(BarCap) European Equity Strategy : Wrestling with the bears

Scepticism is probably the best reflection of investor sentiment at the moment, with many calling into question the post-Brexit move higher in markets. In addition to the recent turn in yields, the three areas of concern appear to be a maturing profits cycle in the US, a sharp slowdown in China and the economic impact of Brexit. While we agree that the risks to the cycle have increased, it is important to note that that sentiment, positioning and valuations do not embody the exuberance that characterizes the peak of a bull market. Even if the Fed hikes rates in September, risking a further short-term correction in markets, excess money growth remains supportive of further PE multiple expansion. Ultimately, if the global economy maintains its post-crisis resilience, valuations could revert higher, in our view.

* Scepticism is probably the best reflection of sentiment towards stocks at the moment, in our view. With a background of performance that has been challenging, and outflows that have been significant, many have been calling into question the sustainability of the post- Brexit rally in stock markets. This scepticism hasn’t escaped the consensus of our fellow
equity strategists across the sell-side. In Europe, the average strategist forecast implies 4.2% downside to STOXX 600 according to Bloomberg. While we were not able to find a time series for this data in Europe, history from the US suggests that the consensus is far more conservative than historical norms



>>> AB InBev may have route to acquisition of Castel via SABMiller’s right of f

AB InBev may have route to acquisition of Castel via SABMiller’s right of first refusal 

SABMiller [LON:SAB], the UK-based brewer being taken over by Anheuser-Busch InBev [EBR:ABI], has right of first refusal over a potential sale of Castel Group of France, the Irish Examiner reported.

Sources said SAB and family-owned Castel have a cross-shareholding which would offer SAB the right to acquire Castel in the event the French company ever seeks to sell itself outside the Castel family. Pierre Castel, head of the family, is approaching 90 years old, the report noted.

Once Belgium-headquartered AB InBev’s proposed GBP 79bn (USD 94bn) acquisition of SAB has completed, AB InBev will also acquire the potential right to buy out Castel, possibly leading the way to a full takeover, the item reported. Analysts estimate Castel to have a value in excess of USD 30bn, the report said.

Alicia Forry, an analyst with Liberum, predicted AB InBev would be very keen to acquire Castel if it had the opportunity, describing the Africa-focused French drinks group as a jewel.

Carlos Brito,Chief Executive of AB InBev, was asked about Castel by analysts last month and said AB InBev plans to nurture its “very important” links with the French business, the item reported.

The report went on to note banker speculation that AB InBev might attempt to take over Atlanta-based soft drinks giant The Coca-Cola Company [NYSE:KO], possibly with the backing of Coke investor Warren Buffett. Buffett and 3G Capital, a backer of AB InBev, have a growing relationship, the report said. Coca-Cola has a USD 188bn market cap, the item noted.

Irish Examiner

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

Dow+1.32% S&P+1.47% Nasdaq+1.68% Russell+1.37%
US MArket closed sharply higher after Friday correction. Interest rates remained in focus at the start of the session as participants mulled over a continued downturn in global bond markets. Recall that last week the European Central Bank disappointed investors by voting to leave its monetary policy stance unchanged. Furthermore, ECB President Mario Draghi indicated that the Governing Council did not discuss expanding the asset purchase program at the central bank's latest meeting. Equity indices shook weakness in the opening hour of trade as Atlanta Fed President (non-FOMC voter) Dennis Lockhart and Minneapolis Fed President (non-FOMC voter) Neel Kashkari struck divergent tones on the future path of interest rate normalization. Mr. Lockhart signaled that recent data seriously warrants the discussion of raising rates. However, Mr. Kashkari stated that there's no urgency in raising rates at this time. implied probability of a rate hike at the September meeting fell to 15.0% from 24.0% in the prior session. All ten sectors ended in the green with technology (+1.7%), utilities (+1.7%), consumer staples (+1.9%), and telecom services (+2.0%) leading the pack. On the flipside, the commodity-sensitive energy (+0.9%) and materials (+1.0%) sectors finished at the bottom of the leaderboard. Volume were above average at 992mil shares. US After Hours UNFI +1% following earnings, KTOS +6% on contract news... WTW -4% on CEO news and despite confidence in growth, APC -3% following Gulf of Mexico asset acquisition news. Asian equity markets are marginally higher, tracking a bounce-back rally on Wall St after a fairly cautious set of comments from Fed's Brainard balanced some of the more hawkish remarks from Rosengren and Kaplan last week. Key August economic data in China were fairly constructive. Industrial output growth of 6.3% stood out the most as it accelerated to a 5-month high. After a record magnitude 5.8 earthquake in South Korea earlier today, Samsung, LG Electronics, and Hyundai Motor temporarily halted some production facilities. South Korea Finance Ministry has also announced it is closed monitoring the impact of the quake, while adding the nuclear test by the North has not played a big part in financial markets. President Park has called for more measures to effectively deal with threats from Pyongyang.

