>>> What to look at this Week End - 2nd & 3rd of April 2016

Weekly Performance
Dow+1.58% S&P+1.81% Nasdaq+2.95% Russell+3.53% Brazil+1.81% Nikkei-4.93% Hang Seng-0.56% Shanghai+1.01% EuroStoxx -2.93% CAC-2.30% Dax-2.28% Ibex-3.64% MIB-3.72% FTSE -0.86%

Yearly (Q1) Performance
Dow+2.11% S&P+1.41% Nasdaq-1.85% Russell-1.60% Brazil+16.64% Nikkei-15.08% Hang Seng-6.46% Shanghai-14.97% EuroStoxx -9.62% CAC-6.79% Dax-8.83% Ibex-9.87% MIB-17% FTSE -1.54%
March arrived with panicky market participants griping about imminent recession and ended this week with those fears essentially in the rear-view mirror. The S&P500 delivered a 1.8% gain this week and a 6.8% gain in March, its best monthly advance since the current bull market began seven years ago - leaving it up a mere 1% for all of the first quarter of 2016. US and China manufacturing data has started perking up, the jobs and housing markets remain strong and there are signs that both China and Europe are starting to get a handle on their respective economic problems. Meanwhile, the recovery in crude prices appears to be over for the moment, as WTI and Brent keep failing to gain any purchase above the $40 mark and the global production freeze deal bogs down from the larger Saudi-Iran rivalry. Fed Chair Yellen negated all of last week's hawkish Fed-speak, apparently taking an April rate hike off the table, citing weak inflation even as the US economy delivered its 73rd month of strong job growth. Treasury yields declined to one month lows and Fed fund futures closed out the week projecting just a 30% chance of a rate hike occurring in June. The US Dollar suffered one its worst weeks in months stirring hopes that the weaker currency will lead to an improving Q2 corporate earnings outlook.

Macro :
Jobs Report Gives Yellen Only Half of What Fed Chair Wants
FT : IMF weighing exit from Greek bailout - http://on.ft.com/1Uzzqf7
Trump Sees U.S. Headed for ’Very Massive Recession’: Wash. Post

Keep an eye on :
- ABG SM : Abengoa Sells Campo Palomas Wind Park in Uruguay
- ADP FP : Zurich Airport May Bid for Nice Airport: Schweiz am Sonntag
- AF FP : Servair sale sees Newrest emerge in poll - JDD
- ATLN VX : Actelion Says EMA Readopeted Positive Opinion on Uptravi in PAH
- AIR FP : Airbus Says U.K. Financing Requests Had Inaccuracies - FT : http://on.ft.com/1M89x3x
- EN FP : Orange Abandons Bid to Buy Bouygues’ Phone Unit
- CNA LN : Centrica hires JPMorgan to advise on potential tie-up with Engie - Sunday Times
- FDSA LN : takeover target for US private equity house Advent International - FT
- DPW GY : Deutsche Post Plans 2,000 Streetscooter E-Cars in 2016: Focus
- ENGI FP : Centrica hires JPMorgan to advise on potential tie-up with Engie - Sunday Times
- ILD FP : Iliad Reiterates Targets as Orange Abandons Bouygues Bid
- KCR1V FH : Terex, Zoomlion Still in Active Talks: DealReporter
- LSE LN : Xavier Rolet: tie-up between LSE and Deutsche Boerse is best deal on the table http://bit.ly/1UB0DOL
- MS IM : Vivendi Said Near Deal to Buy Mediaset Premium Controlling Stake
- NG/ LN : National Grid accused of energy ‘panic’ over coal deals - FT
- ORA FP : French Telecom Regulator Sees Four Phone Operators for Some Time
- PHIA NA : Melrose Said to Drop Out of Bidding for Philips Lighting
- PST IM : Italy May Sell Additional Stake in Poste Italiane, Corriere Says
- RNO FP : Renault, Spanish Unions Reach Deal on Pay Rise: Economista
- SAN SM : Santander Planning to Cut Senior U.K. Staff, Sunday Times Says
- SIKA VX : Sika Shareholder Stern Says Burkard Family Has Options: Le Matin
- HOT US : Chinese Phrase Adds Mystery to Anbang’s About-Face on Starwood - NYT - http://nyti.ms/1UKLUB3
- SUNE US : SunEdison Said to Be Preparing to File for Bankruptcy: WSJ
- VA US : Virgin America Sale Could Come as Early as Monday: Fox Business
- VA US : Alaska Air nears deal to buy Virgin America for over $2 billion: sources - Reuters http://reut.rs/222hSrl
- CSS FP : Vivarte could take a look at Bata - JDD
- VOW3 GY : VW Says It Remains ‘Fully Committed’ to U.S. Market
- YHOO US : Time Inc Said to Consider PE Partner for Yahoo Bid: Reuters

