The Daily Call

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Morning Summary

Jayme Casey, Pat O'Donohue (203) 861-7650 | 9.22.2017


Asian markets finished mostly lower today, on renewed North Korea tensions and after S&P Global Ratings cut Hong Kong’s sovereign rating a day after it downgraded China. The Kospi dropped 75bps, the Hang Seng sank 80bps, the Nikkei lost 25bps, Shanghai lost 15bps, and the Taiex slid 1.2%, while the ASX rose 50bps.

European markets are broadly higher this morning after a weaker opening with the UK up 21bps, Germany up 30bps, France higher by 50bps, and Italy up 40bps as traders await UK PM May's Brexit speech in Florence after 9am EST. Macro data has been generally constructive as France Preliminary September Services PMI came in at 57.1 vs prior 54.9 and Manufacturing was slightly ahead at 56.0 vs prior. 55.8. Germany Preliminary September Services and Manufacturing also came in ahead of consensus.

Equity futures in the US are 10bps lower ahead of Markit PMI data at 9:45am with the President taking to Twitter this morning  to push for Republicans to pass the Graham-Cassidy bill before the Sept 30th fast-track deadline. Safe-haven assets caught a bid with gold climbing 40bps and 10yr yields retreating 3bps after North Korea’s foreign minister responded to the US’s latest sanctions by suggesting the regime may test an H-bomb in the Pacific Ocean. Crude futures fell 30bps as OPEC meets in Vienna today with representatives from the group saying they will likely wait to commit to an extension beyond March due to recent oil price strength. The weekly Baker Hughes rig count comes at 1pm. In M&A news, ConAgra (CAG) is reportedly near a deal to acquire closely-held Angie’s Artisan. In other news, Google (GOOGL) will release two new Pixel phones on October 4. Reuters reported weak customer turnout in Asia for the iPhone 8. AbbVie (ABBV) said China approved its hep C treatment. Separately, Bristol-Meyers (BMY) and AbbVie (ABBV) entered a pact for ABBV-399 and Opdivo. Dova Pharmaceuticals (DOVA) submitted an NDA to the FDA for Avatrobopag. Versartis (VSAR) reported negative study results. The Indonesian government invited its state-run pension fund to take part in buying a stake in Freeport Indonesia (FCX). Transocean (RIG) will retire 6 ultra-deepwater floaters and will take a Q3 impairment charge of $1.4bn. Total (TOT) and Chevron (CVX) entered an exploration agreement to cover 16 blocks operated by Chevron in deepwater GoM. In the agreement, Total will hold stakes of 25%-40% in the wells. Amazon (AMZN) teamed up with Olo, a digital order and pay technology linked to 200 restaurant brands, stepping up competition with GrubHub (GRUB), UberEats and others in the space. Glass Lewis recommended shareholders vote for Nelson Peltz to join the board of Procter & Gamble (PG). Bloomberg reported that Hewlett Packard Enterprises (HPE) will cut 5,000 jobs. Finally, It was reported yesterday after the close that the Financial Stability Oversight Council will discuss today whether to remove AIG’s (AIG) “systemic” label. Syndicate: Juno (JUNO) priced 6.1mm shares at $41/sh, Rexford (REXR) entered a $300mm equity distribution agreement, and Spark Therapeutics (ONCE) is shopping a 1mm share block.

Earnings: Finish Line (FINL) reported EPS at the top end of forecasts, and CarMax (KMX) beat estimates.

Analyst Actions: Leggett & Platt (LEG) raised to “buy” at SunTrust, Enviva Partners (EVA) raised to “buy” at Citi, Pebblebrook (PEB) raised to “buy” at BTIG, Frontline (FRO) cut to “sell” at Danske Bank, Aeorjet (AJRD) raised to “buy” at CL King, Cubic Corp (CUB) raised to “strong buy” at Raymond James


Premarket Movers:

·         Versartis (VSAR) -84% study results

·         Finish Line (FINL) -7.8% comp sales

Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary


Jared Mancuso, Sean Greeley (203) 861-7650 | 9.22.2017


JOBS 51job to acquire 60% stake in parent company of Lagou Information Limited for $119M in cash 
  • The transaction is expected to be completed in Q4 2017, subject to closing conditions.
  • Lagou operates a recruitment website focused on addressing the growing demand for technology and engineering talent in China


Benchmark Capital resisting SoftBank's attempt to invest in Uber - WSJ (pre-Japanese open)

  • People familiar with the matter tell the WSJ that Benchmark's director was the only member of Uber's eight-person board to vote against the term sheet giving SoftBank exclusive rights to invest, and Benchmark is telling people it's unlikely to sell any of its holding to the consortium.

