>>> What to look at today - 16th of August 2016

Dow +0.99% S&P +1.01% Nasdaq +1.47% Russell +1.27%
US Market closed higher as participants dialed back rate hike expectations following a barrage of economic data (fed funds futures market estimates the odds of a rate hike at the September meeting at 12.0%, falling from 15.0% in the previous session. The implied probability of a rate hike at the December meeting fell to 46.2% from 52.9%.). Apple Rally & rebound of Oil also helped the sentiment. All ten sectors ended in the green with telecom services (+1.1%), health care (+1.1%), energy (+1.1%), and technology (+1.7%) leading the advance. Conversely, materials (+0.6%) and financials (+0.7%) ended at the bottom of the leaderboard. Volume were below average with 818mil shares. US After Hours LPTH +10% and SANW +6% following earnings/guidance, CAR +5% on S&P 400 addition news... ORCL -3% following earnings/guidance, NVAX -84% on trial updates, DB -7% on potential hefty DoJ settlement amount. Australia and Japan were the only key indices open in today's session, as Hong Kong joined China, Korea, and Taiwan for Mid-Autumn Festival holiday break. Both traded to the upside, tracking a snap-back rally on Wall St. Korea markets were closed, Samsung Electronics got more bad news as US consumer safety agency CPSC formally issued a recall on about 1M Galaxy Note 7 devices due recent cases of battery overheating and explosions. The company is in hot water with regulators who also claim that Samsung exacerbated the situation with the way it handled communication with consumers. Following the CSPC announcement, Samsung replied it aims for US availability of replacement Note 7 devices as part of voluntary recall no later than Sept 21st.

Nikkei +0.54% Hang Seng Closed CSI Closed Shanghai Closed

Eur$ 1.1239 CNH 6.6495 CNY 6.6747 JPY 102.078 GBP 1.3237 CHF 0.9720 RUB 64.8461 WTI $ 43.52 (-0.93%)

S&P -0.13% EuroStoxx -0.17% Dax -0.25% SMI +0.01%

Macro :
- U.K. Committee to Launch Inquiry Into Executive Pay: Sky News
- Some EU Sources See Chance U.K. May Give Up on Brexit: Telegraph
- Negative Rates Not All Bad as Mizuho Sees Pension Business Boost
- Europe Said to Threaten Revolt Over Bank Capital-Rule Overhaul
- FOMC SURVEY: Hold Seen Next Week as Fed Punts to December

Keep an eye on :
- CS FP : Axa to Buy Back as Much as EU461.9m of Own Shares
- CRTO US : Criteo Revenue Could Triple in 4-5 Years, Exane BNP Says
- BMPS IM : Paschi Could Consider Saccomanni for Chairman Job: Repubblica
- BNP FP : French Banks Undervalued as Capital Rules Not Stable: Brassac
- COLL SS : Collector Announces Rights Issue; Price SEK55 a Share
- DBHN GY : Deutsche Bahn Exiting German Bus Market: Handelsblatt
- DBK GY : Deutsche Bank says U.S. DoJ asks it to pay $14 billion to settle mortgages case --> -8% after H. in ny
- DBK GY : Deutsche Bank Said Near U.K. Insurance Unit Sale to Phoenix
- DBK GY : Deutsche Bank Doesn’t See Settlement Near DOJ $14b Proposal
- EDF FP : GE to Get $1.9b for Hinkley Point C Contract: Reuters
- FCA IM : Fiat Chrysler Recalling 1.4m Vehicles in U.S., 82k in Mexico
- GALP PL : Amorim’s Galp Sale Corresponds to the 5% Stake Bought from Eni, sold @€11.69
- JCI US : Johnson Controls New Outperform as >$1b Savings Seen: Bernstein
- LHA GY : Lufthansa Outlook to Negative From Stable by S&P
- KN FP : Natixis Plans to Create 600 IT Jobs in Portugal Through 2019
- NOVOB DC : Novo Says Victoza Lowered Kidney Damage Progression in Diabetes
- ORCL US : Oracle 1Q Adj. EPS, Rev. Miss Ests.; Shares Down 1.1% Post-Mkt
- PHNX LN : Deutsche Bank Said Near U.K. Insurance Unit Sale to Phoenix
- PST IM : Poste Italiane to Buy 14.8% of SIA From CDP, Corriere Says
- SAF FP : Safran’s Morpho Said to Fetch More Than $2.2 Billion in Bid War
- GLE FP : French Banks Undervalued as Capital Rules Not Stable: Brassac
- TEL NO : Telenor May Sell VimpelCom for $3.5/Shr, Vedomosti Says
- TDC DC : Apollo could make higher offer for TDC; Telia could also be interested
- UCG IM : Italy Banks Under Pressure, Positive Mid to Longer Term: Citi
- UNA NA : Unilever Said to Be in Talks to Buy Honest Co. for Over $1b: WSJ
- VOW3 GY : Volkswagen Confirms Irish Emissions Case Stopped, Pending Review
- VOW3 GY : Hesse Minister Says German State to Sue Volkswagen: HR-Info
- AFX GY : Zeiss Gets FDA Approval for VisuMax Vision Correction Procedure

