TheChek News Flow

Up to 200 killed in attacks on shelters, ammunition storage and armoured vehicles

Turkish jets carried out air strikes against a US-backed Kurdish militia in northern Syria, killing as many as 200 fighters, the Turkish army said in a statement. The Kurdish militia said the death toll was lower.

The 26 air strikes targeted the group — called the People’s Protection Unit, or YPG — north of Aleppo, an area close to the Turkish border that President Recep Tayyip Erdogan wants to keep free from Kurdish influence.

The attacks on a militia that the US counts as an essential force in the fight against Isis in Syria could further complicate Turkey’s relationship with its Nato ally. The raids hit shelters, ammunition storage and armoured vehicles, the military said.

They were the first confirmed Turkish air strikes on Syrian territory since November 2015, when Turkey’s military shot down a Russian fighter jet in the border region, sparking a diplomatic row between Ankara and Moscow.

Mr Erdogan has repeatedly urged the US to use Turkish-trained Syrian rebels for operations inside Syria, but those fighters have proven unable to advance without heavy support from the Turkish military.

Turkey backs rebels fighting to oust the Syrian president, Bashar al-Assad, in Syria’s five-year war, but has been concerned that Kurds have a broader strategy of establishing a de facto state in northern Syria that could one day aspire to independence.

The air strikes come as Mr Erdogan has protested the use of Kurdish and Shia militias in Iraq to free Mosul from Isis, rather than depend on the support of Turkey, which has stationed troops inside Iraq for more than a year.

“If there are threats in Syria or Iraq, we will not wait for the threats to grow and come to our borders,” Mr Erdogan said. “We will drain the swamps instead of killing mosquitoes.”

Turkey considers the YPG to be allied with the Kurdistan Worker’s Party, or PKK, which is designated a terrorist group by Turkey, the EU and the US. But US-support for the YPG has seen it create a near contiguous zone of control south of Turkey’s border, with land wrested from Isis.

Two months ago, Turkey sent troops into Syria to stop the YPG from joining those territories, liberating a town called Jarablus from Isis in the process. It was its most significant intervention in the Syrian conflict.

‘If you think personal cars will survive as status symbols, remember horses were once status symbols’

Your next car might drive itself. “The technology is essentially here,” Barack Obama told Wired magazine this month. Robin Chase, the transportation entrepreneur who co-founded Zipcar, reckons driverless cars are “three-and-a-quarter years away”. Yet we have barely begun to think about how they will revolutionise our lives, revamp our cities — and destroy tens of millions of jobs.

After years of trials on city streets, driverless vehicles are now nearing the live phase. Last month, a driverless bus began carrying passengers through Lyon, France. Most in the automobile industry think self-driving vehicles will be on the road by 2020 or before, says Richard Holman, head of foresight and trends at General Motors.

Driverless cars will initially coexist with human-driven cars. But the first places where they will become dominant are dense urban areas — precisely the spots most damaged by the automobile age. This is “a chance to have a do-over for cities,” Chase told this month’s Autonomy conference in Paris. Many advanced cities are already reducing the role of cars. Driverless cars will hasten that process.

Cities don’t want everyone to own their own driverless car. That would prolong congestion, and isn’t necessary anyway. A driverless car is the perfect cheap taxi — it can drop you at work, and then go off to collect somebody else. If you still insist on driving your own car, cities will probably charge you for the privilege: motoring will become a luxury, like owning and flying your own plane. Driverless cars could allow cities to cut vehicle numbers by about 90 per cent while transporting the same number of people. They will bring us enormous benefits:

• Driverless cars will reduce accidents by around 90 per cent, predicts Pascal Demurger, director-general of French insurer MAIF. That’s big — the annual death toll on the world’s roads is about 1.2 million a year, or double the toll from armed conflict and homicides combined.

• Pollution and carbon emissions will drop, because urban driverless cars will be electric.

• The old, the disabled and teenagers will suddenly gain mobility.

