AFS Morning Note, July 26, 2017 · PDF fileAFS Morning Note, July 26, 2017 1 Corporate...

AFS Morning Note, July 26, 2017

1

Corporate Calendar NL Events: KPN earnings; Aperam earnings after market NL Events Tomorrow: Aalberts, Arcadis, ArcelorMittal, BESI,

Pharming, RELX, Shell earnings; Nedap earnings after market EU/US Events: Abertis, Atos, Bankinter, Daimler, Deutsche

Börse, EDP Renovaveis, Endesa, Gas Natural, GEA, GKN, GSK, LaFarge Holcim, Mapfre, Peugeot, Orange, Subsea7, Snam, STMicro, Thales earnings; Ingenico, LVMH, Jeronimo Martins, Vallourec earnings after market; Boeing, Coca-Cola, Ford, Whirlpool earnings; Facebook earnings after market EU/US Events Tomorrow: AB InBev, Accor, Acerinox, Airbus,

Anglo American, Astra Zeneca, BASF, Bayer, BBVA, Banca Mediolanum, Capgemini, Clariant, Danone, Diageo, Deutsche Bank, DIA, JCDeceaux, Kering, Kesko, Lagardere, L'Oreal, Lloyds Banking, Nestle, Nokia, Orange, Osram, PGS, Prysmian, Red Electrica, Repsol, Roche, Schneider Electric, Sky, Statoil, Suez, Telefonica, Terna, Total, UCB, Verbund earnings; EDP Portugal, Enel, Ferrovial, Saint Gobain, Telecom Italia earnings after market; Glencore sales; ConocoPhillips, P&G, UPS, Verizon earnings;Amazon, Intel earnings after market NL/EU Ex-div: BinckBank NL/EU Ex-div Tomorrow: SSE

Macro Calendar

08:45 France Consumer Confidence 09:00 Spain Retail Sales 10:00 Italy Manufacturing & Consumer Confidence 10:30 UK GDP 11:30 ECB Long-Term Refinancing Operation Result 16:00 US New Home Sales 17:30 ECB's Lautenschläger Speaks 20:00 Federal Reserve Announces Interest Rates Brazil Selic Rate Trump Jr. and Manafort Speak Before Senate Committee

Financials and Regulation Banks:

Societe Generale Rules Out Combinations, CEO Tells Sole -- Societe Generale is focused on improving its services to increase

profitability, adapting its business model to new digital technologies, Frederic Oudea, CEO of Societe Generale tells Il Sole 24 Ore in an interview. * Asked about a possible merger with UniCredit, the CEO rules out any combination for the bank * Says bank will announce new business plan in November (BN)

Credit Agricole Eyes Deals in Private Banking: Handelsblatt -- Private banking is area where bank is most likely to make further

acquisitions after smaller deals in Monaco and Asia, Jean-Yves Hocher tells Handelsblatt in interview. * Segment will consolidate * All banks preparing to pull staff from London on Brexit uncertainty * Paris, Frankfurt may benefit from that * Co. also eyeing potential cooperation with a private bank in Germany (BN)

Paschi May Delay 1H Earnings Report Set for July 28: Radiocor -- Monte Paschi may delay 1H results as it waits for the

approval of the 2 decrees that will allow the state to participate in the bank’s precautionary recapitalization, Radiocor reports. (BN)

Banco BPI CEO Forero Says Bank Is Working to Increase NII -- Banco BPI is working to increase net interest income in a

difficult environment with low interest rates, CEO Pablo Forero tells reporters in Lisbon. * The bank’s 2Q net interest income was EU98.5m vs EU99.4m y/y and EU101.6 in 1Q * CEO says bank will be working “hard” on new products and other segments to increase NII * “It won’t be in a spectacular way, but we want to at least prevent it from dropping,” CEO says (BN)

Bankinter 1H Net Falls 16% to EU241 Millions -- Bankinter 1h net profit EU241m vs EU286m a year earlier, the bank says in a

regulatory filing Wednesday. * 2q NII EU272m vs EU243.5m a year earlier * CET1 fully-loaded 11.31% * Bad loans 3.7% (BN) Regulation/Other:

BOE Says EU Bank-Failure Bill May Undermine Too-Big-to-Fail Fix -- The Bank of England took aim at a European Union plan

to boost supervisors’ powers to stop cash leaving ailing lenders, adding its weight to mounting criticism of a bill intended to make sure big banks can be wound down without wreaking havoc on the economy. The BOE warned of “very serious consequences” if lawmakers adopt an EU bill that sets out a five-day moratorium on payments from failed banks in the process of restructuring. The stay is out of sync with an existing industry agreement that stops banks from winding up derivatives contracts with a struggling firm for two days, according to a BOE working paper seen by Bloomberg News. Industry groups are stepping up their lobbying campaign against the plan before lawmakers in Brussels return to work after the summer break. The Association for Financial Markets in Europe, whose members include Barclays Bank Plc and Deutsche Bank AG, said the proposed powers would disrupt markets and compound the woes of targeted firms. The proposal “would undermine the objectives of resolution, it endangers financial stability and increases contagion risk,” Charlie Bannister, manager for recovery and resolution at AFME, said in an interview. “It challenges the effectiveness of existing powers and would be a backward step.” The need to prevent counterparties from racing for the door when a financial firm gets into trouble was highlighted by the messy bankruptcy of Lehman Brothers Holdings Inc. in 2008, which contributed to a broader crisis in credit markets. In response, the industry agreed to rewrite standard financial contracts to allow certain securities and funding contracts to remain intact for as long as 48 hours after a bank fails. (BN)

Azimut May Bid for Banco BPM Asset Management Unit: Messaggero -- Azimut’s board of directors will meet tomorrow to

formalize an offer for Aletti Gestielle, the asset management unit that Banco BPM put on sale last year, Il Messaggero reports. * The offer may be higher than the one made by Anima * A foreign fund is also interested in the unit * Banco BPM seeks at least EU700m for the unit, while Anima’s offer is lower (BN)


2

[yday] CFA Says Pass Rate for Level 2 Climbs to 47%, Highest Since 2006 -- A greater share of Chartered Financial Analyst

candidates passed the second level of the three-part exam than in any year since 2006. Forty-seven percent of applicants passed the middle leg in June, up from 46 percent in 2016, the Charlottesville, Virginia- based CFA Institute said Tuesday on Twitter. The pass rate for Level 1 was unchanged at 43 percent. Results from the third part of the exam will be published in August. Almost 189,000 candidates signed up to take the test last month, compared with 170,000 from a year earlier. About 30,000 who register typically don’t show up. (BN)

Fintech: no stories Insurers:

Mapfre First Half Net Income EU415 Mln -- Mapfre reported net income for the first half of EU415 million. * 1H revenue EU15.4

billion (BN)

Research Updates Morgan Stanley cut Roche to Equalweight from Overweight; raised Novartis to Overweight from Underweight. AlphaValue raised Axa to Add from Reduce; cut Outokumpu to Add from Buy. Baader-Helvea rated ABB new Hold. Kepler Cheuvreux cut Reckitt Benckiser to Hold from Buy; cut TomTom to Hold from Buy; raised Unilever to Buy from Hold; cut Refresco to Hold from Buy. Bankhaus Lampe raised Rhoen Klinikum to Hold from Sell. Societe Generale cut BP to Hold from Buy.

Credit Rating Changes Moody’s raised LSE to A3 from Baa1 with stable outlook.