>>> Europe : Brokers Upgrades & Downgrades - 16th of August 2016

>>> Up
*DANA RAISED TO OVERWEIGHT AT BARCLAYS
*MORRISON RAISED TO NEUTRAL VS UNDERPERFORM AT EXANE
*MORRISON RAISED TO MARKET PERFORM AT BERNSTEIN
*STATOIL RAISED TO BUY AT BOFAML
*TARKETT RAISED TO BUY AT HSBC
*VONOVIA RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS

>>> Down
*ARKEMA CUT TO HOLD AT HSBC
*FCA CUT TO ADD VS BUY AT ALPHAVALUE
*HERMES CUT TO HOLD VS BUY AT BERENBERG
*MR PRICE CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
*TELENOR CUT TO SELL VS HOLD AT BERENBERG

>>> PT Change

>>> Initiation
*AKZO NOBEL RATED NEW REDUCE AT HSBC
*BASF RATED NEW HOLD AT HSBC
*BNP RATED NEW NEUTRAL AT CREDIT SUISSE
*BRITVIC REINSTATED AT UNDERPERFORM AT BOFAML; PT 600P
*CAMPARI REINSTATED AT BUY AT BOFAML; PT EU11.3
*COVESTRO AG RATED NEW REDUCE AT HSBC
*CLARIANT RATED NEW REDUCE AT HSBC
*CREDIT AGRICOLE RATED NEW OUTPERFORM AT CREDIT SUISSE
*DIAGEO REINSTATED AT BUY AT BOFAML; PT 2,450P
*HARGREAVES LANSDOWN RATED NEW UNDERPERFORM AT EXANE; PT 1,000P
*LANXESS RATED NEW HOLD AT HSBC, PT EU46
*MONEYSUPERMARKET.COM RATED NEW OUTPERFORM AT RBC
*NATIXIS RATED NEW OUTPERFORM AT CREDIT SUISSE
*NOVAVAX CUT TO NEUTRAL AT JPMORGAN
*PERNOD RICARD REINSTATED AT BUY AT BOFAML; PT EU121
*RSA ASSUMED AT OVERWEIGHT AT MORGAN STANLEY; PT 594P
*ST JAMES'S PLACE RATED NEW NEUTRAL AT EXANE; PT 1,050P
*SCHINDLER HOLDING CUT TO REDUCE VS ADD AT ALPHAVALUE
*SIEMENS REINSTATED AT NEUTRAL AT CREDIT SUISSE; PT EU110
*SOCGEN RATED NEW NEUTRAL AT CREDIT SUISSE
*SOLVAY RATED NEW BUY AT HSBC, PT EU125
*TELENET GROUP REINSTATED BUY AT GOLDMAN

>>> Call

Telegraph : EU officials 'believe Britain will give up on Brexit if they make ne



From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: 09/15/16 20:58:42
Subject: Telegraph : EU officials 'believe Britain will give up on Brexit if they make ne
EU officials 'believe Britain will give up on Brexit if they make negotiations tough enough'



Senior figures in the EU believe that Britain will give up on Brexit if they make negotiations as tough as possible, the Telegraph understands.

British officials are fighting to stop Europe adopting a no-compromise position in talks in the hope that the UK will change its mind about leaving the bloc.

This belief is fuelling the hardline message on issues like freedom of movement that have emerged from Berlin, Paris and Brussels in recent weeks.

More than five senior EU figures interviewed by the Telegraph this week expressed doubts that Britain would go through with Brexit when confronted by the “reality of the bureaucratic nightmare” and the “insane act of economic self-harm”, as they referred to Brexit.

One senior British official involved in the set up for the coming negotiations said the EU elite “seem to think the game is to make us change our minds”.

This stance has left officials fighting to explain to European leaders how “dangerous” a game they were playing, and how “unlikely” it was to succeed.

Who are the Brexit ministers?Play! 01:33
A second UK official source with knowledge of the talks added there was a danger that positions in the Brexit talks were already becoming “dangerously entrenched”, even before Theresa May invokes Article 50 that will open formal EU-UK "divorce" proceedings.

The sense that battle-lines are hardening across Europe came as the 27 EU leaders prepared for a summit on Friday in the Slovakian capital, Bratislava, designed to demonstrate unity and a determination to forge ahead with a European future without Britain.