• People will save fortunes by ditching their cars. The average cost of owning a car in Europe is about €6,000 a year, says Chase. If you think personal cars will survive as status symbols, remember that horses were once status symbols.

• Driverless cars will hardly ever need to park, and certainly not in city centres. Cities can therefore convert parking spaces — where many cars now sit for the vast majority of their lives — into bike lanes or parks.

• Congestion will diminish, as driverless cars can drive in dense packs, won’t get lost and won’t have to circle around looking for parking.

• Police will no longer pull over black drivers — or indeed any drivers.

• Once driverless cars spread beyond urban centres, the tedium of commutes will go. “You can use your car for eating, working, sleeping, kissing,” Carlo Ratti, head of MIT’s Senseable City Lab, told the Autonomy conference.

On the other hand, driverless cars will bring catastrophe. The best thing about the automobile age was that it employed tens of millions of people to make, market, insure and drive vehicles. Over the next 20 years, the mostly low-skilled men who now drive trucks, taxis and buses will see their jobs decimated. Instead of taxi drivers setting Uber cars on fire, we could see taxi and Uber drivers get together to set driverless cars on fire. If you thought Donald Trump was bad, wait for the next wave of male losers from modernity.

Or think of insurers, many of whom now get about half their revenues from automobile insurance. Warren Buffett, whose company Berkshire Hathaway owns the auto insurers Geico, says that anything that sharply reduces traffic accidents “would be wonderful. But we would not be holding a party at our insurance company.” Demurger muses, “We could almost become an insurer without insurance.” Governments and cities, too, will lose revenues from parking, speeding fines and petrol taxes.

Carmakers are especially scared. The few cars of the future might be made by tech companies such as Apple, Baidu and Google. Imagine the impact on Germany, where the automotive sector is the largest industry.

There may be a clash ahead between mostly European car companies and American tech companies. The carmakers want people to keep buying and driving their own cars, albeit with new technological aids. By contrast, the tech companies will lobby governments to favour driverless cars.

Dramatic change is coming, but governments have barely begun thinking about it. Obama is a rare politician even to have mentioned self-driving cars. Only 6 per cent of the biggest US cities have factored them into their long-term planning. Driverless cars could arrive by 2020, but most mayors and transport ministers are preoccupied with next week.

A decade ago hardly anyone saw the smartphone coming. It has brought an epidemic of mass addiction. Let’s hope we do a better job of handling the driverless car.

Wealthy owners want vessels equipped to carry Rolls-Royces, helicopters and submarines

Anyone can get lost on a boat. But to get lost in one, you need to be on a superyacht.

On a blustery midsummer day in Falmouth, Cornwall, the epicentre of the UK superyachting industry, I am casting around an interminable carpeted corridor looking for an unlocked door. If it leads to a guest room I’m pretty sure I’m on the second floor (of five). If I enter a massage room (there are two), any of the lounges (three), a kitchen (four), one of the TV rooms (three, including the cinema), a dining room (two), the spa or the gym, then I’ll have to rethink.

Everywhere, clues torment me. I can’t be in the crew quarters — too much brass, the carpet is too thick and there is no call, surely, for a hand-painted ceiling mural of a medieval navigator’s map for those below stairs. There is no sound of the engineers clanging around in the engine room (which takes up two floors and is bigger than most London houses). The lift would help me orientate — I entered it through a lobby with a massive chandelier — but there is no sign of it now.

These days, getting lost on board a superyacht is becoming a more common hazard. In 2015, the footloose super-rich spent just over €3bn on new superyacht commissions, almost 40 per cent up on the figure from two years earlier, according to Boat International Magazine. A total of 254 vessels were sold last year, more than a third higher than the 184 shifted in 2010.

Problems of internal navigation stem in part from yachts’ ever-increasing size. As you might expect, this is a world where length matters. Today there are 4,975 superyachts in existence — typically defined as boats longer than 30 metres — according The Superyacht Group, almost 60 per cent more than a decade ago. Yet the number of boats longer than 60 metres — 364 at present — has doubled over the same time.

