(CS) Equity Strat : Client perspectives: lost and bearish

Following meetings with clients in the US, Europe and Asia over the past few weeks, we make the following observations: 
1) Confusion; 
2) Growth pessimism; 
3) China concerns; 
4) QE not working and has run out of steam; 
5) Two new concerns often cropped up (the $0.5trn decline in global FX reserves, the rising political tide against profits); 
6) Regional views: Pessimism on GEM equities is extreme, except in Asia. Investors are happy to stick with Europe (growth, low margins, QE-friendly ECB), but have largely capitulated on Japan (too exposed to China and leveraged to global GDP); 
7) The recent rotations have hurt the majority of investors; 
8) What was not mentioned: Eurozone politics, US debt ceiling, Russia's involvement in Syria or the UK referendum on the EU. 

In sum, we think clients are focused more on risks, which are abnormally high, rather than reward, which is also high.

>>> What to look at today - 16th of October 2015

Dow+1.28% S&P+1.49% Nasdaq+1.82% Russell+2.27%
US Market closed higher. The broad-based rally in the U.S. followed an overnight session that featured dovish comments from two European Central Bank members, setting expectations for more monetary easing from the central bank. This started with Vitor Constancio who spoke in Hong Kong, joining the chorus of voices calling on the Federal Reserve to delay its first rate hike while Ewald Nowotny said that more needs to be done by the ECB in light of soft inflation data. financials (+2.4%) leading the way, telecom services (+2.3%) and health care (+1.3%), IBB +4.4%. volume were the highest of the week with 993mil shares...US After Hours HSC +2.1%, YUM +1.8%, WAL +1.0%, WYNN -8.2%, SAVE -3.8%, SLB -0.9%, AMD -0.5% following earnings/guidance, PTCT +6.0% on Phase 3...Asian indices are mixed and searching for catalysts and direction despite a final hour surge on Wall St. Nikkei225 is outperforming, tracking a bounce in USD/JPY pair back above 119 after a rise in core US CPI figures restored some hopes that the FOMC could still move this year. focus falls on Monday (Sunday evening US time) release of China Q3 GDP and the balance of Sept economic data. Overnight, China's lending data topped estimates and M2 was in line. Economist with HSBC cited "recovering home market and accelerated infrastructure investment contributing to the growth" in reflecting on China lending data

Nikkei +1.08% Hang Seng +0.50% Shanghai +1.185

Eur$ 1.1385 CNY 6.3583 JPY 119.10 GBP 1.5481 EURCHF 1.0835 BRL 3.7994 RUB$ 61.43 WTI $47.03 (+1.4%)

S&P -0.12% EuroStoxx +0.46% Dax +0.644 SMI +0.06%

Macro :
- Draghi’s Words Mean Little to European Markets Expecting Action

Keep an eye on :
- AIR FP : Air France-KLM Board, CEO, Prefer Growth Plan Over Reductions
- AIR FP : Airbus Seeks Financing From Emirates for A380 Neo: Tribune
- AZN LN : Astra Gets FDA Response Letter for Saxagliptin/Dapagliflozin
- BATS LN : BAT Pays BRL9.3b to Buy 343m Shrs of Brazil Unit Souza Cruz
- BOSS GY : Hugo Boss Revises 2015 Goals, Cites Weak 3Q Results -->-8% pre open
- CA FP : Carrefour 3Q Sales In Line; Other Europe LFL Sales Beat Ests.
- DBK GY : Deutsche Bank Said to Plan Sale of U.S. Private-Client Brokerage
- ELI1V FH : Elisa 3Q Revenue, Net Income Beats Ests.; Raises FY Outlook
- ENEL IM : Tax Cut in Italy to Favor Generators, Boosting Enel, A2A: Citi
- GLEN LN : Glencore Plans More Debt Cuts to Help Win Upgrade in Credit Rating - http://on.wsj.com/1hH6YGF
- GLEN LN : *BLACKROCK ADDS TO GLENCORE POSITION THROUGH SEPT. 16 PLACEMENT
- HPL GY : Hapag-Lloyd May Consider 20%-30% Profit Dividend in Year’s Time
- LSE LN : London Stock Exchange Launches Interest Rate Derivatives Venture
- MOBB BB : Belgian Cable Deregulation Delays Mobistar TV to 2016: Tijd Link
- NESN VX: Nestle Chairman ‘Moderately Optimistic’ on European Growth: WB, Says China Sales Recovery Slower, N. America Better
- NEX FP : Nexans CFO Says Hasn’t Felt Particular Slowdown in Car Demand
- RCO FP : Remy 2Q Cognac Organic Sales Drop Less Than Est, China Improving
- SHP LN : Shire preparing bid for Radius Health - http://bit.ly/1hHc5qt
- TIT IM : Tel. Italia Says Wide Time Margin, Guarantees in Fintech Deal
- VAC FP : Pierre & Vacances: FY Rev. EU1.44B vs EU1.42B
- UCG IM : UniCredit Reiterates Confidence in Managers’ Actions
- VOD LN : Vodafone Said in Branding Deal With Russia’s MTS in Ukraine: FT
- VOW GY : VW Loses Market Share in Europe in Sept. as Recalls Loom, from 23.7% to 23.3%

