(BofA-ML) Style Cycle : The pain trade emerges

* CMI stabilises, Europe still in ‘Recovery’
Improvement on 12m changes in Pan-European bond yields and the OECD Leading
Indicator offset the lower earnings revision ratio (ERR) and weaker Producer Price
Inflation (page 8). In aggregate, our Composite Macro Indicator (CMI) increases slightly
after last month’s decline, keeping us in the ‘Recovery’ phase. During ‘Recovery’, the
Style Cycle prefers Value, High Risk, and Low Quality stocks. Moving towards an initial
Fed hike, Quality could be an important pain-trade

Macro data improvement is differentiated…
European macro should build on this month’s stabilisation, in our view. Increasing money
supply (M1) and easy comps should feed into a stronger CMI over the coming months
(chart 4). However, regional business cycles continue to diverge (chart 3). For
progression from ‘Recovery’ to the ‘Boom’

(CS) Speed dial : 5G in Europe - vision vs reality

Whilst the European industry is only starting to get a pay-back on its 4G
investment, government agencies and standard-setters are busy sharing their
vision for 5G. The ITU has already set a 5G target of up to 10Gbps mobile
download speeds with 1ms latency, supporting new services such as connected
cars, augmented reality and the Internet of Things. Such a 5G vision would
come with a big price tag, requiring many more cell sites to be built.
Meanwhile, the European industry has fallen upon harder times, having lost
around eu300bn of funding capacity from EC regulation of MTRs and roaming
and the impact of smartphones on SMS. Average investment returns have fallen
to cost of capital, and lower for the challengers. Few players are seeking to
enter the industry as network operators and many challengers are seeking to
exit whilst minimising investment. This suggests a pay-back period for the
operators remaining, with spectrum auctioned for 5G likely to fetch a lower price,
5G build to be slow and investment focused first on enhancements to 4G.
5G comes with a big price tag and drives the industry to scale so the pressure
to consolidate will not go away. If the EC really wants Europe to catch up, it will
have to adapt its thinking on consolidation. Attempts to keep current levels of
competition artificially alive through MBA-MVNOs will likely just undermine
investment incentives further. If 5G applications are of real value to society, we
believe long-term consumer interest would be better served by allowing two-tothree
stronger mobile networks to emerge per market, capable of investing in
5G properly, with much better network coverage being the quid pro quo.

(CS) European Auto OEMs : Fleet business to drive 2016 slowdown

* Cutting 2016E European growth forecast to 1.5%. We maintain our
negative view on the sector, as we expect growth in Europe to fall
meaningfully short of expectations. We cut our 2016E market forecast to
1.5% (from 2.5%), which is substantially below market expectations of 5-8%
growth. Our below consensus view is largely driven by slowing fleet volumes
(in particular Germany and UK), which were the main driver in 2015.
Regionally, we see the biggest downside risk for Germany and the UK,
where we expect to see falling volumes. FX (Euro weakness) remains the
key upside risk to our estimate. Within the sector FCA (OP) remains our
preferred name.

* Fleet operators likely pushed forward demand. Fleet operators/leasing
companies are key drivers for car sales, in our view. Solid residual values
(enabling windfall profits) and low financing rates (shortening of duration)
enabled impressive improvement of industry KPI's. However, it also
exaggerates the volume development and pushes forward demand. Limited
upside to reduce duration further combined with a more challenging pricing
environment likely to end the cycle in 2016. VW emission scandal could add
further uncertainty on values of used cars (additional to UK price weakness).

* Germany and UK expected to decline in 2016: Our negative expectations
for Germany (-3.1%) and UK (-1.8%) are a key pillar for our bearish 2016
market outlook. Quality of German growth was already poor in 2015 since
volumes were boosted by self-registrations, which showed the first signs of
weakness recently. Increased off-lease volumes likely to dampen new car
sales further in Germany. UK negative growth in October (first time since
2012) unlikely to be a one-off given that used car pricing is also increasingly
under pressure. Within Europe Italy looks the strongest.

* Currency (Euro weakness) key upside risk. Currency development (Euro
weakness) remain the key upside risk to our estimates. We make moderate
adjustments to our forecasts as lower organic growth is offset by FX. Our
2016 estimates are c.15% below consensus expectations.

