Reuters - Gundlach says considering selling European equities on 'Bremain' vote

Gundlach says considering selling European equities on 'Bremain' vote


Jeffrey Gundlach, the chief executive officer at DoubleLine Capital, said Wednesday that his firm is considering selling its position in European equities early Friday on a "Bremain" vote that keeps Britain in the European Union.

Gundlach, who oversees $100 billion at the Los Angeles-based DoubleLine, also said the Tesla-SolarCity deal is "a complete confidence destroyer" for Tesla Motors Inc shareholders.

Gundlach, whose DoubleLine purchased beaten-down European stocks a week ago, said in a telephone interview that the firm expects Britain to vote on Thursday to stay in the EU "so you want to sell on the pop. European stocks have been rising, so we are expecting one more push into the vote."

Gundlach also chimed in on Tesla's proposed acquisition of SolarCity Corp, which Tesla's Chief Executive Officer Elon Musk called a "no-brainer."

"This is a poor idea for Elon Musk," Gundlach said. "This is damaging to his reputation and to the way he operates."

Gundlach, known on Wall Street as the 'Bond King,' said Wednesday that the Tesla-SolarCity deal wreaks of "bad corporate governance. I feel like there is reputational damage for Musk because he is all about creating good things."

Gundlach had proposed two years ago that Musk cut a deal with competitors in which Tesla would stop making cars and instead supply automakers' batteries.

Shortseller Jim Chanos of Kynikos Associates blasted Tesla's proposed acquisition of SolarCity, describing it as a "brazen" bailout and "shameful example of corporate governance at its worst."

"SolarCity, whose bonds were yielding 20 percent yesterday, is a company headed toward financial distress," Chanos said in an emailed statement on Wednesday. "It is burning hundreds of millions in cash every quarter, a burden that now Tesla shareholders will have to bear, at a total cost of over $8 billion."

Shares of Tesla were down about 10.5 percent on Wednesday, while SolarCity rose about 3.26 percent.

Chanos, whose firm has been betting against Tesla and SolarCity shares, said the combined drop in the market value of the two companies was more than the equity value of the deal itself, "which means that Tesla shareholders think SolarCity shares are essentially worthless.

"Finally," he added, "it is hard for me to believe that this deal was not being contemplated when Tesla, and Mr. Musk himself, sold shares just a few weeks ago."

Overall, Gundlach said about Musk: "This deal feels like he has lost his Midas touch. I also feel like Musk is trying to do too much."

(Reporting By Jennifer Ablan; Editing by Diane Craft and Alistair Bell)

>>> Europe : Brokers Upgrades & Downgrades - 23rd of June 2016

>>> Up
*ACCIONA RAISED TO BUY AT SANTANDER
*EON SE RAISED TO OVERWEIGHT AT BARCLAYS (Note attached)
*FISKARS RAISED TO HOLD AT NORDEA
*METSO RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*RWE RAISED TO EQUALWEIGHT AT BARCLAYS
*SANDVIK RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE (Note attached)
*TECHNIP RAISED TO NEUTRAL VS SELL AT CITI
*VODACOM RAISED TO NEUTRAL VS SELL AT GOLDMAN
*VOESTALPINE RAISED TO OVERWEIGHT AT JPMORGAN

>>> Down
*BAE SYSTEMS CUT TO HOLD VS BUY AT BERENBERG
*LYONDELLBASELL CUT TO NEUTRAL AT JPMORGAN
*NORDEA BANK CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
*REXNORD CUT TO NEUTRAL FROM OUTPERFORM AT ROBERT BAIRD

>>> PT Change


>>> Initiation
*ABERTIS RATED NEW HOLD AT BERENBERG; PT EU14
*ACERINOX RATED NEW NEUTRAL AT UBS; PT EU9.5
*APERAM RATED NEW NEUTRAL AT UBS; PT EU36
*ATLANTIA RATED NEW BUY AT BERENBERG; PT EU31
*ARCAM RATED NEW BUY AT DNB, PT SEK275
*B/E AEROSPACE RATED NEW EQUALWEIGHT AT MORGAN STANLEY, PT $52
*BOEING RATED NEW OVERWEIGHT AT MORGAN STANLEY, PT $153
*EUROFINS SCIENTIFIC RATED NEW BUY AT GOLDMAN
*IGNYTA RATED NEW OVERWEIGHT AT JPMORGAN
*JARDINE LLOYD RATED NEW OUTPERFORM AT RBC; PT 1,050P
*JOHN LAING RATED NEW BUY AT BERENBERG; PT 280P
*MTS SYSTEMS RATED NEW OVERWEIGHT AT JPMORGAN
*OCI REINSTATED AT OVERWEIGHT AT JPMORGAN, PT EU16.50
*OUTOKUMPU RATED NEW BUY AT UBS; PT EU4.8
*POPULAR INC. RATED NEW EQUALWEIGHT AT BARCLAYS
*ROCKWELL COLLINS RATED NEW EQUALWEIGHT AT MORGAN STANLEY
*TELKOM SA REINSTATED AT NEUTRAL AT GOLDMAN; PT ZAR73.1
*TEXTRON RATED NEW UNDERWEIGHT AT MORGAN STANLEY, PT $39

