Halister News

(Bloomberg) -- HSBC raised allocation to cash and fixed income to 78% vs 76% last month, saying the former is the best way to diversify in today’s world of low bond yields, analysts led by global head of asset allocation, Fredrik Nerbrand, write in a note.

• Favors holding cash in USD rather than in negatively yielding EUR, CHF and JPY
• Populist politics will bring to an end the idea that monetary policy can influence the global economy by itself and fiscal policy will start to take center stage while growth will stay weak
• Investors may start to believe asset markets are no longer the key focus of unconventional easing policies in DM, which poses a risk for the equity bull market
• In USTs, position for steeper curves
  • Lifts portfolio weight in 2Y-5Y tenors by 1% to 5%, 7Y to 10Y by 6% to 8% and cuts the weighting for the 10Y and beyond sector by 7% to 15%, on a 6 month view
• Lifts IG by 4% to 6% and cuts HY by 5% to 5%, closes position in global equities and raises S&P 500 weighting by 3% to 3%; lifts overall exposure to stocks to 12% vs 10%
• Weighting in gold reduced by 4% to 6% after a disappointing performance since June
• The best assets can be sourced from EM debt at the moment; so increase exposure to EM debt in local currency, adding 2% to India and Indonesia 10Y positions and take on a Brazilian Real currency exposure, by rotating 2% position in Brazil 10Y USD debt to Brazil 10Y local currency debt

(Bloomberg) -- Asked about difficulties at Italian banks and Deutsche Bank, Bank of France Governor Francois Villeroy de Galhau said their issues need to be addressed quickly. He speaks in an interview with Le Monde newspaper confirmed by his office.

• “The cases are very different. But they can and must be addressed quickly.”
• “In the case of the Italian bank Monte dei Paschi di Siena, for instance, a plan to dispose of doubtful loans and recapitalization were presented in July. It should be applied without delay.”

(Bloomberg) -- Pepsi 3Q adj. core EPS $1.40, est. $1.32 (range $1.27-$1.35)

• 3Q rev. $16.0b, est. $15.84b (range $15.47b-$16.17b)
  • Organic rev. growth 4.2% vs +3.3% q/q
• 3Q global volume food/snacks +3%, bev. +2%
• Segment organic rev./organic vol. results:
  • FLNA +3.5%/+2%
  • QFNA -2%/-2%
  • NAB +3%/+2%
  • LatinAmer +10%/snacks vol. +3.5%, bev. -3%
  • ESSA +5%/snacks +3%, bev. +2%
  • AMENA +5%/snacks +10%, bev. +5%
• 2016 Guidance:
  • Raises core adj EPS view to $4.78 vs $4.71 (July 7)
  • Reaffirms:
    • Net capex ~$3b est. $2.85b
    • FCF (ex. certain items) more than $7b, est. $7.58b (range $7.03b-$8.09b)
    • ~4% organic rev. growth for year, excluding impact of 53rd week, structural changes
• PEP 3Q PREVIEW: Currency Impact May Outweigh Sales Growth
• Call 8am, 800-540-4194 pw 87428416, DEW SHINE
  • NOTE: KO reports pre-market Oct. 26

Statement: NSN OE9H683MMTC0 DATA

• PEP implied 1-day share move following earnings 1.8%: Bloomberg data
• PEP has 16 buys, 11 holds, avg PT $118: Bloomberg data

(Bloomberg) -- Inflation markets are underestimating significant political risks on both sides of the Atlantic, HSBC strategist Theo Chapsalis writes in client note.

• Cheapening across EUR floors might be related to asset- swapping activity but this does not explain the cheaper caps
• The two main ways to benefit from this environment is either to buy inflation volatility or position through steepeners for a re-pricing higher of inflation risk premia with the latter more appealing due to its simplicity
• In the Euro zone, the launch of the new OATei47 has already placed sizeable downside pressure on 30y breakevens and expect an adjustment higher in the coming weeks as the market digests the additional supply
• In the U.S., find good value in the 10y sector as 30y have become expensive and there will be a TIPS auction on Oct. 20

(Bloomberg) -- U.K. August 3 month annualized M4 data at 10.9% nothing to get excited about, Scotiabank analyst Alan Clarke writes in emailed comments.

• The data, which peaked at 14.7% in July, is really a reflection of risk-off trades as fund managers sold assets and parked it in cash around the time of the referendum on EU membership
• That is now starting to unwind but will take 3 months at least to wash out completely
• NOTE: M4 0.9% m/m, 5.4% y/y; M4 ex Intermediate OFCs 10.9% 3M annualized

Economic Release Details: {EUESEMU Index ECOD} --ZOE SCHNEEWEISS

--ANGELA CULLEN

--ANGELA CULLEN