Even these headline numbers do not capture the sprawling dimensions of the floating private empires being fashioned in yards such as Falmouth.

Longer boats need to be wider in order to stay stable, and their greater weight means they sink deeper — even if no more decks are added above water. Just as a cube’s volume increases drastically with any gain in its length, so does that of a superyacht, says James Roy of naval architects BMT Nigel Gee. So, while the inside of a 60-metre boat might comprise about 1,000 gross tonnes (the favoured volume measure), a 160 metre boat could be more than 12 times that figure.

ing out how not to spill it — or its bathing guests — on a rolling sea. Meanwhile, on the floor below, engineers have just cracked how to ensure guests feasting in the principal dining room are not disturbed by the entertainment in the adjacent cinema room.

Consideration must also be given to the crew. Unlike on land, their responsibilities extend to keeping their masters alive, a fact which in no way shifts their lowly status.

“You need to maintain two parallel worlds that never meet,” says Pascale Reymond, a veteran of almost three decades designing superyachts. Observing the requirements of propriety — “be seldom seen and never heard” — while cooped up together in a few cubic metres for months on end can begin to grate on crew members. “The rows can be spectacular,” confides Captain L, a seasoned superyachting captain, speaking on strict condition of anonymity.

More usually, though, it is the guests letting off the fireworks. Captain L once had to charter a plane on behalf of a client in the Bahamas just to track down the right brand of mineral water from a neighbouring island. On other occasions, unreasonable requests reflect unfamiliarity with the milieu. Once in a gale-force storm an indignant passenger came to the bridge to ask him to do something about the comfort of the ride. He looked to the sea, furrowed his eyebrows and bellowed “Calm ye!”

Employing a small army of engineers, naval architects and interiors gurus is not for the faint of wallet. A basic rule of thumb is €1m for every metre of superyacht to be built. However, that formula works only up to 60 metres, apparently. After this, exponential volumes — remember your cube — play havoc with the equation. And that is before you have spent on the wallpaper, fixtures and fittings. The best interiors cost roughly €30,000 per sq metre, perhaps 10 times more than on land, reckons Dickie Bannenberg of London designers Bannenberg and Rowell. German and Italian yards might do it for half that sum, he adds, while Turkish yards can pitch in as low as €6,000.

However, cutting corners on build costs soon becomes a false economy, warns Alasdair Locke, a Scottish energy entrepreneur and yacht owner. Leaving aside the fact that you might not want to surrender your family to the vagaries of an engine failure in the middle of the Atlantic, the maintenance costs will soon come back to haunt you. “After seven years you’ll have to throw the engine away and start again.”

Locke favours Dutch engineers. Don’t expect the red carpet, he says, but they are a highly competent lot. “The Italians will take you for a slap-up meal but you’ll come back to see the engineers hastily stuffing a bundle of electric wires behind a panel,” he says.

Superyachts’ ever-increasing length is great for headlines. Yet it is the boom in adventure yachting that is the most enthralling trend. The uber-wealthy, just like the rest of us, are succumbing to the lure of adventure travel. And if you can bring your integrated floating spa, a 30ft walk-in wardrobe and two dozen staff with you, why not?

* Citi's Take — Publicis’s 3Q results are a little light. Revenues are below consensus

expectations and we suspect consensus forecasts for the FY will have to moderate

on a slightly weaker outlook. The question is whether this should be a surprise? In

our view it shouldn’t. The company has been very upfront about the challenges to

growth in the 3Q/2H and the performance and outlook in the results is consistent

with previous commentary. The issue is that having beaten expectations by some

margin in the last 3 quarters, expectations had got ahead of themselves. With this in

mind, we expect the shares to be weak today but attribute it to a disconnect in

expectations rather than performance. More broadly we don’t think the underlying

investment case is fundamentally altered and we retain our Buy.

