>>> Asian Update

Asian Mid-session Market Update: Equities, risky assets rally as Stay camp seizes the momentum in new Brexit poll

***Economic Data***
- (JP) JAPAN MAY TOTAL MERCHANDISE TRADE BALANCE: -¥40.7B V +¥70BE; ADJUSTED TRADE BALANCE: ¥269.8B V ¥113BE; Exports y/y: -11.3% v -10.0%e (8th straight decline); Imports y/y: -13.8% v -13.8%e (17th straight decline)
- (NZ) NEW ZEALAND MAY PERFORMANCE OF SERVICES INDEX: 56.9 V 57.8 PRIOR
- (NZ) NEW ZEALAND Q2 WESTPAC CONSUMER CONFIDENCE: 106.0 V 109.6 PRIOR
- (KR) South Korea May PPI Y/Y: -3.1% v -3.0% prior; 22nd consecutive decline
- (UK) UK JUNE RIGHTMOVE HOUSE PRICES M/M: 0.8% V 0.4% PRIOR; Y/Y: 5.5% V 7.8% PRIOR

***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +2.2%, S&P/ASX +1.2%, Kospi +1.2%, Shanghai Composite -0.2%, Hang Seng +0.9%, Sep S&P500 +1.1% at 2,081

***Commodities/Fixed Income***
- Aug gold -0.6% at $1,286/oz, Aug crude oil +1.2% at $49.16/brl, Jul copper +1.0% at $2.07/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 5.4 tonnes to 907.9 tonnes; highest since Oct 2013
- SLV: iShares Silver Trust ETF daily holdings fall to 10,492 tonnes from 10,661 tonnes prior
- (CN) PBOC SETS YUAN MID POINT AT 6.5708 V 6.5795 PRIOR
- (CN) PBOC to inject CNY170B in 7-day reverse repos
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr, ¥450B in 5-10yr JGBs
- (KR) South Korea sells 10-yr bonds at 1.62%

***Market Focal Points/FX***
- Markets are in rally mode as polls resume following a pause in Brexit campaigning in the wake of last week's death of pro-Labour MP Jo Cox. As suspected, more likely voters have picked up the mantle of her position on the issue - the momentum behind the Leave camp that was picking up before the MP's murder has stalled. In the first survey since the news - Survation poll for Daily Mail - 45% now support Remain and 42% in favor of Leave. Prior Survation poll saw the opposite breakdown - 42% for remain, 45% for leave.

- Among FX majors, GBP is sharply higher on the reversal, rising over 250pips from Friday close to test above 1.46. EUR/USD is up about 100pips above 1.1380, and USD/JPY is up 50pips above 104.60. High-beta AUD/USD and NZD/USD are both up above 60pips around 0.7450 and 0.7120 respectively. Gold prices were down about $15 below $1285.

- India Rupee was fairly volatile, falling about 1% in early Asia trade after central bank Gov Rajan has bowed to pressure and announced plans to resign at the end of his term in September. The departure has raised the probability of more aggressive rate cuts by the incoming governor - something that Rajan has been reluctant to do due to persistently high India inflation.

- Latest trade figures out of Japan are showing few signs of progress. Headline merch. trade dipped into deficit as export decline was wider than expected while imports were in line. Shipments to Asia fell for the 9th straight month, to China and US for the 3rd straight month, and to Europe for the first time in 4 months. Influential former MOF official Sakakibara (Mr. Yen) did not pull any punches with his prognosis on the currency despite the yen selloff today, forecasting gradual JPY appreciation to ¥100 by the end of the year, at which point an intervention will become more likely.

- China property sector seem to be moderating with latest May price data showing 60 out of 70 cities reporting m/m increases v 65 prior. Y/Y, 50 cities saw prices rise vs 46 prior. The average all-70 city prices also rose for the 8th straight month y/y, up 6.9% v 6.2% prior. Also of note, China Association of Automobile Manufacturers (CAAM) released May vehicle sales data showing a 9.8% y/y increase - comparable to 11.4% rise in the survey by China Passenger Car Association release last week.

