(SG) Bouygues : Ready to sell Bouygues Telecom?

* Update Bouygues has confirmed it is in talks with Orange to sell Bouygues Telecom.

* SG view A transaction valuing Bouygues Telecom at €10.0bn as reported by JDD would
be good news for Bouygues in our view given that Bouygues Telecom is not in a position to
deliver positive FCF for some time. That said, we struggle to understand why CEO Martin
Bouygues appears to have changed his mind about divesting Bouygues Telecom, having
longed ruled out such option. We assume he may prefer to hold a significant minority stake
in Orange in the long term rather than take a full cash offer. Whatever the case, the
regulatory risks cannot be ignored. If recent events in Denmark are anything to go by (see
‘Danish merger falls apart’), a cut in Telecom players in France from four to three may not
get a simple nod from regulators, even if we think Iliad is likely to remain an aggressive
player post deal. For example, we think the regulators could demand the sale of some
assets to a third player (i.e. other than Iliad/Free Mobile and Numericable-SFR) to maintain
a good level of competition in France. In which case the transaction price would have to be
discounted to account for the arrival of a new player, putting the valuation of Bouygues
Telecom under pressure while potentially reducing the attractions of a deal for Orange,
putting the deal itself at risk. Overall, very high regulatory risk combined with uncertainties
regarding the ability of Orange to make asset disposals on good terms underpin our
cautious stance on this (theoretical) transaction and thus on Bouygues. If successful, such
a transaction would be positive for the valuation of Bouygues stock, albeit likely partially
offset by a higher holding discount to capture a new minority stake in Orange, on top of
discounts linked to the 29.4% stake in Alstom and the 43.5% stake in TF1.

* How we value the stock Our €29 target price is based on our SOP valuation, which is
derived from a DCF for all divisions (5.0x EV/EBITDA for Holding Co, 8.15x B-Tel, 5-7x
Construction, 9.0x Real Estate) and SG's target prices for TF1 and Alstom. Sell.

* Events, catalysts & risks to price target, rating & recommendation 24 February FY 15
results. Risks: B-Tel returns to growth; B-Tel commands a materially higher valuation than
our model; material improvement in construction operations.

>>> Street Pre-Market indications

ML
* NN GROUP - ING sells 33m shs, priced at EUR 31, BAML, DBK, JPM and ING.....
EDF - Echos says may sell more than EUR 6bn in assets in 2016.............+1%
SSE/CNA - FT reports SSE CEO says CMA failed to prove overcharging claims.+1%
SOLVAY - Plans to sell Polyamide division, De Tijd says.................+0.5%
ING - Raises over $1bn in 33m NN share sale, still owns c 15%...........+0.5%
ALLIANZ - Pimco flagship fund posted $1.3bn inflow in Dec, 1st since '13+0.5%
GENEL - Says Taq Taq partners receives $30m gross from Kurdish gov........u/c
QINETIQ - Wins tiny contract in the US, worth c $16.5m....................u/c
DAIMLER - Should outperform broader autos as trucks better than exp.....-0.5%
LAFARGEHOLCIM - Resubmits plan to dispose of Indian assets after hiccup.-0.5%
SWISS RE - To buy stop loss business of IHC, AMIC for $152.5m...........-0.5%
AUTOS - US SAAR came in at 17.47m vehicles v 18m MLe, disappointing.......-1%
BURBERRY - We expect SSSG to miss guidance, MLe -3% vs cons at +2%......-1-2%
DLG/ARM - AAPL closed -2.5% post headlines re30% cut to iPhone output...-1-2%
MINERS - CNY deval a headwind, iron ore lower again, weak in Oz...........-3%

