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The title Unipol shares closed yesterday's trading up by 5.36% to 3.77 euro. The market has supported prices holding driven by "suggestion" by return that can be put on paper a plan for cutting the chain of control with the integration of UnipolSai in the parent company. A suggestion was born on the basis of precise clues. The first calls into question the latest moves of the Unipol Group company. Recent internal dealing, show that the company has purchased approximately 56.5 million of bonds UnipolSai putting on the plate a little over 107 million euro. The shares were recorded in the months of February and March and have enabled the company to round the participation of about 2% which led Unipol hold almost 63% of the insurance group. An operation that the Milan Stock has read as a kind of anti-dilutive move a view to a possible merger.
The merger, as is known, no longer seems to be a taboo in Bologna. So much so that some time the CEO Carlo Cimbri opened the hypothesis of a reorganization. In doing so, however, the manager had also stressed that the dossier would become topical only when she could give in Unipol Unipol Banca. Tema, the latter, around which the Milan Stock speculated a lot in the last few days. And this for several reasons.
The first is related to the fact that, as reported by Il Sole 24 Ore on April 10, Unipol would in entering Bper program with a share of between 2 and 5% of the capital. A project that has convinced the market could facilitate asset bank accommodation. On possible agreements with Unipol spoke the same CEO of Popolare dell'Emilia Romagna, Alessandro Vandelli, which all'assembla of Saturday, April 16 held budget approval said: "It is normal that there are contacts with Unipol are partners more than seven years in the insurance field in Arca Vita, so we're ready to reflect on this. "
Operators, therefore, were immediately questioned whether the comparison will focus exclusively on the bancassurance partnership or if called into question the hottest asset, which Unipol Banca: "The agreement could help Unipol to find a solution for the institute then opening the door to a possible collapse of UnipolSai-Unipol chain ", commented an analyst at Radiocor-Plus.
Hence, the decision of the operators to position themselves ahead of the chain of control by pushing up more than 5% the prices of the parent company: the subsidiary UnipolSai has instead ended in progress 1.59% to 2.04 euro.
A performance, however, recorded in a memorable session for the insurance group. The press has given an account of the intention of the company to demand the withdrawal of the rating at Standard & Poor's. The items have since been confirmed in yesterday evening.After General, therefore, even the Bologna group has decided not to rely more on the judgment of your credit profile to the lead agency on the square. He did it, as explained in a statement, as a result of "careful analysis" which was based primarily "on the non-shareable for the uncritical and rigid use of valuation models and for mechanical application of some methodological criteria such as limiting UnipolSai rating of Insurance to the sovereign rating level. " In fact, it's what you feel, these approaches would have prevented that the results achieved by the Unipol Group in the course of the strategic plan 2013 - 2015 could be reflected in the valuation. Unipol Group and UnipolSai continue to be judged by the rating agencies Fitch, Moody's, and Am Best Dagong Europe.
S & P, meanwhile, assigned a BBB- rating and UnipolSai Unipol BB. Rating later withdrawn. The rating of the insurance group, as evident, is aligned with that of Italy. It is not, the agency believes, for a number of reasons. First of all, because 80% of the assets managed by the company are Italian. But not only. S & P has rated "satisfactory" results achieved by the company in 2015 but does not consider them particularly bright, thanks to an ROE of just under 10%. Profitability, is the agency's thinking, it is therefore good but not extraordinary. In addition S & P continues to believe that the former portfolio FondiariaSai, despite progress, it is still sottoriservato, and that the company, for practices, particularly round distribute coupons. Which would not benefit the capital
Original in Italian
Il titolo Unipol ha chiuso le contrattazioni di ieri in rialzo del 5,36% a 3,77 euro. Il mercato ha sostenuto le quotazioni della holding spinto dalla “suggestione” che a stretto giro possa essere messo nero su bianco un piano per il taglio della catena di controllo con l’integrazione di UnipolSai nella casa madre. Una suggestione nata sulla scorta di indizi ben precisi. Il primo chiama in causa le ultime mosse di Unipol Gruppo sulla compagnia. Da recenti internal dealing risulta infatti che la società ha acquistato circa 56,5 milioni di titoli di UnipolSai mettendo sul piatto poco più di 107 milioni di euro. Le azioni sono state rilevate nei mesi di febbraio e marzo e hanno permesso alla società di arrotondare la partecipazione di circa un 2% che ha portato Unipol a detenere quasi il 63% del gruppo assicurativo. Un’operazione che Piazza Affari ha letto come una sorta di mossa anti-diluitiva in vista di una possibile aggregazione.
