Bloomberg on Greece, ZeroHedge on JPM, GS likes autos…

Bonjour

Europe set for lower start. Wall St pared gains in last hour after former Greek PM Lucas Papademos said Greece might leave the euro (corrected later). Asian markets trade lower this morning and commods weaker as BoJ refrained from deploying further stimulus. Eyes on the Brussels EU summit today. Maacro eyes on BoE mins+UK retail sales.

AFTER HOURS

DELL: -9.2% – 1Q adj. EPS 43c, est. 46c. 1Q rev. $14.42b, est. $14.91b. Sees 2Q rev. up 2%-4% Q/q; ~$14.7b-$15b, est. $15.42b. In 1Q Asia-Pacific, Japan rev. was flat, EMEA down 1%, Americas down 7%, China up 9%

CURRENT THEMES

On the Markets
It’s not that things look brighter, it’s just that in the absence of significant economic data, investors feel that the potential for further bad news in Europe is more or less discounted. But, the risks are still here and until we know what will become of Greece, it’s easier (for stress management purposes) to remain cautious. Last night’s falsely reported statements by former prime Minister Papademos and the following drop in markets and in the EURUSD just highlight that tension.

On Europe
Our European leaders meet today in Brussels to discuss… Since most EU summits have failed to bring strong political decision, there isn’t much to expect from this one, except some further disagreement on austerity vs growth and Germany’s reluctance to launch Euro bonds. It will be interesting to see however how Mr Hollande and Mrs Merkel argue on the matter.
(a look at the formal invitation: http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/130290.pdfThe idea is not at this stage to draw conclusions or take decisions but to prepare politically for decisions at the June European Council in the best possible manner.” So nothing really major to expect.

On Greece
Bloomberg runs an interesting story: “War-gaming Greek Euro Exit Shows Hazards in 46 Hour Weekend”. According to this article, the Greeks would only have 46 hours to enact the departure from the Euro from Friday night US close to Monday morning open in Wellington. It runs what could happen over the week end if Greece plans to launch a new Drachma and how the military would be called in to close the borders.

On JPMorgan
An $8bn Loss Or Was JPMorgan ‘Unhedged, Long-And-Wrong’ Post-LTRO2? | ZeroHedge http://bit.ly/KzFYmO

On the US
The next important data to monitor will be tomorrow’s flash PMIs for May which according to Barclays would likely lead to declines in earnings growth expectations for S&P 500 companies. Recent PMIs show a decoupling between an expanding US economy and declines in Europe, Brazil and China.

STRATEGY

GS (Oppenheimer) Global Equity Views – What we like, and why
Equity markets price the economic environment that GS forecasts but not the systemic downside risks. So GS still sees some downsides but has stronger conviction in relative and/or thematic trades.
EUROPE:
Long exporters based in the periphery which offer good recovery potential.
Long Dax / Short CAC
Long international exposure / short domestic exposure.
Long GS ‘stable growers’ basket
US
Long the GS “Quality Basket”

GS (Burgstaller) Europe: Automobiles
Political uncertainties overshadow fundamental value; reiterate Attractive coverage view
European autos trade at a 42% discount to other cyclical sectors.
GS forecasts a 4% growth pa for the next decade and the German premium OEM as main benficiaries.
Top picks: Daimler, Fiat and Faurecia.

EUROPEAN EQUITIES

FINANCIALS
– UniCredit and Intesa are selling 11.5% of London Stock Exchange for 960p-1000p/share
– Aberdeen Asset Rated New Outperform at Credit Suisse; PT 323p

INDUSTRIAL/MINERS/SERVICES
– RIO TINTO’s planned A$1.45 billion expansion of its South of Embley project has been approved by Queensland
– PSA Peugeot Citroen is attracting interest for its Gefco trucking unit from at least six potential buyers including Axa Private Equity and the French national railway operator
Buy Ryanair, ‘cash cow expected to live on,’ Citi says; PT Cut to EU4.40 to EU4.90
– Air Berlin PT Cut to EU1.4 vs EU1.5 at Morgan Stanley; Kept at Underweight
– Corio Raised to Buy From Neutral at UBS
– Bureau Veritas Initiated at Buy at Berenberg; PT EU83; Best Pick in TIC sector
– Intertek Group Initiated at Hold at Berenberg; PT GBp 2,710
– SGS Initiated at Hold at Berenberg; PT CHF 1740
– Wartsila Cut to Reduce vs Buy at Swedbank
– Fiat Named a Least Preferred Stock at Citi
– Volkswagen Named a Most Preferred Stock at Citi
– Michelin Cut to Sell vs Neutral at Goldman Sachs; PT lowered to EU62 vs EU66
– Pirelli Cut to Neutral vs Buy at Goldman Sachs; PT lowered to EU13.5 vs EU13.7

UTILITIES/OIL/HEALTHCARE/CHEMICALS
– National Grid will advise the UK government on setting strike prices that support investments in new nuclear and wind power projects, reports Bloomberg
– EDP sees growth opportunities in Brazil’s power sector
– EDP Renovaveis will spend €3.2 billion through 2015 on wind capacity
– BASF’s oil producing unit confirms the upper end of Maria Norwegian Sea well estimate for 60 mln-120 million barrels of recoverable oil, 2-5 billion sm3 of recoverable gas
– Statoil confirms acceptance of Couche-Tarde’s bid for Statoil Fuel
– Weir Group PT Raised to 1,440p vs 1,300p at Morgan Stanley; Kept at Underweight
– Johnson Matthey Rated New Overweight at Barclays; PT GBP 27.50
– Sonova Upgraded to Hold from Underperform at Jefferies

TMT
– Alcatel-Lucent is to introduce a router designed to be used at the centre of Internet providers’ networks, a market dominated by Cisco
– SAP agrees to buy Ariba for $4.3 billion enterprise value
– Telenet is talking to private equity companies about joint bid for KPN’s BASE, says Reuters
– Vodafone will have to rely on its US wireless venture to reach the top end of a range of profit forecasts and make up for shrinking sales in European economies
Buy Sandvik ahead of CMD next week, Citi says
– STMICROELECTRONICS Kept at Equalweight at Morgan Stanley
– TDC A/S Cut to Hold vs Buy at Berenberg
– Vivendi PT Cut to EU18 vs EU18.5 at Barclays; Kept at Overweight

RETAIL/CONSUMER/LUXURY
– Parmalat’s board approves the $904 million acquisition of Lactalis American Group
– PPR Named a Most Preferred Stock at Citi
– Carrefour Upped to Outperform vs Underperform at Credit Suisse; Added to Focus List

SMALL/MIDCAPS
– Morpol 1Q net EU8.08m vs est. EU6.45m
– Pfeiffer Vacuum sees 2012 rev. EU470m-EU500m vs est. EU512.7m ; sees ‘very mixed signals’ from the semiconductor market and no signs of recovery in solar
– Misys changes structure on $1.07b of loans backing its buyout by Vista Equity Partners, reports Bloomberg
– HomeServe Raised to Equalweight vs Underweight at Morgan Stanley, PT to 185p vs 260p; Raised to Hold vs underperform at Jefferies, PT 160p vs 195p
– De Longhi Resumed at Buy at BofA; PT EU10.5
– Dunelm Group Cut to Neutral vs Overweight at JPMorgan
– Eurofins Scientific Initiated at Buy at Berenberg; PT EU105
– Recordati Added to Conviction Buy List at Goldman
– Spirent Added to Conviction Buy List at Goldman
– Savills Raised to Buy vs Neutral at UBS
– Yell PT Cut 57% to 1.5p at Barclays; Reiterates Underweight

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