(TechCrunch) Apple’s App Store at the end of the app era

Like a fly frozen in amber, the App Store’s fundamental deal has remained unmoving since its inception.

As an enormous ecosystem swelled around it, crystalline structures of new rules and avenues of customer interaction have also grown — but not nearly fast enough for most developers. Especially the “long tail” of independent app makers which account for the most vociferous and loyal segment, if not the majority of downloads.
Then last week, Apple made three big announcements about changes to the App Store. It would bring search ads to the store, make review times much faster for developers and allow any category of app to use subscriptions — paying those developers an additional share of the revenue if people stayed subscribed more than a year.

Why those changes were announced before Apple’s Worldwide Developer Conference, which begins tomorrow, is a matter of who you ask. People inside the company with knowledge of the keynote tell me that it was simply too crowded to spend the time talking about these changes and the nuances that go along with them. People outside the company who are generally well-informed have suggested to me that Apple wasn’t sure how violently the developer community would react to changes that are controversial to some.

Whatever the reason, the past few days have given developers time to think about them, people time to complain about them on Twitter and journalists time to generate a hundred hot takes.

I have some thoughts and some additional details about the announcements now that I’ve spoken to people who know how they’re actually going to get executed, so I thought I’d put them down before we get swept up in the week ahead. I’ll just take them one at a time.

App Review Times

App reviews were always supposed to take five working days. They often ended up taking far longer, especially during the busy weeks or months before Apple ships new versions of iOS. It’s been a constant source of friction between Apple and the community. Now, the goal is to have 50 percent of apps approved in 24 hours and 90 percent approved in 48 hours.

Apple is so confident in these new times that it has removed the chart that told developers what review times to expect from its site entirely. I’ve been tracking the times and they seem in line with claims so far. An independent site that tracks times is also in line.

Apple has increased staff, changed policies (how strenuous it gets with known developers) and improved procedures and tools used to evaluate apps in order to make those times happen.

The changes to review times mean that developers can think about what kinds of features to roll out, bugs to fix and updates to make on a far different time scale. It could now take as little as a single day to roll out a bug fix or a major update to your app from the minute you had it locked internally. Though review times are getting a lot less play than other changes, I feel that this could have a significant impact on how often apps get updated and iterated on. As an independent developer, you may not be able to launch a major new version every month like Facebook, but you now have more options.

Subscriptions

From the beginning, developers who sell on the App Store get 70 percent of the revenue from an app, and Apple takes home 30 percent. Last week’s announcement cracked that amber for the first time, allowing a tiny fly foot to wriggle free.

Now, developers who institute a subscription fee will see their profits swell to 85 percent in the second year of that subscription. If they keep customers around, they’ll see more money. And to facilitate that, Apple also allows any app category to take advantage of subscriptions.

There are now 200 pricing tiers, though those won’t be revealed until later this year. The revenue split changes this week. Developers will now be able to allow users to upgrade, side-grade and cross-grade from one package to another very easily, and Apple is looking at ways to make the interface easier than it currently is. There is a notification when a subscription is going to be renewed and renewal is opt-in, rather than opt-out. You’ll have to say for sure it’s working for you.

The widening of subscriptions to all categories isn’t an exact replacement for a free-trial situation, but it offers a much better situation than before. Any app that decides to roll out a subscription can now offer its wares for free for a time until it requires a subscription, or to a subset of options. These already existed in some apps like news and music, but games developers — who occupy the biggest App Store category — will now be able to play with these tools.

The logic behind the subscription model and the split changing from 70/30 to 85/15 in the second year is simple: It incentivizes developers to continue to maintain and develop apps, which results in fewer dead-end apps; and it provides a boost in revenue as apps with back-end services scale up and retain users, allowing them to offset costs.

This is why I found Google’s somewhat suspiciously hasty announcement the day after Apple’s a bit less than fully considered. By increasing the cut from day one, you’re encouraging every app to be subscription-based, whether that’s actually the best model for that app. There are, and will continue to be, thousands upon thousands of utility apps that you need to buy once and use either regularly or occasionally. They don’t live on your home screen, but they’re there when you need them and they accomplish a simple task without any ongoing maintenance beyond updating for new versions of iOS.

Yes, from here on out, the biggest apps will likely all be subscription-based or free with other sources of revenue. But the long tail of interesting capsule apps, whether games, productivity, business-related or just utilities — those apps will disappear or they will have to make up for revenue they would otherwise lose by being forced to adopt a subscription when it makes little to no sense.

“I think a lot of developers (and other industry folks) who don’t follow the App Store super closely would be surprised at how many apps are already doing quite well with subscriptions, even ones that don’t have killer services and/or content,” says David Barnard of Contrast. “I think a lot of people are freaking out prematurely. Subscription fatigue has already set in for many with Apple Music, Spotify, Netflix, Hulu, etc. But that’s quite different from paying $3-$5 for an annual subscription to an app like Launch Center Pro. I doubt enough apps will go subscription for the average user to notice much difference. Maybe $10/year total. And the thing is, subscriptions necessitate some sort of free trial or free tier, so people will get to check out a few apps before subscribing to the one that works best for them. With paid apps, you end up spending $10 trying a few apps, and only ever use one.”