Nikkei +0.41% Hang Seng +0.92% CSI -0.26% Shanghai -0.19%

Eur$ 1.1230 CNH 6.6906 CNY 6.6797 JPY 101.87 GBP 1.3323 CHF 0.9721 RUB 64.6346 WTI$45.92 (-0.80%)

S&P -0.38% EuroStoxx +0.86% Dax +0.83% SMI +0.68%

Macro :
-Germany Considers Venture Capital Tax Law Change: Handelsblatt
- Fed’s Brainard Urges ‘Prudence’ in Removal of Accommodation
- EU May Allow Regional Telecom Cartels: Handelsblatt

Keep an eye on :
- ABBN VX : Cevian’s Gardell Wants to Spin Off ABB’s Power Grids Unit: SVD
- ABN NA : ABN Amro CEO Zalm to Step Down in 2017
- AIR FP : Boeing Predicts China Demand for 6,810 New Planes in Next 20 Yrs
- AI FP : Air Liquide Seeks EU3.3b in Rights Offer for Airgas Purchase
- AZ IM : Alitalia Seeking 30% Cut in Labor Costs: Repubblica
- APD US : Air Products Block Trade: 3.5m Shrs at $149.25
- ATO FP : Atos to Buy Anthelio Healthcare Solutions From Actis
- BARC LN : Diamond Said to Still Be Interested in Barclays Africa Bid: FT
- BMPS IM : New Paschi CEO To Be Appointed on Wednesday, Padoan Says
- FCX US : Anadarko Buys $2b in Freeport-McMoRan Gulf Assets
- GAS SM : Repsol, Caixa Each Sell 10% Stake in Gas Natural to Gip
- ITP FP : Interparfums Names Ferrant Artistic Director of Rochas Homme
- ISIL US : Renesas to Buy Intersil for $22.5/Share
- RAND NA : Monster Worldwide Board Recommends Accepting Randstad Offer
- RBS LN : RBS Facing Cyclical Headwinds in Core Business, Barclays Says
- SAB LN : ISS Recommends SABMiller Holders Vote for AB InBev Deal
- SAN SM : Santander Said to Buy Citi’s Argentina Retail Business: Nacion
- VOW3 GY : VW’s HR Head Wants to Avoid Layoffs in Restructure: Handelsblatt

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

>>> Up
*CAIRN ENERGY RAISED TO OUTPERFORM VS NEUTRAL AT MACQUARIE
*LUXOTTICA RAISED TO BUY VS HOLD AT DEUTSCHE BANK
*PERNOD RAISED TO BUY VS HOLD AT JEFFERIES
*USG CORP. RAISED TO OUTPERFORM AT RBC CAPITAL

>>> Down
*AB FOODS CUT TO UNDERPERFORM AT JEFFERIES
*BUZZI UNICEM CUT TO NEUTRAL VS OUTPERFORM AT MEDIOBANCA
*HSBC CUT TO NEUTRAL VS BUY AT CITI, PT HK$62
*KONE OYJ CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*KRONES CUT TO NEUTRAL VS BUY AT UBS
*LINDE CUT TO SELL VS NEUTRAL AT CITI
*SECHE ENVIRONNEMENT CUT TO HOLD VS BUY AT KEPLER CHEUVREUX
*SYMRISE CUT TO REDUCE VS HOLD AT KEPLER CHEUVREUX