People familiar with the matter (it's not clear if they're the same as the aforementioned sources) tell the WSJ that SoftBank is seeking more rights for all holders; the article notes that Benchmark and other early investors currently have voting powers exceeding their stakes in the company


 HPE Hewlett Packard Enterprise plans 5K job cuts - Bloomberg

People familiar with the matter say HPE is cutting at least 5K jobs, or 10% of its workforce. The cuts will start by the end of the year


GOOG Google working with publishers to improve their subscription revenues - FT

  • People briefed on the plans tell the FT that the company is talking with News Corp (NWS), the New York Times (NYT), and the Financial Times about new AI tools that will make marketing and selling subscriptions online easier.

The sources tell the FT that a new "subscription apparatus" will be introduced within weeks and will also be provided for other publishers.

Corporate Actions

MDB MongoDB Ltd. files $100M IPO through Morgan Stanley, Goldman Sachs, Barclays and Allen & Company

  • MongoDB is an IT company in the database space.
  • Company has applies to list on the Nasdaq under the symbol "MDB".
  • Selected Financials (y/y)
    • Revenue $101.4M vs $65.3M
    • Net loss ($86.7M) vs ($73.5M)

Holders include Sequoia Capital, Flybridge Capital, Union Square Ventures


TXN Texas Instruments increases quarterly dividend by 24.0% to $0.62 from $0.50; authorizes additional $6B for share repurchases

  • Payable 13-Nov-17; record 31-Oct-17.

The board also authorized the company to repurchase an additional $6.0B of its common stock over time. This is in addition to approximately $4.6B of previously authorized repurchases that remained at the end of June 2017.


TIME Time to seek amendments to credit agreements; reaffirms 2017 adjusted OIBDA outlook and provides update on Q3

  • On 22-Sep, Time Inc. will announce that it is seeking an amendment to its credit agreement to:
    • Extend the maturity of its revolving credit facility from April 2019 to October 2022 and the maturity of its outstanding term “B” loan from April 2021 to October 2024 , if on such date more than $100.0M aggregate principal remain outstanding
    • To reduce the revolving credit commitments under the Revolving Facility from $500.0M to $300.0M
    • In connection with the Amendment, the company intends to commence an offering of up to $300.0M of senior unsecured notes due 2025 in a private placement
  • The company is also reaffirming its 2017 Adjusted OIBDA outlook of at least $400M, with a plan to be flat compared to prior year's $414M (and vs current FactSet consensus of $381M)

During Q3, the company has experienced softness in both print & other advertising revenues and digital advertising revenues relative to the expectations communicated on its Q2 earnings call.


PSDO  Presidio, Inc. reports Q4 pro forma EPS $0.32 vs FactSet $0.32 
  • Reports Q4:
    • Revenue $729.3M vs FactSet $736.7M
    • Adjusted EBITDA $60.4M vs FactSet $63.2M
  • Management Comments:
    • “We are off to a good start to the fiscal year, and our early momentum, particularly in our Security and Cloud solution areas, provides us with the confidence to achieve our FY18 guidance3, which includes: Total Revenue growth of approximately 5.5%; Adjusted EBITDA margin in the low 8% range; and Pro Forma Diluted EPS growth in the high single digit range.
    • In addition, we expect to finish FY18 with our net total leverage ratio in the mid-2x range, which is in line with our long-term strategy of reducing debt, excluding any strategic acquisitions.”