***Equities***
US equities / ADRs:
- BA: Said to sign a contract with Iran for about 100 aircraft; terms not specified but estimated at several billion dollars - financial press

Notable movers by sector:
- Consumer discretionary: Cabbeen Fashion 2030.HK -7.2% (profit warning) Asics Corp 7936.JP -7.8% (cuts guidance); Surfstitch Group SRF.AU +2.1% (restructures US operations)
- Financials: China Vanke Co 2202.HK -2.9% (acquisition and issue new shares)
- Industrials: Worley Parsons WOR.AU +6.7% (oil gains); Toshiba Machine Co 6104.JP +7.1% (MUFJ upgrades); Nissan Motor Co 7201.JP +2.7% (to roll out electric car in China); Mitsubishi Motors 7211.JP -3.8% (to book charges); Austal ASB.AU +4.3% (awarded contracts)
- Technology: Inotera Memories 3474.TW -1.7% (Nanya Tech and Micron not consider price change)
- Materials: Metcash MTS.AU -11.6% (annual result); Gryphon Minerals GRY.AU +20.0% (acquisition)
- Energy: China Coal Energy 1898.HK +1.4% (May result); Origin Energy ORG.AU +7.3% (to sell wind farm)
- Utilities: ERM Power EPW.AU -21.3% (guidance)

>>> What to look at this Week end - 18th & 19th of June 2016

Weekly Performance
Dow -1.06% S&P -1.19% Nasdaq -1.92% Russell -1.65% Brazil +0.23% Nikkei -6.03% Hang Seng -4.15% CSI -1.69% Shanghai -1.44% EuroStoxx-2.13% FTSE -1.55% CAC -2.62% Dax -2.07% Ibex -1.51% MIB -1.15% SMI -2.64%
Brexit fever gripped global markets this week, as uncertainty about the June 23rd referendum on the UK's continued membership in the European Union inspired a big rotation into safer sovereign paper. Four major central banks - US Federal Reserve, the Bank of Japan, the Bank of England and the Swiss National Bank - left policy unchanged at meetings this week, however their most impactful moves appeared to be jawboning about Brexit, largely via warnings about the chaos that would follow the UK seceding from the EU. Meanwhile, the US presidential campaign and the nation at large was rocked by the worst mass shooting incident in US history at an Orlando, Florida gay nightclub a lone-wolf terrorist, with a death toll of over four dozen people. Brexit fears eased temporarily in the latter half of the week after another shooting death: the murder of a British MP by a nationalistic extremist led to a three-day suspension in campaigning on the referendum and delayed the release of new polls. Sovereign bond yields see-sawed through the week, with European benchmark paper dipping into and then out of negative territory, while the 10-year UST yield tested three-and-a-half year lows below 1.60%. Gold hit its highest mark since August 2014 and then pulled back on Friday. Stocks mostly trended lower, and for the week the DJIA lost 1.1%, the S&P500 dipped 1.2%, and the Nasdaq fell 1.9%.

Macro :
- ECB Ready to Act on Brexit, Italy’s Visco Says in Repubblica
- UK Phone Poll on EU Shows About 7 Pt Lead for Remain: BMG/Herald
- IMF Says Brexit Could Push U.K. Economy Into a Recession - http://bit.ly/28MvbSM
- Egypt May Refrain From Devaluing After Rate Increase: EFG-Hermes

