China trade balance, Spanish banks, MS US strat, MS: buy EM…

Bonjour,

Mixed markets expected today. On the futures side, the Dax expected to open up despite the poor Chinese data while the CAC is to open down. Macro eyes on jobless claims, BoE rates, US trade balance.

AFTER HOURS

CISCO: Q3 Sales/EPS came in at $11.6bn/48c vs $11.57bn/47c estimated. The shares dropped 8.4% as the forecasts of 2% to 5% Sales growth for Q4 are way below analysts 7%.

CURRENT THEMES

On Spanish Banks

Spain has taken a 45% stake in Bankia… And as we now all know the government will come with a second royal decree on Friday to deal with real estate loans, put them in a SPV and sell it to??? (I hope people at Avenue Capital, Goldentree and the like are hungry for these overly priced assets…).

JPM is publishing a piece today looking at what measures could be announced on Friday (more provisions, details on the bad banks…)

GS, based on press reports expects €30-40bn of generic reserves for RDL assets funded by the deposit guarantee fund and more money for BFA (Bankia).

 

On the Markets

It’s all about Europe again and it’s all about macro. As US earnings are almost over and as there is no big macro data for two weeks, it leaves us plenty of space to worry about Europe. The real long asset managers are not very active in the market and it’s mostly about HFs and short covering. Aslo, GS and JPMorgan have cut their US GDP Q1 estimates to 1.9%. Next data are today’s jobless claims.

On China

April trade data was worse than anticipated. Exports went up by 4.9% YoY vs 8.5% expected and imports only increased by 0.3% vs 10.9% anticipated. The trade surplus is now $18.4bn vs $5.4bn in March. Apparently the weakness in exports was broad based in terms of categories. It’s the weakness of imports which is more worrisome and raises concerns regarding the domestic demand. Next data are China’s CPI, IP and retail sales tonight.

On Europe

Euro zone governments kept Greece afloat on Wednesday after agreeing a payment of 5.2 billion euros from the region’s bailout fund, despite opposition from some member states following the Greek election results. The comments from the BoE and the Norges bank will be monitored today, but no more purchase expected from the BoE and rates kept at 1.50 in Norway.

STRATEGY

MS (Parker) US Equity Strategy

13 reasons Why 2013 EPS are too high

MS recently launched  a new quant model called SWEEP which is an S&P earnings model using 19 factors (macro micro etc…). Based on this, MS estimates S&P earnings at $98.71 for 2013 which is below MS’ own numbers and 17.5% below the consensus. MS target for S&P 2012 is also below the market at 1167.

MS (Rahman) EM Profile

Small Fish in a Big Pond

According to this paper, global portfolios are still underweight EM and investments in the regions will just have to rise creating a strong rally as the supply of investable assets is way below the demand projections.

OTHER STUFF

FT.com: Resilience of Euro frustrates forex trade http://on.ft.com/JcGJn1

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