The toughening mood was darkly hinted at by Donald Tusk, the European Council president, in a nine-point letter urging EU leaders to use the Bratislava summit to restore citizens' fading faith in the European Union.

In a thinly veiled appeal to make sure Britain was left demonstrably worse-off by Brexit, Mr Tusk insisted that the 27 should resolutely “stick to the Treaty” on issues like free movement.

“If we do so, there will be no room for doubt that it is a good thing to be a member of the Union,” he wrote.

Tusk tells May to get on with Brexit: The ball's in your courtPlay! 01:31
The EU’s choice of lead negotiators – the French finance expert Michel Barnier, for the European Commission and Guy Verhofstadt, the former Belgian prime minister and arch-ferderalist, for the Parliament – has also been taken as a clear sign of the EU’s determination to drive a hard bargain.

The appointments were described on Thursday as "very, very tough" by Herman van Rumpuy, the former European Council president, who warned that negotiations would be “difficult” for Britain.

In the European Parliament, which must ratify any Article 50 deal agreed by the EU 27, the mood against Britain was further soured this week by personal attacks on Mr Verhofstadt by former Ukip leader Nigel Farage and the Brexit secretary, David Davis.

Mr Davis referred to his future interlocutor as “Satan” when addressing the Foreign Affairs select committee, while Mr Farage – long a thorn in the side of pro-EU MEPs – lambasted Mr Verhofstadt as a “fanatic” whose appointment amounted to “declaring war” in the coming talks.

Nigel Farage calls EU's top Brexit negotiator a 'fanatic'Play! 01:27
“Perhaps there was a time when this could not have got nasty,” said one source close to Mr Verhofstadt, “but when the Brexit minister calls the chief negotiator ‘Satan’ what response, really, does Britain expect?”

Those sentiments were echoed by Burkhard Balz, a German MEP whose leading role on the European Parliament’s economic and monetary affairs committee makes him influential on financial services regulation, said Britain must not underestimate the determination of the rest of Europe to deprive the UK of its EU financial passporting rights and euro clearing.

He also warned Europe would accept economic pain to defend its core principles and that the belief among Brexiters that the demands of German and French exporters could substantially soften terms was overblown.

“This summer I travelled all over Germany, and the main reason was to talk about Brexit. Every time, in every place, the biggest round of applause was when I said the ‘the time of cherry-picking and rebates is over’. That is how the German people feel about the situation,” he told the Telegraph.

>>> Asian Update

Asia Mid-Session Market Update: Japan financial lobby urges BOJ to consider the side effects of NIRP; US consumer agency calls for recall of Galaxy Note 7
Fri, 16 Sep 2016 0:39 AM EST

***Economic Data***
- (NZ) NEW ZEALAND SEPT ANZ CONSUMER CONFIDENCE INDEX: 121.0 (8-month high) V 117.7 PRIOR; M/M: +2.8% V -0.4% PRIOR
- (NZ) NEW ZEALAND AUG ANZ JOB ADVERTISEMENTS M/M: 3.1% V 1.4% PRIOR; 7th straight increase
- (NZ) New Zealand Aug Non-resident bond holdings: 66.1% v 67.2% prior
- (SG) SINGAPORE AUG BALANCE OF TRADE: $5.6B V $6.5B PRIOR
- (SG) SINGAPORE AUG ELECTRONIC EXPORTS Y/Y: -6.0% V -12.9% PRIOR; NON-OIL DOMESTIC EXPORTS M/M: -1.9% V -3.1%E; Y/Y: 0.0% V -3.3%E
- (US) NORTH AMERICA AUG SEMI BOOK/BILL RATIO: 1.03 V 1.05 prior
- (US) NPD: Aug Video Games Sales +1% y/y at $573.4M

***Index Snapshot (as of 03:00 GMT)***
- Nikkei225 +0.4%, S&P/ASX +1.1%, Kospi closed, Shanghai Composite closed, Hang Seng closed, Dec S&P500 -% at 2,1

***Commodities/Fixed Income***
- Dec gold flat at $1,318/oz, Oct crude oil -0.6% at $43.66/brl, Dec copper +0.2% at $2.16/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 3.3 tonnes to 932.2 tonnes; 5th consecutive decline; lowest since June 25th
- (JP) BOJ offers to buy ¥70B in JGBs with maturity under 1 year, ¥400B in 1-3 yr JGBs, ¥420B in 3-5 yr JGBs and ¥1.25T in T-bills
- (AU) Australia MoF (AOFM) sells A$700M in 2.25% 2028 bonds; avg yield 2.261%; bid-to-cover 3.68x