Analyst Actions

 SSNI  Silver Spring Networks downgraded to neutral from buy at FBR & Co

 CUB  Cubic Corp upgraded to strong buy from outperform at Raymond James

 TYL   Tyler Technologies initiated buy at Citi

 BLKB Blackbaud initiated buy at Citi  

Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Energy News

 (203) 861-7650 | 9.22.2017


Crude futures fell 30bps as OPEC meets in Vienna today with representatives from the group saying they will likely wait to commit to an extension beyond March due to recent oil price strength. Markets are also cautious on the latest tensions out of North Korea after its foreign minister responded to the US’s latest sanctions by suggesting the regime may test an H-bomb in the Pacific Ocean. The weekly Baker Hughes rig count comes at 1pm. Morgan Stanley raised its Q4 Brent forecast to $55 from $50 and boosted its WTI forecast to $50 from $48. In company news, Phillips 66 Partners (PSXP) acquired a 25% interest in Phillips 66’s (PSX) processing units for $2.4bn, and will fund the purchase through a combination of 6.3mm units at $47.59/unit, $750mm of convertible pfds, and debt. Transocean (RIG) will retire 6 ultra-deepwater floaters and will take a Q3 impairment charge of $1.4bn. Total (TOT) and Chevron (CVX) entered an exploration agreement to cover 16 blocks operated by Chevron in deepwater GoM. In the agreement, Total will hold stakes of 25%-40% in the wells. Bernstein wrote in a note that Oil Search (OSH AU) may be an M&A target for majors such as Exxon (XOM) and Total (TOT) after the government of Papua New Guinea sold the last of its 9.8% stake (31.3mm shares) yesterday. Key Energy (KEG) closed the sale of its well intervention business in Russia, however terms have not been disclosed. Ocean Rig (ORIG) completed its bankruptcy restructuring. Separately, a bankruptcy court objected to certain claims from Ultra Petroleum’s (UPL) bankruptcy proceeds, with the company considering an appeal. China Petroleum (386 HK) announced chairmen Wang Yupu will step down effective today.

Analyst Actions: Frontline (FRO) cut to “sell” at Danske Bank


WTI… $50.40 -0.30%

BRENT… $56.37 -0.10%

HEATING… $180.76 -0.40%

RBOB… $165.10 +0.44%

NAT GAS… $2.967 +0.70%

Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Healthcare News

Patrick O'Donohue, CFA, Jared Mancuso (203) 861-7650 | 9.22.2017


VSAR Versartis announces phase 3 VELOCITY trial of somavaratan in pediatric growth hormone deficiency did not meet primary endpoint ($21.60) 

  • VSAR announced that the VELOCITY Phase 3 clinical trial of somavaratan (VRS-317) in pediatric growth hormone deficiency (GHD) did not meet its primary endpoint of non-inferiority.
  • Non-inferiority versus daily growth hormone was not demonstrated in the intent to treat (ITT) population for the primary efficacy variable, height velocity (HV) at 12 months. The 12-month HV for ITT patients receiving somavaratan twice monthly was 9.44 cm, versus 10.70 cm for those receiving Genotropin 1 daily. Non-inferiority was defined as the lower bound of the two-sided 95% confidence interval of the difference between somavaratan and Genotropin HV greater than or equal to -2.0 cm/year. In the ITT study population the lower bound of this confidence interval was -2.3 cm/year. 

DOVA Dova Pharmaceuticals announces NDA submission to FDA for avatrombopag ($25.37) 

  • Dova Pharmaceuticals announced the submission of a New Drug Application (NDA) to the FDA for avatrombopag, a second generation orally administered thrombopoietin receptor agonist (TPO-RA) for the treatment of thrombocytopenia in patients with chronic liver disease (CLD) who are scheduled to undergo a procedure. 

IART Integra announces first Cadence Total Ankle System has been implanted in Cadence Total Ankle System non-randomized, prospective, multi-center post-market study ($48.31) 

  • The primary objective of the study is to evaluate 2-year implant survivorship in subjects who received the Cadence Total Ankle System for primary ankle arthroplasty. Implant survivorship will further be evaluated at 5 and 10 years post-operatively. 