>>> Call
>> Stock
*BEZEQ ADDED TO CEEMEA FOCUS LIST AT GOLDMAN
*NOVOLIPETSK STEEL ADDED TO CEEMEA FOCUS LIST AT GOLDMAN

>>> What to look at today - 23rd of June 2016

Dow -0.27% S&P -0.17% Nasdaq -0.22% Russell -0.42%
US Market closed lower ahead of the United Kingdom's referendum vote regarding membership in the European Union. WTI crude finished its pit session lower by 1.3% ($49.12/bbl; -$0.65). Biotechnology outperformed in the health care space (+0.3%), evidenced by the 0.7% gain in the iShares Nasdaq Biotechnology ETF (IBB 256.56, +1.77). The ETF trimmed its monthly loss to 8.3% as the Medicare decision eased pressure regarding the group's drug-pricing. Volume were below average with 804mil shares. US After Hours APOG +8%, BBBY -5%, RHT -6% following earnings/guidance. Asian equity markets are mixed as traders hunker down for a whirlwind of volatility over the next 24 hours. UK voters are finally going to the polls to decide on the fate of UK's EU membership - polls will close and some early exit data will be available by about 17:00ET on Thursday. The 11th hour survey from both COMRES and YouGov are tilting in favor of the Stay camp - YouGov saw 51% for remain, 49% for leave (prior was 42% for remain, 44% for leave) and COMRES was 48% for remain, 42% for leave (prior 46% for 'Remain', 45% for 'Leave'). GBP/USD spiked up some 120pips above 1.4840 on the release - a 2016 high - while S&P futures rallied 10pts or 0.5%, and USD/JPY rose over 50pips toward ¥105. Early economic data for June out of Japan is showing few signs of recovery. Prelim manufacturing PMI edged up to 47.8 from 47.7 but remains in contraction for the 4th straight month.

Nikkei +0.78% Hang Seng +0.31% CSI -0.72% Shanghai -0.62%

Eur$ 1.1342 CNY 6.5863 JPY 104.67 GBP 1.4801 CHF 0.9587 RUB 64.3856 WTI$ 49.48 (+0.71%)

S&P +0.57% EuroStoxx +0.10% Dax +0.15% SMI +0.09%

Macro :
- Hedge Fund Partners Paul Marshall and Ian Wace Split by Brexit
- US to hike duties on Chinese steel to over 500% - FT
- G-7 Said to Issue Statement If U.K. Votes to Exit EU: Reuters
- A Bremain Win May Not Spark Sustained Equity Rally, HSBC Says
- Brexit No Longer Priced In After Bank Shares Rise: Credit Suisse
- Gundlach May Sell European Stocks on ‘Bremain’: Reuters

Keep an eye on :
- AC FP : Boscolo has Starwood as frontrunner to acquire stake - Milano Finanza daily edition
- AVV LN : Aveva unlikely to face Schneider reapproach in absence of board change
- AZN LN : Astrazeneca Says CDC Cmte Doesn’t Recommend Vaccine for 2016-17
- CWI AV : Conwert May Buy More Properties in Germany This Year: WiBlatt
- CSGN VX : U.S. Said to Probe Credit Suisse Israel Ops on Tax Issue: WSJ
- ENEL IM : Italy’s F2i to Exit Metroweb, Sell 53.8% Stake to Enel: MF
- LUN DC : Lundbeck’s Sabril Gets Reduced Burdens Under REMS Plan, FDA Says
- ORA FP : Orange CEO Says Co. Has A Lot to Exchange With Vivendi: Tribune
- ROTH FP : Rothschild FY Net Rises to EU232m, Boosted by U.K. Business Sale
- SAN FP : Sanofi Said to Consider Adding CVRs to Medivation Bid
- SIKA VX : Sika Says Most Shareholders Still Oppose St. Gobain Deal
- HOT US : Boscolo has Starwood as frontrunner to acquire stake - Milano Finanza daily edition
- TEL NO : Telenor CEO Expects More Consolidation in Nordic Region: DI
- VIV FP : Orange CEO Says Co. Has A Lot to Exchange With Vivendi: Tribune

>>> Boscolo has Starwood as frontrunner to acquire stake-Milano Finanza daily ed

Boscolo has Starwood as frontrunner to acquire stake

Boscolo, the privately held Italian hotel group, has Starwood Hotels and Resorts , the US-based hotel and leisure company, as frontrunner to buy a stake in the company, the Italian-language daily Milano Finanza reported.