* Results vs. Expectations — We show the detailed results in the chart on page 2,

but 3Q revenues came in at €2,315m below Citi/consensus expectations of

€2,354m/€2.355m. The key focus for many investors will be the organic growth

which at 0.2% is better than Citi expectations at -0.1% but worse than consensus at

0.8%. Within the mix we note that the spread of growth is more polarized than

expected: following Omnicom’s lead, the US is weaker than anticipated at -4.0%

(we/consensus were looking for -1.1%) but Europe much stronger (+7.6% vs.

3.4%).

Losses — As we highlighted running into results, Publicis faced a challenged in

managing expectations into the 3Q. Although the company had been quite clear that

3Q would begin to see the headwind from account losses (300bps) and as such

would see 3Q growth in the range of 0%-0.5%, consensus, emboldened by the

performance from the last 3 quarters, had assumed the company was simply being

conservative. 0.2% is not a disaster. In fact given the pressures from account

losses, we think it is quite a good performance (we were on -0.1%) but consensus

was at 0.8% and steeled for another beat. The reset of expectations will be taken

poorly even if it should not altogether be a surprise.

* Focus 2: 4Q Outlook Suggests More Of The Same — The commentary on the

4Q is quite clear: the company expects the impact from account losses to remain

and also flags some phasing issues within its digital businesses. The clear

implication is that the 4Q will trend similarly to the 3Q in terms of organic growth.

This is no problem for us (we forecast 0% growth across the 2H), but the implication

is that the bullish end of the consensus range may need to come in.

* Call Details — 10am CET/9am UK time. Confirmation Code: 1378237. France: +33

(0)1 76 77 22 57. UK: +44 (0)20 3043 2024. USA: +1 719 325 2202

* Implications — We forecast 1.2% organic growth for the FY, a figure that still feels

eminently achievable even with a flattish performance in 2H. Consensus, however,

is nearer 1.8% which may have to moderate. The implication, for consensus, is a

mild (2%-3%) reset to EPS expectations.

Dow+0.22% S&P+0.22% Nasdaq +0.05% Russell +0.44% VIX 14.41 (-5.69%) VXX 32.70 (-2.39%)

Macro :

- Fed Beige Book Sees Tight Labor Market; Outlook Mostly Positive

- Blankfein Rejects Trump Rhetoric, Says There’s No Banking Cabal

- Saudi Arabia Fund PIF Mulls German Investments: Handelsblatt

- Qatar Said to Consider Joining $100b SoftBank Tech Fund

- Fed’s Dudley Speaks on New York City Economic History in 5 Min.

Keep an eye on :

- ATLN VX : Actelion CEO: Don’t Expect Generic Competition in US Until 2017, Actelion 3Q Uptravi, Tracleer Sales Beat Estimates

- AMS SM : Amadeus Studies Integrating Airbnb in System, Expansion Says

- AXP US : AmEx Rises 4% Post-Mkt; Boosts FY16 EPS View, 3Q EPS, Rev. Beat

- AAPL US : Apple Sends Invitations for Event on Oct. 27

- ATO FP : Atos 3Q Revenue In Line With Estimates; Reiterates 2016 Outlook

- BAS GY : BASF to Restart Ludwigshafen Operations in Coming Days

- BAYN GY : Monsanto Says It Talked to Other Companies Before Bayer Deal

- BIM FP : Biomerieux Says It’s Likely to Beat FY 8% Sales Growth Target

- BMSA GY : Braas Monier activist Petrus canvassed “nearly all” of top 20 shareholders on Standard Industries offer

- BOL SS : Boliden 3Q Operating Profit Ex-Revaluations Beats Estimates

- DB1 GY : Deutsche Borse Says Added U.S. Plaintiffs Filed Iran Complaint

- DENERG DC : Dong Criticized for Ula Platform Safety in Norway: Berlingske

- EDP PL : EDP Jan.-Sept. Iberian Electricity Distribution +0.2% Y/y

- EOAN GY : EON Faces End Current Year With Record Loss: Handelsblatt

- ERF FP : Eurofins 3Q Rev. +25%, Very Positive on Medium-Term Outlook

- GEA GY : GEA Adjusts Outlook for 2016; Sees 3Q Sales of EU1.1 Billion --> -17% pre open