Shore
TOPPS TILES - good start to year,Q1 LfL sales +4.4%.........................+1%
COSTAIN - performing well,order book increased to £3.9bn,FY seen inline....UNCH
JOHNSON SERVICE - FY results to be inline with expec and ahead of prev yr...+1%
GULF KEYSTONE - receives payment of $15m from Ministry of Natural Resources.+2%
RANDALL&QUILTER - Acquisition of FNF Title Insurance Company...............UNCH
PLUS500 - Resumes onboarding activity of new customers today................+1%
FLOWGROUP - Sees full year results in line with estimates..................UNCH
STAFFLINE - Confirms FY profit to be in line with market views.............UNCH
RETAILERS - good Christmas update from John Lewis, grp sales +4.1%..........+1%
VERNALIS - names licensee for its Antagonist program.......................UNCH

Investec
* DIALOG-Apple & suppliers lower n/night,Nikkei report of iPhone prodn cut...-3%
* EDF-may sell more than €6bn in assets in 2016 (Echos)......................U/C
* LVMH-to merge PE arm with Catterton........................................-1%
* SOLVAY-plans to sell Polyamide division (De Tijd)........................+0.5%
* SWISS RE-buys Stop Loss business for $152m, will add to 2016 engs..........U/C
Other
* NN GROUP- ING selling 33m shares at €31, stake falls to 16.2% from 25.8%
* US Co’s reporting: Monsanto
* Austria, Finland, Sweden closed.
Research
* CTT-we reit Add, TP €9.10 from €10.00. Note out and estimates updated.
* ARM-seen cutting iphone production by ~30% (Nikkei story)..................-1%
* CARD FACTORY-Karen Hubbard to suceed Hayes as CEO, says trading in line....+1%
* CAPE-annouces JV with OLIO resources for Malaysian market................unch
* CENTRAL ASIAN METALS-solid production but results trimmed..................-5%
* COSTAIN - in line trading update - sees FY in line........................unch
* FLOW GRP-Update.Trading in line, expects to meet FY exp's.................unch
* JOHNSON SERVICE GROUP - +ve trading update - says trading in line..........+1%
* ROYAL MAIL- FT artcile talking growth in parcel delivery due to online.....+1%
* TOPPS TILES- +ve start to NY with lfl +4.4% in Q1, confident in FY........unch
* 7DIGITAL- Proposed acq's of Snowite.Sml but looks a v good fit.............+1%

CS
Adidas UNCH Peer Li Ning said it expects to breakeven in 2015
AMS -1-2% Spec Apple may cut Iphone 6 production
Arm -1% ADR 1.2% weaker, Spec Apple may cut Iphone 6 production
Card Factory M/P New CEO, trading over Christmas period has been inline
Dialog Semi -3% Spec Apple may cut Iphone 6 production
Euronext M/P Average daily vol in December in line with CS estimates
Miners -2% Copper -0.25%, Brent +0.20%, Iron Ore -1.10%, China +1.70%
SLM Sol +1-2% Company exceeds revenue target for 2015
Sligro Foods UNCH 2015 revs rise 3.8% to EU2.67b vs cons EU2.68b
Solvay +0.5% Plans to sell Polyamide division (De Tijd/Bloomberg)
Topps Tiles M/P 1Q LFL sales +4.4%, encouraging start to full year

MF
*EDF-May sell more than €6b in assets in 2016 - Les Echos..........+0.5% 
*SWISS RE-IHC,AMIC to sell stop loss bizz to Swiss Re $152.5m......U/C 
*SOLVAY-Plans to sell Polyamide Division says De Tijd..............+1% 
*LVMH-To combine PE Unit L Capital with Catterton,exp debt lower...U/C 
*LAFARGE-Submits revised plan to exit India Ops - Standard.........+0.5% 
*DBK-Sees IB Revs -20% in '15 vs -8% for the overall mkt-Press.....-1.3% 
*DIALOG-Apple expected to cut iPhone 6S, 6S Plus production........-2% 
*TUI-Press says Kuoni deal could make Hotelbeds deal easier........+0.5% 
*ALLIANZ-Pimco posted first net inflow of $1.3bn in December.......+0.5%

(GS) Fiat C.A/ : Peeling the onion Reiterate Conv. Buy List PT €12 (+47%)

* Source of opportunity
The Ferrari IPO and spin-off is the latest step in FCA’s multi-year value
creation journey. Post the spin-off, the market’s focus is likely to turn to the
value of FCA core: on this basis, we see an asset trading at lower valuation vs.
Ford and GM, and with stronger earnings growth. FCA’s operational story has
geographic (NAFTA, EMEA) and product (Jeep, Alfa) angles, and drives EPS
growth from above and below the line. We forecast an EPS CAGR of 23% for
2015-19, the highest of any European OEM in our coverage. The structural
clean-up will continue with the suppliers, and the M&A angle is the icing on
the cake of our investment case; we reiterate our Conviction List-Buy.

