>>> Asian Update

Asian Mid-session Update: Volatility continues as China's CSRC looks to contain damage


***Economic Data***
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 112.5 v 111.8 prior
- (VN) Vietnam July Trade Balance: -$300M v -$400Me

***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.3%, S&P/ASX +0.2%; Kospi -0.2%, Shanghai Composite -1.0%, Hang Seng +1.3%, Sept S&P500 +0.4% at 2,072

***Commodities/Fixed Income***
- Aug gold -0.3% at $1,093/oz, Sept crude oil -0.7% at $47.02/brl, Sept copper +0.5% at $2.36/lb
- (CN) China Iron and Steel Association: China H1 steel production 410M tonnes, -1.3% y/y (1st decline in 20 years)
- SLV: iShares Silver Trust ETF daily holdings fall to 10,165 tonnes from 10,227 tonnes
- (CN) PBoC to inject CNY50B in 7-day reverse repos (10th consecutive injection)
- USD/CNY: PBoC sets yuan mid point at 6.1154 v 6.1176 prior setting; strongest Yuan setting since July 15
- JGB: (JP) Japan MoF sells ¥2.29T in 2-yr JGBs; Avg yield: 0.005% v 0.001% prior; bid to cover: 3.84x v 3.71x prior

***Market Focal Points/FX***
- Shanghai Composite opened down by over 4% and extended those declines above 5% to new 2-week lows in the opening hour, but has pared most of those losses and entered midday break down just 1%. Policymakers are looking to relieve the concerns that sent the markets plummeting in the afternoon session overnight, with securities regulator CSRC insisting that its China Securities Finance (CSF) is still present in the market and prepared to increase stock purchases if necessary. PBoC also promised to do its part, reiterating it will maintain "prudent" monetary policy, keep moderate liquidy, and continue supporting economic development. To that end, the PBoC injected another CNY50B via its 7-day reverse repo open market operations. PBoC also maintained that economic indicators are showing some modest improvement. In contrast, the planning body NDRC warned the economy is facing downward pressure, promising to boost construction of key projects in H2.

- South Korea's President Park declared that MERS outbreak is no longer a concern after about a month of no new infections reported. A press report also noted Korean authorities will extend easy mortgage policies by another year, just as Moody's was upbeat on the latest govt measures to contain the country's high levels of household debt. Korean Won came off its lows after hitting its worst levels in 3 years last week, with USD/KRW falling from 1,173 to 1,164.

- USD majors were also increasingly more volatile, largely tracking the swings on the mainland. USD/JPY fell to 123.10 but then rose above 123.50 along with Shanghai Composite rebound. AUD/USD and NZD/USD were also up about 50pips each from their lows, rising to as high as 0.73 and 0.6650 respectively. The euro was under modest pressure after the overnight rally, falling about 30pips below 1.1080.

- In equities, Baidu beat on the top and bottom lines, but shares traded down by over 6% in extended US session. Analysts remarked that markets are skeptical of China internet giant's continued aggressive spending plans.

***Equities***
US equities / ADRs:
- RCII: Reports Q2 $0.50 v $0.48e, R$815M v $811Me; +3.1% afterhours
- CR: Reports Q2 $1.06 v $1.05e, R$711M v $703Me; -1.7% afterhours
- BIDU: Reports Q2 $1.81 v $1.80e, R$2.67B v $2.58Be; -6.3% afterhours
- AMKR: Reports Q2 $0.08 (adj) v $0.10e, R$736.7M v $750Me; -12.6% afterhours

