(Citi) Glencore : Bottomless? - we don’t think so

* Credit or Credibility? — GLEN shares are down >40% since the $2.5bn placing at
125p a few weeks ago. We believe this has been driven by concerns around
balance sheet and liquidity, reflected by both the rising CDS spreads and bond
yields. We believe the markets response is overdone and that the ratings agencies
are likely to take a more through-the-cycle view and therefore a downgrade to subinvestment
grade is not likely. We think that GLEN will promptly execute a
streaming deal and/or a stake sale in agriculture business as outlined at original
announcement which would be both credit and equity positive. Buy, PT £1.70/share.

* Potential Upside Surprise — We believe there is potential upside to the $2bn
target outlined from asset sales, including streaming and minority stake sale to
strategic investor(s) in the agricultural business. The level of interest is likely to be
high in both situations. We also think the group is not limited to just selling a
minority stake and if the need be, the entire agricultural marketing business could
be sold, which we value at ~$10.5bn.

* Stress Testing — Running $4,000/t copper price and all else at spot gives us a
sustainable adjusted EBITDA of ~$7.5bn and a net debt level of <$21bn, whereas
the sustainable EBITDA implies a net debt ceiling of $22.5bn at group’s target of <3
ND/EBITDA. Sustainable EBIT from marketing business at these prices still remains
healthy at ~$1.9-2.0bn, which we believe is an underlying achievable number just
from the logistics handling. We therefore don’t see a stressed balance sheet. The
group has >$12bn in liquidity, including $6.5bn of cash after the recent equity
placing, implying that the group can stay away from debt markets till 2017 and
potentially beyond if it could divest more than the $2bn target.

* Go Private and Re-structure? — We believe that in the event the equity market
continues to express its unwillingness to value the business fairly, the company
management should take the company private, whereby restructuring measures
can be taken easily and quickly, with a potential float of just the industrial business
occuring further down the track.

>>> What to look at today - 29th of September 2015

Dow-1.92% S&P-2.57% Nasdaq-3.04% Russell-2.87% VIX @ 27.63 +16.98%
US Market closed lower. Glencore was on heavily pressure in Europe after an investec report and a 8.8% year-over-year decline in China's industrial profits, a disappointing 1.4% monthly decline in pending U.S. home sales for August, and a declaration from International Monetary Fund (IMF) head Christine Lagarde that the IMF's forecasts for global growth of 3.3% this year and 3.8% next year are no longer realistic due principally to the weakness in emerging markets. allegation from famed investor Carl Icahn that there could be another financial catastrophe looming with the persistence of the Federal Reserve's policy rate near the zero bound, cast a pall on investor sentiment that hung over the capital markets all day. oil (-2.7% to $44.47 per barrel) and other commodity prices got knocked back noticeably, high-yield bond prices continued to weaken, cyclical sectors like the energy (-3.6%), materials (-3.2%), and consumer discretionary (-2.9%) sectors were among the hardest hit areas, and Treasuries rallied in a flight-to-safety bid. VIX surge 17% to 27.63. All tech names were down even Apple after announcing record sell on iPhone 6s. Valeant (VRX) -16.5% on congressional probe into drug prices. Cheniere Energy: Carl Icahn raises active stake to 11.43% from 9.59% AMD Said to Have Held Stalled Investment Talks With Silver Lake, US After Hours LNG +1.2%, AGN +2.0%, CMTL -14.2%, SNX -2.7% following earnings/guidance, YHOO +4.0% (provided update on Alibaba (BABA) stake spin off; co continues to expect completion in Q4; spin-off no longer conditioned upon receipt of a favorable ruling from the IRS)...Asian Equity markets are trackig US & Europe performance ( Glencore & Clinton price reform in biotech weighting)...Evans remarked the Fed should do some three 25bp moves by the end of next year, and moderate voter Williams reiterated liftoff would still be appropriate this year. Williams did acknowledge that inflation is still below preferred levels, though unemployment would fall below 5% later this year and remain there through 2016.

Nikkei -3.87% Hang Seng -3.25% Shanghai -1.96%

Eur$1.1268 CNY 6.3643 JPY 119.45 GBP 1.5175 EURCHF 1.0947 BRL 4.1096 RUB$ 66.1451 WTI $$44.45

S&P -0.33% EuroStoxx -1.09% Dax -0.76% SMI -1.12%


Macro :
- Qatar Fund Loses $5.9 Billion on Holdings in VW, Glencore
- With Glencore, Commodity Rout Beginning to Look Like a Crisis
- Wilbur Ross Ready to Invest More in Greek Banks: Handelsblatt

