>>> Asian Update

Asian Mid-session Update: RBA Quarterly Statement cuts GDP and inflation outlook but maintains neutral stance; BOJ's Kuroda still willing to boost QE if needed

***Economic Data***
- (JP) JAPAN SEPT PRELIMINARY LEADING INDEX CI: 101.4 V 101.8E; COINCIDENT INDEX:111.9 V 112.1E
- (AU) AUSTRALIA OCT AIG PERFORMANCE OF CONSTRUCTION INDEX: 52.1 V 51.9 PRIOR; 3rd month of expansion

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +0.4%, S&P/ASX +0.3%, Kospi -0.2%, Shanghai Composite +0.5%, Hang Seng -0.8%, Dec S&P500 -0.1% at 2,092

***Commodities/Fixed Income***
- Dec gold +0.3% at $1,107/oz, Dec crude oil +0.5% at $45.43/brl, Dec copper +0.3% at $2.26/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 8.3 tonnes to 671.8 tonnes; lowest since Aug 8th
- (CN) China MOF sells 1-yr bonds, avg yield 2.41%
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr and ¥400B in 5-10yr JGBs
- (JP) Japan investors bought net ¥883B in foreign bonds v bought ¥465B in prior week; Foreign investors bought net ¥1878B in Japan stocks v bought ¥325B in prior week

***Market Focal Points/FX***
- Asian equities are mixed, tracking the pause on Wall St going into Friday's non-farm payrolls. A strong number - anywhere above 200K - will likely solidify expectations for December FOMC liftoff even further. Fed funds futures are already pricing in over 50% chance of a hike next month, as short-term rates have continued to move higher. USD is also benefiting from those tailwinds in today's session, particularly vs JPY and AUD, after comments from BOJ Gov Kuroda and RBA Quarterly Policy statement. USD/JPY was up over 20pips above 121.85, while AUD/USD fell 20pips below 0.7140. EUR/USD traded in a 25pip range below 1.09.

- BoJ Gov Kuroda said the central bank is prepared to adjust policy to achieve 2% target if necessary, but still believes the current setting are enough to achieve price objective. Kuroda expressed the most concern over risks in emerging economy slowdown as it pertains to demand for Japan output and exports, and also called for wage growth to be reflected in the price trends. Overall, Kuroda said fundamentals in Japan are sound, as overall the comments continue to explain the BOJ maintaining its stance late last month despite some pressure to boost QE. On China, Kuroda said the chance of a hard landing on the mainland is low, and even the rising NPLs are not a challenge since Beijing has the reserve capacity to solve it. Separately, Japan PM Abe also cheered the economy, noting Japan is closer to escaping from deflation and reiterating the 2% inflation target can be met with current easing policy.

- Among notable comments from China, premier Li acknowledged that the transformation from investment-driven to consumer-led model is a painful process. A Chinese press report also called attention to bank NPLs in some provinces topping 2% - recall overnight CBRC announced Q3 NPLs nationwide hit a new record high of 1.59%

- Reserve Bank of Australia released its quarterly policy statement with projections for growth and inflation. RBA cut 2015 GDP at 2.25% v 2.50% prior, affirmed 2016 at 2.5-3.5%, and narrowed lower 2017 GDP 3.0-4.0% v 3.0-4.5% prior. On inflation, RBA lowered 2015 CPI by 0.5pts to 2.0%, but affirmed 2016 and 2017 at 2-3% range. Despite the lower expectations, RBA reiterated that economic improvement has been firmer and exports recovered in Q3, keeping the damage on AUD to a minimum. Economists with CBA said the central bank reiterated its conditional easing bias and will likely remain on hold unless domestic growth conditions slow dramatically.

***Equities***
US equities / ADRs:
- DATA: Reports Q3 $0.14 v $0.07e, R$170.8M v $156Me; +19.4% afterhours
- QRVO: Reports Q2 $1.22 v $1.11e, R$707.4M v $700Me; Announces $1B share repurchase (15% of market cap); +13.8% afterhours
- NVDA: Reports Q3 $0.46 v $0.25e, R$1.31B v $1.18Be; +9.9% afterhours
- PODD: Reports Q3 -$0.33 v -$0.26e, R$87.3M v $83.8Me; +8.8% afterhours
- MNST: Reports Q3 $0.84 v $0.81e, R$756.6M v $740Me; +8.1% afterhours
- SHAK: Reports Q3 $0.10 v $0.07e, R$53.3M v $47.1Me; +5.4% afterhours
- DIS: Reports Q4 $1.20 v $1.17e, R$13.5B v $13.6Be; -0.4% afterhours
- KHC: Reports Q3 $0.44 v $0.59e, R$6.12B v $6.10Be; -2.2% afterhours
- MHK: Reports Q3 $2.98 v $3.00e, R$2.15B v $2.17Be; -3.2% afterhours
- GLUU: Reports Q3 $0.06 v $0.00e, R$64.4M v $59.3Me; Cuts guidance; -20.5% afterhours
- MW: Reports preliminary Q3 $0.46-0.51 v $0.98e; cuts FY15 outlook now sees $1.75-2.00 v $2.79e; -30.5% afterhours