Notable movers by sector:
- Consumer discretionary: China Eastern Airlines 600115.CN -1.5% (H share sales to Delta); ANA Holdings 9202.JP +0.4% (Q1 result speculation)
- Financials: Beijing Capital Land 2868.HK -8.6% (H1 guidance); Huatai Securities 6886.HK -2.0% (H1 result); Citychamp Dartong Co 600067.CN -3.9% (H1 result); Hulic Co 3003.JP -0.4% (H1 result)
- Industrials: Great Wall Motor 2333.HK +4.2% (H1 result, non-public issuance); Korea Aerospace Industries 047810.KR +1.4% (Q2 result)
- Technology: Leshi Internet Info & Tech Co Beijing 300104.CN -3.0% (denies CSRC probe); Hithink Flush Information Network Co Ltd 300033.CN -3.4% (CSRC probe); Canon Inc 7751.JP +0.2% (H1 result); Samsung Electro-Mechanics 009150.KR +5.1% (Q2 result);
Tokyo Electron Device 2760.JP +3.1% ( Q1 result)
- Materials: Western Mining Co 601168.CN -0.7% (H1 result); RUSAL PLC 486.HK -1.1% (Q2 result); Alacer Gold Corp AQG.AU -3.7% (Q1 result); Nitto Denko Corp 6988.JP -5.0% (Q1 result speculation)
- Utilities: CT Environmental Group 1363.HK -0.4% (H1 guidance)
- Healthcare: Guangxi Wuzhou Zhongheng Group 600252.CN +10.0% (H1 result)
- Energy: Senex Energy SXY.AU +2.0% (Q4 result)

>>> US CLose Dow-0.73% S&P-0.61% Nasdaq-0.96% Russell-0.93%

Closing Market Summary: S&P 500 Registers Fifth Consecutive Decline

The stock market began the trading week on a cautious note with the S&P 500 (-0.6%) settling just above its 200-day moving average (2,064) while the Nasdaq Composite (-1.0%) underperformed.

Equity indices spent the entire day in negative territory after the overnight session was highlighted by an 8.5% plunge in China's Shanghai Composite, which endured its largest one-day decline in more than eight years. The index widened its slide from June highs to 28.0%, falling to lows during the final hour of action after the International Monetary Fund voiced concerns about the degree of recent government intervention in the market.

In all likelihood, government involvement in the Chinese market will be in focus over the next few weeks, especially if the measures currently being employed fail to halt the ongoing slide. To that point, today's rout was followed by reports that China's government will step up its buying measures, but that report was refuted shortly thereafter.

The overseas weakness weighed on investor sentiment in Europe and the U.S. while German Bunds (10-yr yield -6 bps to 0.65%) and U.S. Treasuries (10-yr yield -4 bps to 2.23%) advanced.

Nine sectors finished the day in negative territory with all six cyclical groups ending in the red. Furthermore, five of six growth-sensitive groups settled behind the broader market while the industrial sector (-0.4%) ended just ahead. Similar to the sector, high-beta transport stocks fared better than the broader market with the Dow Jones Transportation Average shedding 0.2%.

Elsewhere among cyclical groups, the energy sector (-1.4%) settled at the bottom of the leaderboard while crude oil fell to early April levels, ending lower by 1.6% at $47.39/bbl. The energy component retreated despite today's greenback weakness that sent the Dollar Index (96.53, -0.71) lower by 0.7%. On the upside, the utilities (+1.3%) sector posted a solid gain after showing relative strength throughout the day while consumer staples (-0.1%), health care (-0.1%), and telecom services (-0.1%) also outperformed, but could not make it out of the red.

Notably, the health care sector was boosted by a 16.4% surge in Teva Pharmaceutical (TEVA 72.00, +10.15) after the company beat earnings expectations and announced the acquisition of Allergan's (AGN 326.98, +18.77) generics business for $40.50 billion. As for biotechnology, the high-beta group struggled with iShares Nasdaq Biotechnology ETF (IBB 373.58, -4.00) falling 1.1%.

Today's participation was ahead of recent averages with more than 900 million shares changing hands at the NYSE floor.

Economic data was limited to Durable Orders, which increased 3.4% in June after declining an upwardly revised 2.1% (from -2.2%) in May while the consensus expected an increase of 3.0%.

A large portion of the increase resulted from a significant surge in aircraft orders as Boeing (BA 141.03, -3.03) reported 161 aircraft orders in June, up from just 11 in May. That gain helped push defense and nondefense aircraft orders up 52.3%. Excluding transportation, durable goods orders increased 0.8% in June after declining a negatively revised 0.1% (from 0.0%) in May while the consensus expected an increase of 0.5%.  