BMY AbbVie (ABBV) and Bristol-Myers Squibb announce collaboration to evaluate therapeutic regimen in advanced solid tumors ($63.33) 

  • AbbVie and Bristol-Myers Squibb announced a clinical trial collaboration to evaluate the combination of AbbVie’s investigational antibody drug conjugate ABBV-399 and Bristol-Myers Squibb’s immunotherapy Opdivo (nivolumab) in c-Met overexpressing non-small cell lung cancer (NSCLC).
    • A Phase 1B clinical study is underway that includes evaluating the potential of combining Opdivo with ABBV-399 to explore the tolerability and potential efficacy of the combination in subjects with advanced c-Met overexpressing NSCLC who failed one prior line of chemotherapy. 

Corporate Actions

JUNO Juno Therapeutics prices 6.1M share follow-on offering at $41/share through Morgan Stanley and JPMorgan ($41.62) 

  • Aggregate gross proceeds from the follow-on public offering and concurrent private placement, before deducting underwriting discounts and commissions, in the case of the follow-on public offering, and expenses payable by Juno will be $277.1M.

ONCE Spark Therapeutics 1M share block being shopped through Morgan Stanley ($87.10) 

  • The reoffer price is $85.63. 

Analyst Actions

VSAR Versartis downgraded to underweight from overweight at Barclays ($21.60) 

  • Target cut to $4 from $28

BDX Becton Dickinson initiated outperform at Wells Fargo ($191.56) 

  • Target is $225

ASND Ascendis Pharma target raised to $50 from $30 at Credit Suisse ($27.74) 

  • Firm notes yesterday's announcement from competitor Versartis (VSAR) that its Ph3 trial of somavaratan in pediatric GHD failed to meet its primary endpoint should bode well for the commercial prospects of Ascendis's TransCon hGH, should its Ph3 trial prove successful
  • Shares remain Outperform rated

MDGL Madrigal Pharmaceuticals initiated outperform at Evercore ISI ($22.33) 

  • Target is $65

SVRA Savara Pharmaceuticals initiated buy at Jefferies ($9.47)

  • Target is $20

AGRX Agile Therapeutics, Inc. assumed overweight at Cantor Fitzgerald ($3.77)

  • Target is $8

CSII Cardiovascular Systems initiated market perform at Raymond James ($27.63) 

EXEL Exelixis downgraded to market perform from outperform at Leerink Partners ($28.01) 

  • Target cut to $28 from $34
Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Consumer News

Josh DiMarzo (203) 861-7650 | 9.22.2017


CAG  Conagra Brands near deal to buy Angie's Artisan Treats from TPG Growth – CNBC


PLYA  Playa Hotels & Resorts provides update following Hurricane Maria

  • Playa’s resorts in Mexico and Jamaica were not impacted by the storm’s path
  • Playa’s three resorts in the Dominican Republic sustained minor impact but no significant damage or injuries were reported
  • Dreams La Romana and Dreams Palm Beach remain fully operational and sustained only minor damage to landscaping


AAN  Aaron's provides update following Hurricane Irma

  • As it relates to Hurricane Irma specifically, 111 Aaron's stores in Florida, Georgia, and South Carolina were forced to close in preparation for and during the immediate aftermath of the storm, with all but one store in Florida having since reopened.
  • In addition, a number of Progressive Leasing's retail partners in the state have experienced business interruptions.
  • In light of the extensive damage in the areas impacted by Hurricane Irma and Harvey, it is difficult to predict when the company's operations will return to normalized levels in the affected markets.
  • The company maintains insurance coverage for windstorm, property and flood damage and business interruption, although it is difficult to predict the amount or timing of any insurance recoveries.

The company expects to be in a better position to assess the financial impact of the storms over the coming weeks and will provide an update on its Q3 earnings call.

Corporate Actions

MCD  McDonald's increases quarterly dividend by 7.4% to $1.01 from $0.94

Payable 15-Dec-17; record 1-Dec-17.


FINL  Finish Line reports Q2 EPS $0.12 ex-items vs 28-Aug guidance $0.08-0.12

  • Reports Q2:
    • Revenue $469.4M as reported on 28-Aug
  • Q3 Guidance:
    • Maintains EPS ($0.32)-($0.40) vs FactSet ($0.35)
    • Maintains comparable sales to decrease 3% to 5%
  • FY Guidance (Feb 2018):
    • Maintains EPS $0.50-0.60 vs FactSet $0.60

Maintains comparable sales to decrease 3% to 5%


KMX  CarMax reports Q2 EPS $0.98 vs FactSet $0.95

·         Reports Q2:

o    Revenue $4.39B vs FactSet $4.26B

Repurchased 2.5M shares of common stock for $156.5M. As of 31-Aug-17, we had $1.25B remaining available for repurchase under the program.

