(Citi) Talking bout Italy - Renzi...--> +ve stance on italian Equities

Talking About Italy
Midway into the Renzi Journey

* The Jury is Still Out — While Matteo Renzi promised to change Italy in a thousand days, midway into the journey the jury is still out: Italy may be heading in the right direction but reversing decades of poor government might require a much longer period of time than PM Renzi and investors factor. We believe that the pending reform of the Senato is likely to be the turning point; if approved, the government might accelerate the reform pace while strengthening the economy.
* Tepid Tailwinds, Structural Headwinds — Citi economists believe that with GDP growth expected to be around 0.7% in 2015 and 1.3% in 2016, Italy’s underperformance is likely to persist. While we appreciate that Italy has been able to take advantage of macro tailwinds (so often missed over the past decades), we are nonetheless concerned that a tepid and uneven recovery might be empowering structural headwinds (i.e., vested interests) that are, in turn, preventing Italy from achieving the strong growth that Renzi will need to convince Italians this time is different.
* Can Italy Return to 3% plus Growth? — Italy needs stability, visibility, credibility; these conditions can be achieved only via an overhaul of the country architecture alongside legal certainties. While we see Renzi as possibly the last opportunity for a turnaround of Italy, his failure might push back Italy into being the chaotic country that disappointed for so long.
* Remain long on Italy — Sharing our strategists’ view that we are in an “old but not dead” bull market, we maintain a positive stance on Italian equities. While we can’t exclude volatility should Renzi fail to modernize the country, corporate finance might provide an interesting angle for long-term investors. Italy is full of first-class companies that are extremely
attractive for overseas investors. And the seeds for an improved economic environment might have been planted.
* What we Like — Among SMID caps, we favour Autogrill, Prysmian and Yoox – not least for possible M&A. While
Luxottica and Geox are Neutral-rated, we could turn more positive on share-price weaknesses. Among asset gatherers, our preference goes for Banca Generali and Mediolanum while we like Unicredit (focus list) and Intesa SanPaolo among traditional banks. UBI and BPER are our preferred means to take advantage of Popolari reform. Finally, A2A and Snam remain attractive in the utility industry — set to benefit from a more favorable environment in years.
* What we Like Less — Mediaset, ENEL, ENEL GreenPower and (Swiss-listed) Dufry, which is taking over WDF.

(Citi) VW Recalls – Initial Read-Through Thoughts to U.S. Auto Stocks

VW Recalls – Initial Read-Through Thoughts to U.S. Auto Stocks

Over the weekend, it was reported by several media outlets (WSJ) that Volkswagen
AG (not covered by Citi) has stopped sale on U.S. diesel-powered cars after
allegedly evading U.S. diesel emissions testing using software. The software that
was allegedly used on about 482k U.S. VW diesel vehicles and made the cars
appear cleaner than they were during testing. The automaker has reportedly issued
an apology and is investigating. Our initial thoughts with respect to the read-through
to our U.S. covered auto stocks is as follows:
– (1) If this issue is contained to VW U.S. – VW commands a small ~2% U.S.
market share. Previous major recalls have not led to noticeably lasting market
share shifts though each recall situation is obviously different.
– (2) If this issue somehow spreads to VW on a Global Scale – Then we may
see some shift in global OEM share as VW group commands a strong ~25%
share in the EU market and a double-digit share in China. Note that at this point
we have no information to suggest that this issue goes beyond the U.S. For
information purposes, suppliers who are exposed to VW globally include
BorgWarner (~17%), Tower (~15%), Magna (~11%), Delphi (~10%), Lear (we est.
8-9%), Autoliv (~8%), Visteon (~3%) and Johnson Controls (listed as a Top 5
largest OEM customer). While exposed suppliers could be hurt on any global VW
market share shift (again, this scenario assumes the situation escalates to a
global scale, for which we have currently no information to suggest it will), these
suppliers would presumably gain some or all back with other OEMs they are
exposed to as most of these companies are well-diversified.
– (3) If this somehow hurts diesel demand – If any impact to diesel demand is
contained to the U.S., the impact to our covered companies would likely be fairly
small given modest diesel penetration in the U.S. If there’s somehow an impact
to diesel demand on a global scale, companies we cover with material exposure
to diesel engines include Delphi (~15% of revenue, though a good portion is
commercial vehicle/some aftermarket and light vehicle content likely made up
partially/wholly by other powertrains) and BorgWarner (diesel turbos = 15% of
backlog). Again, we have no information to suggest that industry diesel demand
is at risk from these unfolding events.