***Market Focal Points/FX***
- Australia and Japan were the only key indices open in today's session, as Hong Kong joined China, Korea, and Taiwan for Mid-Autumn Festival holiday break. Both traded to the upside, tracking a snap-back rally on Wall St, where disappointing retail sales and downward revision in Atlanta Fed GDPNow tool have knocked down expectations for a Fed hike next week to just 12% and a tightening this year below 50%. Australia was led higher by miners - particularly Whitehaven (+6.5%) and Sandfire (+5.0%) - while Japan saw the best gains among the electronics hardware names involved with the iPhone. Note that Apple was once again at the forefront of S&P500 rally on Thursday on strong demand for the iPhone 7 device and a recall at key competitor Samsung. Economic data were limited to 2nd tier New Zealand and Singapore prints, and FX majors traded very thin - NZD/USD in about a 30pip range above 0.73, AUD/USD in a 30pip range above 0.75, and USD/JPY in a 40pip range above 101.75.

- Ahead of next week's BOJ meeting taking place just hours prior to FOMC decision, Financial Services Agency (FSA) and Japanese Bankers' Association waded into consideration for monetary policy. The FSA issued a warning for banks related to risk of rapid interest rate fluctuations, noting the rapidly dwindling supply of JGBs due to BOJ's massive buying program. The JBA was even more blunt, stating that the negative interest rate policy is not effective, and the BOJ should consider the negative consequences on financial sector. Late in the day, Fin Min Aso said monetary policy is up to the BOJ, but expressed readiness for close contact between the central bank and MoF. Also of note, local press speculated that among the 7 current supporters of monetary easing on the BOJ board, there is now as split with only 3 favoring the current policy of bond purchases with negative rates and the others being more skeptical, opening up the likelihood of a close call for changes to the current stance and potentially a new framework in policy response.

- Australia Treasurer Morrison warned that spending cuts and revenue increases alone will not be enough to repay Australia's debt, as policymakers should tackle the problem of slow earnings growth. Note that the Treasury will also put out its Mid-Year Economic and Fiscal Outlook (MYEFO) report next week along with the latest RBA policy meeting minutes from this month.

- Although Korea markets were closed, Samsung Electronics got more bad news as US consumer safety agency CPSC formally issued a recall on about 1M Galaxy Note 7 devices due recent cases of battery overheating and explosions. The company is in hot water with regulators who also claim that Samsung exacerbated the situation with the way it handled communication with consumers. Following the CSPC announcement, Samsung replied it aims for US availability of replacement Note 7 devices as part of voluntary recall no later than Sept 21st.

***Equities***
US equities / ADRs:
- DEPO: Said to be exploring sale following calls from Starboard; Said to reject approach from Arbor Pharma - financial press; +12.7% afterhours
- CAR: To replace Questar in S&P MidCap 400 index after the close of trading on Sept 16; +4.7% afterhours
- P: Announces direct licensing agreement with Warner Music Group; +2.2% afterhours
- ORCL: Reports Q1 $0.55 v $0.58e, R$8.60B v $8.72Be; Guides Q2 $0.59-0.62 v $0.65e (constant currency), Rev 0-3% y/y v +3%e; -3.2% afterhours
- DB: US DOJ said to have asked the bank to pay $14B to settle probe into mortgage securities, much higher than $2-3B estimated by DB counsel; Final settlement may be lower - financial press; -6.8% afterhours
- NVAX: Announces topline RSV F vaccine data from two clinical trials in older adults; topline data did not meet pre-specified efficacy objectives; -83.2% afterhours

Asia:
- JB Hi-Fi JBH.AU +6.9% (resumes after Good Guys acquisition)
- Estia Health EHE.AU +2.6% (new CEO)
- Myer MYR.AU -1.4% (broker commentary)

- Japan iPhone suppliers rise on strong demand of iPhone 7 as Apple leads S&P500 for 2nd straight day; Alps Electric +5.7%, TDK +4.4%

FT : Deutsche Bank asked to pay $14bn in US probe

Deutsche Bank asked to pay $14bn in US probe
Shares fall sharply as lender says it intends to settle DoJ claims for much less


Deutsche Bank shares fell sharply on Thursday as Germany’s biggest bank scrambled to downplay the chances of paying $14bn to settle allegations of mis-selling mortgage securities after receiving an unexpectedly large claim from the US Department of Justice.

New York-listed shares in Deutsche fell as much as 7.4 per cent after hours to $13.67. Investors fretted about the crippling impact of such a fine on a bank with a market capitalisation of only €18bn but a balance sheet of €1.6tn that rivals most in the sector.

In a statement, Deutsche insisted it had no intention of settling the claims for anything like the $14bn figure, which was first reported by the Wall Street Journal. “Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited,” it said.


“The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts.”