>>> Initiation
*AB INBEV RATED NEW BUY AT JEFFERIES; PT EU130
*BERRY PLASTICS GROUP INC RATED NEW OVERWEIGHT AT JPMORGAN
*BRITVIC RATED NEW HOLD AT JEFFERIES; PT 650P
*CAMPARI RATED NEW HOLD AT JEFFERIES; PT EU10
*CARLSBERG RATED NEW HOLD AT JEFFERIES; PT DKK600
*COCA-COLA HELLENIC RATED NEW BUY AT JEFFERIES; PT 2,000P
*GB GROUP RATED NEW BUY AT CITI; PT 400P
*GRANDVISION RATED NEW BUY AT DEUTSCHE BANK; PT EU30.5
*HEINEKEN RATED NEW HOLD AT JEFFERIES; PT EU80
*NCC GROUP RATED NEW NEUTRAL AT CITI; PT 335P
*PURPLEBRICKS GROUP RATED NEW BUY AT CITI; PT 200P
*REMY COINTREAU RATED NEW HOLD AT JEFFERIES; PT EU80
*UNIPER RATED NEW HOLD AT HSBC, PT EU11
*UNIPER SE RATED NEW OVERWEIGHT AT JPMORGAN

>>> Call
>> Index
*EURO STOXX 50 END-2016 TARGET RAISED TO 3,200 AT BARCLAYS
*STOXX 600 END-2016 TARGET RAISED TO 360 VS 340 AT BARCLAYS

>>> Asian Update

Asia Mid-Session Market Update: Improving economic data and upbeat remarks suggest neutral central bank stance in China and Australia


***Economic Data***
- (CN) CHINA AUG FIXED URBAN ASSETS YTD Y/Y: 8.1% V 7.9%E
- (CN) CHINA AUG INDUSTRIAL PRODUCTION Y/Y: 6.3% (5-month high) V 6.2%E; YTD Y/Y: 6.0% V 6.0%E
- (CN) CHINA AUG RETAIL SALES Y/Y: 10.6% V 10.2%E; YTD Y/Y: 10.3% V 10.3%E
- (CN) China Aug Fiscal Balance (CNY) -429.3B v +200.2B prior
- (JP) BSI LARGE ALL INDUSTRY Q/Q: +1.9 V -7.9 PRIOR; LARGE MANUFACTURING Q/Q: +2.9 V -11.1 PRIOR
- (AU) AUSTRALIA AUG NAB BUSINESS CONFIDENCE: 6 V 4 PRIOR; CONDITIONS: 7 V 9 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 118.1 v 114.3 prior
- (KR) SOUTH KOREA AUG UNEMPLOYMENT RATE: 3.8% V 3.6%E; 387K jobs created v 298K m/m
- (NZ) New Zealand AUG Food Prices M/M: 1.3% v -0.2% prior
- (KR) SOUTH KOREA AUG IMPORT PRICE INDEX M/M: -1.9% V -2.8% PRIOR; Y/Y: -8.5% V -7.1% PRIOR; Export Price Index M/M: -1.9% v -2.1% prior; Y/Y: -9.7% v -7.4% prior

***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +0.1%, S&P/ASX +0.1%, Kospi +0.6%, Shanghai Composite -0.2%, Hang Seng +0.8%, Dec S&P500 -0.3% at 2,146

***Commodities/Fixed Income***
- Dec gold +0.6% at $1,334/oz, Oct crude oil -0.9% at $45.88/brl, Dec copper -0.4% at $2.10/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 11,231 tonnes from 11,281 tonnes prior
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.6726 V 6.6908 PRIOR
- (CN) PBOC to inject CNY70B in 7-day reverse repos, CNY30B in 14-day reverse repos and CNY60B in 28-day reverse repos (1st time to conduct 28-day reverse repos since Feb)
- JGB: (JP) Japan's MoF sells ¥1.0T in 0.5% (0.2% prior) 20-year JGBs; Avg yield: 0.437% v 0.286% prior; bid-to-cover: 3.33x (lowest since March) v 3.87x prior
- (AU) Australia MoF (AOFM) sells A$150M in 3.0% 2025 indexed bonds; avg yield 0.4106%; bid-to-cover 2.33x