(Citi) Head to Head: Unicredit vs Societe Generale

Head to Head: Unicredit vs Societe Generale

Transforming into Swans via Capital Rebuilding

* Head to Head — In the latest edition of the series we compare Unicredit and
Societe Generale. Both banks are unloved by the market and trade at discount to
book. This is possibly due to the groups business complexity, as well as market
skepticism on capital level and future profitability. We have run sensitivity analysis
on capital, looked at profitability and balance sheet. We believe the market will rerate
the stocks on the back of evidence of delivery on capital rebuild and profitability
recovery (in Italy for UCI and internationally for SOGN). We rate both banks Buy,
but prefer UCI (on Citi Focus List Europe), given higher ROTE growth, gearing to
Italian business recovery, higher cost cutting opportunities, and upcoming plan.
* Transforming into Swans via Capital Rebuilding — UCI and SOGN are at the
lower end of the peer group on capital. We have run 2 simulations on CET1: on the
current framework we simulate a c50bp gap for UCI and c60bp for SOGN; 2) on a
more conservative scenario (e.g. B4 RWAs) the gap widens to c130bp. Our base
case is no need for capital increases, given banks’ ability to generate capital
organically (we estimate the banks to generate each c170bp of capital in the next 3
year) via higher profitability, RWAs optimization, disposals and actions on dividend.
* Western Europe vs International Recovery — UCI ROTE is depressed by high
loan loss provisions in Italy and low profitability in Austria and Germany. The Italian
cost of risk should benefit from Italian NPLs/macro recovery and we expect higher
cost cutting/restructuring in Austria, Germany and Italy. SOGN has a proven track
record on costs, its domestic business shows stable and high return, the CIB is
profitable, and only the international business is running below target. We expect
ROTE to reach c9% for UCI and c11% for SOGN in 2018E.
* Discount Too Wide — Both banks trade at discount to the European sector (UCI at
0.7x 16E P/TBV; SOGN at 0.8x, vs sector at c1.0x), are unloved vs the main
domestic peer (especially UCI) and we expect no need for external capital and
positive profit development; all of these should support the stocks re-rating. Key
risks are regulatory development and macroeconomic trends.

>>> Pharma Story I missed yesterday that pushed Hilary Clinton to Tweet.

Hilary Clinton Tweet : " she is ready to unveil a plan that would target price gouging among specialty drug makers"
--> Hillary Clinton Drug Plan Would Cap Consumer Costs, Mandate R&D Spending


* Pharmaceutical CEO says he is Glad he Raised Price on $13 AIDS medicine to $750: Will Do It Again

* Drug Co. Started by Hedge Fund Manager Buys Rights to AIDS Drug: Increases Price 5,000%

* Turing Pharmaceuticals CEO Pressed by Lawmakers on Drug Price

* CEO Who Raised Price of Old Pill More Than $700 Calls Journalist a ‘moron’ for Asking Why

(BarCap) Global Eq. Strategy : Earnings hold the key

Earnings hold the key

* The key to the outlook for global equities is earnings, with global valuations in line with
historical averages, a supportive monetary policy backdrop, and very bearish sentiment,
a major hit to EPS is the main risk for the market.

* There are two key issues in the EPS outlook – global GDP and the effect of lower oil
prices. With global GDP expected to remain above the key 2.6% threshold through
2016, global EPS should grow: we forecast 8.4% in 2016.

* The other uncertainty relates to oil. Analysts have slashed earnings estimates for oil
producers by $148bn but only raised forecasts for “oil consumers” by $9bn. This
asymmetry leaves scope for an oil “dividend” whatever happens to oil prices.

* History suggests that, if our earnings projections are right, today’s extremely negative
sentiment towards equities should unwind, with global equities able to recover the bulk
of their recent losses over time.

* Within the market we remain underweight in US equities, with our biggest
recommended overweight position in Europe ex-UK. We also overweight both Japanese
and EM equities.

