On Spain (and it’s bad), China (not great) and Greece (as usual) and GS US equity Strategy.


Europe set for lower start as Spanish fears continue. Asia weaker as Xinhua dampened hopes of major Chinese stimulus. ECB said would oppose injection of govt bonds into Bankia so Spain may likely issue new debt to finance any recapitalisation. Greek polls show pro-bailout party New Democracy still holds a narrow lead over Syriza and opinion polls suggest revised bailout terms favoured. Macro eyes on eurozone sentiment + US April pending home sales index as well as Italian bond auction.


On Spain
There is an article in the FT (http://on.ft.com/KrdVrT) saying that the ECB rejected Madrid’s plan to recapitalise Bankia. This is clearly bad news for Spain as it was looking for ways to indirectly tap the ECB. The ECB reminds all countries that it can’t fund governments. It’s hard to understand the game played by Spain as it says it doesn’t need help to recapitalise its banks and doesn’t tap the markets while it still can… This is bad news

On China
We won’t have a large scale stimulus from China like we did three years ago. This, of course will dampen any hopes from the bulls, but it doesn’t mean there won’t be measures to stabilise the growth. More importantly, we’ll wait for the official China manufacturing PMI at the end of the week…

On Greece
A new poll for Mega TV gives New Democracy 23.4%, Syriza 22.1%. And 81% of Greek people in the survey said thay wanted to stick with the Euro.


GS (Kostin) 2012 US equity Strategy
“It’s about the multiple, not the earnings”

In this GS presentation, available on GS website, David Kostin sees the S&P at 1325 mid year and 1250 at the end of the year.
Economy: Stagnant below-trend US economic growth of 2.2% in both 2012 and 2013; low inflation; low interest rates.
Earnings: We forecast operating EPS of $100 in 2012 and $106 in 2013 (bottom-up consensus is $105 and $119).
Valuation: Historical precedent suggests a stable P/E ratio in 2012. DDM supports our 12-month target of 1250.
Money flow: We forecast $500 billion of net inflow into US equities in 2012. Buybacks will offset retail outflow.
Overweight: Information Technology and Energy;
Underweight: Consumer Discretionary and Health Care.


German insurance companies have reduced their investments in Greek government debt to 10% of the year-ago level, says Bloomberg
Three small, unlisted Spanish savings banks will mergeto create a group with €115 billion in assets, reports Reuters
– BANKIA’s recapitalisation plan has been rejected by the ECB as there would be a danger of breaching an EU ban on ‘monetary financing’, according to the FT
– Barclays is said to have called off the sale of French and Italian arms, reports the Telegraph
– BBVA’s Chairman says that he is convinced that the euro can survive ‘without or without Greece’
– UniCredit’s CEO says that it may consider selling assets and buying back securities; it is shrinking its cash equity division in central and eastern Europe as part of plan to increase profitability and cut costs, says Bloomberg
– UBS has received approval from the China Banking Regulatory Commission to convert its Beijing branch into a locally-incorporated wholly foreign-owned bank
Funding pressures are manageable for Italian banks, Berenberg says; particularly for INTESA and UNICREDIT – Reiterates Buy rating
– Aviva Raised to Buy vs Hold at Deutsche Bank, PT GBP350
– Lloyds Banking Group Raised to Neutral vs Underweight at JPMorgan; PT lowered to 30p vs 40p
– RBS PT Cut to 25p vs 30p; Kept at Neutral

