>>> US Early premarket gappers

Early premarket gappers
Gapping up: ETRM +36%, FLXN +15%, PBMD +13.4%, WMGI +10.4%, LOXO +9.8%, PRGN +8.7%, HRB +6.3%, GIII +4.6%, TJX +3%, ARMH +2.6%, RIO +2.5%, BHP +2.3%, SUNE +2.2%, FCX +1.8%, TSLA +1.8%, GSK +1.7%, T +1.6%, ALU +1.5%, BABA +1.5%, GM +1.5%, AZN +1.5%, CELG +1.3%, X +1.3%, AA +1.3%, JCP +1.3%, BAC +1%
Gapping down: AMBA -9.6%, GPRO -6.6%, RADA -5.9%, AVAV -5.9%, GWRE -5%, SDRL -4.8%, GFI -3%, RIG -2.3%, NBG -1.6%, BP -1.2%, RDS.A -1.2%, AU -0.9%, TOT -0.8%

>>> EUROPEAN AUTOS: Getting Ready For The China Warnings - Cutting Estimates and

EUROPEAN AUTOS: Getting Ready For The China Warnings - Cutting Estimates and PTs

Chinese auto market profitability is rolling over and it's getting bad enough to threaten German OEM earnings. The issues predate the August stock market rout, with the auto industry facing some sector-specific problems as pricing unravels.

We've already seen some pain in Q2 results, but we're convinced there's worse to come. BMW & VW will soon have to start talking about overall targets. Daimler will be the last to see it but that may ultimately make the process even more painful.

We are cutting our H2 and 2016 numbers for all three Germans. We're now below cons. by between 13% (BMW) & 22% (DAI). Perhaps we'll prove to be too early but we're convinced the trend is downwards and that everyone is using the wrong 2016 numbers.

PT cuts [Current (OLD)] - BMW €85 (100), DAI €70 (85), PAH3 €76 (92), UG €22 (24), VOW3 €200 (240), VOW €200 (240)

(BofA-ML) China, costs, contango, and currency still key drivers…

China, costs, contango, and currency still key drivers…
Commodities as an asset class have underperformed equities and fixed income in recent
years. Yet commodities have behaved as advertised, delivering negative returns on
flagging global growth and inflation. After all, world nominal GDP in USD has struggled
to expand in recent years, posting an annualized increase of 0.8% in the 2011-15 period.
That compares to a staggering 8.2% in the previous 10 years. So is this the time to add
to commodity positions? Not yet. In our view, a cocktail of “4Cs”—currency headwinds,
China headwinds, contango headwinds, and cost deflation headwinds—that has driven
commodity investor returns into negative territory is not about to change.

…suggesting it is still early to overweight commodities
A simple risk parity portfolio of equities, bonds, and commodities would point to keeping
commodity exposure well below historical averages at the moment. High volatility mixed
with negative returns has made commodities less attractive than equities or bonds.
Moreover, the fundamental outlook still remains blurred by the “4Cs”. Surely, higher US
interest rates could push curves into backwardation at some point next year, reducing
the negative carry on commodity investments. One may even argue that the massive
commodity cost deflation of recent years could ease. But our economics team believes
that the strong USD trend, coupled with a slowing Chinese economy, is here to stay.

Structural CNY/China weakness remains a major issue…
Recent EM FX weakness should give pause for thought. In particular, our analysis shows
the disproportionate impact of China FX on all commodities, with even nat gas, sugar, or
wheat tending to respond strongly to movements in the CNY. Other EM FX elasticities
are large too, but generally more muted with the exception of pairs such as copper and
Chile. This evidence is concerning. After all, China’s GDP in USD expanded by 25% in
2007 on strong GDP growth, high domestic inflation, and fast-paced CNY appreciation.
If CNY strength reverses, Chinese inflation eases, and GDP growth slows down further,
China’s nominal GDP in USD will likely stagnate. And so will global GDP in USD.