Tomorrow, the Case-Shiller 20-city Index for May will be released at 8:30 ET (consensus 5.6%) while July Consumer Confidence will be reported at 10:00 ET (consensus 100.0).
  • Nasdaq Composite +6.4% YTD 
  • Russell 2000 +0.9% YTD 
  • S&P 500 +0.4% YTD 
  • Dow Jones Industrial Average -2.2% YTD

(BN) The $100 Billion Deal Is Still Out There for Pharma: Real M&A

The $100 Billion Deal Is Still Out There for Pharma: Real M&A
2015-07-27 16:54:13.16 GMT


(For a Real M&A column news alert: SALT REALMNA <GO>.)

By Tara Lachapelle
(Bloomberg) -- Why stop at $221 billion? Drug companies are
entering another round of dealmaking, after plowing past the
global record.
Teva Pharmaceutical Industries Ltd.’s $40.5 billion
agreement Monday to purchase Allergan Plc’s generic-medicines
business puts the mechanism in place to trigger more takeovers.
For starters, the remaining Allergan company -- with its
prized branded drugs, including the lucrative Botox franchise --
may be a good target for Pfizer Inc. Buying Dublin-domiciled
Allergan, currently valued at about $129 billion, may also be a
way for Pfizer to lower its tax bill, a move it’s been dreaming
of but hasn’t yet been able to pull off.
Alternatively, Allergan itself could go “elephant
hunting,” says Ronny Gal, an analyst for Sanford C. Bernstein &
Co. In that case, Amgen Inc. and AbbVie Inc. are the most likely
candidates, each valued at more than $120 billion. Both stocks
surged Monday.
Teva’s decision to drop its pursuit of Mylan NV in favor of
the Allergan transaction also increases the likelihood that
Mylan will get to consummate its purchase of Perrigo Co. While
Perrigo’s board and management team are still resisting a sale,
the stock is trading as if a deal will probably happen.
The spread between Perrigo’s share price and Mylan’s cash-
and-stock bid reached its narrowest on Monday. Perrigo
shareholders will vote on that $35 billion transaction in the
coming weeks.
Even Teva is on the lookout for more deals. Erez Vigodman,
the Israeli drugmaker’s chief executive officer, said in an
interview Monday that Teva has the ability to keep making
purchases for specialty pharmaceuticals this year and next.
“You cannot sit still,” he said, referring to the merger
wave that has swept through the pharma industry.

For Related News and Information:
Teva to Buy Allergan’s Generic-Drug Unit for $40.5 Billion
Allergan May Lower Debt, Continue Buying Spree With Teva Deal
All Eyes on Pfizer as Shareholders Await the Mega-Deal: Real M&A
Teva CEO Sees More Deals Coming After $40.5B Allergan Purchase
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>

To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman

WSJ :BP Looks to the Future After Settling Deepwater Horizon Claims

BP Looks to the Future After Settling Deepwater Horizon Claims
Investors say they want to know how the company plans to move forward


LONDON—As BP PLC prepares to report on Tuesday its first financial results since settling all federal and state claims over the 2010 Gulf of Mexico spill, investors say they want to know how the company plans to move forward from an event that defined its corporate strategy for five years.

“We’re entering into a period where the company needs to decide what it’s going to be,” said Paul Mumford, an investment manager at Cavendish Asset Management Ltd. “When the results come out, I would hope the company would give a clear outline of where it expects to move in the future.”

But don’t expect an abrupt about face, analysts said.

Once the world’s biggest independent oil producer, BP has slid down the rankings of oil giants in the wake of the Deepwater Horizon blowout, which claimed 11 lives and spewed millions of barrels of oil into the Gulf of Mexico. Over the past five years, it has sold off more than $40 billion in assets to help pay for legal and cleanup costs and carefully crafted its business around a smaller set of high-value assets and a regime of cost cuts.

Given the steep drop in oil prices over the past 12 months, that focus on A-grade projects and improving returns is likely to remain, analysts said.