Insiders at Deutsche hope that it will be treated in a similar fashion to Goldman Sachs, which faced an initial $15bn claim from the DoJ to settle its alleged mortgage security mis-selling, but ended up paying close to $5bn earlier this year.

Coming only days after the EU stirred up angry reactions from US politicians by ordering Apple to pay €13bn of back taxes in Ireland, there is a strong suspicion in financial circles that Deutsche could be the victim of the US taking revenge on Europe.

The development, which comes eight years ago almost to the day since the collapse of Lehman Brothers, is another reminder of how banks are still grappling with the regulatory fallout from the financial crisis.

The International Monetary Fund said this year that, among globally significant banks, Deutsche “appears to be the most important net contributor to systemic risks”.

Deutsche, which has lost half of its market value in the past year after reporting a heavy loss for 2015, is one of the most weakly capitalised banks in Europe and is widely expected to launch a rights issue once it has resolved its major legal issues.

Although the final settlement has yet to be determined, the disclosure of the DoJ’s $14bn proposal prompted immediate concerns about how Deutsche would cope with such a huge penalty, especially given its already shaky finances.

Simon Herrmann, an analyst of Deutsche at the stock market research group Wise-owl.com in Sydney, agreed that the DoJ tended to make a “traditionally high” opening bid for a settlement.


“I doubt that the final amount will be $14bn … and it is yet unclear how much of this fine will be payable in actual cash.”

However, he added: “Deutsche’s financial situation and reputation has worsened since the financial crisis and a $14bn settlement claim would have a severe impact, even though the bank has set aside money for mortgage investigations as part of their broader legal provisions.”

Deutsche has built up a reserve of €5.4bn to deal with its legal woes, although it is unclear how much of that is earmarked for the US mortgage securities probe.

Since he took over last year, John Cryan, Deutsche’s British chief executive, has said that he wants to resolve its big outstanding legal cases as soon as possible. But it had counted on a settlement of about €2.4bn for the US mortgage securities case. It is also being investigated by several regulators around the world for $10bn of suspicious trades at its Russian operation.

A person familiar with the bank’s negotiations with the DoJ predicted there would be a fierce backlash on Friday once politicians and regulators in Berlin and Frankfurt learned of the $14bn initial claim from the DoJ.

While some banks have paid vast sums to settle allegations of mis-selling mortgage securities before the 2008 financial crisis, topped by the record $16.65bn settlement with the DoJ by Bank of America in 2014, few had predicted Deutsche would face such a large initial claim.

The DoJ declined to comment.

Deutsche’s financial situation and reputation has worsened since the financial crisis and a $14bn settlement claim would have a severe impact, even though the bank has set aside money for mortgage investigations as part of their broader legal provisions

With the US closing in on a fiercely contested presidential election between Donald Trump and Hillary Clinton in November, the size of Deutsche’s settlement risks becoming a political football that ends up bearing little relation to the size of penalties paid by other banks.

It is the latest setback for Deutsche in the US. The German bank has made few friends in Washington after a string of controversies.

This summer a US arm of the German lender, Deutsche Bank Trust Corporation, failed the Federal Reserve’s stress tests for a second successive year. It was one of only two among the 33 banks that failed outright this year.

The bank was also fined $55m by the Securities and Exchange Commission for understating the risks to the bank in the crisis.

The claim against Deutsche risks repeating the political controversy that erupted in France after BNP Paribas was fined $8.9bn in 2014 for breaching US sanctions in countries such as Sudan. However, BNP was able to absorb that penalty without raising capital or cutting its dividend.

Deutsche, which has already suspended its dividend for two years after making a €6.8bn loss last year, is in a far weaker position than BNP was at the time.

WSJ : Adviser With Ties to Hedge Fund Platinum Put Client Funds in It

Adviser With Ties to Hedge Fund Platinum Put Client Funds in It
Beechwood Re didn’t inform investment clients of its ties to Platinum Partners, which is now under fraud investigation, when it put them in Platinum-related investments

Two years ago, Senior Health Insurance Co. of Pennsylvania hired an investment adviser that swiftly invested tens of millions of dollars of the insurer’s money with hedge-fund firm Platinum Partners and bought a series of hard-to-sell assets from Platinum’s funds.

What the insurer wasn’t told was that the adviser, Beechwood Re, was more than 40%-owned by family members of Platinum’s co-founders through trusts and by a former Platinum staffer, people familiar with the matter said.

Platinum now is under a federal fraud investigation, and Senior Health Insurance of Pennsylvania, known as SHIP, is working to get rid of many Platinum-related assets, SHIP’s chief executive says.

The CEO of Beechwood, Mark Feuer, said he didn’t tell SHIP and other clients about his firm’s ties to Platinum because the ownership stakes were passive and didn’t come with a management role. A Beechwood spokesman later said the firm “believes in the importance of all appropriate disclosures and at all times has acted in the best of interest of its clients.”