La fusione, come è noto, non sembra più essere un tabù a Bologna. Tanto che qualche tempo il ceo Carlo Cimbri ha aperto all’ipotesi di un riassetto. Nel farlo, però, il manager aveva anche sottolineato che il dossier sarebbe diventato d’attualità solo nel momento in cui Unipol fosse riuscita a cedere Unipol Banca. Tema, quest’ultimo, attorno al quale Piazza Affari ha speculato parecchio negli ultimi giorni. E ciò per diverse ragioni.
La prima è legata al fatto che, come riportato da Il Sole 24 Ore del 10 aprile, Unipol avrebbe in programma di entrare in Bper con una quota compresa tra il 2 e il 5% del capitale. Un progetto che, è convinto il mercato, potrebbe agevolare la sistemazione dell’asset bancario. In merito ai possibili accordi con Unipol è intervenuto lo stesso amministratore delegato della Popolare dell’Emilia Romagna, Alessandro Vandelli, che all’assembla di approvazione del bilancio tenuta sabato 16 aprile ha dichiarato: «È normale che ci siano contatti, con Unipol siamo soci da oltre sette anni nell’ambito assicurativo in Arca Vita, per cui siamo pronti a una riflessione in proposito».
Gli operatori, dunque, si sono subito chiesti se il confronto verterà esclusivamente sulla partnership di bancassicurazione oppure se chiamerà in causa l’asset più caldo, ossia Unipol Banca: «L’intesa potrebbe aiutare Unipol a trovare una soluzione per l’istituto aprendo poi le porte a un eventuale collasso della catena UnipolSai-Unipol», ha commentato a Radiocor-Plus un analista.
Di qui, la decisione degli operatori di posizionarsi a monte della catena di controllo spingendo in alto di oltre il 5% le quotazioni della capogruppo: la controllata UnipolSai ha chiuso invece in progresso dell’1,59% a 2,04 euro.
Una performance, peraltro, registrata in una seduta assai particolare per il gruppo assicurativo. La stampa ha dato conto dell’intenzione della compagnia di chiedere il ritiro del rating a Standard & Poor’s. Le voci hanno poi trovato conferma nella serata di ieri. Dopo Generali, dunque, anche il gruppo di Bologna ha deciso di non affidarsi più per il giudizio del proprio profilo di credito alla principale agenzia su piazza. Lo ha fatto, come spiega una nota, come esito di «un’attenta analisi» che si è basata principalmente «sulla non condivisibilità per l’acritico e rigido utilizzo di modelli valutativi e per l’applicazione meccanica di alcuni criteri metodologici come la limitazione del rating di UnipolSai Assicurazioni al livello del rating sovrano». Di fatto, è quel che si percepisce, tali approcci avrebbero impedito che i risultati conseguiti dal gruppo Unipol nel corso del piano industriale 2013 - 2015 potessero essere riflessi nella valutazione. Unipol Gruppo e UnipolSai continueranno ad essere valutati dalle agenzie di rating Fitch, Moody’s, Am Best e Dagong Europe.
S&P, dal canto suo, ha attribuito a UnipolSai un giudizio BBB- e a Unipol BB. Valutazione poi ritirata. Il rating del gruppo assicurativo, come evidente, è allineato a quello dell’Italia. Lo è, ritiene l’agenzia, per una serie di motivi. Prima di tutto perché l’80% degli asset gestiti dalla società sono italiani. Ma non solo. S&P ha valutato “soddisfacenti” i risultati raggiunti dall’azienda nel 2015 ma non li considera particolarmente brillanti, complice un Roe di poco inferiore al 10%. La redditività, è il pensiero dell’agenzia, è dunque buona ma non straordinaria. Inoltre S&P continua a ritenere che il portafoglio ex FondiariaSai, nonostante i progressi, sia ancora sottoriservato, e che l’azienda, per prassi, distribuisca cedole particolarmente rotonde. Il che non andrebbe a beneficio del capitale.