FT : Tsipras accuses IMF of trying to push Greece into default

Tsipras accuses IMF of trying to push Greece into default

Alexis Tsipras, the Greek prime minister, has accused the International Monetary Fund of attempting to push his country into default and demanded clarification of remarks made in a leaked teleconference transcript.
The row, which prompted an emergency meeting of key Greek ministers on Saturday, was sparked by comments made by the head of the IMF’s European operations and its top Greek bailout monitor on a call two weeks ago.

According to a transcript published by WikiLeaks, IMF officials expressed frustration about the EU’s slow progress in granting debt relief to Greece, and mentioned that euro-area governments have in the past left key decisions until the Greek government was on the point of bankruptcy.
Greece has publicly interpreted the comments as a plan by the IMF to prolong negotiations on whether to take part in euro area’s latest bailout of the country until July, when the Greek government is faced with its next big debt payment. The logic would be that the impending deadline would give the IMF more leverage, allowing it to extract concessions out of a reluctant Germany on the debt-relief that the IMF believes is essential for Greece’s long-term recovery.
Athens has erupted in anger over the issue even though the comments set out in transcript seem to be a reflection on, and annoyance with, the EU’s inability to take proactive decisions, and do not set out any intention to take advantage of the July deadline.
The IMF has also flatly denied any intention to engage in brinkmanship around credit events. An IMF spokesman told the FT that the organisation “has never and would never operate in that way”.
Mr Tsipras reacted to the leak by writing to IMF managing director, Christine Lagarde, to express his “deep concerns”. In his letter, sent on Saturday, he says that what is at stake is nothing less than “whether Greece can trust, and continue negotiating in good faith” with the IMF.
Greek officials have been even more forthright off the record, arguing that the transcript is evidence that the IMF is “blackmailing” Germany on the debt relief issue.
The timing could not be worse for the IMF, whose officials are set to return to Athens tomorrow for more technical discussions on the bailout programme.

Despite the competing interpretations over the transcript of the teleconference, it remains the clearest sign to date that the Fund wants to leave Greece’s €86bn rescue to the EU alone and wash its hands of a programme that has led to a torrent of criticism. According to the document, Poul Thomsen, head of the IMF’s European bureau, at one point suggested confronting Angela Merkel, the German chancellor, to either agree to debt relief or allow the IMF to exit.
“The real fight here is between Germany and the IMF; Greece is a mere spectator” said Mujtaba Rahman who heads European analysis at Eurasia Group. “As no IMF means no more bailout, Germany will ultimately support debt relief, it really has no other choice”.
Several observers in Athens said they suspected the Syriza government could be behind the leak.
“The government’s reaction suggests it’s trying to manufacture a crisis to make the fund pull out of the Greek programme, hoping to make a deal on easier terms with the EU,” said Miranda Xafa, a researcher with the Centre for International Governance Innovation.

(ZH) JPM: The Squeeze Is Mostly Over; The Market Is Vulnerable As Most Funds

JPM: The Squeeze Is Mostly Over; The Market Is Vulnerable As Most Funds Are Now Overweight Stocks

 

One month ago, when looking at the overall level of short interest across the market, we reported that according to JPM, the "most painful part of the short squeeze may be yet to come", and sure enough, aided by an unprecedented amount of central bank intervention, the market has since surged, in no small part due to ongoing covering of short positions.