As The Wall Street Journal reported in July, Platinum, which specializes in exotic investments such as loans to struggling companies, is being investigated by federal prosecutors in New York. One of its founders, Murray Huberfeld, has pleaded not guilty to conspiracy and wire fraud in connection with an alleged bribe of a union official for investments. Platinum has suspended redemptions from its hedge funds and announced plans to liquidate them. It has said it is cooperating with the investigation.

Platinum’s fund investors have been largely concentrated in a tight-knit group of observant Jewish businesspeople. Exposure to Platinum reached a far wider realm as a result of Beechwood’s having directed insurance-client money into Platinum funds and related investments.

SHIP’s Platinum-linked investments, which have included loans to Platinum itself, exceed the insurer’s shrinking $35 million capital surplus, or assets minus liabilities. A long-term-care insurer, SHIP counts on its investments to help cover the cost of benefits for elderly policyholders.

Both Beechwood and SHIP said investments are supported by independent ratings and backed by collateral. They said Beechwood, not SHIP, would bear the risk on them. SHIP said its capital levels will remain adequate.

Since early 2014, Beechwood has put more than $200 million of client money in Platinum-linked investments, according to public filings and people familiar with the matter.

Beechwood said all transactions related to Platinum since late 2014 have been “in the context of a restructuring away from Platinum,” a process “nearly complete.” It didn’t provide specific details of the restructuring.

Beechwood said in August that transactions with Platinum “represent under 10% of our well-capitalized $2.4 billion business and should be down to under 1% by the end of the year.”

Beechwood was founded in 2013 by two former Merrill Lynch operations executives, Mr. Feuer and Scott Taylor, partly to help insurers invest their cash.

Mr. Feuer had long known some at Platinum, whose executives were active in the same religious community on New York’s Long Island. He and Mr. Huberfeld served at a charity together, and Mr. Feuer’s sister went to the same school as Beechwood co-founder Mark Nordlicht, according to people familiar with the matter.

For years, Platinum had little success attracting insurance-company money and considered starting a reinsurer to do so, people familiar with the situation said. It didn’t proceed, but after Messrs. Feuer and Taylor opened Beechwood Re, more than 40% of Beechwood’s equity was held by family-member trusts of Platinum’s founders as well as by a former Platinum employee.

That employee, David Levy, who is a nephew of Mr. Huberfeld, became Beechwood’s first chief investment officer. He later returned to Platinum. Then another Platinum employee became Beechwood’s second chief investment officer in 2015.

In other ties, Beechwood hired family members of Platinum’s owners, and it gave Mr. Huberfeld access to an office at its New York quarters in 2015.

Mr. Feuer said opening Beechwood was his and Mr. Taylor’s own idea, and the Platinum-linked owners were bought out this summer or earlier. He said Beechwood now is owned by himself, Mr. Taylor and an investor he wouldn’t name but who he said has no financial interest in Platinum.

Before family trusts of Mr. Huberfeld and Mr. Nordlicht were bought out, they were kept updated. Less than 10 minutes after Beechwood received word that money for its first transaction had arrived, Beechwood’s founders notified Messrs. Nordlicht and Huberfeld, documents reviewed by the Journal show.

A spokesman for Beechwood, David Goldin, said, “Everyone close to minority investors was notified at the same time.”

The initial Beechwood transaction, in February 2014, was a reinsurance deal with CNO Financial Group Inc. —an insurer from which SHIP was spun out—to manage about $500 million of long-term-care policies.

CNO audited $126 million of that total, it said in a filing last month, and believes “some or all of these assets may bear some connection to Platinum” or to parties with a link to Platinum.

CNO’s stock is down around 10% since then. Fitch Ratings placed CNO on a negative ratings watch, on the risk it could have to cover any Beechwood losses.

CNO declined to comment. Speaking for Beechwood, Mr. Goldin said, “We have no reason to believe there have been or will be any shortfalls in the reinsurance trusts.”

The Platinum-related investments Beechwood chose for clients came in several forms: investments in hedge funds, asset purchases from Platinum and loans to the firm or companies linked to it. One such company was Implant Sciences Corp. , an explosives-detection firm that trades as a penny stock.

In winning SHIP, the Pennsylvania insurer, as a client, Beechwood guaranteed a 5.85% annual return, a steep hurdle at a time of low interest rates.

Beechwood executives said many clients asked it to find investments that could achieve higher returns—one reason it chose Platinum-related investments. Another reason, said Mr. Feuer, was that Beechwood’s first chief investment officer, having come from Platinum, was familiar with its positions.

Mr. Goldin said Beechwood determines valuations for assets, and a third-party firm “separately provides an independent view.”