Aryzta AG - Some of our assumptions have not played out, but fundamental value is
not reflected in share price
Aryzta's share price has declined c50% from its peak in 2014. This is disappointing, particularly given its
defensive bakery end-market exposure. While we think that the current share price is underappreciating
Aryzta's strong client relationships and best-in-class productivity, some of our assumptions have not
played out: (1) We thought Aryzta would focus on B2B and not enter B2C via the Picard acquisition,
which leads to question marks over its strategy. (2) We thought Aryzta would free up capacity in the US
to serve new contracts from larger customers. This has not materialised yet. (3) We expected significantly
lower capex, supporting EFCF in case of muted volume growth. This has not yet materialised. (4) Extra
cash costs do not seem to disappear. Our core FY 16 EBIT estimate now includes up to €25m extra cash
costs.
It could take a while to restore investor confidence
Based on investor feedback, we get the impression that trust in Aryzta has suffered significantly due to
profit warnings, strategic questions marks and lack of communication transparency. Hence, we think the
valuation multiple could remain compressed for some time and act as a cap to the share price. It could
take a while to rebuild trust with the investor base. Accelerating LFL sales growth, margin stabilisation,
improved EFCF and a cleaner P&L would be key to supporting investor sentiment.
Despite significant EPS cuts, fundamentals are not reflected in share price
(1) We cut our FY 16-18E EPS by 15-16% due to lower utilisation, contract mix and renegotiations, extra
cash costs now considered core, and higher financing charges due to higher leverage (c4x net
debt/EBITDA in FY 16E, taking into account 75% of the hybrids). (2) Having had contact with suppliers,
competitors and customers, we confirm our view that Aryzta enjoys strong client relationships and high
productivity (after >€1bn investments in new machinery and modern production sites), which
differentiates it in a less developed bakery environment. In the medium to long term, larger bakeries
such as Aryzta should gain market share. In terms of value creation, our key focus is on EFCF, which we
expect in a range of €230-280m over FY 16-20E.
Valuation: New DCF based PT of CHF55 (from CHF65)
On the back of our EPS estimate changes, we lower our price target to CHF55 from CHF65. Aryzta
trades on 11.5x FY 16/17E PE (vs European food producers on 18-22x) with an EFCF yield of 7-8%. Our
Buy rating is unchanged.
EC set to block the Three-O2 UK proposed merger? Low visibility
Pending low visibility on the approval of the proposed Three-02 UK deal (per recent Telegraph and FT
press reports) we present a scenario analysis on TEF's deleverage profile.
O2 UK disposal is key for TEF deleverage process
The disposal of O2 UK is key for TEF de-leverage as it would contribute a €14bn cash-in (c€12.6bn in
2016 and c€1.4bn over the medium term), corresponding to an estimated >0.5x reduction in company
ND/EBITDA. Assuming no disposal of the UK, we calculate TEF's 2016 ND/EBITDA proportionate would
grow to 3.3x vs. our current estimate at 2.9x.
TEF has several alternative options to address de-leverage
That said, we think TEF has a number of strategic and funding options with which it could restore full
balance sheet flexibility while avoiding or limiting dilution for its shareholders (see page 2-3 for our
scenario analysis). We calculate that, over a two-year horizon (by 2017), the company could cover some
60% of the deleveraging shortfall arising from a possible blockage of the TEF UK disposal (see Option 1
in Figure 3). This could be achieved through the reduction of the cash DPS to €0.40 (~€3.4bn cumulated)
and asset disposals (more than €1bn from the BBVA and China Unicom stakes). We cannot rule out the
risk that the remaining gap (~€5.5bn, or c10% of TEF's market cap) may be covered through funding
instruments, which could imply some dilution for TEF shareholders (hybrid bond issuance, mandatory
convertible bonds, rights issue). However, we believe that, before assessing any dilutive option, TEF could
potentially consider the following: 1) partial disposal of the infrastructure company (ongoing); 2) a
disposal of O2 UK to a buyer other than Hutch (in line with management statements); 3) a zero-cash
dividend policy over a two-year horizon (see Option 2 in Figure 3).
Valuation: PT, SOP based, at €14.1 - BUY
The final outcome of the competitive review (decision expected by 19th May) represents the most
important catalyst for the Telefonica share price in our view. We confirm our positive stance on the
stock. TEF has built a strong competitive advantage both in Spain and Brazil (2/3 of EV). The stock is
trading at ~12x EV/OPCF (proportionate) and its performance relative to the European Telecom index is
close to the lows since 2001.