Analyst Actions

TIF  Downgraded to Neutral at Goldman


LEG  Leggett & Platt upgraded to buy from hold at SunTrust Robinson Humphrey




Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Financial News

John Fay, Brad Berger (203) 861-7650 | 9.22.2017


US considers removing federal oversight of AIG -- WSJ, citing sources
Regulators will discuss removing the 'systemic' tag from AIG on 22-Sep  Decision on AIG is not final and the outcome is not certain; vote by the Financial Stability Oversight Council may not take place on 22-Sep.

Data shows Goldman Sachs slumps to its worst ever position in investment bank rating – FT
The FT cites Coalition data, which shows Goldman Sachs’ (GS) fixed income woes have relegated it to its worst ever position in a benchmark ranking of the world’s biggest investment banks. The data shows that for H1, Goldman came joint third in the rankings, which is based on revenue for advising on deals and fundraisings as well as selling bonds and shares on behalf of clients. It says Goldman’s investment bank revenue is now on a par with Bank of America Merrill Lynch (BAC) and behind JPMorgan (JPM) and Citigroup (C) which came first and second respectively. 
It adds this is the first time Goldman has been ranked lower than second since the rankings began in 2007 with its league table ranking fell from joint third last year now a fourth to sixth in H1

MAA MAA sustains provides estimated impact of Hurricanes Harvey and Irma
MAA announced that the company sustained only minor damage to its Houston, Texas area portfolio as a result of Hurricane Harvey. Likewise, only minor damage was sustained to the company's portfolio of Florida properties located in Tampa, Orlando, and Jacksonville as well as properties in Savannah, Georgia and Charleston, South Carolina as a result of Hurricane Irma. No apartment units were taken off-line due to the hurricanes and all communities remain fully operational.  After a full assessment of damages, the company estimates total costs of approximately $3.5M, primarily for tree clean-up and other landscaping work as well as remediating some minor and isolated water intrusion. Approximately 70% of these costs are expected to be operating expenditures with the remaining 30% representing capital expenditures.  The company does not expect these costs to impact the earnings guidance range provided in Q2 earnings release

Corporate Actions

SLG SL Green Realty reaffirms 2017 FFO $6.40-6.50 vs FactSet $6.54
Reflected in this earnings guidance is movement of the company’s $250M investment in the defaulted loans secured by the leasehold interest in 2 Herald Square to non-accrual status as of 4-Aug-17 and the recognition of a $3.9M non-cash write off of deferred financing costs in conjunction with the previously announced refinancing of 280 Park Avenue. These items were considered when earnings guidance was reaffirmed by management on the conference call held on 20-Jul-17 in connection with the company’s Q2 earnings.

REXR Rexford Industrial Realty enters into $300M equity distribution agreement with BofA, BTIG, Capital One, Citi, JPMorgan, Jefferies and Stifel

STAR IStar successfully completes $2B capital markets strategy
The comprehensive set of transactions address all parts of the company's capital structure, resulting in iStar having: Repaid all 2017 and 2018 debt maturities, leaving no corporate debt maturities for the next 21 months  Extended its weighted average debt maturity by 1.5 years to 4.0 years  Reduced annual expenses underlying earnings by approximately $38M, or $0.55 per share  Lowered cost of capital by approximately 35 basis points  Facilitated new banking relationships  Maintained pro forma liquidity of approximately $750M to pursue new investment opportunities

Analyst Actions

CyrusOne (CONE) and CoreSite Realty (COR) initiated after the close with Outperform ratings at William Blair
Digital Realty Trust initiated after the close with Mkt Perform rating at William Blair

HCP downgraded to Neutral from Buy at BofA/Merrill
Pebblebrook Hotel Trust upgraded to buy from neutral at BTIG
Southside Banc initiated neutral at Piper Jaffray
Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Industrial News

