>>> Europe : Brokers Upgrades & Downgrades - 7th of October 2015

>>> Up
*ACACIA MINING RAISED TO BUY AT GMP
*ERSTE RAISED TO BUY VS HOLD AT SOCGEN
*FIDESSA RAISED TO BUY VS NEUTRAL AT UBS
*HAMMERSON RAISED TO BUY VS HOLD AT HSBC
*JUST RETIREMENT GROUP RAISED TO OUTPERFORM AT RBC CAPITAL
*K+S RAISED TO BUY VS HOLD AT HSBC
*LUNDBECK RAISED TO NEUTRAL VS SELL AT GOLDMAN
*OLD MUTUAL RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*SALVATORE FERRAGAMO RAISED TO HOLD AT SOCIETE GENERALE
*SHAFTESBURY RAISED TO HOLD VS REDUCE AT HSBC
*SKANSKA RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX
*SUEZ ENVIRONNEMENT RAISED TO BUY VS HOLD AT SOCIETE GENERALE
*SWEDISH ORPHAN BIOVITRUM RAISED TO NEUTRAL AT GOLDMAN
*THYSSENKRUPP RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*UBS RAISED TO BUY FROM NEUTRAL AT BOFA MERRILL LYNCH
*VILMORIN & CIE RAISED TO HOLD VS SELL AT SOCGEN
*VOLKSWAGEN RATED BUY AT BERENBERG, PT EU150; WAS UNDER REVIEW

>>> Down
*ACTIVE BIOTECH CUT TO NEUTRAL VS BUY AT GOLDMAN
*DIXY CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
*MARKS & SPENCER CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
*MICHAEL PAGE CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
*ORION OYJ CUT TO SELL VS NEUTRAL AT GOLDMAN
*SPORTS DIRECT CUT TO SECTOR PERFORM AT RBC CAPITAL
*TEMENOS CUT TO NEUTRAL VS BUY AT UBS
*TENARIS CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
*ZEALAND PHARMA RAISED TO BUY VS NEUTRAL AT GOLDMAN, PT DKR200

>>> PT Change
*ENGIE PT CUT FROM €19.70 to €17.50 AT CREDIT SUISSE


>>> Initiation
*AFG ARBONIA-FORSTER RATED NEW BUY AT BERENBERG, PT CHF10.7
*VOLKSWAGEN RATED BUY AT BERENBERG, PT EU150; WAS UNDER REVIEW

>>> Call
>> Stock
*AEROFLOT ADDED TO GOLDMAN CEEMEA FOCUS LIST

>>> Drillisch takeover offer being prepared by United Internet

Drillisch takeover offer being prepared by United Internet 

United Internet [ETR:UTDI], a Germany-based telecommunications group, is preparing a takeover offer for local rival Drillisch [ETR:DRI], Der Aktionaer reported, without naming sources.

The magazine pointed out that the two companies would be a good strategic fit for each other. The report acknowledged that Ralph Dommermuth, the chairman of United Internet, ruled out an offer for Drillisch a few weeks ago, but added that the Drillisch share price has outperformed over the last few days.

United Internet currently owns a 29% stake in Drillisch.

Drillisch has a market cap of EUR 2.689bn.

The original article was published in this week’s print edition of Der Aktionaer on page 8 (“Parkettgefluester” column).

Der Aktionaer

>>> BAT rumoured to have hired advisers for Imperial Tobacco deal

TeliaSonera Eurasian exits could fetch EUR 3.5bn; M&A spree unlikely

TeliaSonera [STO:TLSN], the Sweden-based telecommunications company, could fetch EUR 3.5bn by exiting its Eurasian operations, but is unlikely to rush into acquisitions, according to a report by Talouselama.

The Finnish language piece cited Kimmo Stenvall, an analyst at Pohjola Bank, who estimated that the Eurasian businesses that TeliaSonera plans to exit could be worth at least EUR 3.5bn.

Stanvell said that it is unlikely the company will embark on an acquisition spree in Europe. However, the company may make complementary acquisitions, but no significant deals are expected, he added.


Talouselama

>>> BAT rumoured to have hired advisers for Imperial Tobacco deal - report

BAT rumoured to have hired advisers for Imperial Tobacco deal 

British American Tobacco (BAT) is said to have engaged an advisory team for a potential deal with rival UK-listed tobacco group Imperial, according to unattributed chatter noted in a Times market report.

The report briefly mentioned revived takeover speculation surrounding Imperial, which has a GBP 32.32bn (USD 49.27bn) market cap.