Back to plan A – Option values removed
The determination of the four French operators to consolidate their domestic market has proved
insufficient to overcome the complexity of such a deal. We are now back to stand-alone strategies
for some time to come and have therefore removed consolidation option values from our TPs,
notably driving a 18–20% cut on Bouygues and Iliad.
We prefer Orange (+) to Numericable-SFR (-) at the high end of the market
All operators have fibre ambitions but for now, only Orange and Numericable-SFR benefit from an
infrastructure advantage. We prefer Orange, for which the improving trends look sustainable. For
NUM-SFR we are increasingly concerned about the group’s ability to regain commercial
momentum and restore long-term growth. We remain Outperform on Orange (TP unchanged at
EUR18) and Underperform on NUM-SFR (TP cut to EUR28 from EUR35).
We stay away from the low end market; Iliad and Bouygues downgraded to (=) from (+)
In the long run, we believe Iliad has the financial strength to execute its 4G and fibre plans and join
the high end of the market. But in the short term, the company remains exposed to the highly
competitive lower-end market and needs to manage the parallel acceleration of its 4G and fibre
investment. Conversely, we expect Bouygues Telecom to maintain its commercial momentum near
term, but think it lacks the ability to invest and should see its competitive position deteriorate in the
medium term. We downgrade Iliad (TP EUR200) and Bouygues (TP EUR32) to Neutral.
Dow+0.60% S&P+0.65% Nasdaq+0.44% Russell+0.74%
US Market Closed higher, recovering from early oil sell off after Doha meeting. oil slid overnight as crude for May delivery dropped to $37.61 while June delivery fell to $39.00. However, oil prices rebounded off these levels as news of an oil and gas worker strike in Kuwait boosted the energy component. To be fair though, it's likely that today's trade also featured a fair amount of short-covering. May delivery crude ended at $39.78/bbl (-1.2%) while the June contract finished at $41.17/bbl (-1.4%). utilities (+0.3%), industrials (+0.3%), technology (+0.4%), and materials (+0.5%), health care (+0.9%), consumer discretionary (+0.9%), and financials (+0.7%). Volume below average at 830mil shares. US After Hours CE +8.1%, BMI +4.4% NFLX -8%, IBM -5%, ILMN -18.1% RMBS-8.5% following earnings, HRTX+15.6% on FDA News. Boston Fed President Rosengren offered a fairly hawkish outlook for US policy this year, stating that the Fed funds rate may rise faster than markets currently expect. He noted that March jobs data portends higher GDP rate, with growth running slightly over potential. He also said that jobless rate would drift down and that the core inflation rate is much closer to the 2% target, noting there is a cost if US monetary policy is not aggressive enough. Asian equity markets are generally higher, led by a snap-back rally in Tokyo after yesterday's outsized declines. In China, MOFCOM spokesperson said the global glut in steel was the result of decline of demand, also warning about the perils of protectionism. Shen was optimistic that China can sustain the FDI growth rate of Q1 through 2016. Also of note on the mainland, Xinhua speculated that the PBoC could shift to a more prudent monetary policy stance this year, presumably backtracking from a "slight easing bias" that recently lifted expectations of more policy easing. In Japan, Fin Min Aso downplayed calls for policy stimulus from this weekend's earthquake, noting that the current budget funds can still be used before discussion of an extra budget. YUM: China Sovereign Wealth Fund (CIC) thought to be seeking control of Yum unit in a deal worth $7.0-8.0B
Nikkei +3.41% Hang Seng +0.64% Shanghai +0.13%
Eur$ 1.1323 CNH 6.4814 CNY 6.4750 JPY 109.05 GBP 1.4308 CHF 0.9637 RUB 66.4158 WTI 39.79 (+0.03%)