…but a strong G3 economy will ultimately benefit EMs
Surely there is no imminent catalyst to reignite EM FX strength and FX overshooting is a
risk given recent China capital outflows. Still, there is some light at the end of the
tunnel. Our economists point out that a strong economic backdrop for G3 economies
(US, Eurozone, Japan) historically benefitted EMs. Our team forecasts precisely a surge
in global GDP growth from 3.2% to 3.8% from this year to next, so investors may want
to consider “buying on dips”. Pronounced cyclical rallies, a key feature of the market in
the 1980s and 1990s, may happen at lower commodity price levels. As the drastic recent
moves in oil suggest, we think commodity investors will just have to turn much more
tactical. As such, we believe strategies like COT momentum should continue to perform
in this environment.

(MKR) Makor - Technical Research – Euro Stoxx Index (3,188) - Sell rallies to 3

Makor - Technical Research – Euro Stoxx Index (3,188) - Sell rallies to 3,280-3,325
2015-09-02 07:11:51.568 GMT


Technical Research – Euro Stoxx Index (3,188)

·The recent damage to the Index has been pretty savvier as the Index is now
trading well below its 55 and 200 day moving averages, broke below the most
important 3,280-3,325 level and below the rising channel marked on the chart

·The first resistance zone is the 3,280-3,325 area, this area combines the
highs from June, Sep & Dec 2014 highs and the July 2015 low. If we get a move
above this level the next resistance level would be 3,350-3,370 where the rising
channel breakdown level is.

·On the downside, Aug 2015 low at 2,973 is support and a move below it would
target the Oct 2014 low at 2,789.

·At the moment we would be better sellers on a rally to 3,280-3,325 and at
3,350-70

Strategy: Step aside for now.

See Full Report Attached

Contributed via: Bloomberg Publisher WEB Service

Provider ID: da7c9300cffb4180b697819136307b2a


-0- Sep/02/2015 07:11 GMT

(GS) Equity Strat : Restructuring Europe : Consolidate to succeed

* Consolidation is a key pillar of Europe’s restructuring
The European corporate landscape is both highly fragmented (>65% of
people work in SMEs vs. <50% in the US) and heavily dependent on bank
financing (c.70% of all external financing is bank-based vs <25% in the US).
In this context, consolidation represents a rich source of opportunity for
listed companies. We find that in-market acquirers outperform by c.750 bp
in the year post a deal announcement, on average. Acquirers of private
firms outperform the market by c.700 bp in the year post announcement.

* Significant scope to close the financing gap in Europe
An increasing amount of European deal activity comprises public
companies buying private (often bank finance-dependent) targets. The cost
of small bank loans (<€1 mn) is currently c.250 bp more expensive than
listed IG debt, meaning that the refinancing of acquired operations can be a
low-risk source of synergies for buyers. We see ‘financing arbitrage’
creating upside for companies which can roll-up private assets in their
sector, e.g. Brenntag, Randstad, Europcar and Smurfit. We also see
expensively financed M&A candidates offering attractive financial arbitrage
for the buyers (e.g., Tullow Oil, Ocado, Faurecia and Remy).

* Market repair benefits can be the cherry on the cake
We believe that the ‘market repair’ benefits which can result from
consolidation (e.g. potential pricing power, supply discipline) accrue only
in industries that are already moderately concentrated, and where financial
pressure and falling investment can overcome anti-trust concerns. On this
basis, we see market repair benefits as likely to be permitted in telecoms,
utilities, materials, medtech and autos. To invest in the theme we highlight
stocks including Orange, FCA, Buzzi and Smith & Nephew.

* The benefits of recent deals are yet to be realized
There are areas where consolidation has already taken place but potential
market repair benefits are not yet fully priced. Our analysts see stocks such
as Telefonica, Schibsted, Just Eat, GSK, Imperial Tobacco & Nokia as
either active or ‘passive’ beneficiaries of recent in-market deals. We identify
nine companies as beneficiaries of recent market repair. On average GS
2016 EPS estimates are 9% above I/B/E/S consensus for these stocks.