Notable movers by sector:
- Consumer discretionary: SAIC Motor Corp 600104.CN +10.0% (Oct result, private placement); Yamada Denki 9831.JP +5.8% (H1 result)
- Financials: CITIC Securities 6030.HK +3.3% (Oct result); Haitong Securities 6837.HK +3.2% (Oct result); China Merchants Securities Co 600999.CN +2.7% (Oct result); Everbright Securities Co 601788.CN +6.8% (Oct result); GF Securities Co 000776.CN +3.4% (Oct result)
- Industrials: Geely Automobile Holdings 175.HK -2.7% (Oct result); Tongfang Guoxin Electronics Co 002049.CN +10.0% (private placement); Hanjin Shipping Co 117930.KR -1.2% (Q3 result); Daikin Industries 6367.JP 2.2% (H1 result); Mitsubishi Chemical Holdings Corp 4188.JP +1.8% (H1 result); Sumitomo Rubber Industries 5110.JP -7.9% (9-month result)
- Technology: MediaTek 2454.TW -2.7% (Oct result); Funai Electric Co. 6839.JP -1.2 % (H1 result speculation)
- Materials: Marubeni Corp 8002.JP +1.6% (H1 result); BHP -2.5% (Discloses incident at Samarco iron operations; 15 people reported killed)
- Telecom: KDDI Corp 9433.JP +0.3% (H1 result)
- Utilities: Korea Electric Power Corp 015760.KR +1.0% (Q3 result)

>>> Japan PM Abe: Japan economy is closer to escaping from deflation

Japan PM Abe: Japan economy is closer to escaping from deflation 
- Reiterates view to hit the 2% inflation target with current easing policy
- Reiterates view that excessive Yen strengthen has been corrected
- Slower capex and smaller wage hikes to hurt demand
- Hopes China can continues structural reform
- Welcomes Indonesia and South Korea to join TPP

RTR - Fed faces challenge of how to justify possible slowdown in jobs growth - B

Fed faces challenge of how to justify possible slowdown in jobs growth - Bullard

The Federal Reserve has been struggling to convince investors it is about to raise interest rates and now faces the risk that a likely slowdown in job growth will be interpreted as a downturn in the broader economy that will cause the Fed to hold off yet again, St. Louis Fed President James Bullard said on Thursday.

In an interview with Reuters, Bullard said U.S. central bankers may need to mount a new communications campaign to convince markets and the public of a counter-intuitive idea: that slowing monthly job growth is natural at this point in the recovery, and will allow the Fed to stay on track for a likely December rate hike.

Job growth averaging more than 200,000 per month during the recovery is unsustainable, Bullard said, estimating that growth of between 100,000 and 125,000 per month would be enough to account for an increasing population and a trend rate of economic growth.

"This is not Lake Wobegon. You cannot be above average all the time," Bullard said. “I don't think markets have absorbed this. Everyone has in their head 200,000...The natural expectation is for the pace of job growth to slow in the months and quarters ahead. We are expecting that to happen. It would be normal, and that would not indicate poor macroeconomic performance.”

The latest job numbers come out on Friday, and will be closely parsed for clues about how it might influence the Fed. A dip in September to growth of 140,000 jobs caused doubt about whether the Fed could follow through with its rate hike plans.

Bullard, speaking in a conference room at the St. Louis Fed, said explaining any downturn in jobs is one of several struggles the Fed may face not just in approving its "liftoff" rate hike, but in the longer battle to raise rates to a near-normal level.

It has been nearly a decade since the Fed last approved a rate increase, and Bullard said it is an open question how members will return to a meeting-by-meeting judgment of whether to move higher.

"The committee is not used to thinking in those terms because we have been at zero for so long. When is the next move and why? That will be a healthy debate," Bullard said.

The Fed used its statement last week to set the stage for a December liftoff, using language explicitly meant to correct what Bullard said was a "disconnect" between the Fed's judgment that a rate hike was coming soon and investors who had pushed expectations of Fed action well into next year.