SHIP hasn’t marked down any of its Platinum-related investments, said its CEO, Brian Wegner.

In the first quarter, after Platinum’s flagship fund said it wouldn’t immediately be able to meet redemption requests, filings show Beechwood directed about $8 million more of SHIP’s money into Platinum-related investments. In the second quarter, Beechwood directed that around $28 million of such investments be cashed out. Mr. Wegner said SHIP “was not aware of the liquidity issues faced by Platinum” at the time those moves were made.

SHIP, which has more than $2 billion of assets overall, had $57 million invested in or lent to Platinum hedge funds at the end of last year.

Mr. Goldin said Beechwood aims to drop SHIP’s investments in Platinum hedge funds to zero by year-end.

He said Beechwood set up a separate vehicle, funded by Beechwood’s owners, to buy back clients’ investments in Platinum’s hedge funds. Other Platinum-related investments, including loans to the firm and companies close to it, are being repurchased, restructured or refinanced using Beechwood’s own money, Mr. Goldin said.

>>> US After Hours Summary: LPTH +10% and SANW +6% following earnings/

After Hours Summary: LPTH +10% and SANW +6% following earnings/guidance, CAR +5% on S&P 400 addition news... ORCL -3% following earnings/guidance, NVAX -84% on trial updates, DB -7% on potential hefty DoJ settlement amount

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: LPTH +9.8%, SANW +6.1%

Companies trading higher in after hours in reaction to news: DEPO +12.7% (potential sale exploration), SCOR +6.4% (light volume - will provide a company update in conference call on Friday, September 16 at 8:30am; determines that various prior financial statements should no longer be relied upon), CAR +5.3% (to join the S&P MidCap 400), AINV +3% (Apollo Investment expanded the stock repurchase program by $50 mln to $150 mln), OHGI +2.6% (enters into securities purchase agreement, agrees to sell an aggregate of 198,413 shares of common stock at $0.63/share), P +0.8% (ticking higher - Pandora Media and Warner Music Group announce direct licensing agreement), LULU +0.5% (light volume - initiated with a Positive at Susquehanna)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ORCL -3%

Companies trading lower in after hours in reaction to news: NVAX -84.1% (announces topline RSV F vaccine data from two clinical trials in older adults; topline data from the Resolve Phase 3 trial did not meet pre-specified efficacy objectives), CAPR -15.1% (to offer shares of its common stock in an underwritten public offering; size not disclosed), MGT -9.9% (following investor presentation / call detailing goals for the next 3-6 months), DB -7.2% (Deutsche Bank confirms negotiations with DoJ regarding RMBS; expects negotiations will lead to an outcome similar to those of peer banks which have settled at materially lower amounts), SITO -2% (to offer and sell shares of common stock in an underwritten public offering), FOXA -0.9% (downgraded to Market Perform from Outperform at Bernstein)

>>> US Close Dow +0.99% S&P +1.01% Nasdaq +1.47% Russell +1.27%

Closing Market Summary: Stocks Rise on Negative Economic Data

The stock market ended the Thursday affair on a broadly higher note as participants dialed back rate hike expectations following a barrage of economic data. Today's rally also featured continued strength from top-weighted Apple (AAPL 115.57, +3.80), a rebound in crude oil futures, and another mixed performance from the Treasury complex. The Nasdaq Composite (+1.5%) settled ahead of the S&P 500 (+1.0%) and the Dow Jones Industrial Average (+1.0%).

The major averages shook weakness in the opening hour of trade as a weaker-than-expected reading of the Retail Sales Report for August stymied rate hike expectations for the coming months. The report indicated that retail sales declined 0.3% (consensus -0.1%) in August while retail sales excluding autos fell 0.1% (consensus +0.3%). Softening in discretionary spending will likely negatively impact third quarter GDP forecasts.

The Producer Price Index (PPI) for August also appeared to ease fears regarding a sooner-than-expected fed funds rate hike. The report showed that the PPI was flat in August (consensus +0.1%) while core PPI rose an in-line 0.1% over that time. The reading signaled some firming in inflation at the producer level, but also that inflation rates continue to tread below the Fed's target. On a side note, the Consumer Price Index (consensus +0.1%) is slated to cross the wires at 8:30 ET tomorrow.

Equities rallied throughout the session, reveling in diminished rate hike odds. The fed funds futures market estimates the odds of a rate hike at the September meeting at 12.0%, falling from 15.0% in the previous session. The implied probability of a rate hike at the December meeting fell to 46.2% from 52.9%. Additionally, the Bank of England failed to rock the boat when it opted to maintain its monetary policy stance. It is worth noting, however, that the central bank indicated that further easing could be on the way.

