on Tuesday, separately confirmed it was among the parties that had entered into a confidentiality agreement with Medivation. The French company offered its own chronology of events, saying it had told Medivation last week it would only increase its offer upon signing the private agreement and being given access to more information. Sanofi also agreed to withdraw a proposal that had seen it try to drum up support among Medivation shareholders to overthrow the entire company board.
Olivier Brandicourt, Sanofi’s chief executive, said his company’s increased offer reflected the “in-depth analysis of the benefits and value creation potential of a combination. We look forward to discussions with Medivation on a combination which we believe is the most value creating transaction for both companies’ shareholders.
M&A back on the table as ‘big pharma’ targets smaller rivals
US groups ready to move after raising more than $50bn in debt this year
Acquiring Medivation would help Mr Brandicourt meet his goal of rebuilding Sanofi’s cancer drugs business to offset the decline in the group’s diabetes unit. The former Pfizer and Bayer executive has made dealmaking a key pillar of his strategy to strengthen the pharmaceutical company since taking over last year.
Sanofi last month completed a €22.8bn asset swap with Boehringer Ingelheim, which allowed the French group to trade its animal health unit and gain a new consumer-health focused business as well as a €4.7bn cash payment.
Pharma M&A is down 33 per cent so far this year compared with the same period last year, according to Dealogic, as jittery markets and political instability in the US and Europe have hit the confidence of senior executives.
A total of $188bn worth of deals have been announced in the healthcare sector in the first half of 2016, compared with $279bn in the first six months of 2015, as fewer mega deals were announced, according to Dealogic data.

>>> US After Hours Summary: MDVN +1.3% after confirming entry into con


After Hours Summary: MDVN +1.3% after confirming entry into confidentiality agreements with Sanofi, others; confirmed revised takeover offer from Sanofi, which it rejected; GBIM -47% after announcing it would move to delist and deregister its common stock

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: N/A

Companies trading higher in after hours in reaction to news: MDVN +1.3% (Confirmed entry into several confidentiality agreements, including with Sanofi (SNY); Additionally said it rejected an improved offer ($58.00/share in cash & up to $3.00/share in CVR) from Sanofi), BV +0.74% (Vector Capital disclosed a 6.23% active stake).

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: N/A

Companies trading lower in after hours in reaction to news: GBIM -47.22% (Announced its intention to delist, deregister its common stock), LTBR (Announced a 1:5 reverse stock split), VTR -1.23% (Announced it would acquire substantially all of the life science and medical real estate assets of Wexford Science & Technology for $1.5 bln; Additionally announced a 9 mln common stock offering to fund a portion of the acquisition), TSLA -0.93% (Following reports of another accident (non-fatal) of a Tesla operating in autopilot mode)

Fwd:Briefing; WRAPX; Closing Market Summary: Indices Lose Ground as Treasuries Rally


Closing Market Summary: Indices Lose Ground as Treasuries Rally

The stock market ended its day on a lower note, slipping alongside European bourses. The move lower in U.S. equities was prompted by growing fears regarding Italian banking names and revitalized concerns regarding the United Kingdom's exit from the European Union. Additional factors impacting today's trade included a downturn in crude oil, strengthening in the dollar, and the underperformance of the heavyweight financial (-1.5%), industrial (-0.9%), consumer discretionary (-0.7%), and technology (-0.7%) sectors. The Nasdaq Composite (-0.8%) ended behind the S&P 500 (-0.7%) and the Dow Jones Industrial Average (-0.6%).

The major U.S. averages began the day under pressure as investors eyed a downturn in European bourses. European equity markets stumbled as participants weighed remarks from the Bank of England. The central bank struck a cautious tone this morning, warning of risks to commercial property and capital inflows following the country's surprise Brexit vote. Furthermore, Italian banks were in focus after the European Central Bank notified Banca Monte dei Paschi di Siena that it needs to reduce its non-performing loan load.