Though Bullard said he generally opposes such "calendar" guidance, circumstances called for it in this case.

“Market expectations had gone out so far...It was good to reel it in," he said.

The risk now, he said, is that what may be a natural evolution in job growth gets misinterpreted, and undermines perceptions of the Fed's intentions yet again.

Bullard is among the Fed policymakers who are more concerned about inflation, and pushed for a rate hike when the U.S. central bank met in September.

But the level of job growth expected as the recovery matures is something policymakers of all stripes are watching carefully. It figures into forecasts of the unemployment rate, and also into projections of what the U.S. economy would look like if it was growing at a sustainable trend rate.

Several Fed officials have put that figure at around 100,000 jobs per month. A 2014 study of labor market demographics by top Fed staff said that in coming years between 50,000 and 75,000 additional jobs would be needed each month "to maintain an unchanged unemployment rate."

"We want to be talking more about this," Bullard said.

WSJ : Agricultural Giants Look to Join Forces, Syngenta & Dupont in talks over A

Agricultural Giants Look to Join Forces

DuPont explores agriculture deals with Syngenta, Dow as low crop prices pressure profits

Some of the world’s largest agricultural companies are looking to combine with one another as three years of shriveling crop prices have pressured profits, in what would be the industry’s first big shake-up in at least a decade.

Syngenta AG is discussing with DuPont Co. a potential combination with DuPont’s agriculture division, according to people familiar with the matter. DuPont is also separately discussing a potential alternative agriculture deal with Dow Chemical Co., which is exploring a sale of its seed and pesticide unit, another person familiar with the matter said.

The discussions are at an early stage and may result in no deal, the people said.

But the deal talk has clearly gathered steam since Monsanto Co. in August abandoned its effort to acquire Syngenta for as much as $46 billion after being rebuffed by the Swiss company. That deal would have created the world’s largest supplier of seeds and pesticides, but Monsanto now could face the threat of much-enlarged competitors if its rivals end up combining and it strikes no combination of its own, analysts say.

Executives have publicly signaled their interest in consolidating, without being specific. Edward Breen, who became DuPont Co.’s interim chief executive on Oct. 16 following the departure of Ellen Kullman, said last week he has been discussing deals with his counterparts.

“Everyone is talking to everyone,” said Dow Chemical CEO Andrew Liveris on a conference call last month, when his company announced it is exploring deal possibilities for its agriculture division.

U.S. farm income is on pace to hit its lowest level in nearly a decade, pressuring profits in the global market for genetically modified seeds and chemicals to kill weeds and insects. The manufacturers also face growing challenges from pests developing resistance to commonly used products, along with mounting consumer scrutiny of crop chemicals and biotech seeds.
“The natural evolution is to get together, cut costs, combine R&D efforts and get scale,” said Ari Gendason, senior vice president of corporate investments for Continental Grain Co., an agriculture-focused holding company that has owned seed-company stocks. “If one [merger] happens, more than one will happen.”

The recent deal talks follow mounting investor pressure to improve returns. Trian Fund Management LP has pushed for change at DuPont, as has fellow activist fund Third Point LLC at Dow Chemical, while some Syngenta shareholders in October formed a group to protest Syngenta’s spurning of Monsanto’s advances. Syngenta, whose CEO abruptly resigned last month, has said it is selling its vegetable- and flower-seeds businesses and reviewing its other seed businesses.

Inexpensive debt, competitive pressure to secure merger partners and other factors have fueled a broader deal boom that has put 2015 on pace to be the biggest year on record for mergers and acquisitions.

A series of multibillion-dollar deals around the start of last decade formed the “big six” group of companies—which also includes Bayer AG and BASF SE—that continue to dominate the global seed and pesticide business. The sector’s last sizable deal closed in 2007, when Monsanto acquired top U.S. cottonseed developer Delta & Pine Land Co. for $1.5 billion, according to data compiled by Dealogic.

Farmers were enjoying a prosperous period thanks in part to increased crop demand from expanding livestock and biofuel industries, which helped sharply increase farm income and enabled seed-and-pesticide makers to secure handsome margins for their products.

But three straight years of bumper crops have swelled grain bins around the world and pressured grain and oilseed prices. The U.S. Department of Agriculture expects U.S. farm incomes to fall 36% this year to the lowest level since 2006.

A combination of Syngenta with DuPont’s agriculture unit would control about 27% of global pesticide sales, according to data compiled by Morgan Stanley. Analysts say such a combination may require the divestment of Syngenta’s U.S. seed business to smooth antitrust concerns, as DuPont already controls 35% and 33% of the U.S. corn-seed and soybean markets, respectively.