* Catalyst
With the Ferrari spin-off behind us, catalysts include: ongoing operational
improvement and EPS growth; an ongoing structural clean-up, potentially
including the announcement of a spin-off or disposal of FCA’s components
businesses (including notably Magneti), in line with CEO Marchionne’s
stated aim; and potential M&A discussion.

* Valuation
Our new 12-month price targets for FCHA.MI/FCAU are €12.0/$13.0, based
on: (1) a ROIC methodology (85% weight) on a 2016E ROIC of 7.0%; and (2)
an M&A value (15% weight) derived from our sum of the parts valuation.
The change in our price targets (from €18.0/$19.6 previously) is
predominantly due to the stripping out of the value of FCA’s Ferrari stake
(spun out from January 3) plus the impact of minor estimate changes to
FCA’s financial charges and JV income (definitional changes trigger the
reduction in our published 2015 EPS estimate).

* Key risks
Key risks include: deterioration in the risk appetite of equity markets, end
market deterioration (especially NAFTA), USD weakening, further recalls in
the US, potential selling pressure post the Ferrari spin-off, and CEO
Marchionne ‘key man’ risk.

>>> TUI's Hotelbeds unit may go to Kuoni buyer, possibly EQT

TUI's Hotelbeds unit may go to Kuoni buyer, possibly EQT 

Tui, the listed German travel company, looks more likely to make a profitable sale of subsidiary Hotelbeds in light of a possible acquisition of Swiss rival Kuoni, Handelsblatt reported.

Kuoni was cited as saying it is in early-stage talks with several interested buyers. The newspaper noted unconfirmed information from the newswire Bloomberg that the most likely buyer is Swedish investment firm EQT Partners.

The newspaper said the buyer of Kuoni might be a likely buyer of Hotelbeds, which Tui Chief Executive Fritz Joussen recently said might be sold.

According to the newspaper, such a deal may make sense because Hotelbeds, which has annual turnover of EUR 4.3bn, offers the same services as Kuoni, being an online hotel and trip booking agency.

Kuoni's hotel bed agency, Global Travel Distribution (GTD), has been valued by Zuercher Kantonalbank experts at about EUR 650m. The newspaper said Morgan Stanley analysts reckon Hotelbeds is likely to sell for EUR 750m.

The newspaper said Joussen declined to comment on whether there have been talks on selling Hotelbeds to EQT. He did say that notable private equity firms have delcared their interest in the business to the advisors on the possible sale, Merrill Lynch and Deutsche Bank.

Handelsblatt

>>> Kuoni's suitors include EQT, Cinven; Partners Group, Carlyle and HNA Group/B

Kuoni's suitors include EQT, Cinven; Partners Group, Carlyle and HNA Group/Baring Private Equity Asia tipped as possible bidders 

The private equity firms Cinven and EQT are among the bidders for the Swiss travel company Kuoni Group [SWX: KUNN], the Financial Times reported citing sources close to the situation for the claim.

Kuoni issued a statement yesterday (5 January) saying it had been approached by third parties regarding a potential takeover bid. Talks are at an early stage and there is no certainty of a deal, Kuoni said.

One analyst cited by the report estimated that an offer could be pitched at slightly more than Kuoni’s market capitalisation, based on 12 times forecast earnings for next year, but added that a substantially higher offer would be surprising.