 (203) 861-7650 | 9.22.2017


Markets are cautious (-20bps) on the final trading day of the week after North Korea suggested it may test an H-bomb in the Pacific Ocean in response to the latest US sanctions. Data today includes Markit PMI at 9:45am. In M&A news, FMC Corp (FMC) received antitrust clearance in India to close its acquisition of DuPont’s Crop Protection business. Rayonier (RYAM) will no longer need anti-trust clearance for its acquisition of Tembec (TMB CN) after Canada passed new legislation raising the threshold for acquisition approval of Canadian entities by certain non-Canadian investors to $1.5bn from $1bn. Finally, Univar (UNVR) will acquire crop protection company, Tagma Brasil, however terms are not disclosed. In other news, Ardragh Group (ARD) announced its CEO is resigning and appointed chairman, Paul Cousel, to replace him. Compass Minerals (CMP) cut FY2017 EPS guidance, and AECOM (ACM) announced a new $1bn repurchase program.

Analyst Actions: Enviva (EVA) raised to “buy” at Citi, Alcoa (AA) cut to “hold” at Berenberg, Sensient (SXT) initiated “buy” at Berenberg, Aerojet (AJRD) raised to “buy” at CL King, American Airlines (AAL) raised to “overweight” at Barclays


Sector Performance (YTD):

Materials +14.01%

Capital Goods +13.21%

Industrials +11.78%

Transports +9.45%

Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Global Trading Summary

Ralph Mak, Mark Huttmann (203) 861-7650 | 9.22.2017








Nikkei 225












Hang Seng


















EuroStoxx 50

























Market Holidays: Bulgaria, Malaysia, Morocco.


Market commentary:


Taiwan’s Taeix fell 1.2% losing ground throughout the session as tech shares declined.  Discretionary names, health care and financials also underperformed while utilities and telecoms finished mixed.  Shares of Apple supplier Hon Hai Precision dropped 2.7% leading tech shares lower and posting the largest negative impact to the gauge.   Hon Hai Precision is heading for its biggest weekly loss since October 2014, with some analysts saying early sales of Apple’s new iPhone 8 are slower than for previous models.  Other notable decliners in tech include Taiwan Semiconductor -1.1%, Quanta Computer -3.1% and Nanya Technology which fell 1.9%.  Shares of HTC Corp bucked the negative trend jumping 10% after Google agreed to buy part of its engineering and design teams for $1.1 billion.  Insures led financials lower with Cathay Financial -1.8% pacing the group lower.  Formosa Plastic and China Steel each declined 0.8% as materials lost ground and Formosa Petrochemical Corp fell 0.5% weighing on the energy space.  Volumes on the measure ended at 85% of the 20 day average. 


Japan’s Nikkei fell 0.25% as declines in materials, discretionary, telecoms and staples outweighed advances in energy, financials and utilities.  Geopolitical risk emerged again Friday as North Korea’s Kim Jong Un said he’s mulling a response to U.S. President Donald Trump’s threat to destroy the Asian nation. The yen spiked against the dollar after a report suggested Pyongyang may test a hydrogen bomb in the Pacific.  Chemical maker Nitto Denko dropped nearly 2% pacing declines in the materials space.  Automakers ended the session mixed with Suzuki Motors falling 1.6% while Toyota rose .2% and Honda added .5%.  Gains in software companies kept technology names afloat as Konami Holdings rose 1.6% and NTT Data rose 0.3%.  Financials ended with gains of 0.3% though performance was mixed as Tokio Marine fell 1% while Daiwa Securities gained 1.2% and Mitsubishi UFJ added 0.5%.  Volumes ended at 107% of the 20 day average.


Australia’s ASX rose nearly 0.5% outperforming the region on a fairly broad based advance.  Its gain follows recent underperformance, with banks rebounding despite the move lower in yields. The Aussie dollar touched a one-month low following iron ore’s latest sell-off and the lack of hawkish signaling from Governor Lowe on Thursday.  Financials, discretionary names, telecoms and utilities led gainers while industrials and materials declines. Australia’s big four banks led gains on the measure with Westpac Banking +1.1%, Commonwealth Bank +0.7%, National Australia +0.9% and Australia and New Zealand Bank +0.5%.  Service shares led discretionary names higher and Telstra jumped 1% pacing telecoms higher. Woodside Petroleum added 1.5% leading the energy space to gains and foods outperformed the staples group.  Brambles dropped 2.6% leading industrials lower and posted the largest negative impact to the gauge.  Materials ended lower amid a mixed picture as South32 rose 1.6% and Rio Tinto added 0.7% while Newcrest Mining fell 1% and BHP Billiton gave up 0.15%. Volumes on the measure ended at 85% of the 20 day average. 