The Times

>>> Asian Update

Asian Mid-session Update: BOJ stands pat on policy and maintains economic assessment; Samsung Electronics rallies as profit growth recovers


***Economic Data***
- (CN) China Sept FX Reserves: $3.51T v $3.50Te, v $3.56T prior (5th consecutive month of decline)
- (JP) BANK OF JAPAN (BOJ) POLICY STATEMENT: MAINTAINS ITS MONETARY BASE EXPANSION AT ANNUAL PACE OF ¥80T (AS EXPECTED)
- (JP) JAPAN SEPT OFFICIAL RESERVE ASSETS: $1.25T V $1.24T PRIOR
- (AU) AUSTRALIA SEPT AIG PERFORMANCE OF CONSTRUCTION INDEX: 51.9 V 53.8 PRIOR (2nd month of expansion)
- (UK) SEPT BRC SHOP PRICE INDEX Y/Y: -1.9% V -1.4% PRIOR (29th month of decline)

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.2%, S&P/ASX flat, Kospi +0.5%, Shanghai Composite closed, Hang Seng +1.0%, Dec S&P500 -0.2% at 1,964

***Commodities/Fixed Income***
- Dec gold +0.1% at $1,148/oz, Nov crude oil +1.2% at $49.11/brl, Dec copper +0.8% at $2.37/lb
- (US) API Petroleum Inventories: Crude: -1.2M v +4.6M prior week
- SLV: iShares Silver Trust ETF daily holdings fall to 9,855 tonnes from 9,903 tonnes (lowest level since Dec 2012)
- (AU) Australia MoF (AOFM) sells A$900M in 3.25% 2025 Bonds; avg yield: 2.62%; bid-to-cover: 2.14x

***Market Focal Points/FX***
- Asian indices are mixed, tracking less upbeat sentiment on Wall St where stocks broke a string of 5 consecutive sessions of gains. Instead, Asian bourses were more closely aligned with regional developments rather than broader market bias. In FX, USD remained under pressure, particularly against JPY and NZD, as USD/JPY fell some 50pip after BOJ stood pat on policy and NZD extended its gains to 6-week high near $0.66 on another strong dairy trade auction out of Fonterra. S&P eminis were up 4pts around 1,974 late in the Asian session.

- BOJ declined to offer any additional monetary policy easing and also maintained its economic assessment on broader economy and all of its components. Few were expecting expanded QE, however the no-change in all sectors does little to bolster the case for a more popular view of easing in late October, when the BOJ will also unveil its forecasts for inflation and growth. Earlier today, former MOF official Sakakibara (Mr. Yen) said expanded QE may actually arrive later in December.

- Korea's Kospi is bolstered by strong guidance out of Samsung Electronics, which topped consensus with prelim Q3 Op profit KRW7.3T (v KRW4.1T y/y) v KRW6.7Te, Rev KRW51.0T (v KRW47.5T y/y) v KRW50.6Te. This also marks the first quarter of rising profits in some 2 years. Samsung shares were up nearly 8% headed toward the close.

- China put out its FX reserves data showing the govt spent about $50B supporting the Yuan in Sept - about half the estimated amount but still a notable margin. Separately, report out of Moody's revised China GDP target for next year down to 6.3% from 6.5%. This also follows the WEO report out of the IMF earlier today which actually maintained China GDP at 6.8% in 2015 and 6.3% in 2016. Slowing GDP in China was also on display in the quarterly report out of Yum Brands, where the pace of recovery was well below the company's expectations.

- Down under, Australia put out its 2nd straight month of expansion in AiG construction, while iron ore miner Fortescue had reportely received further interest in its assets from China. New Zealand's global dairy trade auction earlier in US hours saw its 4th straight price gain, though industry watchers noted higher prices were in part due to the 2-month low in the quantity of dairy being offered.

***Equities***
US equities / ADRs:
- X: Announces possible consolidation of flat-rolled operations; 2K employees issued WARN notices; -1.2% afterhours
- NKTR: Closes direct private placement with TPG special situations partners of $250M; -1.2% afterhours
- ADBE: Guides initial FY16 $2.70 v $3.23e, R$5.7B v $5.97Be, provides long term guidance ahead of analyst day; -3.1% afterhours
- CLF: Terminates pellet supply agreement with Essar Algoma; -7.4% afterhours
- NUS: Guides Q3 R$570-573M v $629Me; cites currency headwinds and lower sales in China; -10.9% afterhours
- YUM: Reports Q3 $1.00 v $1.07e, R$3.43B v $3.68Be; Cuts FY15 EPS guidance; Raises dividend 12% to $0.46 from $0.41 (implied yield 2.2%); -18.3% afterhours
- ADXS: Reports clinical hold of investigational agent Axalimogene Filolisbac; -25.8% afterhours