However, one look at the NYSE short interest data reveals something troubling: there are still many shorts out there.

 

What is JPM's take? In a note released on Friday night, JPM's Nikolaos Panigirtzoglou has several important observations, the main of which is that CTAs and risk parity funds - which appear to have driven March’s equity rebound - are both significantly overweight equities. As a result he points to figure 2 below as an indication of a "more vulnerable equity market relative to a month ago, with all of the above types of funds currently overweight equities apart from discretionary macro hedge funds which appear to be still close to neutral."

However, "not all shorts are covered. The short base in US equity futures has yet to be covered by spec investors."

He also notes that the short base in S&P500 stocks, i.e. number of shares shorted as % of total shares outstanding, remains elevated and unchanged from its mid February high. Finally, retail investors remain negative and that they sold equity mutual funds over the past two weeks and YTD.

Here is his full take:

The equity market continued to grind higher over the past month driven by further covering of short positions and by CTAs and risk parity funds in particular increasingly their equity exposure markedly intra month. This intramonth swing by CTAs and risk parity funds is best seen in Figure 1 and Figure 2. Figure 1 shows how close the CTA return index has been following the S&P500 index during the second half of March vs. the two indices moving in opposite direction during the first half. Figure 2 goes beyond CTAs and depicts the equity beta of various fund types during the first half of March, i.e. pre- FOMC vs. the second half of March, i.e. post FOMC.

 

Indeed, Figure 2 shows that it was CTAs and risk parity funds that exhibited the biggest increase in equity exposures intra month. CTAs in particular appear to have switched from a significant short equity exposure during the first half of March to a significant long equity exposure during the second half. Risk parity funds more than doubled their equity beta from around 0.4x to 1.1x. In contrast, balance mutual funds or discretionary macro hedge funds saw little change in their equity beta during March. Discretionary macro hedge funds were flattish before and after the FOMC. Balanced mutual funds, which benefited the most from March’s equity rally, were quite long equities before and after the FOMC meeting. Equity Long/Short hedge funds saw a modest only increase in their equity beta shifting from a rather neutral equity beta before the FOMC to a significant overweight post FOMC.

 

 

 

In all, the picture of Figure 2 points to a more vulnerable equity market relative to a month ago, with all of the above types of funds currently overweight equities apart from discretionary macro hedge funds which appear to be still close to neutral.

 

But not all of our position indicators have normalized. The short base in US equity futures has yet to be covered by spec investors. The short base in S&P500 stocks, i.e. number of shares shorted as % of total shares outstanding, remains elevated and unchanged from its mid February high (Figure 3).

 

This year’s previous outflows from equity ETFs have yet to fully reverse, as inflows stalled over the past two weeks. Retail investors sold equity mutual funds over the past two weeks and YTD. And the ammunition from retail investors is even larger than we mentioned a couple of weeks ago. With quarterly reporting funds now available for Q4, it appears that retail investors injected a significant $437bn into money market funds during the second half of 2015. One needs to go back to Lehman crisis to see such accumulation of money market funds. And an additional $16bn was injected into money market funds in the first two months of the year. This previously cumulated firepower could propel equities in the coming months assuming supporting macro and policy news.

His conclusion:

In all, the above evidence suggests that not all shorts have been covered. These prevailing shorts are perhaps the reason the equity market has been trading rather short despite elevated equity betas by the hedge fund types of Figure 2. We had argued before that an alternative way to gauge equity market positioning is to examine the response of equity markets to news, where we think of ‘news’ as surprises relative to expectations. In an idealized world, an environment where equity investor positions are heavily long should see equities responding by more to negative news than to positive news. In an environment where investors are short equities, we think the opposite should be happening, i.e. equity prices should be less responsive to negative news and more responsive to positive news.

 

Over the past six weeks, we had an equal amount of positive vs. negative economic surprises in both the US and Eurozone which in the absence of a position overhang should have been consistent with flat equity markets. Instead the MSCI World Index is up by 10% over the past six weeks.

