>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: CYOU -5.9%, MTU -4.3%, ROP -3.9%

M&A news: D -2.4% (agreed to pay Questar (STR) shareholders $25 per share -- about $4.4 bln -- and assume Questar's outstanding debt)

Select financial related names showing weakness: HSBC -3.1%, CS -3.1%, RBS -2.3%, BCS -2.2%, BAC -1.1%

Select metals/mining stocks trading lower: MTL -16.5%, MT -4.2%, VALE -3.7%, RIO -3.4%, BBL -2.9%, BHP -2.7%

Select oil/gas related names showing early weakness: SDRL -4.3%, BP -4.1%, PTR -4.1%, RIG -3.9%, MRO -3.4%,RDS.A -2.9%, CHK -2.7%, TOT -2.5%, STO -2.4%, COP -2.1%, APA -2%, APC -1.8%, SLB -1.8%

Other news: NOK -11.8% (settles patent dispute with Samsung (SSNLF); also downgraded to Neutral from Buy at BofA/Merrill), ALU -11.7% (in symp with NOK), CNX -11% (pulling back pre-mkt following last week's strength), LUX -7.7% (follow thru weakness after posting earnings on Friday), NEOS -7.6% (files $69 mln common stock offering), SZYM -6.7% (discloses reduction in headcount that is expected to reduce the number of employees by more than 20%; anticipates recording a charge of ~$1-1.5 mln in Q1), PUK -4.2% (still checking), TSLA -3.2% (Elon Musk filed Form 4 (Friday, AH), exercised 532K share option), SNN -3% (announces CEO has been diagnosed with treatable form of cancer; will remain actively involved in running co), SUNE -2.6% (cont pre-mkt vol), X -2.1% (ratings lowered at S&P to 'B' on weak credit measures, outlook negative), RACE -2% (cont pre-mkt vol)

Analyst comments: GPRO -5.2% (target lowered to $7.50 from $9 at Piper Jaffray), ARR -1.5% (downgraded to Underweight from Equal Weight at Barclays)

(JPM) Nokia - Poor Samsung arbitration result, worse than deals company has sign

Poor Samsung arbitration result, worse than deals company has signed in the past

The headline arbitration-related ongoing payment of €130m indicates a
royalty rate of ~15bps. Including payments already recognized in the year,
Samsung’s royalty payment to Nokia could total 20bps. However having
signed much higher rate deals with Apple and, we believe, Huawei in the past,
it does seem to us that the arbitration result is negative for Nokia.

* Details of Nokia's settlement with Samsung: Nokia has announced details
of the outcome of its patents licensing arbitration with Samsung (covered by
JJ Park) and the associated five-year extension of its patent licensing
agreement with Samsung from 1 Jan 2014. These details include: i) this
settlement and the extended patent licensing agreement covers part of the
Nokia Technologies’ patent portfolio until the end of 2018. Nokia is
indicating that it will continue to discuss with Samsung regarding its other
relevant intellectual property portfolios; ii) including this settlement and the
associated catch-up amount from 1 Jan 2014 to 30 Sep 2015, Nokia expects
Nokia Technologies (patent & technology licensing division) net sales of
~€400m in 4Q15 and ~€1,020m for FY15; and iii) Nokia is indicating that
including this settlement, Nokia Technologies’ underlying sales run-rate was
~€800m at the end of 4Q15. Further, Nokia is indicating that it expects to
receive at least ~€1.3bn of cash in 2016-2017 related to its settled and
ongoing arbitrations in Nokia Technologies, including the announced
arbitration outcome with Samsung.
* Arbitration outcome below expectations: Nokia Technologies’ underlying
revenue run-rate prior to the announced arbitration outcome with Samsung
was ~€670m. Thus, Nokia's indication of the new annualized revenue runrate
of ~€800m post the Samsung settlement implies a net increase of
~€130m. This amount suggests a result of approx. 15 bps though we
understand there is some Samsung payment included in the €670m so the
total Samsung royalty seems to be perhaps 20bps which is well below what
Nokia achieved in past deals with Apple and the un-named party in 1Q15
which we believe was Huawei. The 20 bps is well below expectations as
SME Direkt consensus (date 17 Nov 2015) for Nokia Technologies revenue
in 2016 was €911m, which implies there could be a cut to 2016 consensus of
as much as €110m unless new deals are signed in 2016.

>>> China's Jin Jiang raises AccorHotels stake to 5.5 pct

China's Jin Jiang raises AccorHotels stake to 5.5 pct - RTRS


01-FEB-2016 14:13:44

PARIS, Feb 1 (Reuters) - Shanghai Jin Jiang International 600754.SS has raised its stake in French hotel group AccorHotels ACCP.PA to 5.50 percent, becoming its second-largest shareholder, according to a regulatory filing.