Tech and Telecoms Tech, spying and hacking:

Trump Says Apple CEO Has Promised to Build Three Manufacturing Plants in U.S. -- President Donald Trump on

Tuesday said in an interview that Apple Inc. Chief Executive Tim Cook has committed to build three big manufacturing plants in the U.S., a surprising statement that would help fulfill his administration's economic goal of reviving American manufacturing. Mr. Trump, in a 45-minute interview with The Wall Street Journal, said Mr. Cook promised him Apple would build "three big plants, beautiful plants." Mr. Trump didn't elaborate on where those plants would be located or when they would be built. "I spoke to [Mr. Cook], he's promised me three big plants -- big, big, big," Mr. Trump said as part of a discussion about business-tax reform and business investment. "I said you know, Tim, unless you start building your plants in this country, I won't consider my administration an economic success. He called me, and he said they are going forward." Mr. Trump's comments were some of the first he has made regarding Apple manufacturing since assuming the presidency and revives pressure on the world's largest company by market value to move manufacturing operations from Asia to the U.S. Apple faced criticism from Mr. Trump last year on the campaign trail for outsourcing the production of its iPhones and other devices to factories in China. After Mr. Trump won the election, he said in Time magazine that he told Mr. Cook that he wanted "Apple to build a great plant, your biggest and your best, even if it's only a foot bigger than some place in China." Apple has said it supports about two million jobs in the U.S., including its own employees and those of suppliers, app developers and entrepreneurs who offer products across its devices. The company directly employs 80,000 people in the U.S. (DJ)

Uber’s New CEO Short List Is Said to Include HPE’s Meg Whitman -- Uber Technologies Inc. hopes to name a new leader by

early September to replace its ousted chief executive officer and steer the ride-hailing business out of a turbulent period. The San Francisco company has a short list of fewer than six CEO candidates, according to two employees, who attended a staff meeting where the plans were discussed. Liane Hornsey, Uber’s head of human resources, told employees she believes the company could hire a new CEO within six weeks, said the people, who asked not to be identified because the details are private. Among the remaining candidates is Meg Whitman, chief of Hewlett Packard Enterprise Co., said another person familiar with the matter. Whitman, who ran unsuccessfully for California governor as a Republican in 2010, has been meeting with Uber’s leadership in recent weeks, two people said. The names of the remaining candidates couldn’t be learned. (BN)

Atos Confirms FY Targets as 1H Net Rises 25% -- CEO Thierry Breton writes in statement that strong momentum in all markets

makes co. “particularly confident" in realising three-year plan. * Net income increase of 25% excludes impact of Visa stake sale 1H 2016 * 1H op. margin 8.5% of sales (BN)

Atos Expects Growth To Continue To Accelerate in 2H, CFO Says -- Atos 1H results are in line with current targets raised three

months ago, CFO Elie Girard says on conference call. * NOTE: Earlier, Atos Confirms FY Targets as 1H Net Rises 25% * UK businesses are doing very well despite Brexit with growth in big data and cybersecurity: Girard * Atos won’t make acquisitions at any price: CFO (BN)

Worldline First Half Net Income EU51 Mln -- Worldline reported net income for the first half of EU51 million. * 1H revenue EU778

million * 1H free cash flow +EU88 million * Lifts All FY Targets * Sees FY rev. Growth of 3.5%-4% * Sees FY Free Cash Flow Above EU170M (BN)

STMicroelectronics Second Quarter Revenue Beats Estimates -- STMicroelectronics reported revenue for the second quarter

that beat the average analyst estimate. * 2Q revenue $1.92 billion, estimate $1.91 billion (range $1.91 billion to $1.92 billion) * 2Q gross margin 38.3%, estimate 38.14% * 2Q adjusted operating profit $184 million, estimate $180.4 million (range $170 million to $202 million) * 2Q net income $151 million * 2Q adjusted net $156 million, estimate $151.4 million (range $140 million to $164 million) * Sees 3Q gross margin About 39% +/- 2 % Pts * Very Well Positioned to Reach 2H Fin Targets (BN)


3

Texas Instruments Signals Growing Demand in Chips for Cars -- Texas Instruments Inc., the largest maker of analog

semiconductors that are the basic building blocks of every electronic device, gave a forecast that indicated steady demand from the automotive industry. Third-quarter profit will be $1.04 to $1.18 a share, the Dallas-based company said Tuesday in a statement. Revenue will be $3.74 billion to $4.06 billion. Analysts on average projected profit of $1.05 a share on sales of $3.8 billion, according to data compiled by Bloomberg. Texas Instruments chips are used in almost everything that’s plugged into the wall or runs on a battery. Investors use its earnings and outlook as a proxy for demand in most sectors of the economy. The company, which has about 100,000 customers, is benefiting as everything from cars to kitchen appliances gain new functions that require chips to make them more intelligent. Under Chief Executive Officer Rich Templeton, Texas Instruments has given up competing with companies such as Intel Corp. and Qualcomm Inc. in the markets for digital chips and has pursued a strategy of avoiding over-reliance on any one market. That’s now paying off as growth resumes and revenue returns to levels from before the company shuttered its digital-chip efforts. (BN)

AMD Turnaround Shows Sign of Picking Up Pace on New Chips -- Advanced Micro Devices Inc., in search of a return to profit

and relevance in the semiconductor industry, predicted a jump in sales of new chips in the current quarter. Third-quarter revenue will increase about 23 percent, plus or minus 3 percent, from $1.22 billion reported in the second quarter, the Sunnyvale, California-based company said Tuesday in a statement. That indicates sales of as much as $1.54 billion, compared with the average analyst estimate of $1.39 billion, according to data compiled by Bloomberg. The second quarter was the first full three-month period that AMD has been selling chips based on its new Zen design, an overhaul the company says allows it to go head-to-head with Intel Corp. products and win. The upbeat forecast indicates that Chief Executive Officer Lisa Su is off to a strong start with her push to restore AMD to financial health and a better market position. “I still think we’re at very near the beginning of the cycle,” Su said in a telephone interview. “I think customers have regained confidence in what we’re able to do.” AMD’s stock jumped as much as 11 percent in extended trading following the announcement. It had earlier closed little changed at $14.11 in New York. The stock has outrun chipmaker shares in general this year, posting a 24 percent gain compared with a 22 percent increase by the benchmark Philadelphia Stock Exchange Semiconductor Index. The net loss in the second quarter was $16 million, or 2 cents a share, compared with a profit of $69 million, or 8 cents, a year earlier when it had a one-time gain from asset sales. Sales rose 19 percent to $1.22 billion. That compared with an average estimate for a loss of 3 cents a share on revenue of $1.16 billion. The second quarter performance caused the company to increase its predictions for 2017. AMD now forecasts “annual revenue to increase by a mid- to high-teens percentage” compared with a previous projection of “low double-digit” percentage growth. (BN)

Telecoms & other:

Telefonica CEO Breaks With Past Ousting Predecessor’s Confidant -- Telefonica SA Chief Executive Officer Jose Maria

Alvarez-Pallete removed the head of the carrier’s venture capital unit, according to people familiar with the matter, ousting one of the few remaining top executives with closes ties to his predecessor Cesar Alierta. Javier Placer, who ran Telefonica’s Open Future unit, has left the Madrid-based company following management changes announced Tuesday, said the people, who asked to not be named because the departure wasn’t publicly announced. Placer, who joined Telefonica in 2011, is related by marriage to Alierta. Placer wasn’t the only person close to the former chairman to leave on Tuesday; Telefonica also announced the departure of Luis Blasco, the head of the company’s video unit and a childhood friend of Alierta’s. The replacements are the latest sign that Pallete is purging Alierta’s allies from top management less than three months after the former chairman stepped down from the carrier’s board. Alierta still serves as head of the company’s foundation. (BN)

Italy Lawmaker Proposes Telecom Italia, Open Fiber Merger -- A senior Italian senator is proposing to merge ultra-broadband

carrier Open Fiber SpA with Telecom Italia SpA as a way to reduce the influence of Vivendi SA at the country’s biggest phone company, according to a draft obtained by Bloomberg News. Massimo Mucchetti, a Democratic Party member who heads the Senate’s Industry, Tourism and Commerce Committee, is preparing a resolution with his proposal. State-controlled utility Enel SpA and government-owned lender Cassa Depositi e Prestiti -- co- owners of Open Fiber -- would get a minority stake in Italy’s biggest phone company, according to Mucchetti’s draft. Such a merger "could give Telecom Italia a stability that it still lacks as the last change of its top manager shows,” the draft resolution says. Telecom Italia Chief Executive Officer Flavio Cattaneo on Monday agreed to leave the company after receiving a 25 million-euro ($29.1 million) severance package, paving the way for top shareholder Vivendi to install a fourth CEO at the phone carrier in less than four years. Mucchetti wants to counter Vivendi’s influence at Telecom Italia by “bringing in two important state-controlled Italian investors,” according to the draft. Telecom Italia could later spin off its landline network into a new company and eventually list the shares on the Italian Exchange, Mucchetti says in the draft. (BN)