Keep an eye on:
- EN FP : Bouygues Gets EU285M Qatar Contract to Build Sewage Tunnels
- EXO IM : PartnerRe Sees Exor Deal Closing in 1Q16
- GLEN LN : GLNCY closed @ $2.07- 27.9% in the US @ 68.227 vs 68.62 in ldn
- NESN VX : Nestle, Hershey, Mars Sued in Human Rights Abuse Cases
- SUN SW : Renova’s Tiwel Exempted From Making Further Sulzer Tender Offers
- VOW3 GY : VW Committee of Holders, Labor Reps to Meet Wed. on Crisis: DJ
- VOW3 GY : Volkswagen Orders Drop in Japan, Nikkei Reports

>>> Europe : Brokers Upgrades & Downgrades - 29th of September 2015

>>> Up
*AUTOLIV RAISED TO NEUTRAL VS SELL AT GOLDMAN SACHS
*BANKIA RAISED TO MARKET PERFORM AT BBVA
*BNP PARIBAS RAISED TO BUY VS HOLD AT HSBC
*DEUTSCHE WOHNEN RAISED TO HOLD VS REDUCE AT HSBC
*ELRINGKLINGER RAISED TO HOLD VS REDUCE AT KEPLER CHEUVREUX
*ENQUEST RAISED TO BUY VS ADD AT NUMIS
*FAURECIA RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX
*GAMESA RAISED TO BUY VS NEUTRAL AT CITI
*PROSIEBENSAT.1 RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
*SOCGEN RAISED TO BUY VS HOLD AT HSBC
*SWISS RE RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
*TERNA RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS

>>> Down
*ATRESMEDIA CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*DOGUS OTOMOTIV CUT TO HOLD AT HSBC
*ENAGAS CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*FLEX LNG CUT TO HOLD AT DNB MARKETS
*GAS NATURAL CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*HELLA CUT TO NEUTRAL VS BUY AT GOLDMAN SACHS
*MEDIASET ESPANA CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*NOKIAN RENKAAT RAISED TO OUTPERFORM AT EXANE; PT EU35
*OTP CUT TO NEUTRAL VS BUY AT GOLDMAN SACHS
*PEKAO CUT TO SELL VS NEUTRAL AT GOLDMAN SACHS
*PENNON RAISED TO BUY VS HOLD AT INVESTEC
*RTL GROUP CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*SHW CUT TO HOLD FROM BUY AT BANKHAUS LAMPE

>>> PT Change
*ENEL (OW) Raise PT to €5.00 from €4.80 AT BARCLAYS
*ENEL GREEN POWER PT RAISE to €2.50 from €2.40 AT BARCLAYS (Note attached)
*IBEDROLA (UW) Raise PT to €5.30 from €4.30 AT BARCLAYS
*ITV PT LOWER TO 250p from 270p AT BARCLAYS
*M6 METROPOLE PT Lower to €18.50 from €18.75 AT BARCLAYS
*RED ELECTRICA (EW) Raise PT to €74.00 from €65.50 AT BARCLAYS
*REDES ENERGIA (OW) Lower PT to €2.83 from €2.91 AT BARCLAYS
*TELEVISION FRANCAISE 1 PT LOWER to €15.50 from €16.50 AT BARCLAYS

>>> Initiation
*ALDERMORE RATED NEW BUY AT INVESTEC, PT 325P
*ALTEN RATED NEW BUY AT BERENBERG, PT EU55
*ALTRAN RATED NEW BUY AT BERENBERG, PT EU12.60

>>> Call
>> Stock
*BERTRANDT ADDED TO BANKHAUS LAMPE’S ALPHA LIST
*CONTINENTAL ADDED TO GOLDMAN SACHS CONVICTION BUY LIST
*PEUGEOT, FAURECIA REMOVED FROM GOLDMAN CONVICTION BUY LIST
*TECHNOTRANS DELEATED FROM BANKHAUS LAMPE’S ALPHA LIST
*VOLKSWAGEN TO BE REMOVED FROM DOW JONES SUSTAINABILITY INDICES

>>> Asian Update

Asian Mid-session Update: Glencore credit fears, China slowdown crush equities


***Economic Data***
- (AU) AUSTRALIA AUG CORELOGIC RPDATA HOUSE PRICES Y/Y: 0.8% V 0.4% PRIOR; 4th straight increase
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 110.6 v 114.5 prior
- (KR) South Korea AUG Department Store Sales y/y: -6.5% v +0.7% prior; Discount store sales y/y: -7.6% v -1.8% prior

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -2.8%, S&P/ASX -2.8%, Kospi closed, Shanghai Composite -1.9%, Hang Seng -3.6%, Dec S&P500 -0.1% at 1,871