(HSBC) Global Strat. The 2.2 trillion dollar question

The 2.2 trillion dollar question

* Oil prices unsustainably low; expect gradual move higher
* USD2.2 trillion wealth transfer: the four direct equity impacts
* Overweight energy. Most unloved sector; 20-yr valuation low

With Brent crude prices down 60% since last year’s peak, and close to unsustainable decade lows (in HSBC’s view), we look at the four most direct oil impacts on equities:

Macro. Current price fall has driven USD2.2trn annualized wealth transfer (more than Italy’s GDP) from exporter countries to consumers. Lower inflation gives policy options.

Direct corporate input costs, analyzing oil usage for 915 companies (16 have >10% oil costs/revenue) from ESG data. Asia’s oil costs are the largest and Europe’s the smallest.

Secondary benefit to consumer. Market is aggressively assuming this to be non-existent vs prior oil price falls. Ultimate benefits may surprisingly accrue to EU more than US.

Energy stocks, with high dividend yields and falling free cash flow break-evens. We present two Alpha Strategy screens of global large-cap stocks most sensitive to oil.

Historically during oil price falls, DM outperforms EM, and Defensives lead Commodities.

Changing face of the energy sector. The sector has become smaller, with its MSCI index weight halving in the last decade. But it can still have an impact. MSCI ACWI EPS growth this year is 8% excluding the near 50% energy EPS fall, and 1% with it. Over time, the sector correlation with the oil price has increased, likely as the E+P weighting has doubled.

We are equity strategy overweight energy. It is the most unloved sector globally, relative valuations are at 20-year lows, earnings expectations have halved, and HSBC sees a gradual move higher in oil prices to USD55.4/bbl for 2015e and USD60/70/80/bbl for 2016-18e, as non-OPEC supply falls. 2015-16 demand growth estimates have been rising.

(HSBC) AstraZeneca - Upgrade to Buy from Hold on share price weakness and

Upgrade to Buy from Hold on share price weakness and ahead of Oncology news flow

* AZN’s shares have weakened with global market volatility and not for any fundamental reason
* However, AZN has a large amount of Oncology and ImmunoOncology data due in the coming months, which
could be material for the shares
* As we expect predominantly positive outcomes, the share price weakness could be a buying opportunity; hence, we upgrade our rating to Buy from Hold; new target price of 4,600p from 4,640p on revised forecasts

(BN) New Whale Seen Moving Tokyo Markets as Japan Post Sells Bonds

New Whale Seen Moving Tokyo Markets as Japan Post Sells Bonds
2015-09-02 01:40:59.603 GMT


By Anna Kitanaka and Shigeki Nozawa
(Bloomberg) -- As the world’s biggest pension fund nears
the end of its switch from sovereign bonds into stocks,
investors are looking at Japan Post Bank Co. as the next actor
big enough to move markets.
The postal lender, the biggest holder of Japanese
government bonds after the central bank, sold 5.1 trillion yen
($42 billion) in JGBs in the three months ended June, after
offloading a record amount of the debt last fiscal year. The
$1.2 trillion Government Pension Investment Fund, known as the
whale, said last week stock and fixed-income holdings were all
within 3 percentage points of their targets, suggesting it has
almost completed a planned shift into riskier assets including
global bonds and shares.
The Bank of Japan needs to find about 45 trillion yen in
JGBs from the market to meet its annual goal for boosting money
supply to stimulate the economy. Japan Post Bank, with 49.2
percent of its 206.5 trillion yen held in domestic debt, fits
the profile and needs to seek higher profits ahead of a possible
public share sale this year.
“It wouldn’t be a surprise to see Japan Post Bank do to
their portfolio what GPIF did to theirs,” said Yoshinori
Shigemi, a global market strategist in Tokyo at JPMorgan Asset
Management. “It’s important for both investors and the
government that the bank enhance its corporate value and show
that profits are going to grow by aggressively reshaping its
portfolio ahead of its listing.”
Like GPIF, Japan Post Bank has been reducing its dependency
on domestic government bonds. The bank owned 101.6 trillion yen
in sovereign debt at the end of June, with the ratio falling
below 50 percent of holdings for the first time.