Keep an eye on :
- ADS GY : Mentioned +vely in Barrons :
- BAYN GY : Bayer Said to Explore Sale of Radiology Business: Reuters
- BLOH GY : Blohm & Voss Shipyard Close to Winning Luxury Yacht Deal: WamS
- BT/A LN : BT Pension Deficit Widened to GBP9.9b in June 2015: FT
- CSGN VX : Credit Suisse Puts Five on Leave Amid Internal Investigation
- EDF FP : EDF Managers Tell U.K. Panel Plant Should Be Delayed: Guardian
- ENEL IM : Enel Green Power and F2i bid for First Reserve Italian solar energy assets - Il Sole 24 Ore
- ENST LN : Essentra shares gain on talk of takeover interest - Daily Mail
- ERICB SS : Ericsson Workers Summoned in Greek Probe Into Contract From 1999
- IT IM : FTC Requires HeidelbergCement, Italcementi to Sell U.S. Assets
- LSE LN : Brexit May Derail LSE, Deutsche Boerse Merger, WSJ Says - http://on.wsj.com/1Y2pYTy
- NMG US : Neiman Marcus is looking for a buyer (Chinese) - NY Post - http://nyp.st/1UFX6JQ
- POP SM : Popular Chairman Says Bank Isn’t Seeking a Merger: Economista
- RCS IM : Cairo Communications improves public offer for RCS by 33%, from 0.12 to 0.16
- RCS IM : Cairo Could Partner With Sovereign Fund in RCS Bid: Sole
- SGL GY : SGL Carbon's graphite electrodes business draws Vekselberg interest
- GLE FP : Socgen ‘Surprised’ by Prosecutors’ Position at Kerviel Trial
- FP FP : CFDT Union Says Vessel Loadings Resume at Fos-Lavera Terminal
- UBI FP : Ubisoft Stake Held by Vivendi at 20.1%: AMF
- VALE US : Vale Said in Talks With Asia Buyers for Stake in Brazil Iron Ore
- VIV FP : Vivendi Says It Isn’t Planning Public Offer for Ubisoft
- VOW3 GY : Volkswagen to Cut More Than 40 Model Variants: Handelsblatt

FT : Versace, Ralph Lauren, Brunello Cucinelli show report SS17 Milan menswear

Versace, Ralph Lauren, Brunello Cucinelli show report SS17 Milan menswear

The big trend in Milan isn’t a colour, or silhouette, it’s clothes that men can actually wear

Sometimes trends in fashion are about a sensibility rather than a particular look. At three shows or presentations in Milan, where the menswear caravan has parked on the next step of the spring/summer 17 season, there was a move towards the wearable. I know. Clothing that’s wearable. What will they think of next?
Donatella Versace has been moving her menswear towards a reality for a few seasons, usually through sportswear. Here the wearability saturated into pretty much every look. Zip up blousons came in old Versace prints that had been over dyed to create a deeper colour palette. Single-breasted jackets were in a jersey that kept its shape, so they could be treated badly to no ill effect. The weather has been terrible in Milan the past few days, so the long billowing nylon parkas felt apt. It was a strong look.

New CEO Jonathan Akeroyd, ex of Alexander McQueen, has been in the job less than a month, so his effect is yet to be felt. But the mood here was widening the offer. Silk knits worn as well as tied around the waist were a message to its customers: don’t just come here for the extravagance, there are everyday pieces too. Oh yeah but then there was the slashed leather jackets. And the skin tight running shorts worn with a bare chest. This is still Versace, after all.
The music to the show was tracks that Prince had recorded for Donatella. They were good friends. When she talks about him now, she wells up. The tracks sounded like late night jams, versions of his hits re-recorded and reworded. Instead of citing Dynasty on a version of Kiss, he said Desperate Housewives instead. They were extraordinary recordings to hear. Funny, the privileges of this job.
Earlier in the day, there was a brunch on the roof terrace of Ralph Lauren’s palazzo. Sure, it’s nice to stand and chit chat, but us hacks get twitchy: where are the clothes? It was half an hour before the presentation was supposed to begin, but some American colleagues had other places to be, so they led a march to the lift. Downstairs, the models dashed to take their positions on the traditional Ralph Lauren tableaux, clustered in groups to denote the specific theme: navy! Art Deco black and white evening! Etc etc.
Representatives looked panicked as the models dashed across the room to take their place, but actually they shouldn’t, since it was good to see this modern collection move. The impact of new CEO Stefan Larsson was clear. Suiting had construction removed and had been garment dyed, technical speak for being made more approachable. Much of the tailoring as shown with a sweater beneath; if there were shirt and tie, it was often all the same shade. A biker jacket was made from easily-sellable cotton; a grey tropical wool zip-up was waterproofed. Most here was restraint, but under one blazer was an excellent Fair Isle sweater that popped with acid pink and cornflower blue. Crucially, the majority of the models could step down from their place, head out on to the street, and easily merge into real life: a good thing.
“It’s a new moment for menswear,” said Brunello Cucinelli. Oh wow, OK, better listen close. He was talking through his translator, his English as non-existent as my Italian. All around were men in blazers worn trackpants. There were gilets, sneakers, blousons. He was talking about the victory of casual over formal, right? No. He meant a new moment in the way men were shopping. He said they were no longer replacing their clothes, more building a wardrobe, adding pieces, wearing old with new.
OK, OK, but what about the trackpants? Cucinelli is a demonstrative man. He stood up, and summoned over a model who was patrolling the showroom. He put his hands in his pockets and waggled his trousers — they were tailored, with a cuff. The model wore trackpants, with a cuff. He said he was selling suits with two options for trousers, tailored and track. What was important was the blazer, to keep it all sharp. That blazer was linen, snug, and both looks of desirable reality.
I had to get to another show. We stood, and Cucinelli came close. “You are young,” he said through his translator. I can’t remember exactly what came next, but he was talking about me as part of a younger generation, and the responsibilities on our shoulders: the future is in your hands, you can make a change, “you are the sentinel”.
He stopped, then continued, “and maybe in ten years time you’ll remember what a crazy man in Milan said.