The company has already announced plans to trim costs and reduce capital spending by around 20% and it is in the midst of a two-year, $10 billion divestment plan. As prices fell over the past year, BP has taken one of the most austere approaches among the big oil companies. According to Wood Mackenzie, it has delayed approval on six projects so far this year, three times the number of projects delayed by Exxon and Shell.

Chief Executive Bob Dudley has been vocal in expressing his cautious take on the downturn, warning that he expects oil prices to remain “lower for longer.”

“I wouldn’t get ahead that they’re going to roll the dice big. I don’t think that’s Dudley’s style,” said Citigroup oil-and-gas analyst Alastair Syme.

Still this month’s $18.7 billion settlement gives the company more breathing room and allows it to focus on the future. The agreement settled BP’s largest legal exposures, including penalties for environmental damage under the Clean Water Act and claims from Louisiana, Mississippi, Alabama, Texas and Florida.

Though hefty, BP’s payments will be spread out over 18 years leaving room to maneuver with the balance sheet.

“I think they really have a chance now to rise from the ashes,” said BP investor Richard Hulf, manager of the Global Energy Fund at Artemis Fund Managers.

Now could be the ideal time to stage a comeback, some investors said. The oil-price slide could open up interesting acquisition opportunities, though analysts say BP’s ambitions are likely to be far more modest than the $70 billion acquisition of BG Group by Anglo-Dutch rival Royal Dutch Shell PLC. Still, assets in the U.S. or Africa could prove attractive if the price is right.

“They’ve got a chance to completely reset the strategy,” said Jonathan Barber, a portfolio manager at Columbia Threadneedle Investments, which has limited its investment in BP because of the cloud cast by the Gulf of Mexico disaster.

Indeed, acquisitions could prove a necessity. BP’s production has shriveled since 2010 and last year it failed to find enough oil to replace what it pumped. Its elite set of assets—though carefully pruned and curated—isn’t risk free either. A $7 billion investment in Indian gas, made right after the Gulf of Mexico disaster, has largely fallen flat. Last year, it restructured its onshore business in the U.S., after struggling to profit from the shale boom, and it remains exposed to significant political risk in Russia through its stake in state-owned oil company OAO Rosneft.

‘I think they really have a chance now to rise from the ashes.’
—Richard Hulf, Artemis Fund Managers.
Moreover, the five years of belt-tightening that BP endured in the wake of the Macondo blowout has left it better placed than many of its peers to weather the current downturn in oil prices.

BP’s balance sheet remains strong. At the end of the first quarter, its net debt amounted to $25.1 billion, slightly lower than a year earlier. Its ratio of net debt to equity, or gearing, remains below pre-2010 levels. The ratings agency Standard & Poor’s revised its outlook for the company on Thursday from negative to stable, praising its cost-reduction efforts and control on spending.

It is a symbol of the effort BP has deployed to regain shareholder confidence, despite a 40% drop in its stock-price since the 2010 blowout. Though it suspended its dividend in the wake of the disaster, it has raised it pretty consistently ever since reinstating it at the beginning of 2011.

FT : French state faces €5bn bill to rescue struggling Areva


The French government could be required pay as much as €5bn to rescue the struggling state-controlled nuclear group Areva as part of a deal that is set to reshape the country’s energy sector.
Areva and EDF are in the midst of tense, last-minute discussions ahead of key board meetings on Wednesday, where the two groups — both more than 85 per cent owned by the state — need to find a wide-ranging agreement.