>>> Europe : Brokers Upgrades & Downgrades - 16th of October 2015

>>> Up
*ADP RAISED TO BUY VS NEUTRAL AT CITI

>>> Down
*AB FOODS CUT TO HOLD VS BUY AT SOCGEN, PT 3,300P
*EDP RENOVAVEIS CUT TO NEUTRAL VS BUY AT CITI
*HAMBURGER HAFEN CUT TO NEUTRAL VS BUY AT CITI
*HOCHSCHILD MINING CUT TO REDUCE VS BUY AT HSBC
*ICAP CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS

>>> PT Change


>>> Initiate
*CHRISTIAN DIOR RATED NEW HOLD AT SOCIETE GENERALE, PT EU182
*DIAGEO RATED NEW HOLD AT HSBC, PT 1,830P
*EASYHOTEL RATED NEW BUY AT LIBERUM
*EUTELSAT RATED NEW OUTPERFORM AT WELLS FARGO
*FRAPORT RATED NEW BUY AT SANTANDER
*PERNOD RICARD RATED NEW BUY AT HSBC, PT EU108
*REMY COINTREAU RATED NEW HOLD AT HSBC, PT EU63

>>> Call

>>> USAfter Hours Summary: HSC +2.1%, YUM +1.8%, WAL +1.0%, WYN

After Hours Summary: HSC +2.1%, YUM +1.8%, WAL +1.0%, WYNN -8.2%, SAVE -3.8%, SLB -0.9%, AMD -0.5% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: HSC +2.1%, YUM +1.8%, WAL +1.0%

Companies trading higher in after hours in reaction to news: PTCT +6.0% (reported results from Phase 3 ACT DMD clinical trial of Translarna in nonsense mutation Duchenne muscular dystrophy patients; trial did not meet primary endpoint but showed a statistically significant benefit in a pre-specified subgroup of patients), ARQL -3.8% (reported the publication of a paper detailing the pre-clinical profile of ARQ 092 and ARQ 751; findings demonstrated that ARQ 092 and ARQ 751 potently and selectively inhibit both the active and inactive forms of AKT), SCTY +0.4% (Morgan Stanley disclosed 6.1% passive stake in 13G filing)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: WYNN -8.2%, SAVE -3.8%, WDFC -3.6%, SYRG -3.4%, MAT -3.0%, ASB -0.9%, SLB -0.9%, AMD -0.5%

Companies trading lower in after hours in reaction to news: SLRC -3.7% (reported that Voya Financial (VOYA) has agreed to invest $25 mln in its Senior Secured Unitranche Loan Program), CRZO -2.5% (announced public offering of 5.3 mln shares of common stock; co also provided a Q3 production results), TCRD -1.0% (co closed on a new $448 mln collateralized loan obligation), CE -0.8% (announced it will increase list and off-list selling prices for Vinyl Acetate Monomer and Ethyl Acetate)

>>> Asian Update

Asian Mid-session Update: China Premier Li sees economy in range amid transition to new growth engines; Rio Tinto releases Q3 output data


***Economic Data***
- (CN) CHINA SEPT M2 MONEY SUPPLY Y/Y: 13.1% (3-month low) V 13.1%E; M1 MONEY SUPPLY Y/Y: 11.4% V 9.8%E
- (CN) CHINA SEPT NEW YUAN LOANS (CNY): 1.05T V 0.9TE (record high)
- (NZ) NEW ZEALAND Q3 CPI Q/Q: 0.3% V 0.2%E; Y/Y: 0.4% V 0.3%E
- (SG) SINGAPORE SEPT ELECTRONIC EXPORTS Y/Y: 5.7% v 1.2%e; NON-OIL DOMESTIC EXPORTS M/M: 2.8% v 0.9%e; Y/Y: 0.3% v -3.9%e
- (PE) PERU CENTRAL BANK LEAVES REFERENCE RATE UNCHANGED AT 3.50%, AS EXPECTED
- (CL) CHILE CENTRAL BANK (BCCH) RAISES OVERNIGHT RATE TARGET BY 25BPS TO 3.25%; AS EXPECTED