“I do think the onus is on Apple to help prime the pump for this transition,” continued Barnard. “Developers who choose subscriptions need to make sure their apps are truly delivering value over time and worthy of a subscription, but it would help substantially if Apple worked to normalize and validate the idea of subscriptions (and the value of software in general) in some sort of public facing way. Something like the Your Verse ads, but with some more direct hints at the value of apps to our lives.”

Apple is making a couple of changes to the App Store’s discovery mechanisms, in addition to adding ads that appear in searches for apps. It’s bringing back the Categories tabs, for one. It’s also beefing up the Featured tab with better intelligence, filtering out apps you already have installed. Some iOS software betas, by the way, filtered the top charts, as well, but that is a bug, not an intended feature. Top charts will always show apps you have installed as well as those you don’t.

Here’s another fun one: If you 3D touch (hard press) on any app on your home screen, it will soon, by default, have an action that allows you to suggest that app to someone. This is a nice addition that will boost discovery via word of mouth and also provide a basic action anyone can take using 3D Touch, which many developers have yet to implement.

Now, about those ads.

There’s a public stat quoted by Schiller that 65 percent of downloads come from searches on the App Store. I’ve clarified, for what it’s worth, that this is 65 percent of all iOS downloads, and not some subset that only includes downloads originating on the store. That’s a pretty big target. And this is why Apple went after search ads first — it was the biggest possible target for revenue and for developer promotion.

Apple’s ad system is heavily based on relevance above all other factors. Relevance begins with an app’s metadata, which is used to automatically create the ad. The resources for the ad also come from an App Store’s pre-approved listing, which makes it tougher to game the system.

This relevance setting means that if you’re searching for a racing game, a word search game will never ‘win’ in the ad auction process for that term. Apple is also attempting not to penalize new apps in categories for not having a lot of ratings, giving them a chance to win ad auctions and appear in categories. And all apps, of course, pay only on tap not on sight. Apple is exploring things like re-engagement ads for the store as well — so you could be able to direct people to a specific point in your app even if they already use it.

The relevance metric, though, is the one to pay attention to. Specifically, something Apple calls the “minimum relevance threshold.” If your app does not pass this threshold for the search that you’re trying, the app will not even get into the auction. Apple will average out the relevance scores across ads for that term, and if your app doesn’t pass a certain mark of relevance based on keywords, reviews, downloads and other factors, it won’t be allowed to clutter up “non relevant” categories.

A few privacy notes:

Apple is not creating search profiles (a very common practice with most ad products) for users, but they will be looking at data internally on an aggregate level to make sure they’re showing people relevant ads. That includes things like whether you’re clicking on ads, what you download, your age, your location and your gender.
Apple will not be merging its own data with external sources like Axiom or others that collect user data across networks. And Apple does not share that data with external networks or other developers. You won’t search for an app on Apple’s store and then see it in a Google ad.
Tapping on “Ad” on any App Store search ad will also allow you to see the exact data that was used to show you the ad. Which is very nice for transparency.
Apple’s existing ad products like iAd, which didn’t work out so great, will still contribute technology, data and findings to this new effort. So even though it failed the first time, Apple still gets to use the tech to build this out.

Apple’s search ads program is available for free during beta. So if you’re an App Store developer, you should do yourself a favor and try it out during this period, which starts Monday. The ads may be tests (that Apple is watching to prevent gaming), but the downloads are real. The program launches for real in the fall.

Apple is doing its best to minimize the complexity for indie developers. Apple’s behind-the-scenes tool will build your creative automatically, select your keywords and set up the auction for you. All it asks for is a credit card and budget. The big players have more tools available to them, but this ease of use means that any developer should be able to try the system, regardless of how much ad experience they have.

No developer, no matter how big, will never be able to buy exclusivity or a ’blackout’ in a category or search. And there are no minimum bids in the Dutch auction system.

Developers I spoke to seemed optimistic about whether Apple’s search ads would move the needle for them.

“Search Ads in the App Store allows us to reach users exactly at the point when they are looking for apps. It is a relevant environment and the App Store is truly at scale, which very few advertising channels are, especially for mobile,” said Marcus Gners of Lifesum.

Mathieu Nouzareth of FreshPlanet which makes the music trivia game SongPop, shares the sentiment.

“Every app developer is confronted with the same issue: how do I make my app/game known to my potential users once I launched it? I have seem estimates/reports showing that there are about 1,500-2,000 new apps being launched every single day in the app store! Discoverability is an issue for all game/app developers and there are only a few ways you can have you app being discovered:

a) You pray and hope that a miracle happens

b) You are featured by Apple

c) You reach out to journalists

d) You take matters in your own hands and you decide to invest in marketing campaigns.

Until Facebook mobile ads came along, it was not very practical for anyone to do efficient mobile install marketing at scale. No one was offering the holy grail of mobile installs marketing: the combination of reach, targeting and reporting. Based on what I read, I think Search Ads will be able to combine those 3.”

That was a common theme when talking with developers, by the way, and I think that Facebook will less be threatened by this than they will be bolstered — making developers more familiar with search ads will only increase their curiosity in other products of its type.

“In terms of cost, it is going to be interesting to see the actual price on Search Ads versus other solutions,” Nouzareth continues. “Apple claims that the their solution will be cost efficient because ad relevance is prioritized over spend. This would be very appealing for smaller app developers as CPI (cost per installs) tend to rise dramatically on other platforms, thus favoring bigger developers and those who have apps/games with the highest LTV [life time value].”