A report in The Times listed BC Partners, Carlyle Group. EQT, Partners Group, EQT and Permira as some of the buyout groups tipped as potential bidders for Kuoni. BC Partners owns Mergermarket Group, publisher of this news service.

An article in Swiss daily Tagesanzeiger (published today on page 8) named another possible buyer as a consortium of the Chinese travel group HNA Group and Baring Private Equity Asia.

Kuoni’s share price closed CHF 4.25 (EUR 3.91) up at CHF 293.25 in Zurich yesterday, valuing the company at CHF 1.17bn.

>>> Sainsbury expected to submit fresh offer for Home Retail Group; HRG shareh

J Sainsbury expected to submit fresh offer for Home Retail Group; HRG shareholders Toscafund and Schroders see merit of Sainsbury bid; Homebase could go if takeover proceeds 

J Sainsbury [LON:SBRY] is expected to submit a fresh takeover bid for Home Retail Group [LON:HOME], The Times reported. The newspaper cited market speculation, which followed J Sainsbury's disclosure yesterday, 5 January that it had approached HRG about a potential offer. HRG rebuffed the offer, the UK-based supermarket group said.

Bankers cited by the report said Sainsbury’s approach could prompt rival bidders to come forward. The bankers thought that a bidder would need to offer more than GBP 1.1n (EUR 1.50bn) to be given serious consideration.

Separately, HRG shareholders Toscafund and Schroders see some merit in Sainsbury’s offer, The Daily Mail reported. The report quoted Toscafund founder Martin Hughes, who said HRG’s leading investors are receptive to Sainsbury’s offer. Hughes added that HRG shareholders are unhappy at the lack of consultation with the HRG board before it rejected Sainsbury’s approach. Toscafund holds a 5.08% stake in HRG, the item said.

it is thought that Toscafund and Schroders, HRG’s biggest investor with a stake of 18.6% are both unhappy with HRG’s board, The Daily Mail item added.

The Guardian reported that the hedge funds Newbrook Capital Advisors, WorldQuant and Odey Asset Management had all taken out short positions in HRG and had taken heavy losses on their bets yesterday due to the surge in HRG's share price after Sainsbury's approach was announced.

Separately, an online Daily Telegraph report cited unspecified sources who said the Australian gardening supplies retailer Wesfarmers had discussions in December 2015 about a possible offer for Homebase, HRG's DIY retailing arm. The private equity firms Apax Partners and Apollo Global Management were also believed to be interested in Homebase last year, the item said.

The Times' main report said Dunelm and French DIY retailer Leroy Merlin have previously been mentioned as potential buyers for Homebase.

Home Retail Group’s share price closed 40.6p up at 139.3p in London yesterday, giving the company a market capitalisation of GBP 1.13bn.

>>> Europe : Brokers Upgrades & Downgrades - 6th of January 2016

>>> Up
*BAE SYSTEMS RAISED TO TOP PICK AT RBC CAPITAL
*ROYAL MAIL RAISED TO OVERWEIGHT AT BARCLAYS
*KINGFISHER RAISED TO BUY AT JEFFERIES
*SOCGEN RAISED TO MARKET PERFORM VS UNDERPERFORM AT KBW
*VOLKSWAGEN RAISED TO OUTPERFORM VS NEUTRAL AT EXANE

>>> Down
*CARLSBERG CUT TO MARKET PERFORM AT BERNSTEIN
*DIRECT LINE CUT TO HOLD VS BUY AT CANACCORD
*ERICSSON CUT TO HOLD VS BUY AT SOCIETE GENERALE
*HSBC HOLDINGS PLC CUT TO UNDERWEIGHT AT JPMORGAN
*INFINEON CUT TO MARKET PERFORM AT BERNSTEIN
*JCDECAUX CUT TO UNDERWEIGHT VS EQUAL WEIGHT AT MORGAN STANLEY
*POSTNL CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*PUBLICIS GROUPE CUT TO UNDERPERFORM VS NEUTRAL AT BNP PARIBAS
*SAFRAN CUT TO OUTPERFORM AT RBC CAPITAL
*TNT CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*UNICREDIT CUT TO UNDERWEIGHT AT JPMORGAN