 

Figure 5 suggests that the MSCI World index has been more responsive to positive economic news and less responsive to negative news in recent weeks, pointing to overhang of short equity positions. According to Figure 5, the equity market has been trading short since the  end of January but this negativity peaked in the third week of February.

 

In other words, while most program, quant and macro funds are no longer short, the question is whether the momentum higher will spook the last set of net shorts: those traders who remain short spec futures, and retail investors, who are more short the overall market than normal.

FT : Forecasts for European profits growth at 7-year low

Forecasts for European profits growth at 7-year low

Growth forecasts for European corporate profits have plunged to the lowest level since the financial crisis as the region languishes in an earnings recession.
Some investors warn the disappointments will continue, holding back Europe’s equity markets and undermining confidence.

Consensus forecasts for earnings per share growth among European companies have dropped to 0.5 per cent for 2016 — the lowest level since the first quarter of 2009, says UBS.
This follows two successive quarters of negative earnings growth, according to Bloomberg data. Earnings fell 39 per cent year on year in the third quarter of 2015 and dropped 71 per cent in the fourth quarter, according to data from the Bloomberg European 500 Index.
Analysts’ forecasts on earnings have also been consistently too optimistic, leading to big disappointments. This has not helped the equity markets, with European stocks down 10 per cent since the start of the year.
Matthew Beesley, head of global equities at Henderson Global Investors, said: “The earnings outlook is very gloomy. I can’t see where the upside is coming from because there is no engine for growth in the world.”
Mr Beesley adds that companies have cut costs to the bone, with little room for further reductions, which will make it harder to deliver profits. At the same time, sales and revenues are suffering from weak global demand.
There are also political headwinds in Europe, with some investors worried about the potential destabilising impact from the UK’s Brexit vote and the political stalemate in Spain.

Net positive surprises on earnings per share fell to 2 per cent in the fourth quarter of 2015 — one of the lowest levels since the numbers were first compiled seven years ago, according to UBS, which tracked more than 500 of Europe’s biggest companies. Net positive surprises are positive surprises minus negative surprises on earnings forecasts.
However, some investors and analysts say Europe may be at a turning point, with the earnings recession likely to end in the current second quarter or the next.
Nick Nelson, head of European equity strategy at UBS, said: “We may be past the worst. This could be the bottom on the earnings front, assuming commodity prices continue to rise and the macro backdrop improves.”
John Stopford, co-head of multi-assets at Investec Asset Management, said: “We think we have hit the lows on earnings. We expect to see some earnings growth, helped by the rise in the oil price and stabilising commodities.”
Some investors are also positive on Europe because they think an accommodative European Central Bank, which is expected by some to ease monetary policy further, will boost demand for goods and services.
Companies may also benefit from low cost pressures, with subdued inflation, historically low bond yields and constrained labour costs helping to lift the profit bottom line.

FT : Drugmakers race to prescribe preventive migraine remedies

Drugmakers race to prescribe preventive migraine remedies

Migraines are one of the most common illnesses worldwide, affecting about 1 in 7 people and more than 30m in the US alone. Many suffer without effective treatment to control their debilitating headaches.
“I can think of only a few examples of holy grails in medicine, which have existed for thousands of years, and this is one of them,” says Sean Harper, the top scientist at Amgen, a large biotech company developing a drug for the condition.