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +1.4%, S&P/ASX +0.5%, Kospi -0.2%, Shanghai Composite +0.5%, Hang Seng +0.4%, Dec S&P500 flat at 2,018

***Commodities/Fixed Income***
- Dec gold -0.7% at $1,179/oz, Dec crude oil +1.2% at $47.41/brl, Dec copper -0.2% at $2.41/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 5.1 tonnes to 700.0 tonnes; 2nd straight increase; 3-month high
- (CN) China MOF sells 1-yr bonds, avg yield 2.41%
- (AU) Australia MoF (AOFM) sells A$800M in 1.75% 2020 Bonds; avg yield: 2.1153%; bid-to-cover: 3.75x
- (JP) Japan investors net bought ¥1.06T in foreign bonds v sold ¥1.26T in prior week; Foreign investors bought net ¥521B in Japan stocks v sold net ¥178B in prior week

***Market Focal Points/FX***
- Asian indices are mixed and searching for catalysts and direction despite a final hour surge on Wall St. Nikkei225 is outperforming, tracking a bounce in USD/JPY pair back above 119 after a rise in core US CPI figures restored some hopes that the FOMC could still move this year. AUD and NZD also consolidated some of their recent gains against the stronger greenback heading into the weekend, falling about 60 and 50 pips respectively from session highs below 0.7280 and 0.6820.

- The focus falls on Monday (Sunday evening US time) release of China Q3 GDP and the balance of Sept economic data. Overnight, China's lending data topped estimates and M2 was in line. Economist with HSBC cited "recovering home market and accelerated infrastructure investment contributing to the growth" in reflecting on China lending data. China Premier Li also spoke, advocating for deeper reform and new growth strategies to stabilize the economy as it transitions from traditional growth methods to new engines. Li also noted plans for coordinated urbanization and agricultural modernization policies, along with further opening up with free trade areas.

- Reserve Bank of Australia put out its semiannual Financial Stability Review which noted rising risks in commercial property lending along with deteriorating outlook for China. Economist with Westpac drew up the case for more RBA easing in response to tighter financial conditions, as more banks tighten their mortgage rates to help achieve their financial compliance standards. Rio Tinto stood out among the miners after reporting Q3 output figures. Iron ore production rose to 86.1Mt (attributable 69.3Mt) v 71.0Mte, as global shipments were up 12%. Copper and uranium output slid double digits, while coking coal and aluminum were up slightly.

***Equities***
US equities / ADRs:
- PTCT: Announces results from Phase 3 ACT DMD clinical trial of Translarna (ataluren) in patients with Duchenne Muscular Dystrophy; +10.3% afterhours
- YUM: Updates FY15 outlook; Nears Conclusion of Strategic Review; Names Keith Meister to the Board; +1.8% afterhours
- AMD: AMD: Reports Q3 -$0.17 v -$0.11e, R$1.06B v $1.00Be ; Enters JV with Nantong Fujitsu Microelectronics Co., Ltd; receives $371M in cash; -0.5% afterhours
- SLB: Reports Q3 $0.78 v $0.76e, R$8.47B v $8.56Be; -0.7% afterhours
- MAT: Reports Q3 $0.71 v $0.79e, R$1.79B v $1.89Be; -2.4% afterhours
- WYNN: Reports Q3 $0.86 v $0.75e, R$996M v $1.03Be; -8.7% afterhours

Notable movers by sector:
- Consumer discretionary: Galaxy Entertainment Group 27.HK -4.0% (Q3 result); Air China 753.HK +1.2% (9-month guidance); Li Ning Co Ltd 2331.HK +2.8% (quarterly result); Nexon Co 3659.JP +3.7% (stake sales); FamilyMart Co. 8028.JP -5.1% (signs basic agreement with Uny)
- Consumer staples: Fortune Ng Fung Food Hebei Co 600965.CN -1.9% (Q3 result)
- Financials: AIA Group Ltd 1299.HK +4.1% (Q3 result); Shimao Property 813.HK -1.2% (Sept result); Sinolink Securities Co 600109.CN +0.4% (Sept result)
- Industrials: Luxshare Precision Industry Co 002475.CN +4.6% (Q3 result); Avic Heavy Machinery Co 600765.CN +10.0% (update on AVIC restructuring plan); Nippon Shokubai Co.4114.JP +3.4%(H1 result speculation)
- Technology: Taiwan Semiconductor Manufacturing Co 2330.TW -2.1% (Q3 result); Nintendo Co 7974.JP +4.7% (investment in Niantic)
- Materials: Regis Resources RRL.AU +0.9% (Q1 result); Rio Tinto RIO.AU -0.9% (Q3 production result)
- Energy: China Coal Energy 1898.HK -1.8% (Sept result)
- Healthcare: REVA Medical RVA.AU +8.1% (positive initial results)
- Utilities: Mitsubishi Electric Corp 6503.JP +0.6% (acquisition); Kyushu Electric Power Co 9508.JP +3.1% (nuclear reactor restarted, on track to report FY net profit)