S&P+0.06% EuroStoxx+0.23% Dax+0.51% SMI+0.33%
Macro :
- Moscovici: We Should Avoid Kicking Can Down Road on Greek Talks
- Fed’s Kashkari: More Bank Capital May Be Good Way to Combat TBTF
- France Signs EU2b Egypt Deals as Hollande Visits Cairo: Reuters
Keep an eye on :
- ABI BB : AB InBev Asia President Doukeris Sells EU5.78m of Brewer’s Stock
- AAPL US : Apple to Hold WWDC June 13-17, According to Apple’s Siri
- AKZA NA : Akzo 1Q Revenue Misses, EPS Ahead; Says Market Remains Uncertain
- ATC NA : priced $2.75bil (vs $2.25b) of 10y secured notes, 7.5%, ATC has now not debt repayments due until 2022
- BLT LN : BHP Billiton likely to hire Goldman Sachs and Barclays for Latin American mining assets sale
- CABK SM : Banco BPI: CaixaBank's latest takeover bid could be blocked by Angola's central bank - Jornal de Negocios
- BN FP : Danone 1Q LFL Sales Beat Ests., Confirms 2016 Forecast
- ENG SM : Enagas 1Q Ebitda EU206.9m; Est. EU212.5m
- ENGI FP : Engie Seeks to Sell Polish Polaniec Coal Plant for EU500m: Pb.pl
- NXT FP : Euronext Names Giorgio Modica CFO; Amaury Dauge Leaving
- FCC SM : Slim’s Carso Says It Bought 6.98m Shares of Spain’s FCC: Filing
- FNC IM : Finmeccanica’s Moretti Said to Be Candidate as Industry Minister
- FMU FP : Fonciere des Regions to Bid on Remaining Fonciere Murs Shrs
- FDR FP : Fonciere des Regions to Bid on Remaining Fonciere Murs Shrs
- GSP FP : Groupe Go Sport to Buy 12 Bata Shops for Retailer Courir
- KNIN VX : Kuehne & Nagel 1Q Earnings for the Period Rise 10% to CHF169M
- KUNN SW : Kuoni held 74.6% by Kiwi at definitive interim result
- MAISON DU MONDE IPO : Maisons Du Monde Plans Capital Increase in Possible IPO
- NETB SS : NetEnt 1Q Sales, Profit Beat Estimates; Positive About Future
- NOD NO : Nordic Semiconductor Post 1Q Net Loss as Finland Ops Expand
- OR FP : L’Oreal 1Q LFL Sales Growth, Consumer Products Beat Ests.
- OR FP : L’Oreal Confident Operating Margin Will Improve This Year: CFO
- PUB FP : Publicis CEO Remains ‘Cautious’ About the Next 2 Quarters
- RCO FP : Remy Cointreau 4Q Organic Sales Beat, FY16 Total Sales In Line
- RNO FP : Renault’s Ghosn, Rostec’s Chemezov Give Up AvtoVAZ Board Seats
- ROG VX : Roche 1Q Sales Slightly Beat Estimates; Confirms 2016 Outlook ,Roche CEO Says ‘Well on Track’ to Meet Full-Year Targets
- TOM2 NA : TomTom 1Q Sales Rise, Reiterates Outlook
- UNI IM : Unipol to Take Part in Atlante Fund: CEO Cimbri in Repubblica
- FR FP : Valeo to create high voltage powertrains JV with Siemens
- VOW3 GY : VW’s Works Council Head Urges Giving Up Bonuses: Handelsblatt
- YHOO US : Yahoo to Weigh Bids From Verizon, TPG, YP as First Round Closes
>>> Up
*MAPFRE RAISED TO OVERWEIGHT VS UNDERWEIGHT AT JPMORGAN
*OVS SPA RAISED TO NEUTRAL AT CREDIT SUISSE
>>> Down
*BALOISE CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
*GIVAUDAN CUT TO SELL VS HOLD AT SOCGEN
*NEW WAVE GROUP CUT TO HOLD AT NORDEA
*OSRAM CUT TO HOLD AT HSBC
*SONOVA CUT TO REDUCE VS HOLD AT KEPLER CHEUVREUX
*ZEALAND PHARMA A/S CUT TO SELL AT NORDEA
>>> PT Change
>>> Initiation
*IMPLENIA RATED NEW BUY AT KEPLER CHEUVREUX; PT CHF75
*METSO OYJ RATED NEW SECTOR PERFORM AT RBC; PT EU21
*NN GROUP RATED NEW OUTPERFORM AT MEDIOBANCA; PT EU39
*OMV RATED NEW UNDERPERFORM AT MACQUARIE
*SANDVIK RATED NEW UNDERPERFORM AT RBC; PT SEK75
>>> Call
>> Stock
*COOR, SPIE ADDED TO SMALL & MIDCAP KEY CALLS AT UBS
*RESTAURANT GROUP REMOVED FROM SMALL & MIDCAP KEY CALLS AT UBS
Price rises to support growth as deal hopes linger; CL-Buy ORAN
Buy ratings: ORAN (on CL); ATC, NUM, ILD
We estimate declines in share prices after the deal collapse means shares
now discount less than a 10% probability of consolidation. Our valuations
reflect a 20% probability. We expect investors will look through 1Q pain
since price rises offer an inflection point into 2Q.