>>> What to look at today - 22nd of September 2014

Dow+0.77% S&P+0.44% Nasdaq+0.04% Russell-0.23%
US market closed higher. The biotechnology ETF struggled from the get-go, but the group accelerated its decline after presidential candidate Hillary Clinton sent out a tweet saying she is ready to unveil a plan that would target price gouging among specialty drug makers. Today's selling dropped IBB below its 200-day moving average (347.36) to levels last seen at the start of September. financials (+1.1%) and technology (+1.0%) keeping the S&P 500 ahead of the Nasdaq Composite. It is worth pointing out that solid gains in large cap tech names like Apple (AAPL 115.21, +1.76), Google (GOOGL 666.98, +6.06), and Microsoft (MSFT 44.11, +0.63) masked the relative weakness in chipmaker names, Atmel (ATML 8.19, +0.92) bucked the trend, surging 12.7% after agreeing to be acquired by Dialog Semiconductor (DLGNF 41.25, -8.00) for $4.60 billion. Volume were light at 800mil shares. US After Hours VGGL +12.1%, THO -4.3%, RHT -0.2% following earnings/guidance...In Asia While Monday's losses were not entirely in the rearview most of Asia managed to recoup some gains as the US Fed's mixed signals (4th Fed member talked about a possible hike in 2015) create further confusion. Fed Chair Yellen's speech later this week should be highly watched as the markets look for a clear signal on policy. Though Fed fund futures see a hike in Oct 20th meeting at less than 25%.

Nikkei closed Hang Seng+1.11% Shanghai+0.98%

Eur$ 1.1197 CNY 6.3736 JPY 120.50 GBP 1.5510 EURCHF 1.0879 RUB$ 66.19 WTI $46.09 (-1.26%) GOLDS 1,133

S&P -0.13% EuroStoxx Dax SMI


Macro :
- Fed’s Lockhart Favors Interest-Rate Liftoff Later This Year
- Praet Says If ECB Objective at Risk, Will Do What Is Necessary


Keep an eye on :
- AF FP : Air France Wants to Cut Pilot Jobs 8% by 2017: AFP
- ALO FP : Alstom Seen as Preferred Bidder for Amtrak Project: Schumer
- ATE FP : Alten 1H Net Income EU45.3m vs EU33.7m
- AREVA FP : Mitsubishi Heavy May Invest in Areva Reactor Unit, Nikkei Says
- BBVA SM : BBVA Finanzia may attract bid from Apollo - Il Sole 24 Ore
- COX FP : Bausch + Lomb, Nicox Say FDA Accepts NDA Application for Vesneo
- EDF FP : EDF Seeks Major Presence in 3-5 Non-European Countries by 2030
- ING FP : Ingenico Says Talks on Worldpay Acquisition Failed
- RSA LN : RSA CEO Hester Says Company Not in Talks With Any Other Parties
- SDRL NO : Seadrill Gets Notice of Contract Cancellation for West Mira
- SN/ LN : traded higher on takeover talk, JNJ mentionned http://on.ft.com/1QVFR7u
- GLE FP : Societe Generale Plans to Cut 420 Jobs in France: Reuters
- SEV FP : Suez could pursue more deals in Australia following SembSita transaction - Australian Financial Review
- TIT IM : Tel. Italia Media: Shareholder Rep. Seeks Suspension of Merger
- FP FP : Total Needs to Raise Disposal Target, Exane BNP Paribas Says
- VK FP : Vallourec extends maturity of EUR 400m debt facilities via RCF
- VATT SS : Vattenfall Seeks Bidders for German Lignite Assets, Hydro Plants
- VOW3 GY : VW’s Winterkorn to Face Supervisory Board Sept. 23: Handelsblatt

>>> Europe : Brokers Upgrades & DOwngrades - 22nd of September 2015

>>> Up
*BAM RAISED TO BUY VS HOLD AT ING; PT UP TO EU6 VS EU4
*INDIVIOR RAISED TO BUY VS NEUTRAL AT CITI
*MONDADORI RAISED TO OUTPERFORM VS NEUTRAL AT MEDIOBANCA
*TOTAL RAISED TO BUY VS HOLD AT SOCGEN