FT : Big investors hit out at EU over retail fund rules

Big investors hit out at EU over retail fund rules

BlackRock, Schroders and six other global asset managers have urged Brussels to overhaul new rules aimed at protecting consumers, but one MEP warned their move would result in ordinary investors being misled.
Senior executives from eight fund houses, which collectively manage more than $8.5tn of assets, have written to Jonathan Hill, the European commissioner, to complain about the legislation.

The fund executives’ letter, seen by FTfm, says the rules are “not evidenced based, will not help consumers, and will not command respect”.
They called on the European Commission to amend the rules, which form part of a wider piece of regulation known as Priips, or risk leaving consumers without the “high-quality information they deserve”.
But the chief executives’ stance has been criticised by Sven Giegold, the influential Green MEP, who warned the changes demanded by the asset management executives “would mislead ordinary investors”.
He added: “It is a pity that the fund industry is coming forward with questionable demands.”
Under the draft rules, which are expected to be signed off by the commission, the EU’s executive arm, this month, the long-held practice of asset managers including information on a fund’s past performance in key documents for investors will end.
Instead, fund houses will be required to provide guidance on how investment products are likely to perform in the future, based on three scenarios: unfavourable, moderate and favourable.
In the letter, the executives called on Brussels to allow past performance to be included alongside the future scenarios, arguing this would “provide historic proof of an active manager’s ability (or not) to regularly outperform the fund’s benchmark”.
The chief executives additionally called for changes to the proposed methodology for calculating and disclosing transaction costs.
Senior officials from Allianz Global Investors, Axa Investment Managers, Nordea Asset Management, Fidelity International, Robeco and JPMorgan Asset Management also signed the letter.
Any changes to the rules would probably delay the introduction of Priips, which is due to come into force at the start of 2017.
The commission declined to comment. Last week, Mr Hill said at a meeting of the European Parliament’s influential economic and monetary affairs committee that the commission was “committed” to meeting its deadline to approve the regulations by the end of this month.
“We are not planning to change the substance of the standards,” he added.
Once signed off by the commission, the rules will go to the European Parliament and council, the EU’s two other arms, for approval.
Helena Walsh, executive director at Cicero, the lobbying company, said MEPs are likely to support the rules, because they are aimed at defending the rights of consumers.
“While there is a consolidation of efforts on the asset management side to influence this regulation, it hasn’t moved the dial. The parliament has come to its own conclusion to meet the deadline,” she said.