French Gov. Studies Limiting Telecom Operators VAT Gains: Canard -- French Budget Minister Gerald Darmanin is studying

how to modify a loophole in the country’s VAT tax rules that has allowed telecom operators to apply lower rates in their offers, Canard Enchaine reports, without citing anyone. * Fixing loophole could help prevent a shortfall of hundreds of millions euros in tax income for the state, Canard says * Canard says the budget ministry identified that some telecom operators increased margins by using different VAT rates when they include an online newspapers service in some offers ** VAT rate for the press is 2.1% ** Regular VAT rates applied for telecom subscription is 20% * Ministry is studying how to limit the use of the lower 2.1% VAT rate only to the fees telecom operators pay to newspapers for the use of content, Canard says * Canard cites a JP Morgan study that shows the state may have had a EU660m shortfall in tax revenue from telecom operators Altice’s unit SFR and Bouygues Telecom, which are the operators using the system * Canard says if the state modifies the rules, SFR’s gain from loophole would drop from EU400m to EU10m ** Canard doesn’t give further details on financial impact. (BN)


4

Energy, Commodities, Transport and Construction Oil:

Oil Climbs From Seven-Week High on Signs U.S. Stockpiles Plunged -- Oil extended gains from the highest close in seven

weeks as industry data showed U.S. crude stockpiles plunged, easing a glut. Futures climbed as much as 1.4 percent in New York after rising 4.6 percent in the previous two sessions. Inventories tumbled by 10.2 million barrels last week, the American Petroleum Institute was said to report. If the decline is replicated in government data Wednesday, it would be the biggest decrease since September. The United Arab Emirates reiterated its commitment to the OPEC agreement on production cuts and said it would deepen its own curbs. Oil has traded below $50 a barrel since May amid concern rising global output will offset reduced flows from members of the Organization of Petroleum Exporting Countries and its allies including Russia. While U.S. crude stockpiles continue to decline during a period of strong seasonal demand, nationwide inventories remain about 100 million barrels above the five-year average. West Texas Intermediate for September delivery rose as much as 65 cents to $48.54 a barrel on the New York Mercantile Exchange, and was at $48.36 at 12:16 p.m. in Hong Kong. Total volume traded was about 14 percent above the 100-day average. Prices gained $1.55 to $47.89 on Tuesday, the highest close since June 6. Brent for September settlement climbed as much as 45 cents, or 0.9 percent, to $50.65 a barrel on the London-based ICE Futures Europe exchange. Prices added $1.60, or 3.3 percent, to $50.20 on Tuesday. The global benchmark traded at a premium of $2.22 to WTI. (BN)

Seadrill Gets Bank, Bond Extension; In Talks on Recapitalization -- Seadrill reached an agreement with its bank group to

extend the comprehensive restructuring plan negotiating period until Sept. 12. * Also gets lender consent to extend $400 million credit facility maturity date to Sept. 14 and support from lenders representing 84% of the $450 million credit facility maturing Aug. 15 to extend the maturity date to Sept. 14 * In advanced discussions with certain third party and related party investors and its secured lenders on the terms of a comprehensive recapitalization * Still sees comprehensive restructuring plan likely involving chapter 11 proceedings * Sees plan needing substantial impairment or conversion of bonds, as well as impairment and losses for other stakeholders, including shipyards (BN)

Industrials/Utilities:

Thales 1H Net Falls 12% to EU336M; Confirms Targets -- Odile Renaud-Basso replaces Martin Vial as French state

representative on the board, co. says in a statement. * 1H sales EU7.24b * 1H op. free cash-flow EU216m (BN)

Endesa Second Quarter Net Income EU653 Mln -- Endesa reported net income for the second quarter of EU653 million. * 2Q

Ebitda EU1.61 billion * 1H net revenue EU9.8 billion (BN)

SNAM 2Q Net Income Rises 16% to EU250M -- Co. reports 2Q total revenue of EU640m, up from EU628m in the prior

corresponding period. * 2Q EBIT EU361m, Ebitda EU521m * 1H adj. pro-forma net profit up 18% to EU504m (BN) Renewables & environmental markets: no stories Commodities:

Trump Says Administration Is Taking Time on Steel Tariffs -- President Donald Trump said his administration would take its time

in making a long-awaited decision on whether to block steel imports, saying "we don't want to do it at this moment." Mr. Trump and his Commerce Secretary, Wilbur Ross, had earlier this year said they would complete a plan to reduce steel imports in the name of "national security" by the end of June. But the decision has been stalled amid objections from trading partners, domestic steel users, and some of Mr. Trump's own aides. Mr. Trump, in a Wall Street Journal interview Tuesday, said the issue was still on the table, and that "we're going to be addressing the steel dumping," which he called "a very unfair situation." But he backed off promising imminent action. He started to say a move would come "very" soon, but then caught himself and instead changed his wording to "fairly soon." He indicated that the timetable had gotten bogged down by extensive study and various regulations governing the decision. "You can't just walk in and say I'm doing to do this," Mr. Trump said. "You have to do statutory studies... It doesn't go that quickly." The president suggested that a final decision on a steel trade policy may have to wait until other top-priority issues on his agenda get addressed, saying: "we're waiting till we get everything finished up between health care and taxes and maybe even infrastructure." Mr. Trump also spoke during the interview about the North American Free Trade Agreement. He said that while he scuttled a plan in April to pull out of the 23-year-old pact in favor of renegotiation, he still reserved the option to withdraw if the talks with Mexico and Canada aren't settled to his satisfaction. "We're in the middle of a renegotiation right now, so we'll see," Mr. Trump said. "Maybe we'll have to terminate it." (DJ)

Copper Rallies to Two-Year High, Miners Surge as China Brightens -- The red metal is red hot. Copper surged to the highest

level in more than two years on the London Metal Exchange, lifting shares of producers including Glencore Plc, driven by expectations that increasing demand in China may fuel a global shortage and buoyed by a weak dollar. Benchmark three-month futures rallied as much as 2.2 percent to $6,362.50 a metric ton, the highest level since May 2015, and were at $6,349.50 by 12:29 p.m. in Shanghai. That’s a fourth day of gains, and extends Tuesday’s 3.3 percent jump. In Hong Kong, Glencore rose as much as 4.5 percent. Base metals have rallied in the past month as economists have become more upbeat about China’s economy, while concerns over tightening liquidity in the world’s top user have eased. Initial data for July have added to a positive picture. The advance has come as a gauge of the dollar trades around a one- year low, making materials priced in the greenback more attractive. (BN)

Kloeckner 1H Ebitda Climbs 59% to EU140m, Holds FY Forecast -- Kloeckner 1H Ebitda EU140m from EU88m year earlier * 1H

net income EU59m compared to EU19m year earlier * 1H sales rise 12% to EU3.2b * Reiterates FY forecast of more than 10% increase in Ebitda * Says 3Q Ebitda will fall to EU35m to EU45m due to less favorable pricing (BN)


5

Transport:

France Is Said to Study Privatization of Paris Airports: BFM -- The French government has been exploring various options to

sell part or all of its stake in Aeroports de Paris, BFM reports, citing unidentified people familiar with the matter. * Complete sale may achieve returns of EU7b: report * ADP hired BNP Paribas, Goldman Sachs to advise on the matter: report * Finance Ministry said that it won’t comment until the beginning of the new school year in September when contacted by BMF (BN)

Construction:

LafargeHolcim Second-Quarter Profit Beats on Main Market Growth -- LafargeHolcim Ltd., the world’s largest cement maker,

beat estimates for second-quarter profit, helped by growth in their main markets of U.S., India and Nigeria. Earnings before interest, taxes, depreciation and amortization rose 10 percent on a comparable basis to 1.74 billion francs ($2.03 billion), the Jona, Switzerland-based company said in a statement Wednesday. That compares with a 1.73 billion franc average estimate of analysts surveyed by Bloomberg. “LafargeHolcim delivered positive earnings growth for the fifth consecutive quarter supported by favorable pricing, cost discipline and synergies,” LafargeHolcim Chairman Beat Hess said in the statement. Hess remains in charge after the departure in mid-July of Chief Executive Officer Eric Olsen, who will be replaced in September by former head of Sika AG, Jan Jenisch. The two years since LafargeHolcim’s creation from a merger of French and Swiss rivals have been marked by management changes, a 19 percent share price decline and allegations of possible terror funding in Syria. The company kept targets for this year. It confirmed a 1 billion franc share buyback during this year. (BN)

Netherlands and AEX KPN 2Q Adjusted Ebitda Rises 1.5%; Keeps 2017 Outlook Unchanged -- KPN 2Q rev. EU1.63b, 2.7% decline, according to

statement on Wednesday. * 2Q adj. Ebitda EU601m ** Ebitda growth due to improved operational efficiency as a result of Simplification program and lower subscriber retention/acquisition costs ** Second wave of program delivered ~EU65m run-rate savings by end 2Q * 2Q net adds in broadband +8k, IPTV +25k * 2Q FCF was EU296M, Capex EU238M * Says “progress with business transformation” ** “We still have to improve customer satisfaction in Business towards a positive level and we continue to experience strong price competition in mobile in our Large Enterprise and Corporate segment”: KPN CEO Eelco Blok * Keeps 2017 outlook, sees 2017 adj. Ebitda in line with 2016, capex ~EU1.15b * End 2Q, KPN had completed ~60% of EUR200m share buyback announced at 1Q results (BN)

Royal KPN: 3.7 cents Per Shr Will Be Paid as an Interim Div; Intends to Pay a Regular Div Per Shr of 11 cents in Respect of 2017 (DJ)

[yday] Elliott Blasts Akzo Nobel Over Paintmaker’s Shareholder Meeting -- U.S. hedge fund Elliott Management Corp.

escalated its battle with Akzo Nobel NV, accusing the Dutch paintmaker of deliberately flouting shareholder rights just as the company pledged to repair relations with investors. The Amsterdam-based manufacturer of chemicals and coatings is in “serious and direct contravention” with European shareholder rules on the timing of a Sept. 8 investor meeting, Elliott said in a statement on Tuesday. The riposte came hours after Akzo Nobel vowed to “strengthen and maintain a constructive dialogue” with shareholders and create a board committee for relations that will be advised by JP Morgan Cazenove Ltd. Akzo Nobel is emerging from a tumultuous few months that left relations with some investors in tatters.

Elliott led a campaign for talks with rival-turned-suitor PPG Industries Inc. on its unsuccessful $29 billion takeover bid, and has mounted a series of court cases to have Chairman Antony Burgmans removed. Adding to the upheaval, former CEO Ton Buechner suddenly resigned last week for unspecified health reasons, leaving the new CEO, Thierry Vanlancker -- who only joined the company in 2016 -- to carry out the ambitious targets the company put forth as its defense against being sold. The latest tussle between Akzo Nobel and shareholder Elliott revolves around the date chosen by the company for the meeting to vote on Vanlancker’s nomination. It falls short of the 60 days required under Dutch rules for shareholders to be able to submit agenda items, but within the 42-day limit for giving them notification. Elliott said it wants investors to be able to vote on a resolution for the removal of Burgmans. In response to a question Tuesday about the choice of the date, the chairman said, “it was on balance important that we would have the shareholder meeting quickly.” “Shareholders are not easily fooled, neither by blatant circumvention of the law nor by empty claims of active shareholder outreach,” Elliott said. The fund has maintained pressure on Akzo Nobel since PPG walked away from its approach June 1. It’s making a second attempt in court on Thursday to oust Burgmans. It lost a separate case earlier this year during which a judge ordered the paintmaker to restore its relationship with shareholders. (BN)

ASMI Sees Third Quarter Revenue EU170 Mln To EU190 Mln -- ASMI forecast revenue for the third quarter of EU170 million to

EU190 million. * 2Q net sales EU202.0 million * 2Q gross margin 43.7% * 2Q orders EU205.90 * 2Q net income EU132.1 million * 2Q adjusted net EU55.6 million (BN)

ASM Pacific Slides Most Since 2009 as 3Q Billings Slowdown Seen -- ASM Pacific plunges as much as 15% after CEO Lee Wai

Kwong says in statement bookings for back-end equipment and materials will start to slow from 3Q due to seasonality. * Co.’s billings in 3Q will be at similar level as 2Q or grow by single-digit percentage q/q, Lee says in statement (BN)


6

Stock Markets, M&A and Other Corporate News Stock markets:

Asian Stocks Give Up Gains; Japan, Australia Outperform -- Asian shares gave up earlier gains Wednesday, though Japanese

and Australian stocks outperformed, helped by an improvement in appetite for risk, which pushed the U.S. dollar and commodity prices higher overnight. Commodities led the charge in European and U.S. trading on Tuesday, with copper prices jumping 4% and oil rising more than 3%. That's particularly good for Australian stocks, where a big market segment is mining and energy companies. The S&P/ASX 200 was recently up 1%. Mining heavyweights BHP Billiton and Rio Tinto rose about 3% while oil firm Santos advanced 4%. Oil was also supporting Hong Kong's Hang Seng Index, which coming into Wednesday had risen for 11 of the prior 12 trading days. The index was little changed at the midday break, with PetroChina and Cnooc rising 3.3% and 2.5%, respectively. Meanwhile, stocks in South Korea, Taiwan and China edged lower by midday after gaining slightly earlier. In Japan, a rebounding dollar and higher Treasury yields--both a sign of increased risk appetites--helped stocks after the Nikkei Stock Average logged three straight days of declines. It was recently up 0.5% as the dollar moved briefly back above Yen112 in morning trading, nearly 1% higher than where the pair traded at the end of Tuesday's stock trading. (DJ)

U.S. Stocks Climb, Driven by Strong Earnings Reports -- U.S. stocks climbed Tuesday, bolstered by a flurry of upbeat earnings

results. Company earnings are expected to drive much of the trading action this week, analysts say, with roughly 40% of S&P 500 firms scheduled to post quarterly results through Friday. Solid reports should help major indexes keep climbing, investors say, even as many have expressed concerns about stocks looking pricey relative to their historical valuations. The Dow Jones Industrial Average added 100 points, or 0.5%, to 21614, after three consecutive sessions of declines. The S&P 500 rose 0.3%, and the Nasdaq Composite added less than 0.1%. A rally in Caterpillar, McDonald's and DuPont helped lift the Dow industrials. Shares of Caterpillar gained 5.9% after the equipment giant raised its revenue and profit outlook for the year, while McDonald's shares jumped 4.8% after the fast-food chain's earnings topped analysts' expectations. Shares of DuPont, whose earnings also surpassed expectations, added 1.4%. Declines in the shares of 3M and United Technologies, both of which released quarterly results earlier Tuesday, weighed down the blue-chip index. Stock indexes also received a boost from energy shares, which jumped 1.3% in the S&P 500, buoyed by a climb in oil prices. Energy stocks, the second-worst-performing sector in the S&P 500 this year, have come under pressure this year as oil prices have slid. (DJ)

VIX Sets New Milestone, Falls to Record Intraday Low -- A key measure of market volatility set a new floor Tuesday, falling to its

lowest level ever in intraday trading. The CBOE Volatility Index, known as Wall Street's "fear gauge," declined to 9.04 at one point in the day, marking a new intraday low for the index, which was launched in 1993. The CBOE index, called VIX, didn't set a record closing low, settling at 9.43 at the end of the day. The all-time closing low of 9.31 was set on Dec. 22, 1993. The VIX uses S&P 500 options prices to project expected stock-market swings over the next 30 days. It tends to rise when stocks are falling and vice versa. Markets have been calm this year, and some investors and analysts have said that a resurgence in volatility could be on the horizon. The VIX's lows have induced investors to fret about the lack of fear, even spurring some to bet on a reversal. With a close under 10 on Tuesday, the VIX closed in single digits for nine consecutive sessions -- by far its longest streak ever. The previous record of four was set in December 1993, and the VIX closed under 10 just four times from 1995 to 2016. (DJ)