>>> PT Change


>>> Initiation
*ASSA ABLOY RATED NEW BUY AT ODDO
*DANONE RATED NEW BUY AT HSBC, PT EU71.5
*NEXT REINSTATED AT BUY AT CANACCORD; PT 7,800P
*PAYSAFE RATED NEW OVERWEIGHT AT MORGAN STANLEY, PT 500P
*WIRECARD RATED NEW OVERWEIGHT AT MORGAN STANLEY, PT EU55
*WORLDLINE RATED NEW EQUAL WEIGHT AT MORGAN STANLEY, PT EU26

>>> Call

>>> What to look at today - 6th of January 2016

Dow+0.06% S&P+0.20% Nasdaq-0.24% Russell+0.16%
US MArket closed slighlty higher in a shaky session. A defensive pre-market affair focused on the Asian session, during which the Shanghai Composite lost 0.3% despite a $20 billion infusion from the People's Bank of China through open market operations. Oil was able to muster an uptick that coincided with a rebound in European indices, but the energy component was unable to maintain that price level. WTI crude remained weak into the pit close, ending lower by 2.3% at $35.95/bbl. Apple (AAPL 102.71, -2.64) plummeted 2.6% after Nikkei reported Apple is expected to reduce iPhone 6s and 6s Plus production by 30% in Q1. Volume were in line with average at 85mil shares. North Korea has announced it has conducted a successful nuclear hydrogen bomb test, vowing to use its new capability for defensive purposes and to act responsibly as a new member of the nuclear club. In response, South Korea has called for an emergency meeting of the UN Security Council, while Japan cabinet officials indicated they would consider further sanctions on Pyongyang. S&P e-mini futures were down as much as 1% or 20pts below 1,990, and safehaven JPY and US Treasuries strengthened.More PMI data from the Far East has also continued to cloud investment landscape. This time, the services Caixin report from China was surprisingly disappointing at a 17-month low, even though the official non-manufacturing data out earlier was more rosy. China outlets echoed CSRC commentary that the ban on large shareholder stake reduction would remain in place until new rules are announced so as to prevent quick sales in between the policy guidelines. In Japan, Nikkei reported that top management execs are increasingly cautious to boost base wages in the coming spring negotiations like they did the last 2 years, citing China's economic slowdown and Middle East turmoil.

Nikkei -0.99% Hang Seng -0.84% Shanghai +2.25% (Rally on the last 2 hours)

Eur$ 1.0734 JPY 118.65 CNY 6.55 GBP 1.4651 CHF 1.0096 RUB$ 73.6954 WTI %35.90 (-0.25%)

S&P -0.78% EuroStoxx -0.03% Dax -0.20% SMI +0.05%

Macro :
- Saudi Oil Prices Pose No Threat to Iran’s Med Return: Julian Lee
- Qatar Expected to Sign $5.5b Loan Deal This Week, Reuters Says
- China Expects Trade With Russia to Rise in 2016, Mofcom Says
- North Korea Says It Successfully Tested First Hydrogen Bomb
- Yuan Sinks to Five-Year Low as PBOC Surprises With Weaker Fixing