The S&P 500 (+1.0%) settled near its session high, testing resistance near the 2150 price level. All ten sectors ended in the green with telecom services (+1.1%), health care (+1.1%), energy (+1.1%), and technology (+1.7%) leading the advance. Conversely, materials (+0.6%) and financials (+0.7%) ended at the bottom of the leaderboard.

The heavily-weighted technology sector (+1.7%), outperformed as Dow component Apple (AAPL 115.57, +3.80) extended its recent winning streak. The stock rallied 3.4% after the company confirmed that it sold out of first run models of the iPhone 7 plus. Credit Suisse also increased its iPhone 7 sales estimates and restated its "Outperform" designation on the stock. Separately, the PHLX Semiconductor Index (+2.3%) outperformed as iPhone supplier Skyworks (SWKS 77.02, +4.62) rallied 6.4%. The price-weighted index sports a week-to-date gain of 4.4%.

Biotechnology settled ahead of the health care group (+1.1%), evidenced by the 1.5% gain in the iShares Nasdaq Biotechnology ETF (IBB 290.15, +4.22). In the ETF, Vertex Pharmaceuticals (VRTX 93.10, +2.98) led after Stifel raised its price target on the stock to $109 from $105. Meanwhile, Mylan Labs (MYL 41.49, +0.65) trimmed its month-to-date loss to 2.1%. The broader sector has jumped 1.1% this week, which compares to a gain of 0.9% in the benchmark index.

In the financial sector (+0.7%), Wells Fargo (WFC 46.15, -0.37) underperformed following yesterday's report that Federal prosecutors in California and New York are investigating the bank's sales practices. Conversely, MetLife (MET 44.50, +0.72) jumped 1.6% amid continued steepening in the yield curve. The broader sector erased a modest year-to-date loss and now sports a gain of 0.1% over that time.

Treasuries ended on a mixed note with the short end of the curve demonstrating relative strength. The yield on the 2-yr note fell two basis points to 0.74% while the yield on the 10-yr note finished flat at 1.70%. The spread between the 2-yr and 10-yr note expanded to 96 basis points from 89 on Friday.

Today's participation was above the recent average as more than 819 million shares changed hands on the NYSE floor.

Today's economic data included weekly initial claims, retail sales for August, PPI for August, the Philadelphia Fed Survey for September, the second quarter current account balance, Empire Manufacturing for September, Industrial Production and Capacity Utilization, and Business Inventories for July: 

  • Jobless claims for the week ending September 10 were 260,000 (consensus 263,000), up 1,000 from the prior week and the 80th straight week they have been below 300,000.
    • Continuing claims for the week ending September 3 were 2.143 million, also up 1,000 from the prior week.
  • Total retail sales declined 0.3% in August (consensus -0.1%) after increasing a revised 0.1% (from 0.0%) in July.
    • Excluding autos, retail sales declined 0.1% (consensus +0.3%) after declining a downwardly revised 0.4% (from -0.3%) in July.
  • Total PPI was unchanged (consensus +0.1%) after declining 0.4% in July. Core PPI, which excludes food and energy, was up 0.1% (consensus +0.1%) after declining 0.3% in July.
    • Producer pricing trends are improving, yet inflation rates still remain comfortably below the Fed's comfort level.
  • The Philadelphia Fed Index checked in at 12.8 (consensus 0.0) versus 2.0 in August. That marked the first time since last August that the index has registered two consecutive positive readings.
  • The current account deficit for the second quarter totaled $119.9 billion while the consensus expected the deficit to hit $122.8 billion. The first quarter deficit was revised to $131.8 billion from $124.7 billion.
  • The Empire Manufacturing Survey was little changed at -2.0 in September (consensus 0.0) versus -4.2 in August. The dividing line between expansion and contraction is 0.0.
  • Industrial production declined 0.4% in August (consensus -0.3%), which wasn't a complete surprise, after increasing a downwardly revised 0.6% (from +0.7%) in July.
    • The capacity utilization rate dropped to 75.5% (consensus 75.7%) from 75.9%.
  • Total business inventories were unchanged in July (consensus +0.1%) following an unrevised 0.2% increase in June. Sales were down 0.2% after increasing 1.0% in June.
    • Inventory-to-sales ratio for July held steady at 1.39

For more on these economic releases, be sure to visit Economic Calendar page.

Tomorrow's economic data will include CPI for August (consensus +0.1%) and the preliminary reading of the Michigan Sentiment Index for September (consensus 91.5), which will cross the wires at 8:30 ET and 10:00 ET, respectively. Separately, Net Long-Term TIC Flows for July will be released at 16:00 ET. 

  • Russell 2000: +7.9% YTD
  • S&P 500: +5.1% YTD
  • Nasdaq: +4.8% YTD
  • Dow Jones: +4.5% YTD