>>> What to look at today - 19th of November 2015

Dow+1.42% S&P+1.62% Nasdaq+1.79% Russell+1.61% VIX 16.85 (-10.56%)
US MArket Closed higher, with steady performance all day even after FOMC Minutes, that eft little doubt that the Fed is poised to raise rates at the December meeting. Specifically, the minutes indicated that "it may well become appropriate to initialize the normalization process at the next meeting, provided that unanticipated shocks do not adversely affect the economic outlook.". All ten sectors ended the day in positive territory with eight groups adding more than 1.0%. The financial sector (+1.8%) benefiting from rising rate hike expectations. the energy sector (+1.6%) also posted a solid gain, WTI crude ended higher by 0.4% at $41.95/bbl after sliding from its session high near $41.53/bbl. AAPL +3.2% on GS call. IBB+2.9%. Volume were in line with average at 850mil shares. US After Hours GMCR +16.4%, CTRP +16.2%, CRM +5.4%, WB +4.8%, SINA +2.3%, SMTC -8.5% following earnings/guidance, SUNE -9.5% (Reuters reporting that Blackstone (BX) is rejecting rumors it was considering an investmentin SUNE),AMAG -8.8% on FDA Response, AGN -3.2% on Tax Inversion letter from Treasury. US market rally in the wake of the Fed meeting minutes has carried over into Asia, where higher-beta Australia market is leading the way. USD/JPY pair hit a low near 123.00 - down over 50pips - with most of the losses coming after the Bank of Japan policy decision. BOJ maintained its annual pace of monetary base expansion at ¥80T and also kept its overall economic assessment unchanged, suggesting that domestic economy continued to recover moderately. The only change the BOJ has made is on inflation front.

Nikkei +1.07% Hang Seng +1.40% Shanghai +1.16%

Eur$ 1.0692 JPY 123.27 CNY 6.3784 GBP 1.5273 CHF 1.0164 RUB $64.72 WTI $40.90 (+0.37%)

S&P +0.12% EuroStoxx +0.76% Dax +0.78% SMI +0.42%

Macro :
- Most on FOMC Said Liftoff Conditions May Be Met by Dec.: Minutes
- Lew Says Treasury to Issue Tax Inversion Guidance This Week


Keep an eye on :
- AGN US : Pfizer Said to Near Allergan Deal for $370-$380/Shr
- CS FP : Axa’s Duverne Says Insurer to Invest in ‘Less Liquid’ Assets
- BNP FP : BNP Paribas Said to Move Equity Sales Jobs From London to Asia
- CEP SM : Cepsa Hires BBVA to Find Buyer for 9% CLH Stake: Expansion
- GLEN LN : +5% in HK
- JEN GY : Jenoptik Holder Thuringia State to Maintain 11% Stake: Phoenix
- MATAS DC : Matas 2Q Sales Miss Ests., Confirms FY Outlook
- NOVOB DC : Novo Nordisk Says Tresiba Expected to Be Launched Early 2016
- SCMN VX : Swisscom Fined CHF7.9M by Competition Body Over Broadband
- SIX2 GY : Sixt 3Q Pretax Rises 24%; Confirms 2015 Outlook
- SW FP : Sodexo FY Net Beats Ests., Sees FY16 Organic Growth About 3%
- TEF SM : Telefonica May Halt Fiber Investment in Spain: Cinco Dias
- UCG IM : UniCredit Upside Limited in N/T, Execution Risks High: RBC
- VOW3 GY : VW Names Steiner as Compliance Commissioner in Wake of Scandal
- VOw3 GY : VW Admitted Diesel Irregularities to CARB in Aug.: Handelsblatt
- VTG GY : VTG 9-Month Sales, Ebitda Rise; Confirms Forecasts

>>> Europe : Brokers Upgrades & Downgrades - 19th of November 2015

>>> Up
*BIM RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
*DEUTZ RAISED TO HOLD VS REDUCE AT KEPLER CHEUVREUX
*NATIONAL GRID PLC RAISED TO OUTPERFORM AT RBC CAPITAL

>>> Down
*ALDERMORE CUT TO UNDERPERFORM AT BOFA
*PARAGON CUT TO UNDERPERFORM AT BOFA
*SHAWBROOK CUT TO NEUTRAL AT BOFA
*SOCIETE GENERALE CUT TO ADD VS BUY AT ALPHAVALUE
*SOCO INTERNATIONAL CUT TO UNDERPERFORM AT MACQUARIE
*VIRGIN MONEY CUT TO NEUTRAL AT BOFA
*WIRECARD CUT TO EQUAL WEIGHT VS OVERWEIGHT AT BARCLAYS

>>> PT Change



>>> Initiation
*AENA RATED NEW NEUTRAL AT MACQUARIE; PT EU105
*AEROPORTS DE PARIS RATED NEW OUTPERFORM AT MACQUARIE; PT EU130
*FRAPORT RATED NEW NEUTRAL AT MACQUARIE; PT EU60
*HASTINGS GROUP HOLDINGS RATED NEW HOLD AT HSBC
*HASTINGS RATED NEW OUTPERFORM AT CREDIT SUISSE, PT 200P
*HASTINGS GROUP RATED NEW BUY AT GOLDMAN; PT 204P
*HASTINGS GROUP RATED NEW OVERWEIGHT AT BARCLAYS; PT 198P
*NEMETSCHEK RATED NEW HOLD AT KEPLER CHEUVREUX; PT EU41
*RIB SOFTWARE RATED NEW BUY AT KEPLER CHEUVREUX; PT EU15