>>> US Close Dow+1.28% S&P+1.49% Nasdaq+1.82% Russell+2.27%

Closing Market Summary: Financial Sector Leads Stocks Higher

The stock market charged higher on Thursday, erasing its entire decline from the early portion of the week. The S&P 500 spiked 1.5% while the Nasdaq Composite (+1.8%) outperformed.

The broad-based rally in the U.S. followed an overnight session that featured dovish comments from two European Central Bank members, setting expectations for more monetary easing from the central bank. This started with Vitor Constancio who spoke in Hong Kong, joining the chorus of voices calling on the Federal Reserve to delay its first rate hike while Ewald Nowotny said that more needs to be done by the ECB in light of soft inflation data.

The dovish remarks from two ECB policymakers weighed on the euro, sending the single currency lower by 0.8% against the dollar to 1.1383. To be fair, the Dollar Index (94.46, +0.47), which gained 0.5%, spiked to highs after the release of today's economic data, which included a 42-year low initial claims reading (255,000; Briefing.com consensus) and an in-line CPI report (+0.2%).

In addition to the flurry of economic data, investors received a fair batch of quarterly reports that were mostly in-line with expectations.

All ten sectors ended the day in the green with financials (+2.4%) leading the way. The influential sector was powered by Citigroup (C 52.97, +2.25) and Goldman Sachs (GS 184.96, +5.45) as the two heavyweights rallied 4.4% and 3.0%, respectively. Citigroup delivered a better than expected quarterly report while Goldman Sachs matched estimates.

The financial sector held the lead throughout the session while other groups shuffled around as the session wore on. When the dust settled, telecom services (+2.3%) and health care (+1.3%) ended not far behind financials with the health care sector rallying behind biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 314.76, +13.18) surged 4.4%, masking a 1.6% decline in the shares of UnitedHealth (UNH 59.33, -0.70), which followed a one-cent beat.

Elsewhere, the energy sector (+1.8%) finished among the leaders despite showing relative weakness in the early going. The early underperformance and the subsequent recovery followed the price action in the oil market as WTI crude was down more than 2.0% after the latest Energy Information Administration storage report showed that inventories remain near levels not seen at this time of the year for more than 80 years. However, the energy component staged a full recovery, ending the pit session lower by 0.6% at $46.38/bbl before returning to unchanged in electronic trade.

Also of note, the top-weighted technology sector (+1.3%) ended in a position of relative strength despite having a brief power outage in late morning action. That brief swoon was brought on by a pullback in chipmaker names following yesterday's M&A speculation. That being said, the PHLX Semiconductor Index still ended higher by 1.0%.

Treasuries ended the day on their session lows with the 10-yr yield rising four basis points to 2.03%.

Today's session generated the largest volume of the week with more than 933 million shares changing hands at the NYSE floor.

Economic data included Initial Claims, CPI, Empire Manufacturing, and Philadelphia Fed Survey:

  • The initial claims level declined to 255,000 for the week ending October 10 from a downwardly revised 262,000 (from 263,000) while the consensus expected an increase to 269,000
    • The claims level has returned to its mid-July mark, which represents the lowest level since November 1973
    • The continuing claims level fell to 2.158 million from an upwardly revised 2.208 million (from 2.204 million) while the consensus expected a decline to 2.200 million
  • The CPI declined 0.2% in September after decreasing 0.1% in August, which is what the consensus expected
    • The decline in prices was the result of a sizable drop in energy costs with total energy prices falling 4.7% in September after declining 2.0% in August
    • Gasoline prices declined 9.0% while food prices increased 0.4%
    • Excluding food and energy, core CPI increased 0.2% and ended two consecutive months of 0.1% gains. The consensus expected an increase of 0.1%
  • The Empire Manufacturing Survey for October registered a reading of -11.4, which was above the prior month's reading of -14.7, but below the consensus estimate, which was pegged at -8.0
  • The Philadelphia Fed's Business Outlook Survey increased to -4.5 in October from -6.0 in September while the consensus expected an increase to -2.5
    • While the headline index improved, nearly all of the sub-indices within the survey deteriorated on a month-to-month basis
    • Business managers claimed that activities were slightly improved in October, but stated overwhelmingly that trends in production, orders, and employment were worse off

Tomorrow, September Industrial Production (consensus -0.2%) will be reported at 9:15 ET while August Job Openings and Labor Turnover Survey and the preliminary October Michigan Sentiment Index (consensus 88.4) will be released at 10:00 ET.