***Commodities/Fixed Income***
- Dec gold flat at $1,132/oz, Nov crude oil +0.1% at $44.46/brl, Dec copper -0.6% at $2.23/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 9,871 tonnes from 9,898 tonnes; 4-month low
- (TH) Thailand Central Bank sells 3-month bills at 1.507% and 6-month Bills at 1.514%
- (JP) Japan MoF sells ¥2.31T in 2-yr JGBs; Avg yield: 0.010% v 0.008% prior; bid to cover: 3.71x v 4.39x prior; Weakest demand since June
- USD/CNY: (CN) PBoC sets yuan mid point at 6.3660 v 6.3729 prior setting (strongest Yuan setting since Sept 18th)
- (CN) PBoC to inject CNY40B in 14-day reverse repos (27th consecutive injection); Offer yield at 2.70%, unchanged from prior

***Market Focal Points/FX***
- Asian equity markets are tracking another heavy dose of selling in US hours, where the overnight pressure from disappointing China industrial profits data was compounded by credit panic driven decline in commodity trading giant Glencore and worries of Clinton price reform in the biotech space. After a 30% drop in Glencore, commodity names such as BHP and Rio Tinto were sharply lower in Australia, sending S&P/ASX along with Australia 3-year bond yields to 3-week lows. Hang Seng led the decliners with an outsized catch-up move following yesterday's holiday. Shanghai Composite also fell just shy of yesterday's 2-week lows below 3,050.

- After yesterday's decline in China industrial profits, researcher with CASS said profitability will turn even more negative in H2 on expected uptick in fixed costs and negative sentiment from stock market volatility. Separately, CASS reiterated China Q3 GDP estimate at 6.9%, while NBS chief Wang remarked China will remain global growth driver. Premier Li was also cited calling external volatility to China's economic fluctuations as excessive, adding China economy is still within a reasonable range.

- Economic calendar remained light ahead of the much more busy sessions for the rest of the week. Australia's house prices rose for the 4th straight month by a wider margin, though CoreLogic noted the price increase was mostly skewed toward Melbourne. Weekly consumer sentiment index fell after last week's bounce on Australian political transition. Tomorrow will bring the release of Japan retail sales and Australia building approvals.

- Outside of Asia, Fed speak continued late in Monday's US session. Evans remarked the Fed should do some three 25bp moves by the end of next year, and moderate voter Williams reiterated liftoff would still be appropriate this year. Williams did acknowledge that inflation is still below preferred levels, though unemployment would fall below 5% later this year and remain there through 2016. Risk-off flows saw predictable reactions in FX space. AUD/USD and USD/JPY were both down about 50pips from the highs around 0.6940 and 119.40 respectively, while EUR/USD crept up about 30pips to test 1.1270.

***Equities***
US equities / ADRs:
- RJET: Deutsche Bank Raised RJET to Buy from Hold, price target: $8; +6.6% afterhours
- ZIOP, XON: To develop graft-vs-host disease drugs; ZIOP +1.5%, XON +1.9% afterhours
- AGN: Guides H2 $6.25-6.65 (no comparable ests), Rev above $8B (no comparable ests); cites adjustments due to divestiture to Teva; +1.0% afterhours
- SNX: Reports Q3 $1.47 v $1.44e, R$3.33B v $3.36Be; -1.1% afterhours
- ESPR: Provides further updates on ETC-1002 global Phase 3 strategy following receipt of End-of-Phase 2 meeting minutes; -10.7% afterhours
- ZSAN: Resumes development of weekly ZP-PTH treatment for severe osteoporosis; -52.5% afterhours

Notable movers by sector:
- Consumer discretionary: Nitori Holdings 9843.JP -5.9% (H1 result); FamilyMart Co 8028.JP -1.5% (H1 result speculation)
- Financials: CITIC Securities 6030.HK -6.4% (Cinda Sinorock cuts stake)
- Industrials: RUSAL 486.HK -2.5% (postpones interim dividend consideration); Suzuki Motor 7269.JP -2.1% (Aug Japan auto data)
- Technology: TDK Corp 6762.JP -3.2% (cooperation with Imation); Alpine Electronics 6816.JP -6.2% (cuts guidance)
- Materials: Beijing SJ Environmental Protection and New Material Co 300072.CN +0.9% (Q1-Q3 guidance); Glencore 805.HK -27.4%, BHP Biliton BHP.AU -6.0%, Fortescue Metals Group FMG.AU -4.9% (momentum); Kobe Steel 5406.JP -11.1% (cuts guidance)
- Energy: PetroChina 601857.CN -1.9%, Sinopec 600028.CN -1.9% (crude oil declines)
- Healthcare: Eisai Co 4523.JP -5.2% (FDA news)
- Telecom: TPG Telecom TPM.AU -3.5% (speculation to sell asset)