>>> Call
>> Stock
*FLOW TRADERS ADDED TO SMALL & MID CAP LIST AT CREDIT SUISSE

(BarCap) Global Equity Strat.: 2016 Outlook: EPS and Sentiment toTrump Rates

2016 Outlook: EPS and Sentiment to Trump Rates

Prospects for an imminent rise in US interest rates need not undermine stock prices.

Sentiment took a beating in the late summer selloff and we now know non-resident investors were very heavy sellers: history shows positive returns from such episodes.

Global growth of 3.4% next year, and an expected removal of the Oil price drag, should mean earnings growth recovers to 7% in 2016.

Most global valuation measures are “in-line” or slightly below historical norms, and therefore no barrier to performance if the earnings are forthcoming. Indeed the global market is cheaper now than at the start of previous US tightening cycles.

We do think Fed policy could impact leadership within the market. In the past, higher rates have favoured value over quality and growth, while inhibiting the performance of early cycle cyclicals, such as Consumer Discretionary.

Higher US rates and superior EPS growth should also encourage leadership amongst non-US equities.

>>> Asian Update

Asian Mid-session Update: Markets rise on expectations of slow Fed liftoff; BOJ on hold with a new downside inflation risk warning


***Economic Data***
- (JP) JAPAN OCT TRADE BALANCE TOTAL: ¥111.5B V -¥246BE; ADJUSTED: -¥202.3B V -¥343BE
- (NZ) NEW ZEALAND Q3 PPI INPUT Q/Q: +1.6% (2-year high) V -0.3% PRIOR; PPI OUTPUT Q/Q: +1.3% (2-year high) V -0.2% PRIOR
- (NZ) NEW ZEALAND OCT ANZ JOB ADVERTISEMENTS M/M: 1.2% V 2.3% PRIOR

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +1.1%, S&P/ASX +1.3%, Kospi +0.9%, Shanghai Composite -0.1%, Hang Seng +1.1%, Dec S&P500 +0.1% at 2,081

***Commodities/Fixed Income***
- Dec gold +0.6% at $1,075/oz, Jan crude oil +0.7% at $42.23/brl, Dec copper -0.6% at $2.06/lb
- (CN) NDRC to cut natural gas wholesale price by 28% from Nov 20th - SCMP
- (CN) PBoC to inject CNY20B in 7-day reverse repos (40th consecutive injection); Injects net CNY10B this week v neutral position prior
- (JP) Japan investors bought net ¥871B in foreign bonds v bought ¥1.03T in prior week; Foreign investors bought net ¥328B in Japan stocks v bought ¥171B in prior week

***Market Focal Points/FX***
- Impressive US market rally in the wake of the Fed meeting minutes has carried over into Asia, where higher-beta Australia market is leading the way. The takeaway from the minutes is generally that December meeting would be the likely juncture for the liftoff, but any tightening campaign would be very gradual. US treasuries traded little changed post minutes, though USD has been on the defensive in Asia, particularly vs AUD and NZD. AUD/USD rose some 70pips above 0.7170, NZD/USD up nearly 80pips from the lows above 0.6540, and EUR/USD up 60pips above 1.0710.

- USD/JPY pair hit a low near 123.00 - down over 50pips - with most of the losses coming after the Bank of Japan policy decision. BOJ maintained its annual pace of monetary base expansion at ¥80T and also kept its overall economic assessment unchanged, suggesting that domestic economy continued to recover moderately. The only change the BOJ has made is on inflation front, reiterating that Y/Y rate of increase in CPI about 0% and inflation expectations rising from longer-term perspective, but adding some indicators recently showed weak developments. In its outlook, BOJ still sees Y/Y increase in CPI to be 0% for time being due to decline in energy prices.

- Earlier, Japan trade balance was better than expected on the headline, but a look inside the numbers revealed exports falling for the first time in 14 months and import decline much higher than expected - -13.4% v -8.6%e. Shipments to Asia and China were both down over 3.5%, while exports to US and Europe up over 5%.

- Elsewhere, shares of BHP were up about 3% amid positive sentiment from its annual shareholders meeting in spite of the Samarco disaster. China weekly open market operations revealed first net injection after 2 weeks of neutral stance. Terror alert levels across the globe in the wake of the Paris attacks also remain high - NYC police dept said it was "aware" of an ISIS video featuring Times Square, but did not suggest there were any immediate threats.