Neal Shenoy of Speakaboos says that search ads may help developers because they’re based directly on download intent. “…Consumers are being more selective and downloading less apps in general increasing the cost of app marketing,” says Shenoy. “The result is that discovery in the App Store is a true “last mile” problem that we believe search ads can help solve. Whether an app developer is looking for new customers or re-marketing to existing prospects, Search Ads should accelerate download volumes, generate more qualified prospects and improve conversion because they are being delivered at the precise point of consumer intent.”

Changes

The current temperament among developers is that if this is “it” for the App Store in 2016, then it is not enough. Many indies, especially, are hoping to see a re-energized Apple now that control over the App Store has moved under SVP Phil Schiller and away from Eddy Cue.

Cue, Apple’s content deal-maker and broker of the Beats deal, has become a hugely polarizing figure among developers. Many feel that Cue was not giving the appropriate amount of attention to pushing the store forward, focusing instead on deals with content makers, celebrities and other power players.

There is a cautious optimism among the community that Schiller will right the ship and shatter the stasis that the App Store has endured over the past few years.

“Overall, it’s not like I think there’s some magic bullet that will make everything okay for indies, so I’m glad the person in charge is thinking about us and trying a bunch of things,” says Phill Ryu of Impending.

Everything I’ve been hearing is that this is the “first of many” changes to the App Store. Some of those changes will come this year and some will come later, because there are many structural challenges in rolling out major changes to a store that serves hundreds of millions.

In my mind, the changes are linked. Subscriptions add much more flexibility across the board to enormous categories of apps that cannot be defined specifically as “subscriptions to services.” Improvements to discoverability (as long as they continue) aid in the long tail still being a place where business are built. And shortening review times creates a faster moving and more iterative App Store mentality.

But I think that’s just the beginning. And Apple needs to acknowledge that these improvements are, frankly, just table stakes in comparison to many of the things that Google has announced recently to developers on the Play Store. There is a new era on the horizon: the era of the distributed app.

I’ve written before about “invisible apps,” which offer benefits to the user without being on the home screen, being opened or even having a “home” on the phone. Recent years have shown that this is the way things are going. People download fewer apps and keep the ones they use more. But they use more services than ever.

We’re headed for a point at which people use more “invisible,” distributed services on iPhones than they do “apps you launch via an icon.” That’s a given. So Apple has two choices — either it can milk the last drops out of the capsule app ecosystem as we know it, or it can start building App Store tools to support these kinds of apps and services and to help developers monetize them.

Subscriptions and services, of course, go together hand in hand. What if a developer could craft software that provided a truly useful service but had no icon, required no installation and was paid for out of an all-in-one App Store subscription that was based on usage? What happens when virtually and augmented reality are ubiquitous and phones are small again and the home screen means nothing?

That’s going to happen. It is happening already with bots. Whether Apple is flexible and attentive enough with the App Store to allow it to capitalize on this new era is the only question.

So, these changes are baby steps, but they’re baby steps with the right fundamental mindset. Developers should hope that the trend continues.

>>> Christian Liaigre receives investment from Navis Capital

Christian Liaigre receives investment from Navis Capital

Navis Capital Partners (“Navis”), an Asia-based private equity firm, has completed an investment in Christian Liaigre Group (“Liaigre”), a well-known French ultra-luxury furniture brand.

The transaction has been made in conjunction with Symphony International Holdings Limited, a Singapore-based investment holding company focused on lifestyle and healthcare businesses, and Chanintr Living, a Thai-based furniture retailer, which operates Liaigre showrooms in Asia on a wholly-owned and joint venture basis.

Post-completion, the Liaigre showrooms in Asia will be reorganised directly under the Liaigre holding company, and Chanintr Living will become a shareholder in the enlarged group.

Christian Liaigre is a renowned and internationally recognized interior architect and furniture designer, who has developed the Liaigre name into the most sought-after furniture and lifestyle brand.

The Liaigre brand is now synonymous with discreet and understated luxury. It is renowned for its elegant, minimalistic and discreetly luxurious design style. Liaigre has a strong intellectual property portfolio, with a huge archive of proprietary furniture and lighting designs. Liaigre retails a range of bespoke furniture, lighting, fabric, leather and accessories in a network of 26 showrooms in 11 countries across Europe, the US and Asia, In addition, Liaigre undertakes exclusive interior architecture projects for select hotels, restaurants, yachts and private residences.

This transaction enables the reorganisation of the Asian and Rest-of-World activities of Liaigre under one single company and provides new capital for the next stage of growth. The plan is to further develop showrooms, and design activities in key Asian cities, including Hong Kong, Taipei, Tokyo, Shanghai and Seoul in addition to a more modest expansion in Europe and North America.

Christophe Caillaud, President of Liaigre, said: “We are delighted to have concluded a transaction with Navis, Symphony and Chanintr Living and look forward to great success with their backing. Their presence and relationships in Asia are highly complementary to our growth plans.”

Nicholas Bloy, Managing Partner of Navis, said: “Liaigre is an exclusive and well-established company with strong brand equity, great locations and superior store economics compared to peers. We have known and admired Liaigre and the principals of Symphony and Chanintr Living for many years, and we now look forward to working with our partners to further strengthen and institutionalize the capabilities of the company as it embarks on the next exciting phase of growth in Asia.”