After the recent crash in miners, SocGen expects a ‘dead-cat bounce’ due to an acceleration in China bank lending and some easing signals from China
– Voestalpine FY sales EU12.06b vs est. EU11.8b; FY Ebit EU704.2m vs est. EU866.9m
– BHP Billiton’s CEO says that it will not approve any major projects until the end of the year as costs rise and commodity prices ease
– DE BEERS’ CEO says that it should be debt free in about a year
– GLENCORE’s Vittera deal is expected to be closed by the end of July
– VALLOUREC says that European factories could be slowed by a further 20% if the economy worsens, according to Les Echos
– XSTRATA says that its Tintaya mine in Peru is running normally after community protests that led to four deaths and prompted authorities to declare a state of emergency
– Lufthansa’s catering unit may cut up to 1,000 jobs, says Bloomberg
– Daimler’s Mercedes-Benz says that 1,500 workers in Brazil are being laid off for five months after contraction in bus and truck market led to reduction in its output program
– Fiat Industrial and CNH Global are to simplify its structure, creating a single primary listing on NYSE
– PIRELLI’s market concerns are unjustified, Morgan Stanley says; intact earnings momentum, lower market sentiment and attractive valuation make it a key Overweight
– Buy Saipem, ‘top of the cheap stock queue,’ Citi says
– Lafarge Upgraded to Outperform vs Neutral at Exane; PT raised 4% to EU40
Buy Wolseley, long-term investment case still intact, UBS says;PT Cut to 2,700p vs 2,800p at Morgan Stanley, Kept at Overweight
– Adecco Raised to Outperform vs Neutral at Credit Suisse

– BP’s worsening dispute with billionaire investors means TNK-BP’s board cannot approve dividends from the Russian venture that provided $3.7 billion last year
– Lukoil plans to focus its overseas investment on Kazakhstan and Uzbekistan to boost production of oil and gas
– Repsol will cut its dividend payout ratio, the highest among major oil producers, to increase production outside Argentina after its YPF unit was seized
– SHELL’s CEO sees a ‘slight’ recovery in natural gas prices in 2013
– AREVA’s CEO says that it is clearly in line with objectives, reports Les Echos
– EDF seeks US natural-gas production assets in a wager that prices will rebound from a 10-year low
– GlaxoSmithKline and Pronova BioPharma Norge have won a ruling upholding the validity of patents for the Lovaza heart medicine and delaying the introduction of generic rivals
– Algeta Rated New Buy at Deutsche Bank; PT NK211
– RWE and E.ON will suffer from overcapacity and reregulation, Citi says

Large application software companies are using their excess cash to acquire smaller software vendors to drive revenue growth, according to Bloomberg
– Orascom 1Q rev. up 20% to SF63.5m; 1Q Loss before minorities SF3.5m
– Alcatel-Lucent’s CEO says that Europe’s phone companies risk turning the region into a ‘digital desert’ by shying away from investing in networks, widening the gap with the US
– WPP’s CEO is to face shareholder objection on compensation, says the FT
– KPN may be worth EU9-EU10+ if Telefonica counterbids, UBS says
Buy ARM, further cash returns likely, UBS says
Buy BSkyB, ‘risk/reward tilts positively,’ Citi says
– Reed Elsevier Rated New Neutral at Citi; PT EU10.3
– Telecom Italia short-term opportunity, Morgan Stanley says, Kept at Equalweight, PT EU1.05; Upgraded to Outperform at Bernstein, PT increased to EU0.95 vs EU0.9
– Vodafone PT Raised 3% to 180p at Exane; Kept at Underperform

– Marks & Spencer Raised to Hold vs Sell at ING

– Intralot 1Q rev. EU347.2m; 1Q adj. net EU5.1m; 1Q net profit EU4.1m
– Laurent-Perrier FY sales rise 10.6% to EU218.8m; FY net profit rises 46% to 21.7m
– AIR FRANCE’s former CEO is to have his pay opposed by a government official at the AGM on May 31st
– Hellenic Petroleum is to shut its Thessaloniki refinery on May 30th for 35 days
– Great Portland Estates PT Raised to 380p vs 350p at Morgan Stanley; Kept at Overweight
– Petra Diamonds Raised to Buy vs Neutral at BofA

Max Kamir

Louis Capital Markets UK,LLP
Authorised and regulated by the FSA and Banque de France
39-41 rue Cambon
75001 Paris

T +33 (0)1 53 45 10 74
E mkamir
I http://www.louiscapital.com


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