>>> Down
*ABB CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
*ANGLO AMERICAN CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE (Note Attached)
*ANTOFAGASTA CUT TO UNDERPERFORM AT CREDIT SUISSE
*BT GROUP CUT TO NEUTRAL VS BUY AT NOMURA
*HANDELSBANKEN CUT TO UNDERWEIGHT VS EQUALWEIGHT: MORGAN STANLEY
*IMI CUT TO HOLD AT JEFFERIES
*KAZ MINERALS CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
*ONESAVINGS BANK CUT TO SELL VS HOLD AT INVESTEC
*OXFORD INSTRUMENTS CUT TO UNDERPERFORM AT JEFFERIES
*ROTORK CUT TO UNDERPERFORM AT JEFFERIES
*SOCIETE GENERALE CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
*VEDANTA CUT TO UNDERPERFORM AT CREDIT SUISSE
*VOLKSWAGEN CUT TO HOLD VS BUY AT DZ BANK

>>> PT Change


>>> Initiation
*CINEWORLD GROUP RATED NEW NEUTRAL AT NOMURA

>>> Call
>> Stock
*HSBC ADDED TO GOLDMAN SACHS CONVICTION BUY LIST
*HENKEL, RHOEN-KLINIKUM REMOVED FROM BANKHAUS LAMPE ALPHA LIST
*BMW, FRESENIUS MEDICAL CARE ADDED TO BANKHAUS LAMPE ALPHA LIST

>>> Deezer preparing IPO

Deezer preparing IPO 

Deezer, the French global digital music streaming service, is understood to have decided to list on the Euronext Paris stock exchange, assisted by BNP Paribas, French daily Le Figaro reported. The unsourced report said that Deezer, with 6m paying subscribers, could be valued at around EUR 1bn.

This development was also reported in daily Les Echos, which noted that Deezer could list by the end of the year and was worth EUR 300m in 2012. The company reported sales of EUR 142m in 2014 with an operating loss of EUR 22m, and aiming to generate revenues of EUR 750m by 2018.

According to the report, Deezer is 25% owned by Access Industries, 20% by Universal Music, Warner, and Sony Music jointly, 10% by IDInvest, 10% by Orange, and 10% by its founders.

Le Figaro, Les Echos

>>> Asian Update

Asian Mid-session Update: China date provides a glimmer of hope ahead of flash PMI later in the week


***Economic Data***
- (AU) AUSTRALIA Q2 HOUSE PRICE INDEX Q/Q: 4.7% V 2.3%E; Y/Y: 9.8% V 8.0%E
- (CN) CHINA AUG CONFERENCE BOARD LEADING ECONOMIC INDEX M/M: 1.0% V 0.9% PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.5 v 105.3 prior
- (TW) Taiwan Aug Unemployment rate Y/Y: 3.7% v 3.8%e

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 closed, S&P/ASX +0.6%, Kospi +0.3%, Shanghai Composite +1.0%, Hang Seng +0.7%, Dec S&P500 -0.2% at 1,959

***Commodities/Fixed Income***
- Dec gold flat at $1,133/oz, Nov crude oil -0.9% at $46.53/brl, Dec copper -0.2% at $2.38/lb
- (CN) PBoC to inject CNY50B in 7-day reverse repos (25th consecutive injection)
- USD/KRW: Onshore opens at KRW1,178 v KRW1,174 prior close
- USD/CNY: PBoC sets yuan mid point at 6.3721 v 6.3676 prior setting
- (ID) Indonesia to allow rice imports this year; specific volume has not been decided yet - press

***Market Focal Points/FX***
While Monday's losses were not entirely in the rearview most of Asia managed to recoup some gains as the US Fed's mixed signals (4th Fed member talked about a possible hike in 2015) create further confusion. Fed Chair Yellen's speech later this week should be highly watched as the markets look for a clear signal on policy. Though Fed fund futures see a hike in Oct 20th meeting at less than 25%.

Australia's ASX held some marginal increase led by energy names riding the kite supplied by oil prices rebounding during US hours. Korea's Kospi rose 0.3% and Hong Kong 0.2% at the open, markets continued to rise further as China Conference Board Leading Economic Index came in higher than prior 0.9% to 1%. This supplied some cautious optimism despite the blanket of Fed uncertainty. China and Hong Kong expected to continue their slightly erratic movements ahead of Wednesday release of Sept flash PMI. China bank names were up on the news that London and Shanghai are exploring a way to connect markets.