Starwood is putting forward two options, the unsourced report claimed. In the first option, Starwood will pay EUR 350m for the hotels and real estate but would leave the management of the chain in the hands of the Boscolo family for the next 18 years, the report added.

The second option would see Starwood take over the management of the hotels, as well as the property, for EUR 375m.

Private equity firm Blackstone is still interested in Boscolo, as is Cassa Depositi e Prestiti (CdP), the holding of the Italian Treasury.

Starwood is being advised by the Dentons law firm. CdP is being advised by the Gattai law firm, the item added.

Boscolo is running to a tight deadline in terms of selling the stake. If a buyer is not found by 30 June, creditor banks owed EUR 330m can demand the payment of a EUR 80m tranche, the report comcluded.

Milano Finanza daily edition

(CS) Metso & Sandvik Upgraded - note attached

* METSO (OP, TP EUR24.0): We upgrade Metso to Outperform as we see an attractive value case in the shares that we expect to be realised as the company's earnings stabilise this year after a 3-year long downturn. We also see balance sheet optionality in Metso with up to €500m acquisition fire power. We reduce our 2016/2017 estimates by 5% but with higher confidence in new forecasts and consensus now only 3-4% above, we recommend buying the last downgrade.

* SANDVIK (N, TP SKR79.0): We upgrade Sandvik to Neutral and increase our TP to SEK79. Having run blue and grey sky scenarios using peer multiples we see risk/reward as balanced. While we think new management can improve FCF conversion materially vs last cycle, we are less positive on Sandvik Machining Solutions (SMS) and on the group 7% 2015-18E EBIT CAGR target (CSe 4.2%). We reduce our 2016E-18E EBIT by 3% and change our TP methodology to SOTP.

(BarCap) Mining vs Oil: Oil shades it still

Mining vs Oil: Oil shades it still
A year on from our last note on “Miners” vs “Oils” which favoured oil investment
(see Mining vs Oil: Time for scrip?) and, in response to a rising debate on relative
positioning of investors in these two sectors, we update our comparative analysis in
terms of cashflow, balance sheet strength, dividend yield, growth and returns. The key
differentiator is the respective yield (average 7.1% for BP and Shell in 2016E vs 2.8% for
Rio and BHP). We believe Oils can maintain this (despite payout a 2016 ratio of 108%
on spot pricing falling to 89% in 2017 vs 67% and 50% for mining) due to stronger
balance sheets, higher margins and higher ROEs plus more capacity to cut costs and
capex. It’s close though – if miners were to pay out all their spare cash in dividends the
yield would still be lower – just. We rate both BP and Shell as OW with 550p and 2,450p
price targets respectively, BHP EW and RIO OW with 925p and 2,600p price targets.

>>> Asian Update

Asian Mid-session Market Update: Sterling spikes as more polls show growing Stay camp support; Japan June PMI remains in contraction

***Economic Data***
- (JP) JAPAN JUNE PRELIM MANUFACTURING PMI : 47.8 V 47.7 PRIOR; 4th straight contraction

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.5%, S&P/ASX +0.1%, Kospi -0.5%, Shanghai Composite -0.8%, Hang Seng +0.2%, Sep S&P500 +0.4% at 2,085

***Commodities/Fixed Income***
- Aug gold -0.1% at $1,268/oz, Aug crude oil +0.6% at $49.40/brl, Jul copper -0.3% at $2.13/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 3.6 tonnes to 915.9 tonnes; highest since Sept 2013
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5658 V 6.5935 PRIOR
- (CN) PBOC to inject CNY60B in 7-day reverse repos
- JGB: (JP) Japan's MoF sells ¥1.00T in 0.2% (0.4% prior) 20-year JGBs; Avg yield: 0.218% (record low) v 0.288% prior; bid-to-cover: 3.61x v 3.36x prior
- (JP) Japan investors sold net ¥458B (first net sale since Mar 26th) in foreign bonds v bought ¥868B in prior week; Foreign investors sold net ¥231B in Japan stocks v bought ¥128B in Japan stocks in prior week