>>> Street Pre-MArkets Indications

ML
INMARSAT - 2 contracts win +ve for senti. Next 5 yrs approx 2000 vessels..+2%
TEF - Positive. CVC, Apax in talks for joint £10B raid on 02; S.Times.....u/c
SOCO - We UPGRADE to Buy with PO 170p, indicating 40% upside potential....u/c
GENMAB - POLLUX data for Darzalex confirmed best-in-class profile.........u/c
LVMH - CEO of watch division says Tag grows revs c. 20% in 2016 YTD.......-1%
LAFARGEHOLCIM - Planning asset sales in additional 9 countries; FT........-1%
UK BANKS - ODCHLEAV (betting av odds for leave) up another 7% over w/e....-1%
MERLIN - Inline with goal to sell EUR300m of resi into a bigger vehicle...-1%
BMW - Expects US market becoming more difficult as mkt should stagnate....-2%
SAFRAN - We DOWNGRADE to Neutral with PO of EUR65. O/P EU peers by 7% ytd.-2%
G4S - Mateen, who carried out mass-shooting in Florida was active employee-5%
CS
Accor -1-2% HNA had no discussion with Accor and doesn't plan any
Autos -2% BMW US head says US market becoming more difficult
Larfarge Hol M/P Co is stepping up its post-deal disposal programme
LVMH -0.5% Tag Heuer CEO says Jan-May sales rise 20% y/y
Man Group -0.5% FT reporting $14bn fresh money into quant strategies in Q1
Miners M/P Gold +0.5%, Copper +1.25%, Iron Ore futures +2%
Novo Nord +0.5% Semaglutide Showed Superiority in 2 SUSTAIN Trials
Oils -1-2% Rig count rose again, WTI -2% from EU close
Richemont -0.5% Tag Heuer CEO says Jan-May sales rise 20% y/y
Rio Tinto M/P Rio Tinto Hires Goldman to Help Privatize Copper Unit (ST)
South 32 M/P Strike at nicklel mine in columbia looking less likely
Swatch -0.5% Tag Heuer CEO says Jan-May sales rise 20% y/y
Telefonica M/P Apax, CVC Capital May Make Joint Bid for O2
UBM unch DOJ Files for clearance for propsed sale of PR Newswire.
Weir M/P Baker Hughes rig count @ 414 vs 408 w/w
Investec
UK
* EASYJET-Hopes for constructive dialogue after Pilots plan June 14 strike..-1%
* GVC HDG-NJ Regulator confirms BWIN deal meets license requirements.......unch
* INMARSAT-Signs 5 yr fleet express partnership with Speedcast.............unch
* RIO-hires GS to help privatise copper unit(S Times).......................-2%
* TAPTICA-Opens new office in Seoul to increase exposure in Asia Pac.......unch
* UBM-DoJ has files for clearance for proposed sale of PR Newswire.........-½%

Europe
* ACCOR- HNA denies reports that it has discussed taking stake..............-1%
* AIR FRANCE-25% of pilots strike, sees 'tens of millions' in losses.....-1.5%
* BAER-to focus on organic growth says CEO..................................-1%
* BASF-won't counterbid for Monsanto(Dealreporter), no real surprise......-0.5%
* BAYER-Monsanto rejects new offer(same terms), wants higher price (DJ)...-0.5%
* DAIMLER-signs 4bn Yuan deal with BAIC Motor...............................-1%
* HENKEL-targets further growth through aqns (RP)...........................-1%
* LAFARGEHOLCIM-disposals programme to exceed Chf3.5bn (FT)...............+0.5%
* LANXESS-wants to join rubber consolidation, won't be rushed(CEO in BZ)....-1%
* LVMH-Tag Heuer CEO says Jan-May sales rose 20%(Rtrs)......................U/C
* SIEMENS-Chairman confirms will not make bit for KUKA(-2%).................-1%
* TEF-Apax, CVC may make jt bid for O2 (S Times)............................U/C
* VESTAS-to produce 3.45MW turbine in China (CEO).........................
 