Field trip takeaways: Can't pronounce consolidation dead...
We met recently with senior management of Iliad, Numericable and ARCEP
and also with investors. Investor questions focused on the cause of the
collapse of the ORAN/BOUY deal and what to expect for the market in its
absence. There are two key obstacles to the deal as per statements by
Bouygues: 1) deal execution risk; risk of an operator walking away from a
deal, a particular risk to Bouygues; 2) governance concerns over Bouygues'
stake in Orange that would have come as part the payment. We believe
neither of these issues is insurmountable. We get the impression that
operators see scope for further negotiation on both points. Also, French
unions have expressed concern that the deal collapse could jeopardises jobs.
As time passes, concern is likely to increase that the regulatory jurisdiction
over any deal could move to the EU from France. We had estimated €10-
20bn of net value creation for the French market from the deal.
... while prices are rising
Following the deal’s collapse, many promotions have been removed. NUM
has raised fixed pricing 3%-10% and mobile pricing 5%-10%, to be
implemented May 1. Bouygues has raised fixed pricing 10%-15% for new
customers. Orange has stated it expects price rises, with scope to expand
its premium in fixed; we think possibly removing its €20 fibre promotion.
Iliad stated it is unlikely to raise headline pricing, but is focused on raising
ARPU through upselling €2 subs to €20. It sees this as a key driver of its
med-term profitability targets. We believe there are multiple incentives for
price rises in France, particularly given the structural challenges facing
Bouygues and as it and Iliad do not generate cash.
1Q promotions a drag on growth rates
We expect growth headwinds due to heavy promotions across the market
ahead of the potential French market consolidation. In this environment,
we expect Orange (due to its premium positioning) and Iliad (as fixed
revenue growth accelerates)to fare better than Bouygues and NUM.
Banco BPI: CaixaBank's latest takeover bid could be blocked by Angola's central bank
CaixaBank's EUR 1.113 per share offer on Banco BPI, the listed Portuguese lender, will need clearance from Banco Nacional de Angola (BNA), reported Jornal de Negocios.
Sources told the paper that BNA approval for the CaixaBank BPI bid, launched on 18 April, is seen as the main hurdle for the Catalan bank's latest attempt to take control of BPI, where it is already the largest investor.
Angola's central bank could stymie the BPI acquisition by CaixaBank because the cross-border transaction involves BFA, the Angolan unit of BPI which the Portuguese financial group has agreed to divest under ECB pressure.
CaixaBank launched its offer after failing to reach agreement to acquire the 18% BPI stake of Isabel dos Santos, who had wanted to take control of BFA in Angola in exchange for exiting BPI. The unresolved problem of BPI's exposure to Angola is a reason for the relatively low price in this week's takeover, which is 16% lower than the offer made in February 2015 and some 32% below the bank's book value.
Jornal de Negocios
Asian Market Update: RBA minutes voice growing concern with elevated AUD; BOK on hold but lowers GDP, inflation outlook
***Economic Data***
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50%; AS EXPECTED
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.8 v 112.0 prior
- (NZ) NEW ZEALAND MAR PERFORMANCE OF SERVICES INDEX: 54.8 v 56.7 PRIOR; 16-month low
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +3.4%, S&P/ASX +1.0%, Kospi flat, Shanghai Composite +0.1%, Hang Seng +0.6%, Jun S&P500 flat at 2,088
***Commodities/Fixed Income***
- June gold flat at $1,235/oz, June crude oil -0.5% at $41.00/brl, May copper -0.2% at $2.16/lb
- JGB: (JP) Japan MoF sells ¥2.19T in 0.1% (0.1% prior) 5-year JGBs; Avg yield: -0.226% v -0.142% prior; Bid-to-cover: 4.36x v 3.59x prior
- (CN) PBOC SETS YUAN MID POINT AT 6.4700 V 6.4787 PRIOR; strongest Yuan setting since Apr 13th; 2nd straight firmer setting
***Market Focal Points/FX***
- Asian equity markets are generally higher, led by a snap-back rally in Tokyo after yesterday's outsized declines. Despite the setback in oil production negotiations over the weekend, sentiment recovered quickly in the US hours and has carried over to the far east. Energy was also the leading sector in Australia after yesterday's selling, even as WTI June contract tested the downside of $41/brl. In FX, USD/JPY traded up about 40pips to 109.20, AUD/USD hit 10-month lows above 0.7780, and NZD/USD rose above 0.70 for the first time since June of 2015.