European stocks face a cautious open Wednesday, with DAX futures down 10 points and FTSE 100 futures unchanged. (DJ)

M&A:

Michael Kors Plans More Major Deals After Jimmy Choo Purchase -- Michael Kors Holdings Ltd. isn’t done with deals. The

fashion house, which agreed to buy luxury shoemaker Jimmy Choo Plc for about $1.2 billion on Tuesday, is planning to build a portfolio of upscale brands. And that means acquiring more businesses, possibly in the same billion-dollar range, according to Chief Executive Officer John Idol. “We are not going to do something small, let me just say that,” he said in an interview. “We are not going to buy a $10 or $20 million brand, that’s not going to move the needle for us.” The company is turning to deals as it tries to regain lost sales -- a slump brought on in part by its flagship brand becoming too exposed. Michael Kors plans to focus on integrating Jimmy Choo, known for its “Sex and the City” stilettos, in the next six to 12 months. Then it will start shopping around again, Idol said. The Jimmy Choo acquisition was Michael Kors’s biggest effort to expand beyond its own brand name since its initial public offering in 2011. The takeover gives the company a greater presence in higher-end luxury -- and helps it play catch-up with Coach Inc., which agreed to buy Stuart Weitzman in 2015 and made a $2.4 billion deal to buy Kate Spade & Co. in May. (BN)

Other corporate news:

German Carmakers Risk Global Trust, Justice Minister Tells HB -- Carmakers don’t seem to have “fully understood what’s at

stake for our country: the global trust in the entire German car manufacturing industry,” Justice Minister Heiko Maas writes in Handelsblatt. * That means hundreds of thousands of jobs are at stake * Carmakers must decisively work against erosion of trust and improve crisis management * Carmakers should bear costs for fixing cars on roads * Germany’s KBA should in future not only check if cars are safe, but also if they live up to what manufacturers promised (BN)

BMW Puts on Hold Daimler Talks Over New Projects: Sueddeutsche -- BMW angered at Daimler for informing authorities about

possible collusion and has put talks about potential new projects on hold. Sueddeutsche Zeitung reports. * Discussions span joint procurement of parts to network of filling stations for electric vehicles ** Filling stations projects to be continued, but may now experience delay * Cos also plan to cooperate in car-sharing with units Car2Go and Drive Now (BN)

German Auto Diesel Emissions to Get Priority at EU: HB -- European Commission President Jean-Claude Juncker put the issue

on commission meeting agenda for Wednesday, Handelsblatt reports, citing information it obtained from an EU Commission spokeswoman in response to a request for information. * Juncker also instructed his deputy Jyrki Katainen to compile all aspects of diesel emissions scandal to present them to panel of 28 EU Commissioners * Katainen to coordinate work of three EU Commissioners -- Consumer Protection Commissioner Vera Jourova, Industry Commissioner Elzbieta Bienkowska and Competition Commissioner Margrethe Vestager * Vestager currently investigating whether to open an antitrust case against VW, Audi, Mercedes-Benz, BMW and Porsche (BN)


7

Daimler Earnings Miss Estimates as Truck Division Profit Falls -- Daimler AG, reeling from allegations of decades-long

collusion with other German carmakers, missed second-quarter operating-profit estimates amid a drop at its commercial-vehicle divisions and spending on new automotive technology. Earnings before interest and taxes climbed 15 percent to 3.75 billion euros ($4.4 billion) from 3.26 billion euros a year earlier, the Stuttgart, Germany-based company said Wednesday in a statement. That was less than the 3.9 billion-euro average of five analyst estimates compiled by Bloomberg. Sales increased 6.5 percent to 41.2 billion euros. Any positive boost from buyers flocking to Mercedes’s new suite of sporty models is likely to be overshadowed by this month’s revelation that regulators are looking at whether decades of technology talks among German auto manufacturers constitute an antitrust violation. That’s opened another set of challenges, which also include the threat of diesel driving bans, industrywide recalls rooted in Volkswagen AG’s emissions- cheating scandal and heavy investment burdens to develop electric vehicles. Daimler said a week ago that it will recall 3 million autos to fix exhaust-system software, booking the costs in the third quarter. First-half research and development costs jumped 19 percent as the manufacturer gears up to bring out battery-powered autos. Daimler said in March that it will release 10 new electric vehicles by 2022, three years earlier than a previous target, and its working to adapt an engine plant to produce batteries. Daimler Trucks outlined plans in April to reduce fixed costs by 400 million euros, in part through employee buyouts to cut the workforce. The project will result in 500 million euros in spending this year and next. Carmakers’ shares have dropped since Spiegel magazine reported Friday that Daimler and Volkswagen informed authorities last year of discussions they’d had since the 1990s that also included BMW AG. Over the weekend, the European Union’s antitrust overseer confirmed it’s studying possible collusion among auto producers, together with Germany’s regulator. Daimler Chief Executive Officer Dieter Zetsche declined to comment on the issue during a conference call Wednesday beyond saying the car industry is facing negative news. Manufacturers could face fines ranging from several hundred million to a low billion euros, according to Evercore ISI. While they’ve declined to comment on the allegations, Volkswagen and Daimler’s disclosure to regulators reportedly could help the companies reduce penalties or escape them entirely. BMW said industry talks involved setting up infrastructure for refilling an exhaust-treatment fluid. (BN)

*DAIMLER CEO SAYS DIESEL'S FUTURE IS WORTH FIGHTING FOR; SYSTEMATICALLY INVESTIGATING DIESEL ALLEGATIONS (BN)

VW Superv’y Board Wasn’t Informed Properly, Minister Tells ffn -- Lower Saxony’s economy minister Olaf Lies tells ffn radio

station he heard about VW submitting documents to cartel authorities through the media, and is checking if that violated management’s information requirements to the supervisory board. (BN)

PSA First-Half Profit Jumps as It Upgrades Auto Market Forecasts -- PSA Group posted an 11 percent increase in first-half

profit after the manufacturer of Peugeot, Citroen and DS cars boosted revenue and further squeezed costs. Recurring operating income rose to 2.04 billion euros ($2.37 billion) from 1.83 billion euros a year earlier, the company said in a statement Wednesday. Revenue advanced 4.9 percent to 29.2 billion euros, beating the average of five analyst estimates compiled by Bloomberg. “We improved the performance of all our divisions,” Chief Financial Officer Jean-Baptiste de Chatillon said on a call with journalists. The automotive unit “delivered a performance level that more than compensated for headwinds” including lagging Chinese sales, currency effects resulting from Brexit and rising raw material costs, he said. Chief Executive Officer Carlos Tavares is counting on new models, international expansion and the acquisition of General Motor Co.’s European operations to boost results. While the Paris-based manufacturer is struggling in China, where sales of its cars almost halved since the start of the year, the recurring operating margin at the auto division grew to a record 7.3 percent. Europe’s second-biggest carmaker is acquiring the Opel and Vauxhall brands from GM to gain scale in its home continent. The company confirmed targets laid out last year in Tavares’s Push- to-Pass plan for automotive recurring operating margin to reach more than 4.5 percent on average over the 2016-2018 period and over 6 percent by 2021, while revenue would grow by 10 percent between 2015 and 2018, with an additional 15 percent by 2021. (BN)

U.K. to Allow Tax on Most Polluting Diesel Cars: Telegraph -- Local governments will be allowed to impose tough levies on the

most polluting diesel vehicles as soon as 2020 as a last resort to bring down the levels of harmful nitrogen dioxide emissions, The Daily Telegraph reports, citing the government’s air quality strategy to be published on Wed. * The strategy urges local authorities to first try to reduce emissions by retrofitting the most polluting diesel vehicles with filters, changing road layouts and removing speed humps * The government will also commit to banning the sale of all new diesel and gasoline cars by 2040 to force people to switch to electric and hybrid vehicles (BN)