The S&P 500 (-0.7%) opened under pressure, slipping alongside weakness in heavily-weighted financials (-1.5%), industrials (-0.9%), consumer discretionary (-0.7%), and technology (-0.7%). The benchmark index tested and maintained technical support near 2084/2085 into the afternoon. However, equities succumbed to further selling pressure as crude oil moved to new session lows. WTI crude ended its session lower by 4.7% ($46.73/bbl; -$2.28).

Buyers stepped in during the final hour, enabling the benchmark index to close eight points off its worst level of the day. Eight sectors ended in the red with energy (-1.9%), materials (-1.9%), and financials (-1.5%) rounding out the board. The remaining cyclical sectors ended with losses between 0.7% (technology) and 0.9% (industrials). On the flipside, countercyclical sectors outperformed as utilities (+0.7%), consumer staples (+0.5%), telecom services (UNCH) and health care (-0.1%) each benefited from safe-haven inflows.

The financial sector (-1.5%) remained pressured throughout the session, trading lower in sympathy with European banking names. On that note, Barclays (BCS 7.21, -0.38) ended lower by 5.0% as falling bond yields and the Bank of England's outlook weighed. On the home front, Dow component JPMorgan Chase (JPM 59.55, -1.71) rounded out the price-weighted index. The bank name fell 2.8% after rebounding 2.8% last week. Elsewhere, real estate investment trusts outperformed as Public Storage (PSA 259.74, +5.90) gained 2.3%.

In the industrial sector (-0.9%), airlines demonstrated relative weakness, evidenced by the 1.6% decline in the U.S. Global Jets ETF (JETS 21.10, -0.35). The group moved lower in sympathy with Delta Air Lines (DAL 34.62, -1.15) after the company reported that passenger unit revenue fell 5.0% year-over-year in June. The airline also cut its second-quarter operating margins and unit revenue guidance.

The high-beta chipmakers underperformed in the technology space (-0.7%) as the PHLX Semiconductor Index declined by 1.8%. Qorvo (QRVO 51.82, -2.68) and Skyworks (SWKS 58.85, -3.78) rounded out the index. In the broader technology sector, data storage names underperformed as Seagate Technology (STX 23.16, -0.87) and Western Digital (WDC 44.72, -1.75) lost a respective 3.6% and 3.8%.

The U.S. Dollar Index (96.21, +0.56) ended near its best level of the day as the euro, commodity currencies, and the pound each lost ground to the buck. The single currency lost 0.8% against the greenback (1.1070) while the dollar/Canadian dollar pair gained 1.2% (1.2997). Separately, the dollar lost 0.9% against the yen (101.71).

The Treasury complex settled broadly higher as the yield on the 10-yr note slipped seven basis points to 1.37%. The 10-yr yield notched a new all-time low (1.35%) earlier in the session.

Today's participation was above the recent average as more than 955 million shares changed hands on the NYSE floor.

Economic data was limited to Factory Orders for May: 

  • New orders for manufactured goods declined 1.0% in May (consensus -0.9%) to follow a revised 1.8% increase in April (from 1.9%).
  • The decline snapped a streak of two consecutive increases.
  • Shipments ticked up 0.2% despite the overall decline, representing the third consecutive increase.
  • Orders for durable goods decreased 2.3% after increasing a revised 3.2% in April (from 3.4%).
  • Transportation orders fell 5.7% and orders for manufactured nondurable goods ticked up 0.3%.
  • Total inventories for all manufacturing industries decreased 0.3%, representing the tenth decline in the past eleven months.
  • The inventories-to-shipments ratio was unchanged at 1.36.

Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index. Additionally, the May Trade Balance  consensus -$40.0 billion) and June ISM Services (consensus 53.3) will cross the wires at 8:30 ET and 10:00 ET, respectively. The day's data will be capped off with FOMC Minutes from the June meeting, which will be released at 14:00 ET. 