>>> Barrons weekend summary: positive on CELG, DLPH; Cautious on SQ

Barrons weekend summary: positive on CELG, DLPH; Cautious on SQ 

Cover story: A look at the best watches of 2016, which must be new models and house a mechanical movement made either in-house or exclusively for the brand; The list is topped by the Patek Philippe World Time Chronograph, which costs $73,700. 

Features: 1) "Based on valuations and dividend yields, foreign stocks look more attractive than their U.S. counterparts," and they could rally if the U.K decides to remain in the European Union; 2) Positive on CELG: Company may depend on a single drug, Revlimid, but demand is rising and it has about a decade of remaining patent protection, including promise in combination therapies; 3) Cautious on SQ: Silicon Valley unicorn is at least a year away from making a profit, and the recent expiration of a lockup of more than 250M shares means there's a huge overhang of stock and a sizable short position; 4) Positive on DLPH: "Investor concerns about peaking vehicle sales in the U.S. and China have created an attractive opportunity to buy Delphi stock at multiples well below the company's expected earnings growth rate."

Tech Trader: Cautious on MSFT: Though the price Microsoft is paying for LNKD isn't expensive, it's still worth asking why the tech giant agreed to add a 50% premium to LinkedIn's share price; There is probably some wishful thinking on chief Satya Nadella's part that should give investors pause in light of past Microsoft deals. 

Trader: Although a potential Brexit appears to be holding U.S. stocks hostage, Aaron Clark of GW&K Investment Management says an EU exit may already be priced in; Positive on BAC: Shares appear cheap, creating a good entry point for investors, who could see a 20% or more gain once the bank gets past current problems; another potential plus is the sale or spinoff of Merrill Lynch; Cautious on WTR: Company's stock now trades near levels that previously preceded steep declines, a sign its recent run may be mostly over. Profile: Jamie Wilhelm, manager of Touchstone Focused fund and a follower of Warren Buffet's investment philosophy, seeks to find businesses that have a significant and sustainable competitive advantage, then buy when shares fall below intrinsic value (top 10 holdings: Berkshire Hathaway, BK, MDLZ, AMZN, SYY, NVS, GE, AAPL, ORCL, CSCO). 

Interview: Russell Napier, publisher of the global macroeconomic and strategy report "The Solid Ground," shares his views on the Brexit referendum. 

Follow-Up: Barron's debunks some of writer Michael Lewis' claims in "Flash Boys," finding that he and many proponents of IEX conflated legitimate concerns about computer front-running with a broader fear that small retail traders were getting nicked; Cautious on OPK: Shares are down as investors continue to question the acquisition of Bio-Reference Laboratories; the combined company remains unprofitable and its market valuation too high. 

European Trader: Positive on Adidas, Roche: Companies "are all-weather businesses with strong balance sheets that generate plenty of cash," and should continue to provide solid returns regardless of how the Brexit vote plays out. 

Asian Trader: Story on how a Brexit would affect Asia notes that the region has the advantage of distance, and that not many Asian companies to sell to Britain. 

Emerging Markets: Observers expect Turkey's real GDP to expand by about 3.5% this year, which is partly why foreign investors don't seem overly concerned about the country's geopolitical problems. 

Commodities: Hog prices have soared on demand from China, but experts say the market is getting top-heavy, and that making a case for future gains is difficult. 

CEO Spotlight: Profile of HSIC chief executive Stanley Bergman, who has built a multinational distributor of dental, veterinary, and medical products with investment returns twice those of Berkshire Hathaway. 

Streetwise: Positive on NFLX, NKE, DE, ESRX, QCOM should start to benefit from the reversal of a trend in which the most labor-intensive companies outperformed the lest labor-intensive ones; Cautious on SYF, DFS, AXP, COF: Earnings for the consumer-finance industry have plateaued, and the trend isn't likely to change soon.

WSJ : Brexit Could Derail LSE-Deutsche Börse Merger

Brexit Could Derail LSE-Deutsche Börse Merger

Completion would face formidable obstacles in case of a British exit from the EU

FRANKFURT—The prospect of Britain leaving the European Union threatens to undermine the proposed merger of Deutsche Börse AG and London Stock Exchange Group PLC, according to politicians, regulators and bankers.