“There’s just no effective preventive therapy for migraine that’s worth taking,” he adds.
Although there are drugs intended for those who suffer migraines occasionally, there are far fewer options for “episodic” or “chronic” sufferers that experience an attack on more than 10 days a month.
Instead, these patients try to cope by avoiding factors that can trigger attacks, such as alcohol and stress, and by taking over-the-counter painkillers such as ibuprofen. Many are forced to take significant amounts of time off work.
However, that could be about to change as four drug companies race to develop a generation of “prophylactic”, or preventive medicines, designed to be taken regularly to reduce the number of attacks.
Last week, Alder BioPharmaceuticals, a tiny biotech group based in Washington state, reported results from a mid-stage study that showed its drug, codenamed ALD403, reduced the average number of migraine days by 75 per cent in a third of patients after three months.
If it can replicate those results in a larger study the drug is likely to be approved by the US Food and Drug Administration. Shares in the company jumped more than 50 per cent after the announcement, giving it a market capitalisation of almost $1bn.
Alder is hoping to grab a large chunk of the market for the new class of migraine drugs, which analysts say could generate as much as $10bn a year in peak global sales.
But the group faces a battle with three goliaths of drugmaking: Amgen, Eli Lilly and Teva, the Israeli drug group.
The companies are in the latter stage of developing medicines similar to Alder’s, which target a chemical known as calcitonin gene-related peptide or CGRP; it helps control the width of blood vessels and plays an important role in managing pain.
Scientists first identified the significance of CGRP in migraines in the 1980s, but earlier drugs developed by US-based Merck and Boehringer Ingelheim were abandoned amid signs that they caused liver damage. This latest crop appears to have few safety issues, according to data from clinical trials.
But some investors and analysts fear that with four companies chasing the same patients, the market for CGRP inhibitors could become crowded.
Randall Schatzman, Alder’s chief executive, disagrees, arguing that up to 13m US patients could benefit from taking one of the new migraine drugs. “It is not as crowded as some people are expecting it to be,” he says. “There’s plenty of room for multiple players.”
As is often the case when multiple drugmakers are running neck and neck, the companies developing CGRP inhibitors are keen to tout the relative benefits of their medicines.

Mr Harper argues that the advantage of Amgen’s drug, codenamed AMG 334, is that it is taken via a once-a-month injection that patients administer themselves. Meanwhile, Alder’s drug is delivered intravenously once a quarter, although it is also working on a quarterly injection.
“What patients really want is to grab an auto-injector out of their fridge once a month, to inject themselves, and to throw the rubbish in the trash,” he says.
Michael Yee, a biotech analyst at RBC Capital Markets, says intravenous delivery, which must be carried out at a doctor’s surgery, means that even if Alder’s drug is the most effective it will only be given to the sickest patients.

Mr Schatzman prefers to see it as a benefit: “All the 800lb gorillas are going down the same highway with a once-a-month injection,” he says, referring to the size of his much larger competitors.
Eli Lilly, meanwhile, is aiming to become the first group to win approval to use its CGRP inhibitor to treat cluster headaches, a rarer condition with about 200,000 sufferers in the US, but one where patients are still underserved by existing medicines.
“The enthusiasm in the field is warranted, and we’re trying to stay ahead of the pack in a very competitive space,” says John Lechleiter, Eli Lilly’s chief executive.
However, recent negotiations between drugmakers, the US government and insurers that pay for medicines show the best medicine may not necessarily win.
Last year, Express Scripts said it would no longer cover an expensive hepatitis C medicine made by Gilead for many of its patients. Instead, it recommended a drug from AbbVie, which is widely seen as inferior, after securing a big rebate from the drugmaker.
Mr Yee says: “Ultimately this will come down to some aggressive marketing and rebating.”

Reuters - Alaska Air nears deal to buy Virgin America for over $2 billion: sourc

Alaska Air nears deal to buy Virgin America for over $2 billion: sources http://reut.rs/222hSrl

Alaska Air Group Inc (ALK.N) is nearing a deal to acquire Virgin America Inc (VA.O), the ninth-largest U.S. airline by passenger traffic, for more than $2 billion, having outbid JetBlue Airways Corp (JBLU.O), people familiar with the matter said on Saturday.

The acquisition would herald the first U.S. commercial airline merger since US Airways and American Airlines combined in 2013 to form the world's largest carrier. It would boost the size of Alaska Air's home market by allowing it to expand into lucrative hubs such as San Francisco and Los Angeles.

Alaska Air is set to pay between $56 and $58 per share to acquire Virgin America, the people said. A deal could be announced as early as Monday, the people added, asking not to be identified because the agreement had not yet been finalized.

Alaska Air, Virgin America and JetBlue did not respond to requests for comment.

Burlingame, California-based Virgin America went public in the U.S. stock market in 2014 as an offshoot of billionaire Richard Branson's London-based Virgin Group. Launched as a low-cost U.S. airline, it became famous for its mood lighting, comfortable leather seats and media-rich inflight entertainment system.