MainFirst Pre Mkt Indications
*HENKEL-Targets further growth through acquistions - Rheinische......-0.5%
*BAYER-MON will not open books,also MON/PFE bid for Bayer-Spiegel....-2%
*TELEFONICA-Apax & CVC may make joint bid for O2(£10b)-S/Times.......+0.5%
*BASF-Won't counterbid for Monsanto,may buy some assets-D/Report.....-1.5%
*SIEMENS-CEO says co isn't bidding for robot maker Kuka..............-1%
*BAER-To focus on Organic Grth in 2016,New Money inflow Q1 weak......-0.5%
*ACCOR-HNA Hospitality says didn't talk to Accor on acquisition......-1%
*MERLIN-And Metrovacesa plan vehicle for Rental Homes-Press..........U/C
*BMW-Expects an ongoing difficult environment in the US..............-1%
*ALLIANZ-CIO lower-quality comm.real est mkt close to a 'bubble'.....-1%
*LANXESS-CFO said get away from cyclicality,focus Div,not M&A........-1%
*AIRBUS-Govt approves arms exports to Tunisia/Nigeria-Spiegel........+0.5%
*LAFARGE-Disposal program to exceed CHF3.5bln says FT................+0.5%
*LVMH-Tag Heuer CEO says Jan-May sales rose 20% - Reuters............U/C
shore- enters strategic partnership with network provider SpeedCast...UNCH
GVC - gains New Jersey licence approval....................................+2%
FUTURA MEED - signs agreement with TTK,eyes entry into India................+2%
UBM - DoJ files for clearance for proposed sale of PR Newswire.............+1%
PLEXUS - looks to raise £6m in placing at 65p to boost balance sheet.......MKT
SPORTS DIRECT - said to have made a last-ditch bid for some BHS stores....UNCH
RBC PRE-MARKET INDICATIONS:
*HEIA/ABI: +1% AC Nielsen May data positive volume share gain, HEIA +8.5% YOY.
*JULIUS BAER: 0% focus on Asia, CEO confident reach new money growth target.
*KUKA: 0% SIEMENS CEO Kaeser denies bidding for robot maker KUKA.
*LVMH +1% TAG HEUR Jan-May Sales +20% YOY, demand for 80,000 smart watches.
*RBS: 0% claims pushing software co. into administration to benefit from sale.
*SANOFI: +1% LIXILAN diabetes drug trial meets key targets.
*TELEFONICA: 0% Apax & CVC may joint bid for O2 (£10B).

FT : LafargeHolcim disposals to exceed $3.6bn

LafargeHolcim disposals to exceed $3.6bn

LafargeHolcim, the Franco-Swiss cement group created by a €41bn merger last year, is stepping up its post-deal disposal programme with planned asset sales in an another nine countries.
Eric Olsen, chief executive, has been under pressure from some investors to boost the group’s performance, which has been hit by severe global pricing pressures and weak economic growth in key markets.

Shareholders had been promised SFr3.5bn ($3.6bn) of disposals this year. But the company now says a portfolio review has identified a further nine countries “where we will seek opportunities to divest if we can achieve favourable valuations”.
LafargeHolcim said it was confident of delivering this year’s target “and expects further divestments to crystallise beyond 2016.”
Shareholder scepticism about the benefits of last year’s tie-up between France’s Lafarge and Switzerland’s Holcim — which succeed only after a series of internal power struggles — has weighed on the group’s shares, which are almost 40 per cent lower than a year ago.
With a global capacity glut in the cement industry, Mr Olsen believes LafargeHolcim significantly over-invested in the past and is shifting the combined company’s business model towards lower capital spending and stronger cash flow generation.
Asset sales will help LafargeHolcim reduce net debt but analysts have warned that a rush to push through disposals would lead to lower sale prices.
“I don’t see how this process will create value — but that is the story of this merger so far,” said Phil Roseberg at Bernstein. “It is a very complex integration. You had two similar sized companies with two different cultures and now they want to create a third culture.”
So far this year, the Zürich-headquartered company has already secured a third of its SFr3.5bn disposal target, through divestments in South Korea and Saudi Arabia and a merging of operations in Morocco. Competition authorities have required additional asset sales in India.
LafargeHolcim, which operates in about 90 countries, has not set out where the next round of disposals will occur but it is expected to quit operations in most of the chosen locations completely.
However, one country where LafargeHolcim is investing for longer-term growth is Brazil, despite the country’s economic downturn hitting its results in recent quarters.
Last month, the group opened a SFr570m plant in Barroso, south-eastern Brazil, which has the capacity to produce 3.6m tonnes of cement per year. It first took the investment decision in 2011.
Although it does not expect an early turnround in Brazil’s economic prospects, the company believes the new plant will cut production costs. It recently helped in the construction of the Olympic Village for this year’s Rio de Janeiro games.
For the first quarter, LafargeHolcim reported a larger than expected 21.5 per cent annual fall in adjusted earnings before interest, tax, depreciation and amortisation, to SFr824m.
But the group argued that the construction industry in North America and Europe was often hit by bad weather in the early months of the year, meaning the quarterly results were “not indicative” of expected full-year performance. Mr Olsen said then that he expected to see “momentum building through the year”.
He has forecast “at least a high single-digit” like-for-like increase in adjusted operating ebitda in the group’s full-year results.

>>> What to look at today -13th of June 2016

Risk aversion remains the prevailing sentiment for the 3rd straight trading session in Asia, while US futures markets have been in the red from the start. The worst shooting in US history at an Orlando nightclub early on Sunday by a "lone-wolf terrorist" killing over 50 people while professing his loyalty to ISIS has served as a reminder of vulnerability to such attacks. With two weeks until the Brexit vote, polls coming in are hardly suggesting that cooler heads will prevail, with continued momentum behind the Leave camp. In FX majors, USD/JPY is testing the downside of 106 handle for the first time in over a month, while GBP/JPY cross below 150.50 is a 3-year low. GBP/USD fell over 70pips from Friday close below 1.4180. China May economic data were generally in line or softer than expected.
In US deals news, Symantec announced it is buying Blue Coat Systems for $4.65B amid further consolidation in security space. In materials, Rio Tinto was reportedly working with Goldman to take control in copper assets Turquoise Hill and sell shares to a large investor after increasing its own stake. Tesla CEO CEO Musk tweets: "NHTSA confirmed today that they found no safety concern with the Model S suspension and have no further need for data from us on this matter"