Keep an eye on :
- AAPL US : Apple Seen Cutting iPhone 6S, 6S+ Production by ~30%: Nikkei
- DLG GY : Dialog Semiconductor Falls 3.3% at Tradegate vs Xetra Close
- EDF FP : EDF May Sell More Than EU6b in Assets in 2016, Les Echos Reports
- EURN BB : Euronav COO Staring Spends EU0.67m Exercising Stock Options
- FPM LN : Faroe Petroleum Proved Plus Probable 2P Reserves Est. 60.6 Mmboe
- FCA IM :FCA CEO Marchionne Holds 1.46M Ferrari Shares: Regulatory Filing
- RACE IM : FCA CEO Marchionne Holds 1.46M Ferrari Shares: Regulatory Filing
- GBLB BB : GBL May Invest in Italian Care Center Operator KOS: Tijd Link
- GKP LN : Gulf Keystone Says $15m Received for Shaikan Crude Oil Exports
- HOME LN : Hedge Funds Odey and Immersion Lose as Home Retail Shares Soar
- INGA NA : ING Plans to Sell 33m Shrs in NN Group, Raising About EU1b
- NN NA : ING Plans Sale of $1.1 Billion Shares in Dutch Insurer NN Group
- PLUS LN : Plus500UK Resumes Taking on New Customers
- SAP GY : SAP Top Pick in EU Software at Barclays; Sees ‘Sweet-Spot‘ Ahead
- SLIGR NA : Sligro 2015 Revenue In Line With Estimates, 4Q Revenue Rises
- SOLB BB : Solvay Plans to Sell Polyamide Division, De Tijd Reports
- SHP LN : Cash Div. Use in BXLT-Shire Could Avoid ’Device Test’: Willens
- TOM2 NA : TomTom Offers California, Michigan Automated Driving Maps
- VOW3 : Volkswagen Dec. U.S. Sales Fall 9.1%, Est. Up 0.2%

>>> US After Hours

After Hours Summary:

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings:  SIRI +0.9%

Companies trading higher in after hours in reaction to news:  AMIC +20.8% (and Independence Holding (IHC) announced sale of stop loss business to Swiss Re Corporate Solutions for $152.5 mln in cash), CNAT +15.0% (achieved positive results with Emricasan in initial stage of Phase 2 liver cirrhosis clinical trial), HLTH +2.5% (intended to restate consolidated financial statements for FY14 and for 2015 interim periods).

After Hours Losers:

Companies trading lower in after hours in reaction to earnings:  SONC -1.4%

Companies trading lower in after hours in reaction to news:  EPZM -10.0% (proposed public offering of $120 mln in stock), SAGE -7.6% (filed mixed securities shelf offering for an undisclosed amount,  commenced an offering of $150 mln of its common stock), CEMP -5.9% (to offer and sell shares of its common stock with a price of ~$175 mln in an offering), OTIC -5.4% (announced $100 mln stock offering), ACAD -4.4% (proposed public offering of $300 mln in shares of common stock), TXMD -4.4% (launched $125 mln offering of common stock), PXD -3.6% (commenced a public offering of 10.5 mln shares of its common stock), PRTA -3.3% (commenced an underwritten public offering of 2.25 mln of ordinary shares).

>>> Asian Update

Asia Market Update: North Korean announces successful hydrogen bomb test; China Services PMI slide catches up to manufacturing

***Economic Data***
- (HK) HONG KONG DEC PMI: 46.4 V 46.6 PRIOR (10th month of contraction)
- (CN) CHINA DEC CAIXIN PMI SERVICES: 50.2 V 51.2 PRIOR; 17-month low
- (CN) China Dec Westpac Consumer Confidence index: 113.7 v 113.1 prior
- (JP) JAPAN DEC NIKKEI SERVICES PMI: 51.5 V 51.6 PRIOR; COMPOSITE PMI: 52.2 V 52.3 PRIOR
- (TW) TAIWAN DEC CPI Y/Y: 0.1% V 0.5%E; WPI Y/Y: -7.1% V -7.5%E
- (UK) DEC BRC SHOP PRICE INDEX Y/Y: -2.0% V -2.1% PRIOR (32nd consecutive monthly decline)

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -1.5%, S&P/ASX -1.4%, Kospi -0.7%, Shanghai Composite +0.7%, Hang Seng -0.9%, Mar S&P500 -0.9% at 1,993

***Commodities/Fixed Income***
- Feb gold -0.1% at $1,077/oz, Feb crude oil +0.1% at $36.00/brl, Mar copper -0.3% at $2.09/lb
- (US) API Petroleum Inventories: Crude: -5.6M v +2.9M prior; largest draw in 4 months
- SLV: iShares Silver Trust ETF daily holdings fall to 9,884 tonnes from 9,888 tonnes; lowest since Nov 21st
- (NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index: -1.6% v +1.9% prior; First decline after 2 straight rises
- USD/CNY: (CN) PBoC sets yuan mid point at 6.5314 v 6.5169 prior; weakest Yuan setting since Apr 2011
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, and ¥450B in 5-10yr JGBs