Notable movers by sector:
- Consumer discretionary: Ryohin Keikaku 7453.JP -7.7% (H1 result); J.Front Retailing 3086.JP +1.1% (H1 result); Air New Zealand AIR.NZ +2.6% (H1 guidance)
- Financials: Daewoo Securities 006800.KR +1.7% (bid speculation)
- Industrials: Nippon Express 9062.JP -2.7% (H1 earning speculation); China Resource Cement 1313.HK -4.0% (profit warning); Aurizon Holdings AZJ.AU -0.4% (cost cuts)
- Technology: Sony Corp 6758.JP +0.8% (to start chip company); MediaTek 2454.TW +3.9% (Sept revenue); Samsung Electronics 005930.KR +6.3% (Q3 prelim result)
- Materials: Glencore Xstrata 805.HK +7.0% (financing arrangements); Saracen Mineral Holdings SAR.AU +1.3% (Q1 result)
- Energy: Santos STO.AU +10.5% (stake sell-off speculation); Woodside Petroleum WPL.AU +4.4%, Origin Energy ORG.AU +23.8% (oil price rises)
- Healthcare: Summerset Group SUM.NZ +2.8% (Q3 guidance)

(CS) Global Equity Strategy : Reduce UW in Energy, select exposure to Commo

The importance of oil
We think equities are currently facing five principal challenges: the widening of
high yield spreads; Chinese real estate; the gap between the Fed dots and the
forward curve; disruptive technology; and the fall in the oil price.
A stabilisation in the oil price is critical to the stabilisation of equities and
cyclicals. The fall in the oil price so far has been very closely correlated to the
fall in inflation expectations, cyclical underperformance and a rise in non-energy
high yield spreads. The market seems to interpret the fall in the oil price as
demand-driven, but we would argue that it has been primarily supply-side driven.
The problem is that commodity-related capex accounts for c30% of global
capex (with oil capex down 13% and mining capex down 31% in the past 12
months), and thus the fall in US and global commodity capex and opex has
taken at least c0.8% off US GDP growth in H1 2015 and c1% off global GDP
growth over the last year. The benefit in some regions has been slow to
materialise (because as in 1985/86, the consumer has saved some of the
windfall gains): Europe should experience the biggest benefit, as the starting
level of the savings ratio is high. We agree with the IMF that the fall in the oil
price should ultimately boost global GDP growth by c0.5%-1%, even
adjusting for the capex and savings headwinds.
We believe that the oil price will now stabilise. OPEC spare capacity is just
1.5mbd and Saudi Arabia has, at the current price, achieved its objective of
stabilising market share: non-OPEC output is forecast to fall by 0.5mbd in 2016,
while Saudi Arabia is running a budget deficit of c20% of GDP. However, we still
think consensus forecasts for end 2016 (at $65pb) could be too optimistic, as an
oil price at those levels would risk allowing high cost production to re-enter the
market.
Investment implications: 1) we reduce our underweight in IOCs (energy as
a share of market cap in Europe is close to all-time lows, positioning is cautious),
but we refrain from raising to benchmark until we see a FCF yield two years out
that covers dividends on a $50-60pb oil price. US E&Ps (e.g. Pioneer, Marathon
Oil) look better than IOCs. OFS could be vulnerable if oil capex follows mining
capex (i.e. falls another 20% relative to projections); 2) if oil stabilises, select
cyclicality should do well (employment agencies, Italian banks and Fiat);
3) we recommend select exposure to commodity-exporting GEM (Experian,
Iberdrola, Mondi); 4) we take airlines to benchmark from overweight (they
have been a double play on oil, and capital discipline seems to be waning), and
we believe the fall in oil is fully priced into UK retailing.

>>> US After Hours Summary: YUM -17.0%, NUS -6.8%, ADBE -3.3%, NG

After Hours Summary: YUM -17.0%, NUS -6.8%, ADBE -3.3%, NG -0.8%, ATI -0.7% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to news: MDCO +8.4% (co and SymBio Pharmaceuticals established a strategic partnership for IONSYS in Japan), AMRI +3.0% (extended Supply Agreement with GE Healthcare), CDE +2.5% (reported preliminary Q3 production of 3.8 mln ounces of silver and 85,658 ounces of gold, or 9.0 mln silver equivalent ounces; maintained FY15 production guidance), POM +0.9% (co and Exelon (EXC) released an official statement confirming settlement with the Government of the District of Columbia and others on their proposed merger), LOGM +0.8% (provided update on succession plan: retiring CEO Michael K. Simon has agreed to serve in an advisory role until December 15, 2016), ALTR +0.7% (co's stockholders approved pending merger with Intel)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: YUM -17.0%, NUS -6.8%, ADBE -3.3%, NG -0.8%, ATI -0.7%

