On the Markets, the Fed, the Euro. GS lowers EU growth. JPM’s views. MS top 10 stocks.

Bonjour,

Markets to open down today according to the futures direction. Volume will be low as our friends across the pond celebrate the Queen’s Jubilee. The few open macro eyes will look at the US factory orders, the ISM NY, the Eurozone PPI and China Services PPI…

ASML and Essilor are to be added to the Euro Stoxx 50, with Deutsche Boerse and Telecom Italia to leave; changes will be effective on June 18th

CURRENT THEMES

On the Markets
This week’s focus will be the ECB meeting on the 6th and the introduction of a bank framework and Bernankes’s testimony on Thursday. Can’t say if the ECB will cut rates at this meeting. It had been quite optimistic so far, thanks to the German performance. There is no concern on the inflation side, but the effects of a rate cut could help the banks borrowing from the ECB and boost their lending or at least send a signal to the markets. Not moving now can also keep the pressure on European governments (Kasman at JPM).

On the Fed
Nothing really new either, but the poor NFP data of Friday could put a QE3 back on track. There is no clear incentive to do this as yields can’t be push lower? The other option cuold be one hinted by Bernanke would be to buy mortgages, but not sure how it would filter through the economy in terms of money supply.

On the Euro
FT.com: “Central banks in emerging markets have been dumping euros to shore up their own currencies, contributing to the euro’s drastic slide in recent weeks, according to traders.” ” “Regular demand from reserve managers is believed to be one of the main reasons the euro stayed relatively strong throughout much of 2011 and the first four months of this year, with central banks tending to view falls in the euro as a buying opportunity.” (http://on.ft.com/LrGi74).

STRATEGY

GS (Pill) European Views
Euro area macro outlook – update.
GS lowers its growth forecasts for the Euro to -0.5% for 2012 with a an inflation of 2.4%.

JPM (Loeys). The J.P. Morgan View
Economy now adding insult to euro injury
• Asset Allocation
–– We are net short risk through UWs of the euro and Cyclicals. Retain OW of US and EM Asia stocks. Fund risk assets in euros. Prefer credit over equities and commodities. Retain longs in gold.
• Economics –– Growth momentum has turned negative. Both EM Asia and US forecasts have been cut after disappointing PMIs and jobs data.
• Fixed Income –– Path of least resistance is still to wider intra-EMU spreads.
• Equities –– Stay long US vs euro equities, despite weak US jobs, as we have not yet seen the full impact of the escalating euro crisis on economic data.
• Credit –– We move to OW EM $ Sovereigns vs. EM Corporates and Neutral European Senior Financials.
• Foreign exchange –– Stay short EUR/USD, GBP/USD and EUR/CHF.
• Commodities –– We remain neutral and prefer spread trades. Our highest conviction of these are short corn vs. natural gas and long corn vs. live cattle.

MS (Parker) Global Equity Strategy
Top 10 Favored/Disfavored Global Stock Ideas Among the 100 Largets companies.
Favored ideas
: WFC, Sanofi, Hyundai Motor, CNOOC, HSBC, CVX, JPM, Bayer, ICBC, and Novartis
Disfavored ideas: BMY, L’Oreal, PG, AMZN, ABT, Unilever, Roche, AmBev, KO, and POSCO

OTHER STUFF

Complete Eurocrisis Summary | ZeroHedge http://bit.ly/M33Ou0
Things That Make You Go Hmmm – Such As The Spread Between Gold And Gold Miners | ZeroHedge http://bit.ly/Lf6qAc

Remarks at the Festival of Economics, Trento Italy | George Soros http://bit.ly/KWYmaf

EUROPEAN EQUITIES

FINANCIALS
Several banks and insurance companies are withdrawing from long-held stakes in private-equity funds, reports the FT
– Bankinter CEO says that the measures the Spanish government introduced to bolster the banking system risk undermining healthy lenders
– GENERALI’s board removes its CEO
– Deutsche Boerse PT Cut to EU55 vs EU59 at BofA; Kept at Buy

INDUSTRIAL/MINERS/SERVICES
Mining companies are seeking funding in bond markets, as volatile equity markets and reticence of lenders have restricted miners from their usual sources of funding, according to the FT
– BMW says that US brand sales are up 13.8% y/y
– DAIMLER’s Mercedes-Benz May total US vehicle sales are up 19.2%
– Fiat’s May car sales fall 9.8% in Italy
– LUFTHANSA’s Jade Cargo International venture may face liquidation, reports Bloomberg; it plans to sell its LSG Sky Chefs unit to concentrate on its main businesses
– Infineon Technologies expects only a ‘slight’ drop in sales this year compared with 2011, says Bloomberg

UTILITIES/OIL/HEALTHCARE/CHEMICALS
– EDF CEO’s fate may be decided by the government by the end of September, says Bloomberg
– BP’spartners may seek to block due diligence of TNK-BP, says the FT;it may return half of TNK-BP sale proceeds, reports the Telegraph
– SNAM’s separation from Eni is backed by a €11 billion loan by four lead banks, as well as Morgan Stanley, Bank of America, Citigroup, UBS, HSBC, Mediobanca, Société Générale
– Bayer’s agricultural unit plans purchases of technology and seed licenses; its experimental cancer drug regorafenib delayed progression of stomach cancer after standard treatments fail
– GlaxoSmithKline melanoma drugs worked better than chemotherapy in separate studies, paving way for final-phase trials on their use together
– Roche’s ‘smart bomb’ cancer drug delays the growth of breast tumours
– AstraZeneca is among the bidders for Amylin Pharmaceuticals, says the Times
– Buzzi Unicem Kept at Hold at Deutsche Bank; PT EU8 unchanged

TMT
– ARM Holdings expects to see the first ‘tape out’ of its chips using 14 nanometre technology next year
– Royal KPN is said to have rejected a Telefonica bid for E-Plus, according to Bloomberg
– Telefonica says that it did not make a bid for KPN’s E-Plus
– Telecom Italia begins the liquidating proceedings of Olivetti I-Jet unit
– Mediaset wins advertising refusal case brought by Sky Italia, reports Bloomberg

SMALL/MIDCAPS
– Imtech Buys VÄRnamo Elservice to expand into the Nordic Region
– Logica Cut to Neutral vs Buy at UBS; PT Kept at 107p
– Constantin Medien PT Cut to EU1.4 vs EU1.5 at Deutsche Bank; Kept at Hold

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