***Market Focal Points/FX***
- Geopolitical turmoil sent investment sentiment under assault once again, though this time the culprit resides just above the 38 parallel. After 3 prior tests going back as far as 2006, North Korea has announced it has conducted a successful nuclear hydrogen bomb test, vowing to use its new capability for defensive purposes and to act responsibly as a new member of the nuclear club. In response, South Korea has called for an emergency meeting of the UN Security Council, while Japan cabinet officials indicated they would consider further sanctions on Pyongyang. S&P e-mini futures were down as much as 1% or 20pts below 1,990, and safehaven JPY and US Treasuries strengthened. Among Asia-Pac indices, ASX is weighed down by mining names with iron ore falling, Nikkei is down on firmer JPY, and Shanghai is boosted by speculation of continued policy accommodation on soft economic data.

- More PMI data from the Far East has also continued to cloud investment landscape. This time, the services Caixin report from China was surprisingly disappointing at a 17-month low, even though the official non-manufacturing data out earlier was more rosy. Caixin economists noted marginal increase in new work at service providers, sending new orders component down for 2nd straight month. Payrolls continued to rise but at a slower pace, and backlog was little changed. Caixin survey saw China companies express "relatively low level of optimism towards the 12-month business outlook in December." Hong Kong PMI was also a disappointment, remaining in contraction for the 10th straight month with a deeper dive. Economists noted both output and new orders fell at faster rate due to weaker client demand in China, as private sector companies cut back on their purchasing activity again in December. Rate tightening at the FOMC was also cited as adding to uncertainty. Lastly, Japan's Services PMI was flat, though new business growth "accelerated to a four-month high in December, supporting a further increase in both output and employment."

- Outside the PMI prints, both China and Japan saw some notable press reports and commentary. China outlets echoed CSRC commentary that the ban on large shareholder stake reduction would remain in place until new rules are announced so as to prevent quick sales in between the policy guidelines. In Japan, Nikkei reported that top management execs are increasingly cautious to boost base wages in the coming spring negotiations like they did the last 2 years, citing China's economic slowdown and Middle East turmoil.

- Among FX majors, USD/JPY fell as much as 70pips from the highs to around 118.40 lows, EUR/USD was flat around 1.0750, while AUD and NZD fell over 0.5% against USD on broad risk aversion to respective lows near 0.7110 and 0.6630. NZD/USD was under added pressure after the latest Fonterra auction saw prices fall after 2 straight increases, and analysts questioned whether the co-op could meet its payout target. PBoC Yuan fix was also set sharply lower yet again - the weakest since Apr 2011 - as offshore currency rate spiked up above 6.66 against USD.

***Equities***
US equities / ADRs:
- VZ: Reportedly begins sale process for data centers; Hopes to secure over $2.5B as it looks to focus on core business- financial press
- SONC: Reports Q1 $0.24 v $0.24e, R$145.8M v $145Me; -3.7% afterhours
- VRX: Said to search for a new leader; CEO Pearson remains hospitalized; Unclear if appointment would be permanent - financial press; -7.3% afterhours

Notable movers by sector:
- Consumer discretionary: Li Ning 2331.HK +4.3% (profit alert)
- Technology: Sharp 6753.jp -2.5% (speculation of 9-mo loss)
- Financials: China Vanke 2202.hk -11.4% (resumes trade after dilution)
- Materials: BHP -2.5%, Rio Tinto -3.0%, Fortescue -5.7% - renewed decline in iron ore price after protracted rise
- Industrials: China Airlines 2610.TW +2.2% (China-Taiwan air transit); Mitsubishi Heavy 7011.jp -2.7% (ends Brazil JV); South Korea defense stocks rise on North Korea's nuclear test