Nikkei -3.08% Hang Seng -2.49% CSI -1% Shanghai -0.99%

Eur$ 1.1252 CNH 6.5973 CNY 6.5850 JPY 105.85 GBP 1.42 CHF 0.9646 RUB 64.48 WTI $ 48.55 (-1.06%)

S&P -0.37% EuroStoxx -1.51% Dax -1.48% SMI -0.98%

Macro :
- Dijsselbloem Plans EU Deposit Guarantee Deal by Year-End: HB
- Iran Collects $5 Bln Owed by Emirates National Oil Co.: Shana
- Poll Shows 43% for Brexit; 42% Back Remain: Times/YouGov
- MSCI Inclusion of A Shares Is ‘Historical Certainty’: CSRC

Keep an eye on :
- AF FP : Air France Says 77% of Flights Operating Sunday Amid Strike
- AF FP : Air France-KLM CEO Won’t Move KLM Flights to Paris, FD Reports
- BAYN GY : Monsanto Said to Rebuff New Bayer Offer at Same Price: Dow Jones
- BCSI US : Symantec to Buy Blue Coat in $4.65b Cash Deal
- CBK GY : Commerzbank Expanding Wealth Management, Boersen-Zeitung Says
- COP US : ConocoPhillips rebuffed USD 2bn-plus bids for UK arm from Ineos and Blackstone
- DBK GY : Deutsche Bank Plans System Security, Stability Improvements: FT
- EDF FP : France-U.K. Electricity Interconnector Proposed: Telegraph
- ESJ LN : EasyJet Hopes For ‘Constructive Dialogue’ With VNV Union
- ENI IM : Eni, BP to Start Drilling 2nd Well at Egypt’s Baltim: Borsa
- FEYE US : Symantec Said to Have Been in Advanced Talks to Buy FireEye
- FON FP : Foncia could fetch EUR 1.8bn - Journal du Dimanche
- HEN3 GY : Henkel Targets Further Growth Through Acquisitions: Rheinische
- KU2 GY : Kaeser Says Siemens Isn’t Bidding for Robot Maker Kuka
- KU2 GY : Merkel Urges Equal Treatment of German Investors in China
- KU2 GY : Midea in Contact With Kuka Shareholder Voith: Handelsblatt
- LHN VX : LafargeHolcim Top Investor Calls Franc Impact ‘Devastating’: NZZ
- LXS GY : Lanxess to Actively Join Consolidation Rubber Mkt, CFO Tells BZ
- MC FP : LVMH’s TAG Heuer CEO Says Jan-May Sales Rise 20% Y/Y: Reuters
- MRL SM : Merlin, Metrovacesa Plan Vehicle for Rental Homes: Confidencial
- RNO FP : Renault Nissan Auto India’s Workers to Get ~57% Wage Rise: ET
- RIO LN : Rio Tinto Hires Goldman to Help Privatize Copper Unit: S. Times
- SAN FP : Sanofi Says Positive Phase 3 Results for Lixilan-O, -L Trials
- SAN FP : Medley (Brazilian generics unit) could be sold by Sanofi, bought for E500m in 2009 - O Globo
- SAS SS : SAS Says 220 Flights Affected by Pilot Strike on Sunday, Swedish Mediation Office Calls in SAS, Pilots for More Talks
- SAS SS : SAS CEO Says Airline Can’t Afford Pilots’ Demands, DI Reports
- SIE GY : Kaeser Says Siemens Isn’t Bidding for Robot Maker Kuka
- TIT IM : Telecom Italia to Name George Nazi Head of Technology: Corriere
- TEF SM : Apax, CVC Capital May Make Joint Bid for O2, Sunday Times Says (GBP 10b price mentionned)
- LANS NA : FMR Reports 3.6% Van Lanschot Stake: AFM Filing
- YHOO US : Verizon, AT&T Said to Make Final Round Bids for Yahoo: Reuters

>>> Europe : Brokers Upgrades & Downgrades - 13th of June 2016

>>> Up
*AURUBIS RAISED TO BUY VS HOLD AT BANKHAUS LAMPE
*ELECTROCOMPONENTS RAISED FROM UNDERWEIGHT TO EQUALWEIGHT AT BARCLAYS
*RESTAURANT GROUP RAISED TO NEUTRAL VS SELL AT CITI
*SOCO INTERNATIONAL RAISED TO BUY VS NEUTRAL AT BOFAML

>>> Down
*KGHM CUT TO SELL AT SOCIETE GENERALE
*SAFRAN CUT TO NEUTRAL VS BUY AT BOFAML
*SAP CUT TO UNDERPERFORM VS HOLD AT JEFFERIES
*VODAFONE CUT TO NEUTRAL VS OUTPERFORM AT MACQUARIE