- ICAD FP : Icade 9-Mo Sales EU993.3M, Down 3.6%; 2016 Targets Confirmed

- ITX SM : Inditex Accelerates U.S. Growth Plan, Expansion Reports

- LDO IM : Leonardo to Raise Stake in Avio to About 28% vs 14%

- LHA GY : Lufthansa Boosts 2016 Adj. Ebit View, Short-Term Bookings Better

- MAERSKB DC : Maersk Drilling paired with a Norwegian peer makes logical step in company split - Merger Market

- MAT US : Mattel 3Q Revenue Tops Est. on Barbie, American Girl Strength

- MS IM : Mediaset: ‘No Constructive Approach’ From Vivendi in Last Months

- ML FP : Michelin 3Q Sales Miss Estimate; FY Guidance Confirmed, CFO: Pricing Pressure More Intense in Europe Than U.S.

- NAS NO : Norwegian Air 3Q Net Beats Estimates; Keeps 2016 Forecast

- NESN VX :  Nestle 9-Month Organic Sales Growth Misses Estimates, Cuts 2016 Organic Sales Growth Forecast

- PHIA NA : Philips Lighting on Track for Y/y Operational Profitability

- RI FP : Pernod 1Q Organic Sales Growth Beats Ests., Confirms Forecast

- PC IM : Pirelli IPO Seen by 1H 2018

- PUB FP : Publicis 3Q Organic Growth Hit by Impact of Lost Media Accounts, CEO Sees 4Q Headwind, Growth to Be Higher Next Year

- ROG VX :  Roche 3Q Sales Slightly Below Estimates; Confirms 2016 Outlook, CEO Schwan Says Confident Co. Will Meet 2016 Targets

- SGL GY : Showa Denko to Acquire SGL’s Graphite Electrode Ops.: Nikkei

- SLIGR NA : Sligro Says Sees 2016 Profit ‘Well Below’ 2015

- LOCAL FP : Solocal Shareholders Reject Debt Restructuring, Le Figaro Says

- SCMN VX : Swiss Telcos Agree On Lower Mobile Termination Rates

- TELE2B SS : Tele2 3Q Ebitda, Sales Beat Estimates; Keeps FY Outlook

- TTI GY : Tom Tailor Drops 2016 Forecast, Begins New Profitability Measure

- UCG IM : UniCredit in Pact With Kruk Group to Sell Non-Performing Loans

- VIV FP : Vivendi: No Longer Priority to Find Friendly Mediaset Solution

- WIHL SS : Wihlborgs 3Q Rental Income Rises 5% From Year Earlier

>>> Up

>>> Down

*ABERDEEN CUT TO UNDERPERFORM AT JEFFERIES, PT 254p

*BP CUT TO NETURAL AT UBS, PT 500p

*EDENRED CUT TO NEUTRAL VS BUY AT ODDO

*SES CUT TO HOLD AT HSBC

*SUBSEA 7 CUT TO HOLD AT JEFFERIES

*SURGUTNEFTEGAZ CUT TO SELL VS NEUTRAL AT GOLDMAN

>>> PT Change

>>> Initiation

*ATRESMEDIA ASSUMED AT UNDERPERFORM AT JEFFERIES; CUT FROM HOLD

*M6 ASSUMED AT UNDERPERFORM AT JEFFERIES; CUT FROM HOLD

*MEDIASET ASSUMED AT HOLD AT JEFFERIES, DOWNGRADED FROM BUY

*MEDIASET ESPANA ASSUMED UNDERPERFORM AT JEFFERIES; CUT VS HOLD

*RTL ASSUMED AT BUY AT JEFFERIES, UPGRADED FROM HOLD

*SAF HOLLAND RATED NEW BUY AT BERENBERG, PT€16

*U-BLOX HOLDING RATED NEW SELL AT UBS; PT CHF182

>>> Call