- In China, MOFCOM spokesperson said the global glut in steel was the result of decline of demand, also warning about the perils of protectionism. Shen was optimistic that China can sustain the FDI growth rate of Q1 through 2016. Also of note on the mainland, Xinhua speculated that the PBoC could shift to a more prudent monetary policy stance this year, presumably backtracking from a "slight easing bias" that recently lifted expectations of more policy easing.
- Australia central bank's meeting minutes for April played somewhat dovishly, with a particular focus on the impact of rising AUD. RBA said low inflation offers room for further easing, growth among trading partners was below average, and wage pressures remain low. On FX, RBA said that rising AUD could complicate economic rebalancing and keep inflation low, adding that the services sector - the new focal point of economy - is also sensitive to exchange rates. Among key miners, Rio Tinto's Q1 global iron ore production rose 13% y/y to 84M tons. RIO aso affirmed its FY16 global iron ore shipments at 350Mt but cut Pilbara production to 330-340Mt.
- Comments from BOJ Gov Kuroda coincided with most pronounced USD/JPY run in the session as it hit a high of 109.20. Most notably, Kuroda mentioned -0.4% rate as the level where he saw negative interest rates potentially going, warning that inflation trend may be affected if excessive Yen appreciation continues. Fin Min Aso also spoke, reiterating his support for the sales tax hike in the absence of an economic shock. Aso also downplayed calls for policy stimulus from this weekend's earthquake, noting that the current budget funds can still be used before discussion of an extra budget.
- BOK left rates on hold at 1.50% as expected by a wide majority of analysts. The decision was once again not unanimous with 1 board member calling for a rate cut. BOK Gov Lee did announce a 2016 GDP and inflation forecast cut to 2.8% from 3.0% and to 1.2% from 1.4% respectively. The policy statement was somewhat more upbeat however, forecasting domestic recovery continuing and consumption improving, with risks to the downside anticipated to abate somewhat in H2 of this year.
- Boston Fed President Rosengren offered a fairly hawkish outlook for US policy this year, stating that the Fed funds rate may rise faster than markets currently expect. He noted that March jobs data portends higher GDP rate, with growth running slightly over potential. He also said that jobless rate would drift down and that the core inflation rate is much closer to the 2% target, noting there is a cost if US monetary policy is not aggressive enough.
***Equities***
US equities / ADRs:
- HRTX: Provides update on FDA review of SUSTOL: FDA has indicated that there are no substantive deficiencies in the NDA; +16.3% afterhours
- BMI: Reports Q1 $0.55 v $0.44e, R$100.6M v $94.3Me (2 est); +5.9% afterhours
- AKS Raises base prices for all stainless steel products; +0.6% afterhours
- IBM: Reports Q1 $2.35 v $2.07e, R$18.7B v $18.3Be; -5.1% afterhours
- NFLX: Reports Q1 $0.06 v $0.03e, R$1.96B v $1.97Be; -7.8 % afterhours
- ILMN: Reports prelim Q1 R$572M v $598Me; Cuts FY16 Rev guidance; -18.5% afterhours
- YUM: China Sovereign Wealth Fund (CIC) thought to be seeking control of Yum unit in a deal worth $7.0-8.0B - financial press
- YHOO: Expects a decline in revenue for its core Search and Display Ads business units in 2016, which has scared potential investors - NY Post
Notable movers by sector:
- Industrials: Guangzhou Automobile Group 2238.HK +3.2% (guidance); Air China 753.HK -1.3% (Mar result); Chongqing Changan Automobile Co 000625.CN -0.5% (FY15 result)
- Materials: Rio Tinto RIO.AU +3.5% (Q1 result); Marubeni Corp 8002.JP +2.1% (cuts guidance)
- Energy: Oil Search OSH.AU +5.2% (Q1 result)
- Telecom: China Unicom 762.HK -0.9% (guidance)