Based in Seattle, Alaska Air and its partner regional airlines serve more than 100 cities in the United States, Canada, Costa Rica and Mexico. It has a market capitalization of $10.2 billion.

Virgin America accounts for about 1.5 percent of U.S. domestic flight capacity, while Alaska Air and its subsidiary Horizon Air account for 5 percent, Deutsche Bank analyst Michael Linenberg wrote in a recent research note. JetBlue accounts for 6 percent, according to the note.

"It's inevitable that we would see some form of combination (among smaller airlines) as they strive to find a way to compete with the larger carriers," said travel industry analyst Henry Harteveldt.

Government regulators are expected to scrutinize the deal between Alaska Air and Virgin America for potential overlap in routes and airport slots.

Mega-mergers in the past decade have reduced the U.S. industry to four top players that control more than 80 percent of the market.

The Wall Street Journal reported earlier on Saturday that Alaska Air had emerged as the likely winner of an auction for Virgin America.

>>> Centrica hires JPMorgan to advise on potential tie-up with Engie - Sunday Ti

Centrica hires JPMorgan to advise on potential tie-up with Engie - Sunday Times

Centrica is believed to have engaged JPMorgan to advise on options regarding a potential deal with the gas and oil production unit of France-based Engie, The Sunday Times reported. UK-based Centrica, which owns British Gas, and state-backed Engie have entered early-stage negotiations on a tie-up which might take the form of a joint venture, the unsourced report said.

Centrica and Engie jointly own the Cygnus gasfield in the North Sea, the report said, noting that a number of North Sea players are discussing merger deals in an attempt to reduce their costs.

Sunday Times

>>> Servair sale sees Newrest emerge in poll

Servair sale sees Newrest emerge in poll 

French catering group Newrest is the favourite to take over Servair, the onboard catering operation due to be sold by French Dutch carrier Air France KLM, according to a French language weekly. Le Journal du Dimanche reported that Newrest is favoured over competing Austrian Do & Co and Gategroup of Switzerland.

An unidentified Servair union official told the JDD that the two players have much in common but working conditions diverge. Newrest operates both in the inflight meal sector and in airport concessions and the report noted it would promote growth at Servair.

Earlier mooted suitor Gategroup is itself in the throes of a restructuring process and recently acquired Inflight Service for more than EUR 200m. As to Do & Co, the paper dubbed it an outsider.

The report said Newrest had looked at Servair and then opted against a bid. Now, however, it is looking again but will not buy in at a price that is exorbitant. Reports have tagged a EUR 500m price tag on Servair. The name of the party granted exclusivity should be made public soon.

Journal du Dimanche

NY Post : Softbank eyes control of Marissa Mayer’s Yahoo assets

Softbank eyes control of Marissa Mayer’s Yahoo assets

SoftBank President Nikesh Arora is a busy guy these days — the head of Japan’s global telecom giant is in “active” discussions with Yahoo’s board, which includes Chief Executive Marissa Mayer.

“They are figuring out a solution for the whole,” said a source, adding, “Things are quite active.”

On the Money’s tipsters say there are quite a few permutations of a deal between SoftBank and the Yahoo board, but say talks are slow-going.

SoftBank is in the catbird seat if it can make a deal with Yahoo, according to sources.

The telecom company already owns a 36.4 percent stake in Yahoo Japan. Yahoo, meanwhile, owns 35.5 percent.

SoftBank also has a 32 percent stake in Alibaba Group Holdings, while Yahoo has a 15.5 percent slice, with Jack Ma retaining 5 percent.

Should SoftBank acquire Yahoo’s piece, it would own 47.5 percent of the whole.

However, a source says, “Jack Ma does not want SoftBank as a controlling shareholder” in Alibaba.

Meanwhile, SoftBank joined private equity firm Silver Lake as an investor in Hollywood super agency WME/IMG last week.

Would SoftBank, owner of Sprint, want Yahoo sold to Verizon?

Could WME help SoftBank figure out content for Sprint?

Questions, questions…