  • Nasdaq +2.8% YTD
  • S&P 500 -1.7% YTD
  • Dow Jones Industrial Average -3.8% YTD
  • Russell 2000 -3.4% YTD

>>> Wynn Resorts reports EPS in-line, misses on revs --> -4%

Wynn Resorts reports EPS in-line, misses on revs 

* Reports Q3 (Sep) earnings of $0.86 per share, in-line with the Capital IQ Consensus of $0.86; revenues fell 27.3% year/year to $996 mln vs the $1.03 bln Capital IQ Consensus. Adj. property EBITDA was $279.9 million for the third quarter of 2015, a 39.0% decrease YoY.
- Macau: In Q3, net revenues were $585.1 million, a 37.9% decrease YoY. Adjusted property EBITDA in the third quarter of 2015 was $162.8 million, down 50.0% from $325.5 million in the third quarter of 2014.
- Vegas: For Q3, net revenues were $411.2 million, a 3.9% decrease YoY. Adjusted property EBITDA was $117.1 million, down 12.1% compared to the prior year.
* We expect to open our resort on Cotai in the first half of 2016.

(BUS) Schlumberger Announces Third-Quarter 2015 Results

Schlumberger will hold a conference call to discuss the above announcement and business outlook on Friday, October 16, 2015. The call is scheduled to begin at 8:00 a.m. (US Central Time), 9:00 a.m. (Eastern Time), 3:00 p.m. (Paris time). To access the call, which is open to the public, please contact the conference call operator at +1 (800) 230-1085 within North America, or +1 (612) 234-9960 outside of North America, approximately 10 minutes prior to the call’s scheduled start time. Ask for the “Schlumberger Earnings Conference Call.” At the conclusion of the conference call an audio replay will be available until November 16, 2015 by dialing +1 (800) 475-6701 within North America, or +1 (320) 365-3844 outside of North America, and providing the access code 365406

>>> Valeant Default Risk Surges As Bond Market Sees 36% Chance Of Bankruptcy



Following Valeant's confirmation that it had received a Federal subpoena, most eyes are on the stock's inexorable decline. However, it is the bond market that not only started showing concerns earlier but is now spiking to record credit risk highs. At a cost of 515bps to protect against a Valeant default, based on market-standard recovery rates, the CDS market implies a 36% chance of default for the former Biotech darling.

>>> Russia Responds To French President's Renewed Attempt To Sell Ships To Mosco

Russia Responds To French President's Renewed Attempt To Sell Ships To Moscow

Two months after French president Hollande, under heavy pressure from NATO, decided to scrap a deal to deliver two Mistral helicopter carriers to Russia which were sold to Egypt instead (the same Egypt whose foreign reserves are plummeting, whose fiscal house is in total disarray, which just devalued its currency, and which could only afford the $1.1 billion purchase if the CIA handed its military dictator the cash via envelope), the same French President announced on Wednesday that he "expects to sell new warships to Russia in the near future."

Quoted by AP during a visit to the shipyard of Saint-Nazaire in western France, Hollande said that "Things went well with Russia, which has agreed to cancel the contract. And I even think we'll get partnerships for new ships." He didn't specify whether they could be military ships. More from AP:

Hollande came aboard one of the warships that was originally named the Vladivostok, in reference to the Russian port. The inscription on the hull has been erased and replaced by grey paint.
The Mistral sale was supposed to be the biggest arms sale ever by a NATO country to Russia, until the deal fell apart because of the Ukraine crisis. France refunded the 950 million euros ($1 billion) already paid by Russia and sold the ships to Egypt, which signed a 950 million-euro contract last week.
"I had to sell them to a country that needed to ensure its own security but didn't threaten anyone," Hollande said.
The assault ships can each carry 16 helicopter gunships, 700 troops and up to 50 armored vehicles. They are due to be delivered to Egyptian authorities in March 2016.
The ships are supposed to arrive in Egypt in summer 2016 but first they should be de-equipped of Russian-developed command, control and communication systems.
Russia promptly responded with the following simple and brief message:

Paris is looking to sell new ships to Russia, France's President Francois Hollande said during his visit to the Saint-Nazaire shipyard. The president, however, neglected to mention whether Russia is actually eager to purchase such hardware from France.