Michelin First-Half Operating Profit Slips on Raw Material Costs -- Michelin & Cie. reported a 0.9 percent decline in first-half

operating profit after raw material costs climbed early in the year. Operating earnings from recurring activities fell to 1.39 billion euros ($1.62 billion) from 1.41 billion euros a year earlier, the company, based in Clermont-Ferrand, France, said in a statement Tuesday. That compares with the 1.42 billion-euro average of 10 analyst estimates compiled by Michelin. The company boosted tire prices earlier this year to reflect a jump in raw materials costs -- which have since turned lower -- and in June announced plans to streamline management and shed some 2,000 jobs by 2021, including 1,500 positions in France. Michelin on Tuesday confirmed its targets for 2017 and said “changes in the price mix and raw materials costs” should have a positive impact over the rest of the year. Chief Financial Officer Marc Henry said on a call with journalists that the negative impact of higher material prices could be as low as 750 million euros in 2017, down from a previous estimate of 800 million euros. Net sales climbed 7.5 percent in the first half to 11.1 billion euros, while net income rose 12 percent to 863 million euros. Europe’s largest tiremaker benefited in the first half from a pickup in demand for specialty tires, especially from the mining industry. Michelin predicted last month that the market for mining-vehicle tires will grow 10 to 15 percent this year. (BN)

Lonza 1H Sales Growth 15%; Announces 2022 Mid-Term Targets -- Lonza announces mid-term guidance to 2022 with sales of

CHF7.5b, core Ebitda margin 30%, core RONOA 35%, co. says in statement. * Co. expects continued momentum in 2H, confirms upgraded full- year outlook ** Still sees high-single digit sales growth, core Ebitda >CHF1b, double-digit core Ebit growth above sales growth, core RONOA >21 .5% * Confirms positive outlook for Capsugel, sees first benefits from 2018 onwards * 1H sales CHF2.32b vs CHF2.02b y/y * 1H core Ebit CHF447m vs CHF312m * 1H core Ebitda CHF577m vs CHF447m * 1H core Ebitda margin 24.8% vs 22.1% * 1H core RONOA 31% vs 20.3% (BN)


8

Klepierre Lifts Outlook for FY Cash Flow; 1H Revenue Rises 1.1% -- Klepierre EPRA NAV EU37/share as of June 30 vs

EU34.80 a year earlier, co. says in emailed statement. * 1H net current cash flow EU1.22/share vs EU1.16/share * Co. lifts target for 2017 net current cash flow to at least EU2.45/share, from previous target of EU2.35-EU2.40/share ** Forecast based on European economy in line with OECD projections * 1H revenue EU654.5m vs EU647.7m * 1H net rental income from shopping centers EU527.1m vs EU520.7m ** Shopping centers like-for-like NRI rose 2.7% * Klepierre 2Q performance was better than 1Q, “which is rather promising,” Executive Board Chairman Jean-Marc Jestin says in conference call * Jestin says doesn’t see “flagrant” improvement in Turkey in next 12-18 mos., confident for medium term ** “The fundamentals of the Turkish economy remain strong” * 1H cost of financing was 1.9% ** Cost of debt seen stable to “slight improvement” for FY, may fall 10bp in next 12-18 mos., co. says in conference call, deputy CEO Jean-Michel Gault says in call. (BN)

Central Banks, Macro and Geopolitics Brexit/UK:

U.K. Withdrawal to Create EU10b-EU12b Gap in EU Budget Post-2020 -- European Commission plans to present proposal for

next multi-annual EU budget “in late spring or summer 2018” as financial impact of U.K. decision to leave bloc may become more visible next year, EU Budget Commissioner Guenther Oettinger tells reporters in Brussels. * “Our expectation is that British payments to EU budget will continue until end of 2020” * “We don’t have a plan B if U.K. doesn’t make payments until end of programming period” in 2020 * “They have a clear legal obligation: Cameron agreed they to pay until the end of the current budget” (BN)

ECB:

ECB’s Nowotny Sees No Need to Set Timetable to End Bond Buying -- The European Central Bank shouldn’t set a definite

timetable for ending its bond purchases, according to Governing Council member Ewald Nowotny. As the ECB prepares to hold its first formal talks on the future of its 2.3 trillion-euro ($2.7 trillion) quantitative- easing program, the Austrian central-bank governor said caution should be the watchword. He cited the strategy of the U.S. Federal Reserve, which announced reductions in its bond purchases on a month-by-month basis, as a potential model. “I consider it wise to step off the gas slowly,” Nowotny said in an interview with Salzburger Nachrichten published on Tuesday. “The U.S. central bank also implemented tapering without committing to a definite timetable.” The ECB’s QE program is provisionally scheduled to run until the end of this year, but the Governing Council doesn’t intend to discuss the future until at least September. The chief worry is that inflation pressures remain muted, meaning that paring back stimulus too fast might disrupt progress toward restoring price stability. The International Monetary Fund highlighted its own concerns earlier, when it warned of significant downside risks to the euro area’s economic outlook and urged the ECB to keep stimulus in place. “Monetary policy should remain firmly accommodative until there is a sustained rise in the inflation path toward the ECB’s price-stability objective,” the Washington-based lender wrote in a report. It also said that some countries will have to tolerate higher rates for a “prolonged period” to lift the average in the 19-nation euro area. ECB Executive Board member Yves Mersch said on Tuesday that the central bank can be more “assured” about meeting its inflation goal, but it’s still too soon to call its mission accomplished. “A very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation,” he said at an event in Singapore. “Reflationary forces are at play. Price pressures in the early stages of the pricing chain remain strong but have still not transmitted to the later stages.” (BN)

Eurozone (member states):

Macron’s Govt to End Current Domestic Financial Transaction Tax -- Finance Minister Bruno Le Maire says his government

plans to scrap a tax the equivalent of a domestic financial transaction tax that he says is a major impediment for financial companies to move to France. * Le Maire speaks to lawmakers at a Senate hearing on Tuesday * Le Maire says France to scrap the “intra-day tax” starting 2018 through the budget law * Le Maire says tax to be removed as part of measures to attract financial institutions looking into moving business out of the U.K. ahead of Brexit (BN)

Greece Gets Solid Demand for First Bond Issuance in Three Years -- Greece got solid demand Tuesday for its first bond

issuance in three years, in what the government sees as the first of several moves that will enable the debt-ridden country to wean itself from new bailouts. Tuesday's deal included an invitation for holders of a bond coming due in 2019 to swap their securities for new ones due in 2022. Greece sold EUR3 billion worth of the 2022 bond, Greek government officials and bankers said. About half of that is new money, and half is existing investors in the 2019 bond who switched, according to one of the banks managing the deal. The new bond matures in August 2022 and will yield 4.625%. The 2019 bond is yielding around 3.2%, so investors will be paid a decent premium for participating in the swap. Greek bonds have been on a tear of late. Greece paid EUR102.60 per EUR100 face value of the 2019 bond. A year ago, the bond was trading below EUR90. Still, the sum raised is a token -- less than 1% of Greece's total debt -- and on its own not enough to forestall the need for more aid or other concessions from its eurozone rescuers. But the bond issuance was meant as a show of confidence and test of investors' appetite for its debt, two years after the country was teetering on the brink of collapse and eurozone exit. It is also a way to ease a big hump of debt repayments due in 2019. Athens' debt office is aiming to go ahead with more bond issues before the end of the country's third bailout in mid-2018. (DJ)

Portugal’s First-Half Budget Deficit Widens as Spending Rises -- Portugal says Jan.-June budget deficit widens to EU3.075b

vs. EU2.81b in same period of 2016, Finance Ministry’s budget office says on website. * Budget office provides comparative figures for public administration deficit * Jan.-June spending rises 1.6% Y/y; staff costs climb 0.3% * Revenue increases 1.0%; tax revenue falls 1.5% (BN)

Switzerland: no stories


9

Fed/North America:

Trump Says Cohn and Yellen Are Contenders to Lead the Fed -- President Donald Trump is considering renominating Janet

Yellen as Federal Reserve chairwoman but also views his economic adviser Gary Cohn as a top candidate, he told The Wall Street Journal in an interview Tuesday. Mr. Trump reiterated that he thinks Ms. Yellen is doing a good job and he has "a lot of respect for her," and said she is still in the running to serve a second four-year term as leader of the central bank. But he said he also is considering replacing Ms. Yellen with Mr. Cohn, who became Mr. Trump's National Economic Council director after a 26-year career at Goldman Sachs Group Inc. "He doesn't know this, but yes he is," he said, when asked if Mr. Cohn, who was present during the interview, was a candidate for the job. "I actually think he likes what he's doing right now." Mr. Cohn has been managing the search for the next Fed chief and has emerged as a key intermediary in the administration's relationship with the central bank. "I've known Gary for a long time, but I've gained great respect for Gary working with him, so Gary certainly would be in the mix," Mr. Trump said. Mr. Cohn and other White House officials have said he is focused on his current job. But former colleagues have said he has developed an appreciation for the power of the Fed during his long career on Wall Street, and for the central bank's relative independence during his current stint in Washington. As for Ms. Yellen, Mr. Trump said, "She is in the running, absolutely." "I like her; I like her demeanor. I think she's done a good job," he said. "I'd like to see rates stay low. She's historically been a low-interest-rate person." Mr. Trump said there are "two or three" other contenders in the mix, but declined to name any other potential candidates and said he probably wouldn't announce a nominee until the end of the year. "It's early to make the decision," he said, noting Ms. Yellen's term doesn't expire until February. He said he expected the confirmation process for the Fed job would move quickly. Mr. Trump's fierce criticism of the Fed and Ms. Yellen in the final weeks of his campaign led many to conclude he was unlikely to reappoint her. But the two have forged an amicable relationship since he took office, reflected in part by his willingness to consider her for the job. Mr. Trump has offered contrasting views of Ms. Yellen during the campaign and his first months in office. In May 2016 Mr. Trump said Ms. Yellen was doing a good job, but he likely would replace her when her term expires. Four months later, he accused the Fed chairwoman of being "highly political" and keeping interest rates low to help President Barack Obama. In an April interview with the Journal, he left open the possibility of nominating Ms. Yellen for another four-year term as chairwoman. "I like her; I respect her," he said at the time. Since taking office, the president and his advisers haven't publicly questioned the Fed's actions -- including its decision to raise short-term interest rates in March and June, and pencil in another rate increase this year. The Fed is expected to leave rates unchanged at its two-day meeting Tuesday and Wednesday. Ms. Yellen hasn't said whether she would like to serve another term as chairwoman, or whether she intends to step down from the Fed board of governors when her term as chairwoman expires. "I absolutely intend to serve out my term," she told lawmakers on Capitol Hill earlier this month. "I'm very focused on trying to achieve our congressionally mandated objectives, and I really haven't had to give further thought at this point to this question." (DJ)

Trump Sees 'Major Trade Deal' With U.K. -- President Donald Trump said Tuesday his administration was negotiating "to do a

major trade deal" with the U.K., aiming to have it kick in soon after Britain completes its exit from the European Union in early 2019. "It'll be a big trade deal -- much, much more business than we do right now, many, many times," Mr. Trump said in an interview with The Wall Street Journal. Mr. Trump's enthusiasm for expanding trading ties with the U.K. stood in contrast with his more critical comments about the European bloc that Britain is leaving. "I have a good relationship with the EU people and all, but they are very, very protectionist," the president said. Mr. Trump spoke as Britain's trade secretary, Liam Fox, was visiting Washington, formally opening trade talks with administration officials and meeting with members of Congress. A White House official in a separate interview later elaborated on Mr. Trump's comments, saying that a future U.S.-U.K. deal could cover a wide range of issues, such as agriculture, aviation and financial services. He said that "there may be things that we do with the U.K. that are not covered by the EU" under current trading arrangements. During the interview, Mr. Trump also said his administration's long-anticipated curbs on steel imports were still being discussed internally, and that it may be some time before he takes any action -- perhaps after higher-priority agenda items like overhauling the tax code get completed. Earlier this year, Mr. Trump and his Commerce Secretary, Wilbur Ross, had said they would look to impose new steel protections in the name of "national security" by the end of June. But that timetable slipped amid objections from trading partners, domestic steel users, and some of Mr. Trump's own aides. Asked about the status of the tariffs, Mr. Trump said "we don't want to do it at this moment." He added that "we're waiting till we get everything finished up between health care and taxes and maybe even infrastructure," a sequencing that suggests steel action may not take place for months. "The president said he's waiting for more and more information," the White House official said in explaining the delay. The official added that Mr. Trump is focused on "getting things done right, and in an order that makes sense." He then said: "The first priority for the president and his agenda is tax reform." (DJ)

Senate Panel Reaches Deal for Manafort Testimony, Drops Subpoena -- A Senate committee has reached an agreement to

receive testimony from President Donald Trump’s former campaign manager Paul Manafort and is dropping a subpoena. Judiciary Committee Chairman Chuck Grassley of Iowa and ranking Democrat Dianne Feinstein of California had issued the subpoena to Manafort late Monday after they were initially unable to reach an agreement with Manafort about his testimony. "Faced with issuance of a subpoena, we are happy that Mr. Manafort has started producing documents to the Committee and we have agreed to continue negotiating over a transcribed interview," the two lawmakers said in a joint statement Tuesday. "As we’ve said before, we intend to get the answers that we need, one way or the other. Cooperation from witnesses is always the preferred route, but this agreement does not prejudice the committee’s right to compel his testimony in the future." Separately, Manafort met with investigators from the Senate Intelligence Committee on Tuesday, according to Jason Maloni, Manafort’s spokesman. He “answered their questions fully,” Maloni said. The Judiciary Committee had invited Manafort to appear at a public hearing Wednesday to discuss his lobbying activities on behalf of foreign entities, along with Donald Trump Jr. Manafort likely will appear before the committee in September, Feinstein said in an interview. The committee wants him to testify in a public hearing, she added. The panel said late Friday that it was negotiating with Manafort and Trump Jr. over their appearances, as well as the committee’s request for documents. It didn’t provide an update Tuesday on its talks with the president’s son, but Trump Jr. had indicated previously he was willing to appear under oath. (BN)


10

Kushner Described as Forthcoming in Closed-Door House Meeting -- President Donald Trump’s son-in-law, Jared Kushner,

was cooperative and forthcoming Tuesday during a closed-door interview with the House Intelligence Committee examining potential connections between Russia and the Trump campaign, lawmakers said. Kushner entered the meeting with Democrats poised to level tough questions, including about his meeting with a Russian banker and his attempt to establish a back-channel with the Russian government. The top Democrat on the panel, Adam Schiff of California, described the more than three-hour meeting as "a very productive session -- an opportunity to ask about a range of issues the committee was concerned about." Kushner was receptive to returning to the committee for more questioning, he said. Mike Conaway of Texas, the Republican leading the panel’s investigation into Russian meddling in last year’s election, said Kushner "wanted to answer every question we had.” Kushner, 36, has emerged as a central figure in the Russia investigations, which seek to determine whether Trump or anyone in his campaign colluded with the Kremlin to tip the election his way. Now perhaps the president’s closest adviser, Kushner contended in verbal and written statements on Monday that he had just four contacts with Russian government officials during the 2016 campaign and transition, and described them all as unremarkable. There were hints that Kushner’s second appearance in as many days before congressional committees investigating Russian meddling had the potential to be tense. (BN)

Japan/China:

BOJ’s Nakaso Pledges to Persistently Continue Powerful Easing -- Bank of Japan Deputy Governor Hiroshi Nakaso says the

bank needs to continue monetary stimulus to achieve its 2% inflation target as soon as possible. * Nakaso speaks to business leaders in Hiroshima, Japan * Price momentum toward the target is maintained firmly * It’s crucial to aim at 2% inflation as CPI data overstates inflation * The 2% target is an international standard and thus helps keep stability in foreign exchange rates in the longer term * There is a still long way to achieve the price target * Nakaso detailed his thinking on why wages haven’t risen despite the tight labor market, citing factors including companies choosing to cut long business hours instead of raising wages and a sticky deflationary mindset * The improvement in labor productivity is positive for the economy and wages will eventually rise (BN)

Asia Pacific excluding Japan & China:

Aussie Slumps as Disappointing Inflation Damps Tightening Bets -- Australia’s dollar slumped against most major peers as

slower-than-expected gains in consumer prices damped expectations for an interest-rate increase by the central bank. The probability the Reserve Bank of Australia will raise rates by May fell to 51 percent from 56 percent Tuesday, interest-rate swaps show. Central bank chief Philip Lowe reiterated his global counterparts’ moves to withdraw stimulus “has no automatic implications” for the RBA’s policy. Australia consumer prices rose 0.2 percent in the second quarter from the previous three months, missing economists’ expectations for a 0.4 percent increase. The trimmed mean, however, matched median forecasts for a 0.5 percent rise. (BN)

Lowe Says RBA Doesn’t Need to Follow Peers in Removing Stimulus -- Australia’s central bank chief Philip Lowe said his

global counterparts’ moves to withdraw stimulus from their economies “has no automatic implications” for policy Down Under. “Just as we did not move in lockstep with other central banks when the monetary stimulus was being delivered, we don’t need to move in lockstep as some of this stimulus is removed,” Lowe said in the text of a speech to be delivered in Sydney Wednesday. The governor reiterated remarks Friday by his deputy, Guy Debelle, that because Australia didn’t cut rates to zero and expand its balance sheet, it’s not obliged to begin tightening together with others. The Reserve Bank of Australia has kept its cash rate at 1.5 percent for almost a year, showing a willingness to tolerate weaker inflation to avoid further increasing high Sydney and Melbourne house prices with more cuts. Lowe delved deeply into the labor market in his speech, and the implications for consumption and debt from weak wage growth. He did note that because Australia’s labor market has strengthened -- recording the biggest back-to-back gains in full-time jobs in almost 30 years -- that’s allowed the RBA to be “patient” on policy and slow inflation. The governor saw a couple of scenarios for wages and inflation: * It could be that the lag between employment and wage growth is a bit longer and there could be a catchup that sees inflation pressure quickly emerge; he said this is a low probability, but can’t be ruled out * Globally, it could be that slow wage growth turns out to be more persistent, and it takes longer for wages to pick up, leaving inflation lower for longer. Under this, the Phillips Curve is flatter than it was. One consequence, he said, is that a flatter Phillips Curve means policy stimulus has “relatively little effect” on inflation. In addition, low inflation, low unemployment and low rates is likely to encourage more borrowing to buy assets, posing “a medium-term risk” to financial stability (BN)

RBNZ’s McDermott Says Inflation Pressures ‘Relatively Moderate’ -- Reserve Bank of New Zealand Assistant Governor John

McDermott comments in speech published on RBNZ website. * Says core inflation is currently estimated to be 1.4%, has broadly tracked sideways over past year * “So while inflation pressures have lifted from the lows seen in early 2015, they still appear to be relatively moderate” * Says changes to a single measure “are unlikely to materially alter the overall assessment of inflation pressures at any particular period” * Currently, RBNZ estimate of neutral interest rate is around 3.5%: McDermott * “The neutral interest rate has been slowly falling for some time” * “Despite a boost from strong net immigration in recent years, growth in potential output has remained much lower than in the past two expansions due to nearly no contribution from productivity growth” (BN)

Nordics: no stories


11

Eastern Europe:

EU to Update Stance on Poland Sanctions After Court-Revamp Veto -- The Polish president’s surprise veto of disputed judiciary

laws will influence European Union deliberations on Wednesday about whether to punish the bloc’s largest ex-communist member for backsliding on democracy. The European Commission will discuss the legal and political tools it has to prod Poland into scaling back a package of controversial legislation a week after threatening to recommend a “nuclear-option” procedure that could end up stripping the country of its voting rights in the EU. On Monday, President Andrzej Duda vetoed two bills that aimed to strip the courts of independence and hand control to politicians -- measures leaders in the EU and the U.S. have lambasted as undermining the rule of law. But he signed a third measure into law. The commission, the 28-nation EU’s regulatory arm, will weigh the state of democracy in Poland at a regular meeting Wednesday “in light of the latest developments, including the announcement of Polish President Duda to veto two out of the three disputed laws,” spokesman Margaritis Schinas said on Tuesday in Brussels. While the vetoes may forestall a worst-case punishment for the government in Warsaw, they’re unlikely to end the standoff with the commission as it seeks to confront members that flout the EU’s democratic values. Poland also has allies. Hungarian Prime Minister Viktor Orban, who has vowed to pursue an “illiberal democracy” modeled on Russia and Turkey, said last week his country would use “all legal tools available” to defend Poland. (BN)

Rest of the world: no stories


12

Last Trading Day Stats

Index Close 1D %Chg YTD%Chg 1Y% Change Currencies Rate

AEX 524.69 0.58% 8.59% 15.56% EURUSD 1.1642

EuroStoxx 50 3473.54 0.59% 5.56% 16.60% USDJPY 111.86

CAC 5161.08 0.65% 6.14% 17.44% GBPUSD 1.3029

DAX 12264.31 0.45% 6.82% 19.68%

FTSE 100 7434.82 0.77% 4.09% 10.57% Bund Yield

SMI 8937.9 0.45% 8.74% 8.64% 2yr -0.654%

OMX 1568.909 0.13% 3.41% 13.46% 5yr -0.153%

S&P 500 2477.13 0.29% 10.64% 14.20% 10yr 0.560%

Dow Jones 21613.43 0.47% 9.37% 17.00% 30yr 1.331%

Nikkei 225 20062.79 0.54% 4.96% 22.46%

Shanghai Composite 3238.041 -0.17% 4.33% 6.16% Sovereigns Yield

U.S. 10Y 2.321%

AEX Close 524.69 Japan 10Y 0.083%

ADR Impact 0.23 France 10Y 0.819%

ADR Impact % 0.04% Ita ly 10Y 2.143%

AEX Parity 524.92 Spain 10Y 1.552%

AEX Ex-div impact 0.00 Netherlands 10Y 0.682%

Volatility

ADR Close in NY VIX 9.43

Aegon 5.51$ -0.67% VDAX 13.80

ArcelorMittal 26.10$ -0.29%

ASML 152.73$ -0.24% Commodities

Galapagos 81.76$ 0.40% Brent Crude 50.58

ING 18.30$ 0.31% Gold Spot 1246.45

Philips 37.98$ -0.08%

RELX 20.54$ 0.22%

Royal Dutch Shell 54.37$ -0.10%

Unilever 57.77$ 0.22%

Difference from Amsterdam closing

AFS GROUP AMSTERDAM Research: Arne Petimezas: [email protected] +31 20 522 0244; Jauke de Jong: [email protected] +31 20 522 0242

Sources include: Bloomberg (BN); Reuters (R); Dow Jones Newswires (DJ); Market News International (MNI); Financial Times (FT); Wall Street Journal (WSJ); BBC News; CNN, NY Times (NYT), Washington Post (WP), The Guardian (G), het Financieele Dagblad (FD), Telegraaf (DFT), Volkskrant (VK) and NRC. The information and opinions contained in this document have been compiled or arrived from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and estimates expressed in this document are subject to change without notice. AFS does not accept any liability whatsoever for any direct or consequential loss arising from the use of this document. This document is for information purposes only and is not, and should not be construed as, an offer to buy or sell any securities or derivatives. The information contained in this document is published for the assistance of the recipient, but is not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient.

AFS Morning Note, July 26, 2017 · PDF fileAFS Morning Note, July 26, 2017 1 Corporate...

Documents

Transcript of AFS Morning Note, July 26, 2017 · PDF fileAFS Morning Note, July 26, 2017 1 Corporate...