>>> US After Hours Summary: AGN +2.0%, CMTL -14.2%, SNX -2.7% fo

After Hours Summary: AGN +2.0%, CMTL -14.2%, SNX -2.7% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: AGN +2.0%

Companies trading higher in after hours in reaction to news: YHOO +4.0% (provided update on Alibaba (BABA) stake spin off; co continues to expect completion in Q4; spin-off no longer conditioned upon receipt of a favorable ruling from the IRS), MWW +3.0% (announced sale of 50.01% owneship position in JobKorea for ~$85 mln), POM +2.4% (co and Exelon (EXC) filed an application for reconsideration with the DC Public Service Commission requesting reconsideration of the order denying the pending merger; EXC +2.1%), XON +2.1% (formed a new Exclusive Channel Collaboration with ZIOPHARM Oncology (ZIOP) to pursue cellular therapy approaches to autoimmune disorder), CANF +1.3% (Mitchell P. Kopin discloses 7.4% passive stake in 13G filing)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: CMTL -14.2%, SNX -2.7%

Companies trading lower in after hours in reaction to news: ZSAN -52.5% (discontinued development of its Daily ZP-PTH treatment for severe osteoporosis; resumed development of its Weekly ZP-PTH product; terminates collaboration with Eli Lilly (LLY)), ESPR -7.4% (lower by ~12.5% following update on ECT-1002 development plan; new wording suggests FDA could require a completed cardiovascular outcomes trial before approval)

>>> Japan Tobacco close to deal to acquire SantaFe Natural Tobacco from Reynolds

Japan Tobacco close to deal to acquire SantaFe Natural Tobacco from Reynolds for about USD 5bn 

Japan Tobacco [TYO:2914] is close to an agreement to acquire New Mexico-based Santa Fe Natural Tobacco, a subsidiary of Reynolds American [NYSE:RAI], for about USD 5bn (JPY 600bn), the Nihon Keizai Shimbun reported.

The Japanese-language report disclosed, without citing any sources, that the two companies are seeking to reach a deal during this week. It would be the largest overseas M&A deal by Japan Tobacco since it acquired UK-based Gallaher in 2007 for USD 14.7bn, the report said.

Santa Fe Natural Tobacco manufactures the Natural American Spirit brand, which is sold in the US, Europe and Japan, the report said, adding that by obtaining the sales rights to the brand Japan Tobacco aims to accelerate global growth. There is a possibility, however, that the rights to sell the brand within the US may not be included in the deal, the report added.

Santa Fe Natural Tobacco had net sales for 2014 of USD 658m, the report said.

Nihon Keizai Shimbun

>>> Morgan Stanley's mea culpa on 'really bad' energy call

Morgan Stanley's mea culpa on 'really bad' energy call

Morgan Stanley is finally moving off its fouled call to buy energy shares – but the investment bank can't be certain the downgrade won't align with a rebound for the embattled sector.

The US investment bank advised investors to "overweight" the energy sector at the beginning of 2015. Their thinking?

Our original thesis when we went overweight the energy sector at the beginning of the year was that they were cyclical stocks that were down a lot, you had to be anticipatory and the valuation was compelling.

It turned out to be terrible timing for the recommendation.

US crude oil prices have tumbled 16.3 per cent, while Brent, the international benchmark, has dropped 17.3 per cent, since the beginning of 2015.

The sharp decline has weighed heavily on energy shares, with the S&P 500 energy sector having lost about a quarter of its value this year.

In a note on Monday explaining its move to downgrade energy stocks from "overweight" to "market-weight," the analysts said they've altered the way they view dynamics in the industry.

Whereas analysts had looked at rig count as the key variable in determining production, it is now looking at technology employed by energy firms that allow them to keep making money - and pumping oil - at lower prices.

"It is clearer now than ever that technology has massively altered the energy landscape. Rig counts are down dramatically but production is not," Morgan said, noting companies can make the same profit margins at $60 oil today that they could at $90 oil a few years ago.

From their report:

We thought the falling rig count would be a catalyst to spark a dream of higher oil. Well, we now think rig counts aren't the way to think about it. It is production, and production isn't down really at all in the US.

While the sector rallied in February and March in anticipation of achievable estimates in April, the sector has lagged massively since because of stronger than expected supply. The valuation argument only works with a dream of a much higher oil price in the future, and that dream has been a bit of a nightmare.

Morgan Stanley reckons oil supply and demand fundamentals may not improve over the next year, meaning investors may be offered a better entry point for energy-related equities over the next six to nine months. Still, the analysts warn "this downgrade could be the beginning of an energy rally."

Morgan also said it has "seen this movie in the gas market."

Natural gas prices traded at more than five times their current value in summer 2008, but have faced pressure amid increasing production