Syngenta would keep its corporate base in Switzerland as part of any deal, according to a person familiar with the matter.

DuPont and Dow’s agricultural operations combined would control about 17% of the global market in pesticides, becoming a close No. 3 behind Syngenta and Bayer, according to Morgan Stanley. Dow’s seed business also may need to be divested in such a combination.

Trian last year had pushed DuPont to split off its agriculture unit, but Ms. Kullman had rejected the move as overly costly and providing few clear benefits.

Most agriculture executives say that big crops and low commodity prices are likely to continue, barring a major drought or pest outbreak, deepening challenges for farmers and the companies that supply them.

Brett Wong, an analyst with Piper Jaffray & Co., said the current agricultural downturn “could be more elongated than people might think.”

Farmers, however, remain leery of the increased pricing power that farm groups say could come with increased industry concentration. Since 1995, the average cost of seeds has more than tripled, while pesticide costs have risen about 11%, according to USDA data that aren’t adjusted for inflation.

Bob Young, chief economist with the American Farm Bureau Federation, said he hasn’t yet seen evidence that market concentration is driving higher prices. But he noted that “there’s just not a whole lot of these guys left, and you almost get to where you’ve got to take what they’re going to hand you.”

>>> US After Hours Summary: STMP +19.8%, ECOM +19.4%, DATA +18.5


After Hours Summary: STMP +19.8%, ECOM +19.4%, DATA +18.5%, ICON -51.8%, MW -30.2%, SWIR -19.7% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: STMP +19.8%, ECOM +19.4%, DATA +18.5%, VRNS +17.7%, SREV +16.9%, LPTH +16.7%, QRVO +14.5%, WTW +13.3%, RATE +13.3%, YUME +12.9%, AXGN +12.5%, TRUE +12.2%, GSVC +11.1%, CYTX +10.8%, UBNT +10.4%, NVDA +10.3%, MITK +10.2%, AIRM +10.1%, KTOS +9.8%, DWA +8.9%, MNST +8.9%, PODD +8.8%, ATRA +8.3%, AGTC +6.9%, OCLS +6.6%, OLED +6.3%, SHAK +5.7%, WING +5.3%, JAX +4.9%, ELON +4.8%

Companies trading higher in after hours in reaction to news: PVCT +28.7% (reported results that reveal a clinically relevant immunoadjuvant pathway triggered by tumor cell death secondary to ablation with RB), MHR +20% (reported refinancing of its existing senior secured revolving credit facility), ECOM +19.4% (appointed Richard Cornetta as Chief Accounting Officer), RATE +13.3% (reached an agreement to sell its insurance business to Genstar Capital Partners for $140 mln in cash), OXGN +7.4% (reported initial data from a Phase 1b/2 study of CA4P in combination with Votrient; results are 'encouraging and we expect to move into the phase 2 portion of the study in early 2016'), AGEN +12.5% (entered into three transactions, including agreement to acquire XOMA's (XOMA) antibody pilot plant manufacturing facility and capabilities), BRKS +1.4% (agreed to acquire BioStorage Technologies for $127 mln in cash; expects it to become accretive to Co's non-GAAP earnings within the first half of fiscal 2016; co also reported earnings)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: ICON -51.8%, MW -30.2%, SWIR -19.7%, MCZ -18.6%, CMLS -18.6%, TNGO -18.4%, GLUU -18.3%, PXLW -14%, SKUL -13.4%, GDOT -11.3%, AAOI -9.8%, TRIP -8.8%, ALDR -7.6%, MFLX -7.4%, MMI -7.1%, CPST -7%, NEWR -5.6%, AEZS -5.6%, CLVS -4.9%, XOMA -4.6%, FICO -4.6%, SNTA -4.5%, SYN -4.3%, GEVO -3.7%, ACET -3.5%, PRAA -3.5%, AMTG -3.4%, TCPI -3.2%, DIOD -3.1%, GST -2.4%

Companies trading lower in after hours in reaction to news: KBIO -58.0% (to reduce workforce by ~61%; paused enrollment in KB004 Phase 2 study; will explore strategic alternatives), MCZ -18.6% (entered into $25 mln ATM common stock offering agreement with Ascendiant Capital, reported Q3 results), MRNS -13.3% (to offer and sell shares of its common stock in an underwritten public offering; size not disclosed), BSTC -5.8% (reported that Endo International (ENDP) has exercised its early opt-in for CCH to include two new potential indications: lateral thigh fat and plantar fibromatosis), EYES -3.7% (disclosed that Medicare payment rate for the Argus II Retinal Prosthesis System may be cut), TCPI -3.2% (announced delay in reporting third quarter 2015 financial results; due to a pending Audit Committee investigation; offers prelim Q3 results), NSR -2.3% (agreed to acquire MarketShare Partners for $450 mln)

>>> US Close Dow-0.02% S&P-0.11% Nasdaq-0.29% Russell+0.03%

Closing Market Summary: Stocks Slip Ahead of October Employment Report

The major averages registered their second consecutive decline on Thursday with the S&P 500 shedding 0.1% while the Nasdaq Composite (-0.3%) underperformed.