The negotiations, which concern the price EDF will pay for Areva’s reactor businesses and fuel treatment contracts, will shape how much France’s cash-strapped state has to put in to recapitalise Areva.
People close to the talks say that the government could be forced to contribute as much as €4bn-€5bn to a capital raising expected in September, far more than the €2bn-€3bn that ministers had hoped for just a few months ago.
Relations between EDF and Areva are strained. Philippe Varin, Areva’s chairman, last week wrote a letter to the government warning that the whole deal was in danger of falling apart.
The two companies, which both report half-year results on Thursday, need to agree on the price for Areva’s reactor unit, called Areva NP.
According to people close to the talks, the expectation is that the unit will be valued at about €2.7bn, more than the €2bn expected last month, but EDF, which operates France’s 58 nuclear plants, will take only about 75 per cent of the equity in the company.
This would leave Areva with a 25 per cent stake of Areva NP. But then it would receive roughly €700m less cash, and the shortfall would probably need to be made up by the state in the capital raising, according to those same people.
Even more tense negotiations are under way over a number of commercial contracts between EDF and Areva, chiefly over the price that EDF will pay for fuel treatment and recycling until 2023.
People close to Areva say that the price being offered by EDF is too low. The French state also has an interest in EDF paying a higher price for this major contract, as more revenue could lead to lower capital needs for Areva.
The third part of the talks is over whether the French state will indemnify both Areva and EDF against any future losses on a construction project in Finland, which has already cost Areva €3.9bn in impairment charges.
Areva has over the past five years suffered from delays to key projects as well as a slump in global demand for new reactors following the 2011 Fukushima disaster.
The company reported a €4.8bn loss last year, prompting the government to step in to try to broker a solution with EDF to save a key player in one of France’s most important strategic industries.

WSJ : Teva to Buy Allergan Generics for $40.5 Billion

Teva to Buy Allergan Generics for $40.5 Billion

Deal puts Teva among biggest drug makers, enables it to drop bid for Mylan

Teva Pharmaceutical Industries Ltd. on Monday agreed to buy Allergan PLC’s generics unit for $40.5 billion in cash and stock, in a deal that will vault the Israeli company into the top ranks of global drug makers.

Teva said Allergan would receive $33.75 billion in cash and Teva shares valued at $6.75 billion, giving it a 10% stake in Teva.

The deal, the latest in a wave of consolidation in the drug industry in recent years, combines Teva, the world’s largest generic-drug company by sales, with the third-largest competitor in the market.

The acquisition will give Teva increased scale in the hotly competitive generic-drug market, and an opportunity to pursue further cost reductions that could help it cope with the end of a wave of big patent expirations.

“What we are doing here will enable Teva to be one of the winners of the ever-changing pharmaceutical industry,” Teva Chief Executive Erez Vigodman said in an interview. He expects Teva will be able to divest the products needed to satisfy any government concerns about antitrust.
Teva shares rose 13% in premarket trading.

Mr. Vigodman added that Teva would drop its pursuit of rival Mylan NV in wake of its agreement to buy Allergan’s generic-drugs business. “We believe we have an even greater opportunity to create value for shareholders from” the Allergan transaction, he said.

Teva said it plans to review its options with respect to the approximately 4.6% of Mylan stock that it owns.

Mylan, in a separate statement, congratulated Teva, said its focus remains unchanged and reaffirmed its commitment to acquiring rival Perrigo Co. So far, Perrigo has rebuffed Mylan’s takeover attempts.

Mylan shares fell 13% premarket, while Perrigo gained 3.9%.

For Allergan, the Teva deal provides it with cash to pay down debt and allows the company to focus more on lucrative brand-name drugs. Actavis was renamed Allergan earlier this year, after doing $100 billion in deals last year that gave it brand-name drugs, notably wrinkle fighter Botox.

Those deals had swollen Allergan’s debt levels, and the company has said it is committed to reducing its debt levels.

Allergan shares added 7%.

Teva said it expected the acquisition of Allergan Generics to contribute $2.7 billion in earnings before interest, taxes, depreciation and amortization, or Ebitda, in 2016, excluding synergies. It expects to achieve cost synergies and tax savings of approximately $1.4 billion annually, largely achievable by the third anniversary of the closing of the transaction.

Allergan’s 1,000 low-price products include branded generic drugs, over-the-counter medicines and generic versions of well-known pharmaceuticals such as the OxyContin pain treatment and Concerta, which treats attention-deficit-hyperactivity-disorder.

The deal is expected to attract antitrust scrutiny from regulators. Teva may need to sell off products with about $500 million in yearly sales to win approval, Evercore ISI analyst Umer Raffat estimates.

Teva said the transaction was unanimously approved by the boards of both companies and is expected to close in the first quarter of 2016.