  • Nasdaq Composite -3.7% YTD
  • Russell 2000 +0.3% YTD
  • S&P 500 +2.2% YTD
  • Dow Jones +2.4% YTD 

WSJ : Brexit Buys: London Office Landlords Look Oversold

Brexit Buys: London Office Landlords Look Oversold
It is time for selective bargain-hunting in U.K. property

Fears of falling rents for London office space have seen a selloff in real estate investment trusts.

Another day, another selloff in U.K. real-estate investment trusts. Shares in London office landlords in particular languish on discounts reminiscent of 2008.

Valuations seem likely to fall as a result of Britain’s vote to leave the European Union. But the market has probably overreacted—particularly in dollar terms. Priced in greenbacks, shares in Great Portland Estates , a West End office landlord with a formidable track record, are down 34% since referendum day.

The latest trigger is news that three mutual funds invested in property have suspended redemptions following a rush of requests from skittish private investors. The last time this happened was during the banking crisis.

Regulators have since encouraged fund managers to hold a greater share of their assets in cash and shares rather than illiquid bricks-and-mortar. REITs have therefore stepped into the gap as a liquidity buffer for open-ended funds. This partly explains why their shares have fallen so dramatically since the referendum. It also explains why the selling appears somewhat indiscriminate.

There are already some hints of how Brexit will hit commercial property prices. A couple of mall transactions in the first half were priced at a 5% to 10% discount to previous valuations in anticipation of the vote. Now that the result is in, the trade press is awash with stories of big deals being pulled or renegotiated as investors scramble to anticipate the consequences.



Office rents seem likely to fall as banks and other financial institutions relocate staff to Frankfurt, Paris or Dublin. Real-estate research outfit Green Street Advisors has factored an immediate 10% decline in London office valuations into its book-value estimates. Outside London, shop rents are also set to suffer, because sterling’s fall pushes up retailers’ import costs and depresses consumer demand.

Yet even a 30% decline in Great Portland’s valuations would merely bring its book value in line with its reduced share price. Over the past five years its shares have traded roughly 10% above book value, on average. Similar value arguments can be made for the other London office specialists, Derwent London and Workspace .

Just as importantly, these companies have much less debt than in 2007. Green Street reckons the balance sheets of the London specialists would look solid even in a worst-case market scenario, allowing them to buy assets in a downturn. The same cannot be said of mall landlords Hammerson and Intu or the diversified FTSE 100 REIT British Land .

The peak-to-trough fall in U.K. property values during the 2008 banking crisis was roughly 45%. But this would be an improbably extreme outcome when investors are so desperate for the yield property provides. Apart from the mutual funds, which own perhaps 5% of Britain’s commercial property, there are no obvious forced sellers. This is a crisis of politics and potentially consumer confidence, not—as Bank of England Governor Mark Carney stressed today—of the financial system.

It is time for selective bargain-hunting in U.K. property.

>>> Italian Banks - News


BANKS Reuters reports that properly regulated and controlled state support for banks in the euro zone can be justified, though such intervention needs to be used sparingly, European Central Bank supervisor Ignazio Angeloni said on Monday.
Italian Prime Minister Matteo Renzi criticised European Central Bank Governor Mario Draghi for not having done more to resolve Italy's banking woes when he held a key Treasury job in Rome in the 1990s.
Il Sole reports that the government is working on a plan to provide the Atlante fund with further resources dedicated to buying NPL’s and the state CDP, insurance companies could be involved.

BMPS La Stampa reports that Italy plans about 3 bil € of support for Bmps, the article suggest that Government is considering plans for a convertible bonds issue.
Il Corriere reports that the Gov is discussing with Brussels the mechanism used by Greece to give 4 banks state aid. Instead of the cancellation of or reduction of the nominal value of bonds, for the owners od subordinated bonds there is the idea / proposal of transforming them into shares and that this is a hypothesis being considered for BMPS.

INTESA SP Il Sole reports comments from the Chairman of the banking foundation Compagnia San Paolo (one of the main shareholders of ISP with 9.3%) that the foundation has no obligation to sell (part) of its stake in ISP and does not intend to do so (under current mkt conditions).