>>> PT Change

>>> Initiation
*APPLUS SERVICES RATED NEW BUY AT KEPLER CHEUVREUX
*BUREAU VERITAS RATED NEW BUY AT KEPLER CHEUVREUX; PT EU23.40
*HANNOVER RE RATED NEW UNDERPERFORM AT CREDIT SUISSE; PT EU97
*HELLENIC PETROLEUM RATED NEW HOLD AT BERENBERG; PT EU4.50
*HISCOX RATED NEW OUTPERFORM AT CREDIT SUISSE; PT 1,150P
*INTERTEK RATED NEW HOLD AT KEPLER CHEUVREUX; PT 3,480P
*MOTOR OIL RATED NEW BUY AT BERENBERG; PT EU16
*MUNICH RE RATED NEW NEUTRAL AT CREDIT SUISSE; PT EU172
*SCOR RATED NEW UNDERPERFORM AT CREDIT SUISSE; PT EU28
*SGS RATED NEW BUY AT KEPLER CHEUVREUX; PT CHF2,410
*SWISS RE RATED NEW UNDERPERFORM AT CREDIT SUISSE; PT CHF87
*TALANX RATED NEW NEUTRAL AT CREDIT SUISSE; PT EU32
*TUPR RATED NEW HOLD AT BERENBERG; PT TRY67

>>> Call

WSJ : Fed Decision Makers Wrestle With So-called Natural Rate

Fed Decision Makers Wrestle With So-called Natural Rate

Disagreement about long-term outlook leads to the writings of a long-dead Swedish expert

While Federal Reserve officials debate when to next raise short-term interest rates, they are also wrestling with the question of how high to lift them in coming years.

Signs point toward the new normal being much lower than in the past, which has broad implications for when the Fed should tighten monetary policy, how quickly, and how far.

Fed officials disagree about their likely end point, in part because they are struggling to understand why another underlying interest rate—the mysterious natural rate—has fallen in recent years. And for that many are turning to the musings of Knut Wicksell, a Swedish expert on the subject who died 90 years ago.

According to the textbooks, this so-called natural rate is the inflation-adjusted rate that’s consistent with the economy operating at its full potential, expanding without overheating. Also known as the equilibrium or neutral rate, it balances savings and investment.

The natural rate can’t be observed directly; the Fed knows it has been reached only by how the economy responds. “It’s like discovering Pluto: you can only see the effect of the gravitational pull,” said Eddy Elfenbein, an investor and blogger at the site Crossing Wall Street, comparing it to the dwarf planet whose existence was inferred from the orbits of Uranus and Neptune.

“The practical implication is when a Fed person talks about the natural rate of interest, what they’re telling you is what they think is the terminal rate of the next hiking cycle,” said Adam Posen, president of the Peterson Institute for International Economics and a former member of the Bank of England’s monetary policy committee.

Most economists figured the natural rate was around 2% just before the financial crisis. Today, seven years after the recession, most estimates are around or just below zero.

“We’re seeing no pickup, none whatsoever, in the natural rate even as the economy has gotten back to full strength,” John Williams, the San Francisco Fed president who has spent years studying it, said in a recent interview with The Wall Street Journal.

This implies the central bank won’t be moving its benchmark federal-funds rate up much from its current level between 0.25% and 0.50% over the next few years. This, in turn, means lower rates for borrowers and lower returns to savers.

Policy makers are likely to leave their benchmark rate unchanged Wednesday at the conclusion of their two-day policy meeting, and could consider moving in July or September if the economy improves. They also will release Wednesday new projections for where they think the rate will rest in the long term.

The Fed’s estimate of its long-run fed-funds rate has been falling. In March, when officials released their most recent estimates, the median was 3.3%. Adjusted for their expectation of 2% inflation, that suggests a natural rate of 1.3%, down from 1.75% in June last year.

One risk for the Fed and the economy is that a low natural rate leaves less room for the central bank to cut rates if it wants to spur faster growth during a recession or boost inflation to meet its 2% target.

“This is a huge challenge for us,” Mr. Williams said.

The problem is economists don’t fully understand why the natural rate is so low. That makes it hard to know whether the shift is permanent or temporary, and therefore whether the rate will rebound and by how much—and in turn where the long-term fed-funds rate will rest.

“I think the current level of neutral or normal rates is pretty low,” Fed Chairwoman Janet Yellen said in Philadelphia last week. She expects it will rise over time, but said “that is something we’re uncertain about and have to find out over time.”

Economists have offered several theories for why the natural rate has fallen. Former Fed Chairman Ben Bernanke has cited a glut of savings world-wide. Harvard University economist Lawrence Summers blames ‘secular stagnation,’ or a chronic shortfall in investment demand.

Ms. Yellen has said temporary headwinds that have restrained growth since the financial crisis may be responsible, such as economic uncertainty, a strong dollar, and slower growth of productivity and the labor force.

For guidance Fed officials have been revisiting the work of Mr. Wicksell, a famed Swedish economist who did much of the seminal thinking on the subject more than a hundred years ago. Speeches by senior policy makers, including Ms. Yellen, have referenced Mr. Wicksell five times in the past year alone, and Mr. Bernanke has blogged about the Swede’s ideas about the relationship between interest rates, economic growth and inflation.

Mr. Wicksell characterized the natural rate of interest as “a certain rate of interest on loans which is neutral in respect to commodity prices, and tends neither to raise nor to lower them.” But the natural rate isn’t observable and depends on “a thousand and one things which determine the current economic position of a community,” and those factors—such as productivity, unemployment, and technological and demographic change—are constantly in flux, he said.

Fed Vice Chairman Stanley Fischer this year predicted the natural rate will remain low for the next few years, and warned that factors governing the rate are “extremely difficult” to forecast.

“The answer to the question, ‘Will [the natural rate] remain at today’s low levels permanently?’ is that we do not know,” he said in a January speech. “Eventually, history will give the answer.”