Midsize companies such as Teva have largely driven the breakneck pace of consolidation in the drug industry in recent years—part of a broader boom in mergers and acquisitions—as they take advantage of cheap debt and in some cases low tax rates secured by relocating overseas, while drawing on the approval of investors who have driven their shares higher. Meanwhile, bigger, more-established rivals have largely been on the sidelines of major deal making.

Last year Teva, which had a market value of $60 billion before The Wall Street Journal reported Teva’s talks with Allergan on Saturday, had $9.1 billion in generic-drug sales, according to EvaluatePharma, about 12% of the world market. The company said it already accounts for one in six drug prescriptions in the U.S. But much of its business is in no-name generic medicines sold at lower prices. Nearly half of Teva’s $20.3 billion in sales last year were from the off-patent generic copies of drugs.

By adding Allergan’s business, which reported $6.6 billion in sales last year, Teva would have revenue significantly greater than that of better-known, branded-drug companies such as Cialis maker Eli Lilly & Co., which reported $19.6 billion in sales last year.

The deal could give the combined company a market value exceeding that of Lilly, which stood at $94 billion on Friday.

Teva also said Monday that it expected to report better-than-expected sales and earnings for the second quarter ended in June. The company projected earnings excluding certain items of $1.43 a share on revenue of $4.97 billion, down 2% from a year ago but up 6% excluding the impact from currency changes. Analysts, on average, were expecting earnings of $1.31 a share on sales of $4.92 billion, according to FactSet.

For 2015, Teva raised its per-share earnings forecast to a range of $5.15 to $5.40, from its previous range of $5.05 to $5.35. Analysts were expecting per-share earnings of $5.20, according to FactSet.

Dublin-based Allergan became one of the top 10 drug companies by sales this year when Actavis bought the maker of wrinkle treatment Botox for nearly $70 billion, and renamed itself. The Teva deal allows Allergan to sharpen its focus on its branded pharmaceutical business.


“We will have the potential to add scale in existing therapeutic areas, expand into new therapeutic areas and geographies and evaluate strategic transformational deals as we continue to build on our position as the most dynamic branded growth pharma company,” Allergan CEO Brent Saunders said.

In a sign of its continuing ambition, Allergan announced a deal on Sunday, saying it will pay $560 million upfront for Naurex Inc. and its antidepressant-drug candidate.

(BFW) Iran Says in Talks With Glencore on Oilfield Investment: Seda

Iran Says in Talks With Glencore on Oilfield Investment: Seda
2015-07-27 13:03:46.919 GMT


By Bruce Stanley
(Bloomberg) -- Amir-Hossein Zamaninia, Deputy Oil Minister
for Intl & Commercial Affairs, met w/ Glencore officials in
Switzerland, discussed possible investment in Iranian oil
fields, he says in interview w/ Iran’s Seda weekly magazine.

* Zamaninia doesn’t give date for talks, declines to identify
fields under discussion; Glencore officials recently visited
Iran, he says: Seda
* Iran oil ministry also in talks w/ Trafigura and since April
w/ officials from Poland, Austria, South Africa, Malaysia,
Croatia, Russia; talks aim at helping Persian Gulf country
regain oil sales lost under sanctions over its nuclear
program
* Zamaninia sees no difficulties selling additional 1m b/d of
oil after sanctions lifted; other OPEC members to make room
for this new 1m b/d, which won’t have much impact on prices
* Iran to pump additional 500k-600k b/d w/in 2 mos of lifting
of sanctions; will return to pre-sanctions output in 6 mos-1
yr after curbs removed
* Most of Iran’s cash in frozen accounts is in Japan, India,
China, S. Korea, some European countries; Greece owes Iran
$800m
* Iran can double natgas exports to Turkey but prices must be
negotiated


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

--With assistance from Ladane Nasseri in Tehran.

To contact the reporter on this story:
Bruce Stanley in Dubai at +971-4-364-1055 or
bstanley5@bloomberg.net
To contact the editors responsible for this story:
Nayla Razzouk at +971-4-3641056 or
nrazzouk2@bloomberg.net
Bruce Stanley, Rachel Graham