***Market Focal Points/FX***
- Asian equity markets are mixed as traders hunker down for a whirlwind of volatility over the next 24 hours. UK voters are finally going to the polls to decide on the fate of UK's EU membership - polls will close and some early exit data will be available by about 17:00ET on Thursday. The 11th hour survey from both COMRES and YouGov are tilting in favor of the Stay camp - YouGov saw 51% for remain, 49% for leave (prior was 42% for remain, 44% for leave) and COMRES was 48% for remain, 42% for leave (prior 46% for 'Remain', 45% for 'Leave'). GBP/USD spiked up some 120pips above 1.4840 on the release - a 2016 high - while S&P futures rallied 10pts or 0.5%, and USD/JPY rose over 50pips toward ¥105. Risk-on AUD/USD and NZD/USD were also bid slightly higher on those poll results, rising 25pips each to 0.7525 and 0.7180 respectively. In the event of an adverse surprise, a statement from G7 finance leaders has indicated they will issue a joint statement to calm the markets.

- Early economic data for June out of Japan is showing few signs of recovery. Prelim manufacturing PMI edged up to 47.8 from 47.7 but remains in contraction for the 4th straight month. Among key components, deterioration in backlog, output/input prices, and inventories is on the rise. New orders, exports, and employment are still falling but at a slower rate. Markit economist commentary noted a sharp drop in international demand and April earthquake impact as factors weighing on Japan economy, underscoring employment growth easing to its worst rate in 9 months and calling for further govt stimulus. However, commentary from BOJ dissenter Kiuchi is questioning whether any further benefit can be gained from more monetary easing, adding that the struggle to achieve 2% inflation is because of inadequate structural changes in the economy. Kiuchi added Capex conditions are unlikely to improve and that negative rate policy is a detriment to financial market stability.

- After yesterday's report from Moody's warning about the impact of banks' investment in loans, today's note focused on the risk to China from SOE-contingent liabilities. Specifically, Moody's noted a split in expectations "whether or not China will face a financial crisis over the coming years", acknowledging high debt load of Chinese entities connected with the government that raises contingent liability risk for the sovereign but not prepared to forecast an imminent financial crisis. SOE leverage stabilisation - Moody's notes - is unlikely in the near term, but only 15% of business leaders anticipate financial crisis in 1-2 years and 27% are looking at 3-5 year horizon for deeper strain to materialize.

***Equities***
US equities / ADRs:
- MLHR: Reports Q4 $0.67 v $0.52e, R$583M v $567Me (2 est); Raises dividend 15% to $0.17 (implied yield 2.2%); +5.9% afterhours
- BKS: Reports Q4 -$0.24 adj v -$0.24e, R$877M v $889Me (1 est); +4.9% afterhours
- FUL: Reports Q2 $0.67 v $0.69e, R$533M v $543Me; -2.6% afterhours
- BBBY: Reports Q1 $0.80 v $0.86e, R$2.74B v $2.78Be; -4.3% afterhours
- RHT: Reports Q1 $0.50 v $0.50e, R$568M v $563Me; Announces $1.0B Stock Repurchase Program (6.9% of market cap); -6.7% afterhours
- SCS: Reports Q1 $0.18 v $0.16e, R$718.8M v $699Me (2 est); -14.5% afterhours

Notable movers by sector:
- Consumer discretionary: Trinity 891.HK -1.7% (profit warning); SEEK SEK.AU -4.4% (affirms guidance); Shun Tak Holdings 242.HK +4.2% (Macau asset sale plan)
- Consumer staples: Anhui Kouzi Distillery Co 603589.CN -5.1% (shareholder to sell stake)
- Financials: Bank of Communications 3328.HK +0.2% (approval for preferred share sale plan)
- Industrials: Hitachi 6501.JP +2.1% (guidance)
- Technology: Alibaba Health Information Technology 241.HK -2.1% (FY16 result); Sharp Corp 6753.JP +8.0% (job cut speculation, to start OLED shipment)
- Materials: Dongbu Steel 016380.KR -3.1% (in talks on plant sale); Fortescue Metals Group FMG.AU +5.4% (to repay loans before maturity)
- Energy: Sundance Energy Australia SEA.AU -2.5% (guidance)

>>> US After Hours Summary: APOG +8%, BBBY -5%, RHT -6% following earn


After Hours Summary: APOG +8%, BBBY -5%, RHT -6% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: APOG +7.8%, BKS +6.3%, MLHR +4.5%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SCS -9.9%, RHT -6.1%, BBBY -5%

Companies trading lower in after hours in reaction to news: CASC -9.3% (to offer and sell shares of its common stock in an underwritten public offering, size not disclosed; separately will sell shares of Series D convertible preferred stock having an aggregate value of up to $13.8 mln), MRTX -6.4% (announces Mark Gergen will step down as COO to pursue other opportunities)