Currencies were subdued in the session EUR/USD remaining little changed at the $1.12 level after declines of 2% in the prior days. Addition decline expected if EU follows through on action to address inflation concerns. Japan remained closed another day but the Yen saw some gains to 120.3250.

A$ seemed unconcerned (ranged from 0.7150-0.7121) with Australia's rising housing prices, which have been a concern to policy makers, who are fretting about a correction's impact on consumer sentiment and confidence. Many analysts expect that the housing sector has peaked and tighter mortgage rules and housing restraints have done their job.

Indonesia Central Bank Gov Martowardojo noted that the country will not issue any more debt in 2015 despite growing deficit and has asked for a $4.2B loan from World Bank and ADB to cover 2015 deficit.

IMAX China Holding announced a $280M IPO in Hong Kong, to trade under 1970.HK, 62M shares expected to price in range of HK$29.80-34.50/shr. Asian Development Bank (ADB) lowers 2015 developing Asia GDP to 5.8% from 6.1%, lowers 2016 to 6.0% from 6.2%

***Equities***
US equities / ADRs:
- RHT: Reports Q2 $0.47 v $0.44e, R$504M v $495Me; +0.9*% afterhours
- MOS: Cuts production of Potash at Colonsay mine; sees volumes at low end of prior guidance; cites current crop nutrient market conditions; -2.6% afterhours
- THO: Reports Q4 $1.31 v $1.31e, R$1.06B v $1.16Be; -4.6% afterhours

Notable movers by sector:
- Consumer discretionary: 361 Degrees International 1361.HK +2.8% (summer trade fair result);Li Ning Co 2331.HK -0.6% (chairman comment); Lotte Shopping 023530.KR +2.3% (Q1 result, plans to list hotel unit)
- Consumer staples: Yashili International Holdings 1230.HK +2.0% (to acquire asset from Mengniu)
- Financials: Ping An Insurance 2318.HK +1.5% (to boost lending platform IPO): Greenland Hong Kong 337.HK +1.3% (to invest in Japan); CITIC Securities 600030.CN +3.9%, Haitong Securities 600837.CN +4.6% (CSRC to remove assistant chairman)
- Industrials: Hyundai Motor 005380.KR +2.8%, Kia Motors 000270.KR +3.7% (South Korea to probe VW and Audi diesel cars)
- Materials: New Hope Corporation NHC.AU +6.5% (FY15 result); Northern Star Resources NST.AU +1.1% (guidance); South32 S32.AU +1.0% (update)
- Healthcare: Pharmaxis PXS.AU +9.8% (drug result)
- Telecom: TPG Telecom TPM.AU -2.2% (FY15 result); China Telecom 728.HK +1.3% (Aug operation data)
- Utilities: DUET Group DUE.AU +0.7% (update on acquisition)

>>$ US After Hours Summary: VGGL +12.1%, THO -4.3%, RHT -0.2% fo

After Hours Summary: VGGL +12.1%, THO -4.3%, RHT -0.2% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: VGGL +12.1%

Companies trading higher in after hours in reaction to news: TRXC +6.7% (acquired the surgical robotics division of SOFAR S.p.A., in a cash and stock transaction with total consideration of $99.8 million), CORE +3.9% (to replace TTC in the S&P SmallCap 600), NRG +1.5% (announced authorization to repurchase $251 mln of common stock), JACK +1.3% (announced new $200 mln share repurchase program), TTC +1.3% (to replace SPX in the S&P MidCap 400), GCO +0.8% (announced its Board has authorized the repurchase of $100 mln of common stock)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: THO -4.3%, RHT -0.2%

Companies trading lower in after hours in reaction to news: MRD -4.3% (announced an underwritten public offering of 10.25 mln shares of its common stock), CBK -3.6% (to be removed from the S&P SmallCap 600), NMFC -2.8% (announced an underwritten offering of 5 mln shares of its common stock), SJM -1.8% (announced 8.28 mln share offering of common stock by Blue Holdings), ITCI -1.7% (assumed sponsorship of the Investigational New Drug applications for studies related to ITI-214 and ITI-214), SCMP -1.1% (disclosed plans to hold meetings with potential lenders in connection with the financing of its proposed acquisition of R-Tech Ueno beginning on September 22, 2015)