Unlike GPIF, however, Japan Post Bank hasn’t been
increasing domestic stocks. It held just 900 million yen of
local equities at the end of the first quarter, unchanged from
March.
“Among the whales that the market has been focused on, the
GPIF has had the biggest impact,” said Hidenori Suezawa, an
analyst at SMBC Nikko Securities Inc. in Tokyo. “Others have
massive assets, but it may take some time for them to match
GPIF.”
The pension fund reduced domestic bond holdings to 38
percent of its assets at the end of June, down from about 50
percent a year earlier. The fund had 23 percent in Japanese
stocks, up from 17 percent, while international debt made up 13
percent and 22 percent was in equities abroad in June. It
targets 35 percent in JGBs, 25 percent each in domestic and
foreign shares, and 15 percent in overseas notes.

‘Massive Amounts’

“GPIF sold massive amounts of Japanese debt and the BOJ
absorbed it very quickly,” said Shuichi Ohsaki, a rates
strategist at Bank of America Corp.’s Merrill Lynch unit in
Tokyo. “So now that GPIF’s selling has finished, the focus will
be on who else is going to sell. Unless Japan Post Bank sells
JGBs, the BOJ won’t be able to continue its monetary stimulus
operations. It has to sell.”
Japan’s 10-year government bonds yielded 0.39 percent on
Wednesday, down from about 0.5 percent a year earlier. The Topix
index of the country’s shares has risen 14 percent in the past
year, even after a global equity rout sparked a sell-off that
pushed the measure into a correction.
Japan Post Bank saw returns from investments fall 6.3
percent in the three months ended June from a year ago. GPIF
earned 19 percent more in the same period as stocks rose and the
yen weakened, boosting overseas assets.

Asset Diversification

The postal bank said in April it plans to increase
investments in assets aside from JGBs, such as foreign
securities and corporate bonds, by 30 percent to 60 trillion yen
in the fiscal year ending March 2018.
“Japan Post Bank needs to do something to make itself look
attractive with its listing coming up,” said Nicholas Smith, a
strategist at CLSA Ltd. in Tokyo. “The company’s going to be a
lot more valuable if it’s able to get some decent returns. And
with the market on its back at the moment, it seems a very good
time to be doing that.”

For Related News and Information:
Fore the Japan Credit story daily: SALT JNCREDIT
For more credit columns: TOP CM
World equity valuations: WPE
World equity index monitor: WEI
Most-read stock market stories: MNI STK
Biggest movers this year: TPX INDEX MRR 10
Market map of today’s trading: TPX INDEX IMAP

To contact the reporters on this story:
Anna Kitanaka in Tokyo at +81-3-3201-8140 or
akitanaka@bloomberg.net;
Shigeki Nozawa in Tokyo at +81-3-3201-3867 or
snozawa1@bloomberg.net
To contact the editors responsible for this story:
Sarah McDonald at +61-2-9777-8684 or
smcdonald23@bloomberg.net;
Sandy Hendry at +852-2977-6608 or
shendry@bloomberg.net;
Garfield Reynolds at +61-2-9777-8695 or
greynolds1@bloomberg.net
Tomoko Yamazaki, Ken McCallum

(BofA-ML) China Banks : Upgraded to Buy (31/08/2015) missed it worth reading

BofAML’s #1 ranked China Banks analyst, Winnie Wu, makes a bold call to BUY China banks at current levels. 1)Winnie cites three key reasons for her call: Trough valuations of 0.7x P/B or 2.7x P/PPP which has not been seen since March 14. Note that 3x P/PPP has generally been a good entry point. 2) Net interest margin (NIM) bottoming out in 2017 as rate cuts is coming toward the end. Winnie also believes that China’s rates should not go to 0 given that reported GDP is still at 7%. 3) Bottom line recovery as credit cost peaks out. We do expect NPL ratio to keep rising but credit costs should peak-out in the next 2-3 years. In our view there are risks that the market is panicking and will overshoot in the near-term but fundamental investors should start accumulating at current levels and position for next year.

--> Full note attached