The Rubyrock Capital Company Limited, an entity controlled by Jin Jiang, made the stock purchase on the market on Jan. 25, the AMF stockmarket watchdog said in the Jan. 29 filing.

AccorHotels, Europe's largest hotel group, could not be immediately reached for comment.

A growing number of French and Chinese groups have joined forces in recent years to seek opportunities in tourism, with Chinese investor Fosun 0656.HK buying a stake in French holiday group Club Med last year.

Jin Jiang International also bought Europe's No. 2 budget operator, France's Louvre Hotels Group, from U.S. investment group Starwood Capital in 2015. (Full Story)

By 1301 GMT on Monday, Accor shares were up 1.1 percent, outperforming the CAC 40 .FCHI index of French blue-chips, which was down 1.09 percent.

"The hotel sector is currently in a strategic consolidation moment," Kepler analysts said in a note. "Even if Jin Jiang’s final plan is not yet clear, there is a clear industrial logic to seeing hotel leaders consolidate to reinforce market share, segmentation and distribution forces."

Last week AccorHotels finalised its strategic alliance with China Lodging Group HTHT.O, which will create a major new player in the fast-growing Chinese domestic travel and hospitality market.

>>> Deutsche Wohnen top-10 shareholder considers campaign against Vonovia deal

Deutsche Wohnen top-10 shareholder considers campaign against Vonovia deal

* Cohen & Steers may call, write to shareholders
* CB holders’ voice muted by cash settlement option
* DW LTV less attractive if CBs redeemed in cash

A top-10 Deutsche Wohnen (DW) [ETR:DWNI] shareholder may launch his own campaign to discourage Vonovia’s [ETR:VNA] hostile takeover of the company, which he says is destroying more value every day it continues.

Rogier Quirijns of Cohen & Steers, which holds around 2% of DW stock, has told this news service he stands by his previous comments that the deal was not in the interests of either companies’ shareholders, particularly after Vonovia moved to extend the offer period by another two weeks on Monday.

Quirijns said he was close to calling or writing to other investors who he knows have been in support of the combination to discourage them from tendering into the offer, or even to ask them to withdraw their already-tendered shares.

He would also ask Vonovia shareholders to withdraw their support, which has provided the suitor’s management with a mandate to pursue the combination, he said.

The deal would be value destructive and Vonovia’s apparent lack of confidence in reaching its initial minimum acceptance threshold of 57% showed DW shareholders are not in favour, Quirijns said. Vonovia cut the acceptance threshold on 25 January, extending the initial tender offer period until 9 February.

Both Vonovia’s lowering of the threshold and extension of the acceptance period were inconsistent with earlier statements it had made that it would not do either, he said, echoing arguments put forward by DW on Friday 29 January.

Vonovia taking a minority stake in DW would not be in any investor's interests, but that scenario could arise if convertible bondholders do not, or are unable to, tender shares, he said.

The bidder has “full support” from DW’s convertible bondholders, but those bondholders can only tender their converted shares during the additional two-week acceptance period, according to the bidder’s CFO Stefan Kirsten speaking to investors on 25 January.

Reducing the acceptance threshold from 57% to 50% took those bondholders’ tendering commitments into account, the company said.

But if the bondholders do not tender the shares into the deal, Vonovia could potentially be left with less than 50% ownership of DW. Vonovia has ruled out “the alleged possibility of accepting a minority position in Deutsche Wohnen”.

Regardless, DW has moved to negate the support of its bondholders for the takeover offer by only offering cash for their conversion, a source close to the target said. DW had originally committed to redeem the notes in shares, but following Vonovia changing the acceptance threshold, the issuer said on 29 January that it would reserve the right to settle in cash.

Vonovia has always looked to secure 100% approval from DW’s CB holders, but now any commitments from CB holders could be worthless if DW elects to settle in cash, the source close to the target said.

DW’s potential election to pay in cash puts the fate of the tender back into the hands of DW shareholders, the source said.

DW should make the decision on whether to convert the bonds into cash or shares before the end of the acceptance period, the source said. A DW spokesperson said the deadline for a decision depends on which CB the company chooses to convert in cash.

Vonovia’s statement in response claims that the cash pay-out to CB holders would amount to around EUR 1bn and further increase DW’s leverage.

Any change in leverage will only be marginal, the source argued. Current aggregated fair market value for the EUR 250m 0.5% 2020 and EUR 400m 0.875% 2021 CBs is approximately EUR 800m versus a cash redemption cost of slightly below EUR 1bn, he added.