***Equities***
US equities / ADRs:
- KBIO: Turing Pharma CEO Martin Shkreli discloses buying 1.2M additional shares raising his stake to 1.625M shares (39.4% shares outstanding); +824% afterhours
- GMCR: Reports Q4 $0.85 v $0.70e, R$1.04B v $1.02Be; Raises annualized dividend 13% to $1.30 (implied yield 3.2%); +19.1% afterhours
- CTRP: Reports Q3 $2.09 (unclear if comp) v $0.07e, R$501M v $487Me; +13.6% afterhours
- CRM: Reports Q3 $0.21 v $0.19e, R$1.71B v $1.70Be; +5.8% afterhours
- WB: Reports Q3 $0.10 v $0.06e (1 est), R$124.7M v $84.1M y/y; +4.7% afterhours
- SINA: Reports Q3 $0.39 v $0.21e, R$224M v $220Me; +2.3% afterhours
- NTAP: Reports Q2 $0.61 v $0.56e, R$1.45B v $1.42Be; +1.8% afterhours
- LB: Reports Q3 $0.55 v $0.53e, R$2.48B v $2.50Be; +0.8% afterhours
- AGN: Pfizer said to be in advanced talks with Allergan on deal terms for as much as $380/shr - financial press; +0.7% afterhours
- SMTC: Reports Q3 $0.16 v $0.23e, R$116M v $115Me; -7.2% afterhours
- SUNE: Reportedly Blackstone unit denies earlier reports, says NOT looking to invest in SunEdison debt - financial press; -9.9% afterhours


Notable movers by sector:
- Consumer discretionary: Mobile Embrace MBE.AU +14.6% (guidance); Panasonic Corporation 6752.JP +1.2% (to sell new OLED TVs in FY17)
- Financials: Legend Holdings Corporation 3396.HK +0.3% (Q3 result); Bank of Beijing 601169.CN +10.0% (targeted RRR cut); Greentown China 3900.HK +6.2% (plans JV); OzForex Group OFX.AU +28.1% (possible takeover speculation); Tokio Marine Holdings 8766.JP +1.5% (H1 result)
- Industrials: James Hardie Industries JHX.AU -8.0% (H1 result)
- Technology: Truly International Holdings 732.HK +1.2% (9-month result)
- Materials: South32 S32.AU +4.0% (reaffirms guidance); BHP Billiton BHP.AU +2.1% (AGM; to commission external probe into dam spill)
- Energy: China Resources Gas Group 1193.HK -1.8% (NDRC cuts natural gas price)

>>>> US After Hours Summary: GMCR +16.4%, CTRP +16.2%, CRM +5.4%,


After Hours Summary: GMCR +16.4%, CTRP +16.2%, CRM +5.4%, WB +4.8%, SINA +2.3%, SMTC -8.5% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: GMCR +16.4%, CTRP +16.2%, CRM +5.4%, WB +4.8%, SINA +2.3%, NTAP +0.7%, CVO +0.6%, LB +0.6%, HI +0.2%

Companies trading higher in after hours in reaction to news: KBIO +687.4 (Former Retrophin CEO and current Turing Pharma CEO Martin Shkreli discloses ownership of ~1.625 mln shares; ~1.2 mln shares purchased from 11/16 to 11/17 at prices ranging from $0.30-2.45 per share), STEM +51.7% (reported six-month interim results for the first cohort in its ongoing Phase II Pathway Study in cervical spinal cord injury; data showed motor improvements in both strength and function), VTAE +23.3% (announced positive top-line results from a Phase 1 multiple ascending dose trial of VTP-43742; shown to be safe and generally well tolerated in healthy human volunteers), PLPM +6.4% (signed multi-currency processing agreement with BBVA Bancomer and launches its integrated payments hospitality solution for BBVA Bancomer merchants), TUMI +6.4% (to replace IPCM in the S&P SmallCap 600), CETV +1.9% (TCS Capital Management discloses 10.9% active stake in 13D filing; TCS sends letter to Board urging pursuit of strategic alternatives), RTN +1.5% (affirmed $0.67/share quarterly dividend; added $2 bln to repurchase program)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: SMTC -8.5%

Companies trading lower in after hours in reaction to news: SUNE -9.5% (Reuters reporting that Blackstone (BX) is rejecting rumors it was considering an investment in SUNE), AMAG -8.8% (received Complete Response Letter from the FDA for Makena (hydroxyprogesterone caproate injection) for the reduction of the risk of preterm birth), VLP -7.6% (announced an underwritten public offering of 4.25 mln units), AGN -3.2% (lower following WSJ report that the Treasury Department may issue anti inversion tax rules), DVA -1.7% (co's subsidiary received Civil Investigative Demand from the U.S. Department of Justice),