But even if Britons on Thursday vote to remain in the EU, the deal to create one of the world’s largest exchange groups, with a market capitalization of $30 billion, faces growing political concerns in Germany.

Deutsche Börse and LSE in February revealed plans for a tie-up that they said would better compete with aggressive rivals in the U.S. and Asia. Executives from both companies have promoted the merger as significant step for the integration of Europe’s capital markets because it would improve financial stability and the real economies’ access to funding.

The merger partners earlier this month said that LSE’s investors would get to vote on the deal on July 4, while the tender period for Deutsche Börse shareholders ends on July 12. The dates are crucial because shareholders will be able to decide after the U.K. referendum.

People working on the merger privately acknowledged that obstacles to closing the deal in the current structure would be formidable in case of a British exit from the EU, or “Brexit,” because of likely mounting political objection, tighter regulatory scrutiny and a shift in the valuation of both companies.


One of the main points of criticism is the perception that Deutsche Börse would be controlled from London through a proposed new holding company. Deutsche Börse Chief Executive Carsten Kengeter last year received high-level political backing to base the holding company there, according to people familiar with the matter.

“Why is the location of the holding company and its management London, even though Deutsche Börse AG is the obviously stronger partner?” said Florian Rentsch, a member of parliament from the Free Democratic Party in the state assembly of Frankfurt’s home state, Hesse, in a private letter to Mr. Kengeter that was seen by The Wall Street Journal.

Hessian Economic Minister Tarek Al-Wazir of the Green Party must give the merger permission to proceed and hasn’t publicly revealed his intentions.

Other state politicians from across the political spectrum have publicly raised concerns.

“Regardless of the outcome of the U.K. referendum, the head quarter of a combined group needs to be in Frankfurt" given Deutsche Börse is the bigger company, said Michael Boddenberg, member of the CDU in the parliament of Hesse. He added that the U.K. corporate governance system puts greater emphasis on shareholder value and that it is questionable whether that can be aligned with our goal of strengthening Frankfurt as a financial hub, for instance when it comes to investments into the IT infrastructure.

Officials at Germany’s financial watchdog, BaFin, privately raised concerns over the merger in case of a Brexit because Britain’s finance industry—including the new holding company—would be outside EU supervision.

Other potential threats some investors see in a Brexit are a sharp drop in the value of the British pound and lower trading volumes on the LSE, both of which would skew the deal’s valuation.

Even if the U.K. votes to stay in the EU, the intricacies of German takeover laws and Deutsche Börse’s shareholding structure may impede a deal. At least 14% of Deutsche Börse’s capital is held by index funds, according to calculations by the Journal. Those investors often tender only after an offer is complete because of internal rules.

The technicality could complicate reaching the 75% minimum threshold necessary to complete the deal, people familiar with the matter said.

Executives in both camps have also warned that LSE and Deutsche Börse could become prey for bigger rivals in the U.S. and Asia if the deal falls through. The owner of the New York Stock Exchange, Intercontinental Stock Exchange Inc., said in May it wouldn’t bid for LSE but could reconsider should LSE not merge with Deutsche Börse.

Chicago Mercantile Exchange, the world’s largest stock operator by market value, could consider approaching Deutsche Börse, Mr. Kengeter speculated in May.

>>> Cairo Communications improves public offer for RCS by 33%

Cairo Communications improves public offer for RCS by 33%
Cairo Communications said in a press release that it has boosted its public offer for rival Italian media group RCS from 0.12 Cairo Communication shares for each RCS share to 0.16. Cairo noted that this is a 33% increase and boosts the monetary amount of the offer to EUR 0.69 an RCS share.

Cairo also noted that it is putting forward an industrial plan that will lead to a merger between the two groups in the next 1-2 years.

An item in Il Sole 24 Ore noted that RCS shares are presently trading at EUR 0.69 a share.

RCS has a market cap of EUR 408m.

The Cairo Communication press release in Italian can be found here