Companies trading lower in after hours in reaction to news: AXPW -57.3% (announced that the exclusivity period under its Binding Letter of Intent with LCB International expired; LCB has indicated an unwillingness to move forward with any deal structure that contemplates anything further than a technology license), ADXS -24.5% (reported Clinical Hold of Investigational agent Axalimogene Filolisbac; expects hold to be resolved expeditiously and without significant interruption to the HPV clinical development program), CTRV -12.0% (announced offering of common stock and warrants to purchase common stock for an undisclosed amount), CLF -7.4% (terminated Pellet Supply Agreement with Essar Algoma), LINE -2.8% (co and LinnCo (LNC) announced Board approval to suspend the companies' distribution and dividend, effective September 30, 2015; LNCO -1.6%), AVXL -2.1% (announced a 1-for-4 reverse stock split in preparation for Nasdaq uplisting)

>>> US Close

Closing Market Summary: S&P 500 Snaps Five-Day Streak Amid Weakness in Biotechnology

The stock market endured a shaky session on Tuesday with the Dow Jones Industrial Average (+0.1%) eking out a slim gain while the S&P 500 (-0.4%) and Nasdaq Composite (-0.7%) underperformed throughout the day.

For the second day in a row, the U.S. trading day began after the release of some disappointing economic data overseas. Today, it was Germany's Factory Orders report for August, which showed a 1.8% decline while the market had expected an increase of 0.5%. That being said, European equities were able to register gains after erasing their early losses, but the strength did not carry over the U.S. session as continued weakness in the biotech space kept the broader market under pressure.

Specifically, the iShares Nasdaq Biotechnology ETF (IBB 301.91, -11.29) lost 3.6% after surrendering 0.7% on Monday. On a related note, the health care sector tumbled 2.3% while most other influential sectors also struggled.

Similar to health care, heavily-weighted financials (-0.5%) and consumer discretionary (-0.7%) underperformed throughout the day while another influential group—technology (+0.2%)—climbed ahead of the broader market during afternoon action.

The largest sector by weight received support from the likes of Apple (AAPL 111.31, +0.53), Microsoft (MSFT 46.75, +0.12), and Intel (INTC 31.74, +0.53), but several other large components finished the day in negative territory. High-beta chipmakers struggled in the early going, but the PHLX Semiconductor Index added 0.3% after erasing a 1.5% decline.

Elsewhere among cyclical sectors, energy (+2.2%) and materials (+1.3%) continued their recent show of relative strength, extending their respective week-to-date gains to 5.1% and 4.0%. Commodity prices were behind today's charge as crude oil surged 4.9% to $48.53/bbl with reports suggesting oil traders have taken note of rising tensions in Syria.

Unlike stocks, Treasuries ended the day near their highs after a brief morning appearance in the red. The 10-yr note added a quarter of a point, pressuring its yield two basis points to 2.04%.

Today's participation was ahead of average as more than 950 million shares changed hands at the NYSE floor.

Economic data was limited to the August trade balance, which showed a deficit of $48.30 billion while the Consensus expected the deficit to come in at $44.50 billion. The prior month's deficit was revised to $41.80 billion from $41.90 billion.

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the Consumer Credit report for August will cross the wires at 15:00 ET (consensus $19.50 billion).

  • Nasdaq Composite +0.3% YTD
  • S&P 500 -3.8% YTD
  • Dow Jones Industrial Average -5.8% YTD
  • Russell 2000 -5.8% YTD

>>> Renault board to meet on Nissan alliance - source

French carmaker Renault (RENA.PA) plans to hold a board meeting to discuss its alliance with Japanese partner Nissan (7201.T) later on Tuesday, a source close to the matter said, confirming a report in Le Figaro newspaper.
The meeting comes after the French government increased its stake in Renault to 19.7 percent from 15 percent in April, a move it said was intended to boost its voting rights and protect its position as a key shareholder but which angered both Renault and Nissan.
Since then, the head of the APE state holding agency, Regis Turrini, has been replaced by Martin Vial.
A Renault spokesman confirmed there would be a board meeting on Tuesday but would not comment on the agenda. A meeting on the French carmaker's strategy is also planned for Wednesday.

Carlos Ghosn, who is chief executive of both carmakers, may review various scenarios for the alliance, which dates back to 1999 and which he wants to deepen, Le Figaro wrote without naming its sources.

Ghosn said at the Frankfurt car show last month that discussions were continuing among all parties without being urgent.

Shares in Renault were trading up 3.4 percent by 0905 GMT at 67.97 euros, down from a late-May high of about 100 euros.

"The market is speculating on the potential developments of the alliance with Nissan that could be made," a Paris-based trader said.