***Market Focal Points/FX***
- Asian equity markets are marginally higher, tracking a bounce-back rally on Wall St after a fairly cautious set of comments from Fed's Brainard balanced some of the more hawkish remarks from Rosengren and Kaplan last week. As the "bookend" Fed speaker entering the quiet period before next week's FOMC decision, Brainard seemingly achieved a halt of momentum for building expectations of an impending rate hike, and fixed income probability of a 25bps move now stands at just 15% vs 24% prior. USD has been under some pressure as a result as well, particularly against the Yen, with USD/JPY falling as much as 50pips below 101.50. AUD/USD and NZD/USD traded in about a 25pip range in Asia below 0.7570 and 0.7370 respectively.

- Key August economic data in China were fairly constructive. Industrial output growth of 6.3% stood out the most as it accelerated to a 5-month high. Power generation component also preserved its momentum, rising 7.8% v 7.2% prior. Retail Sales also topped consensus at 10.6% V 10.2%E, while fixed asset investment showed healthy growth in property investment (+5.4% y/y), construction (+12.2% y/y), and sales value (+38.7% y/y). China Stats Bureau spokesperson did note that while August saw some positive changes in the economy, downward pressure remains large. NBS official added that jobless rate stabilized, housing inventory reduction is running its course, and there is reason for optimism on both external and internal demand. China state researcher Zhu was less optimistic ahead of the data, warning that GDP could slow below 6% in 2018, while recommending that Beijing sets a GDP target 5.5-7.5%.

- In Australia, RBA Assistant Gov Kent said there's a good chance that growth in wages and the rate of inflation will gradually rise in coming months, and that AUD has fallen as much as expected in recent years. Kent added the post-mining boom transition has taken place faster and healthier than expected, and that the worst of a slump in mining investment was over given recent improvement in materials prices. Goldman Sachs' take on the speech was that it signals a neutral RBA policy stance, with no hint of further easing in the pipeline. Australia's upcoming employment and quarterly CPI data will help determine whether expectations of a hold can be sustained.

- After a record magnitude 5.8 earthquake in South Korea earlier today, Samsung, LG Electronics, and Hyundai Motor temporarily halted some production facilities. South Korea Finance Ministry has also announced it is closed monitoring the impact of the quake, while adding the nuclear test by the North has not played a big part in financial markets. President Park has called for more measures to effectively deal with threats from Pyongyang.

***Equities***
US equities / ADRs:
- ISIL: Renesas to acquire Intersil for $22.50/shr or $3.22B cash; +7.3% afterhours
- KTOS: Awarded $54M contract to provide Marine Common Aircrew Trainers (MCAT); +5.9% afterhours
- SANM: Announces $150M stock buyback program (8% of market cap); +3.5% afterhours
- FCX: Anadarko announces $2B acquisition of Freeport McMoRan assets; raises FY16 capex $2.8-3B (prior $2.6-2.8B); FCX -0.4%, APC -2.9% afterhours
- WTW: CEO resigns, effective Sept 30th; -2.6% afterhours

Notable movers by sector:
- Consumer discretionary: Le Saunda Holdings 738.HK +1.9% (Q2 result); FAW Car Co 000800.CN +2.1% (restructuring)
- Financials: China Resources Land 1109.HK -0.5%, China Overseas Land 688.HK -0.2% (Aug result); Woori Bank 000030.KR -2.2% (POSCO not to bid for stake)
- Technology: Mabuchi Motors 6592.JP +2.6% (SMBC raised to outperform); Samsung Electronics 005930.KR +5.4% (HP printer business deal)
- Materials: Evolution Mining EVN.AU +2.9% (affirms guidance); Fortescue Metals Group FMG.AU +2.8% (repayment of loans)
- Energy: China Shenhua Energy Co 1088.HK +1.1% (Aug result); Origin Energy ORG.AU -2.0% (bidders for windfarm development); Santos STO.AU -1.5% (job cut)
- Healthcare: Santen Pharmaceutical Co 4536.JP +4.5% (to buy back shares)