>>> Asian Update

Asian Mid-session Market Update: Stocks sell off after deadly US mass shooting, persisting Brexit fears, and soft China data

***Economic Data***
- (CN) CHINA MAY FIXED URBAN ASSETS YTD Y/Y: 9.6% V 10.5%E; multi-year low
- (CN) CHINA MAY INDUSTRIAL PRODUCTION Y/Y: 6.0% V 6.0%E; YTD Y/Y: 5.9% V 5.9%E
- (CN) CHINA MAY RETAIL SALES Y/Y:10.0% (1-year low) V 10.1%E; YTD Y/Y: 10.2% V 10.2%E
- (CN) China May Foreign Direct Investment (FDI) Y/Y: -1.0% at CNY342.6B; YTD Y/Y: 3.8% v 4.8% prior; 3-month low
- (CN) China May fiscal revenue CNY1.55T, +7.3% y/y, spending +17.6% y/y
- (JP) JAPAN Q2 BUSINESS SURVEY INDEX (BSI) LARGE ALL INDUSTRY Q/Q: -7.9 V -3.2 PRIOR; BSI LARGE MANUFACTURING Q/Q: -11.1 V -7.9 PRIOR

***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -2.6%, S&P/ASX closed, Kospi -1.6%, Shanghai Composite -0.8%, Hang Seng -2.6%, Sep S&P500 -0.4% at 2,079

***Commodities/Fixed Income***
- Aug gold flat at $1,276/oz, Jul crude oil -1.3% at $48.42/brl, Jul copper +1.4% at $2.06/lb
- (IR) Iran appoints Ali Kardor as managing director of National Iranion Oil Co, replacing Javadi - Iran press
- SLV: iShares Silver Trust ETF daily holdings rise to 10,587 tonnes from 10,535 tonnes prior; highest since Dec 2014
- GLD: SPDR Gold Trust ETF daily holdings rise 6.5 tonnes to 893.9 tonnes; highest since Oct 2013
- (CN) S&P Global Platts China Steel Sentiment falls to 16-month low
- (CN) PBOC SETS YUAN MID POINT AT 6.5805 V 6.5593 PRIOR; weakest Yuan setting since June 1st
- (CN) PBOC to inject CNY40B in 7-day reverse repos

***Market Focal Points/FX***
- Risk aversion remains the prevailing sentiment for the 3rd straight trading session in Asia, while US futures markets have been in the red from the start. The worst shooting in US history at an Orlando nightclub early on Sunday by a "lone-wolf terrorist" killing over 50 people while professing his loyalty to ISIS has served as a reminder of vulnerability to such attacks. With two weeks until the Brexit vote, polls coming in are hardly suggesting that cooler heads will prevail, with continued momentum behind the Leave camp. In FX majors, USD/JPY is testing the downside of 106 handle for the first time in over a month, while GBP/JPY cross below 150.50 is a 3-year low. GBP/USD fell over 70pips from Friday close below 1.4180, and AUD/USD traded in a 25-pip range above 0.7360.

- China May economic data were generally in line or softer than expected. Most notably, fixed urban investment growth slowed to multi-year low as property sales value and construction activity saw most pronounced declines. China industrial output was more mixed - power generation recovered from last month's decline and crude steel output showed slightly higher growth, even though the headline numbers were as expected. China Stats Bureau noted overall employment is steady and investment is growing, though economy is still faced with uncertainties. Stats Office official added the ministry will develop gauges to track the Services sector as the economy transitions more toward consumption. Separately over the weekend, IMF's dep director Lipton brought up the deterioration in China's credit markets, stating "mounting corporate debt is a key fault line in the economy" particularly with many SOEs already "on life support."

- In US deals news, Symantec announced it is buying Blue Coat Systems for $4.65B amid further consolidation in security space. In materials, Rio Tinto was reportedly working with Goldman to take control in copper assets Turquoise Hill and sell shares to a large investor after increasing its own stake.

***Equities***
US equities / ADRs:
- SYMC: Confirms to acquire Blue Coat for $4.65B; Guides FY18 $1.70-1.80
- RIO: Working with Goldman Sachs on £8B takeover of copper operations - UK press
- TSLA: CEO Musk tweets: "NHTSA confirmed today that they found no safety concern with the Model S suspension and have no further need for data from us on this matter"
- VCYT: On a preliminary basis, Medicare cuts reimbursement rate for Afirma to $2,240 from $3,200

Notable movers by sector:
- Consumer discretionary: Hotel Shilla Co 008770.KR +1.7% (rival under probe); BAIC Motor Corp 1958.HK +2.4% (acquisition)
- Financials: Noble Group NOBL.SG -4.0% (disposal of US business); Poly Property Group Co 119.HK -1.0% (YTD result); China Vanke Co 2202.HK -3.6% (said to resume trading in early July); Industrial Securities Co 601377.CN -2.2% (regulatory probe)
- Industrials: Nippon Yusen 9101.JP -1.5% (acquisition); Calsonic Kansei Corp.7248.JP +5.2% (2nd round bidding); Daewoo Shipbuilding & Marine 042660.KR -3.6% (may further cut jobs)
- Technology: Sharp Corp 6753.JP -2.2% (S&P may upgrade rating); TCL Communication Technology 2618.HK +28.2% (proposes of privatization)