Broadly speaking, the Thursday affair was fairly quiet, but that was not particularly surprising considering Friday morning will feature the release of the Employment Situation report for October. The Consensus expects the report to reveal the addition of 181,000 payrolls while hourly earnings are expected to have increased 0.2% in October.

Tomorrow's report could lead to volatility in the market, making today's reluctance among investors to push the market in either direction rather understandable. The S&P 500 is set to enter the Friday session with a week-to-date gain of 1.0% while the Nasdaq is higher by 1.5% for the week despite today's underperformance.

Biotechnology was largely responsible for today's relative weakness in the tech-heavy Nasdaq. Valeant Pharmaceuticals (VRX 78.77, -13.21) was in focus once again as the stock dove 14.4% amid continued concerns about the company's revenue recognition practices. However, biotech's woes were not isolated to Valeant as Gilead Sciences (GILD 107.83, -1.15) lost 1.1% while Celgene (CELG 120.46, -6.71) dove 5.3% after reporting a one-cent beat on below-consensus revenue. For its part, the broader iShares Nasdaq Biotechnology ETF (IBB 331.16, -6.47) lost 1.9% while the health care sector surrendered 0.4% after being down more than 1.0% in the early going.

Similar to health care, influential sectors like energy (-1.0%) and technology (-0.3%) also finished among the laggards. The energy sector narrowed its week-to-date gain to 2.9% amid a decline in crude oil. To that point, WTI crude fell 2.3% to $45.26, widening this week's decline to 2.9% after being up nearly 4.0% at its best level on Tuesday.

As for technology, the top-weighted sector struggled amid weakness in the chipmaker arena after Qualcomm's (QCOM 51.07, -9.19) cautious guidance overshadowed better than expected earnings. Shares of QCOM fell 15.3% while the PHLX Semiconductor Index fell 2.1%. Elsewhere in the tech sector, Facebook (FB 108.76, +4.82) surged 4.6% in reaction to better than expected results.

Treasuries spent the day in negative territory, ending roughly in the middle of their ranges with the 10-yr yield rising one basis point to 2.24%.

Today's participation was roughly in line with average as more than 870 million shares changed hands at the NYSE floor.

Economic data released today included initial claims and productivity/unit labor cost data:

  • Initial claims for the week ending October 31 increased 16,000 to 276,000 (consensus 262,000) from an unrevised 2600,000 level in the prior week. There were no special factors influencing the jump in claims, which are still running at encouragingly low levels.
    • The four-week moving average for initial claims increased by 3,500 to 259,250
    • Continuing claims for the week ending October 24 increased 17,000 to 2.163 million (consensus 2.145 mln) from the prior week's upwardly revised level of 2.146 million (from 2.144 mln)
  • The preliminary third quarter productivity report showed nonfarm business productivity increasing 1.6% quarter to quarter (consensus -0.2%) versus 3.5% in the second quarter
    • Output increased 1.2% while hours worked decreased 0.5%, marking the first decline in that series since the third quarter of 2009
    • Unit labor costs were up just 1.4% (consensus 2.2%)

Tomorrow, October Nonfarm Payrolls (consensus 181,000) will be reported at 8:30 ET while the September Consumer Credit report (consensus $18.00 billion) will be released at 15:00 ET.

  • Nasdaq Composite +8.3% YTD
  • S&P 500 +2.0% YTD
  • Dow Jones Industrial Average +0.2% YTD
  • Russell 2000 -1.1% YTD

>>> Tel. Italia Board Approves Savings Shrs Conversion Proposal

Board approved proposal to convert non-voting savings shares to common stock, according to company statement.
  • Investors can swap one savings share for 1 common stock and receive 9.5 euro cents or at the end of the offer period they would receive 0.87 common share without cash payment.
  • Conversion expected to bwe completed before distribution of 2015 dividend
  • Common shareholders meeting set for Dec. 15, while savings holders scheduled to meet Dec 17
  • Approval came at board meeting today