A DW spokesperson put the book value of the CBs at the end of 2015 at about EUR 890m, with cash conversion leading to an additional leverage increase of EUR 100m maximum.

DW’s standalone LTV would go from 41.4 to 41.9% in that case, but Vonovia’s pro forma LTV would increase to 58.7% if the convertibles are cash-settled and the offer is successful, the DW spokesperson said.

Vonovia had anticipated reduced leverage on DW’s balance sheet of close to EUR 800m, reflecting an equity conversion of the notes, meaning the bidder’s hope to secure DW with a lower loan-to-value than at present would be dashed in the event of cash settlement, the source said. Vonovia did not respond to a request for comment.

The final decision on how to settle the notes would depend on the DW’s judgement of whether Vonovia would be likely to get a majority without the help of convertible bondholders, the source said.

DW remained very confident that would not happen, particularly after it received positive response to its most recent shareholder letter sent out on Wednesday 27 January to the company’s 30 largest investors, the source said.

Those shareholders who have shown public support for DW’s wish to remain standalone – including MFS, Cohen & Steers and PGGM – said the reduction in the acceptance threshold had not changed their minds, according to the source quoting feedback to the company.

FT : Growth worries spur closer oil and equities relationship

Growth worries spur closer oil and equities relationship

Both markets face volatility, contagion and unusual correlations

Traders in both the oil and equity markets have been blaming each other for their unsettling start to the year.
Yet both are being influenced by much larger changes in their common environment — changes that have increased codependency, aggravated asset class contagion, and suffocated, at least for now, some pretty obvious and potentially rewarding longer-term differentiations.

Equities and oil experienced a pretty awful January. Notable price declines have occurred in the context of wild volatility, including intraday swings. And the correlation between the two has been unusually high, with the asset classes tending to move together, alternating between sharply lower and higher.
As is often the case, quite a few analysts have rushed to attribute causation to such high correlation. Noting that energy names account for a sizeable part of the S&P index, large falls in oil prices are deemed to depress this component’s earning potential while worsening sentiment for equities as a whole.
For their part, oil traders feel that a sell-off in equities amplifies worries about global growth, dampening energy consumption forecasts and placing pressure on energy prices. And both worry that the disinflationary impulses accentuate the risk of a general deflation that would encourage consumers to postpone purchases in anticipation of lower prices in the future.
While there is some validity to these arguments, they are far from compelling as robust explanations for the rather unusual correlations that have developed between oil and equities around the world.
For a start, lower oil prices translate into huge windfall gains for consumers, leaving them with more cash in their pocket to spend on other items. Indeed, it is not so long ago that an oil price plunge was viewed as unambiguously positive for western countries — and also for quite a few developing economies.
To the extent that there is now more production taking place in the US in particular, the macroeconomic impact of the related losses is still less than the consumption gains.
The questionable causality is amplified by the lack of differentiation. The equity market sell-off has been indiscriminate, encompassing even airlines and also retail names that serve segments of the population that disproportionately benefit from the fall in oil prices, including lower income consumers. Similarly, only gold has been spared the generalised decline in commodity prices.
A better explanation of the correlation between oil and equities is that both are being influenced by three more general developments.
First, downward revisions in global growth projections on account of concerns about uncharacteristic policy mishaps in China and other emerging economies. This has added to the unsettled demand situation for oil and is placing a cloud over corporate earnings; illustrated last week by Apple’s revenue miss and its lower second-quarter guidance.
Second, the loss of safety nets. The December interest rate shift by the US Federal Reserve has crystallised an important reality for equity investors — notwithstanding Japan following Europe into negative policy rates, they can no longer rely to the same extent on central banks to uniformly maintain ultra-interest rates as a way of encouraging financial risk-taking and pushing more money into stocks. Meanwhile, the oil market is yet to recover from the shock of seeing Opec reject being the swing producer on the downside, or exiting its historical role of limiting production to counter a price decline.
Thirdly, there are very few sizeable balance sheets willing to step into markets, even when segments have visibly overshot. The countercyclical risk appetite of the broker-dealer community has been muted by both regulatory and market pressures.
The most patient sources of all investment capital, such as the Norwegian sovereign wealth fund whose liabilities are associated mainly with future generations, no longer have the spare cash they once had. And large institutional investors are increasingly anxious about giving up the returns of recent years, especially with the trauma of 2008-09 still fresh in their minds.
Rather than blame each other, both oil and equity traders need to realise that they are part of a much bigger reality. It is one that promises continued volatility, both up and down, coupled with excessive contagion, unusual correlations and some yet to be exploited opportunities for longer-term returns.
Mohamed El-Erian is chief economic adviser to Allianz, chair of President Obama’s Global Development Council, and author of the forthcoming book “The Only Game in Town”