South Korea’s Kospi fell 0.75% on renewed North Korea concerns.  Overnight, the US stepped up sanctions against North Korea, which surprisingly included cooperation from the PBoC in ordering Chinese banks to stop doing business with Pyongyang. North Korea’s Kim responded with a rhetorical broadside against President Trump, while its foreign minister threatened an H-bomb test in the pacific. Tensions have been cited for the underperformance of Korean equities and the won.  Chemical companies, miners, transports and service shares underperformed while telecoms, and utilities managed gains. petrochemical stocks fell after Maeil Business Newspaper reported that China’s commerce ministry has stepped up antidumping investigations into Korean products. China has launched four such investigations since South Korean government deployed anti-missile Thaad system in July 2015; had been only seven other investigations over past decade.  LG Chemical fell 4.8% and Samyoung Chemical declined 16% leading the space lower. Financials ended the session mixed with Hana Financial adding 2.25% and KB Financial rising 1.8% while Woori Investment Bank declined 1.3%.  Telecoms led advancers with SK Telecom +1.2% and KT Corp adding 0.2%. Volumes on the gauge ended in-line with the 20 day average. 


Hong Kong’s Hang Seng Index fell 0.82% today, for a second day of losses, as real estate stocks and automakers pulled the index lower. S&P Global Ratings cut the city’s sovereign rating a day after it downgraded China, while investors await policy signals in speeches from Federal Reserve officials. S&P’s China downgrade represents weakening confidence that Beijing can strike a balance between maintaining economic growth and cleaning up its financial sector. Automakers declined after gains earlier this week, as Brilliance China Automotive Holdings Ltd. fell 5.04%, leading the group lower. Geely Automobile Holdings Ltd. dropped 3.51% and Guangzhou Automobile Group Co. declined 2.31% as well. Developers tumbled after a recent rally, with Logan Property Holdings Co. sinking 7.3%, the most since November 2015, after the company said it isn’t in talks regarding a reported top-up placement. Logan Property’s denial on share placement and the S&P downgrade led investors to take profits in developers. Volumes on the index were light, closing at 75% of the 20 day average.


European markets are broadly higher this morning, after opening lower, mirroring a weaker session in Asia, with the UK up 0.21%, while Germany is up .032%, France rising 0.5% and Italy up 0.41%, as traders await UK PM May's speech in Florence, which is being billed as her first major Brexit speech since she set out her vision in January. In Germany, focus is on the decision for Air Berlin (AB1.GR). The stock is up 18% right now, after the preliminary creditors' committees decided to continue negotiations with selected bidders Lufthansa (LHA.GR) and easyJet (EZJ.LN), with these negotiations expected to continue until October 12th. In M&A news, L’Oréal (OR.FP) is up 2.92% this morning, after analysts at JPMorgan noted the passing of heiress Liliane Bettencourt, saying that the unlocking of the Nestlé (NESN.SW)/Bettencourt shareholders agreement in six months opens up the potential for L’Oréal to mount a share buyback program, as well as the optionality for Nestle to raise its stake. In earnings news, Smiths Group (SMIN.LN) is currently down 3.6% this morning, following FY earnings, with revenues a bit shy of market expectations. Lamprell PLC (LAM.LN) is also down 11% following H1 numbers and a cut in FY revenue guidance as well as cautious outlook for FY18. Macro data released so far this morning is generally constructive, as France Preliminary September Services PMI came in at 57.1 vs prior 54.9 and Manufacturing was slightly ahead at 56.0 vs prior. 55.8. Germany Preliminary September Services and Manufacturing also came in ahead of consensus. Staples, consumer discretionary stocks, tech and health care companies lead advancers, while telecom stocks and utilities companies are underperforming. The EUR is up 0.21% while the GBP is off 0.21% and volumes are running at 90% of the 20 day average.

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