13.06.12 – On the Sirtaki, on European Yields, RCUBE warmer and warmer, JPM timing model and European Equities.

Bonjour,

Europe set for slight better start following a positive close on Wall St. PM Monti said doesn’t think Italy will be needing any bailout. Wolfgang

Schaeuble reiterated that view. FT cites George Osborne saying Greek exit may be the price to persuade Germany to save the EUR. German bond auction today. Macro eyes on Eurozone IP, CPI, US May retail sales and Italian bills.

INDITEX: Very strong numbers this morning with +15% sales (vs 12%e), better margins, and better EPS.

AFTER MARKETS

Dell Initiates Quarterly 8c Div. Starting in 3Q. Stock +3.5% after close

Equities saw decent gains today (semi’s continued to be one of the best performing groups), recouping some of the Mon declines (the S&P is still down on the week though). Not a whole lot has really changed for this tape – investors remain preoccupied with Europe (the S&P hit its lows coinciding with a peak in Spanish 10yr yields at >6.8% and bounced following an ECB report advocating the creation of a pan-European deposit guarantor.
Trading trends are the same: very headline sensitive, dominating by faster-money, and futures/ETFs accounting for the bulk of the intra-day swings (vs. single-stock cash). Investors really aren’t doing a whole lot of anything with most people awaiting the result of the Greek election this Sunday

World Bank Trims 2013 Global Growth Outlook 0.1 Point to 3%; it cuts World, Europe, China, U.S. Growth Forecasts; Sees euro area 0.3% contraction in 2012 same as January; Sees euro area 0.7% 2013 growth vs. 1.1% in January

GLOBAL THEMES

On the Sirtaki
There is a letter by Alexis Tsipras in the FT this morning (http://on.ft.com/M1GSck)..: “I will keep Greece in the Eurozone and restore growth”. Yes! Yoohoo! BUT he will drop the memorandum… Getting tired of Greece?
Also worth noting that there is an article on Bloomberg saying that banks depostis outflows continue and may reach up to €500m daily…

On European Yields
While all equity players are being hypnotised by the Spanish and Italian yields and wondering how it will end, there is a strong move on the German Bund as well which rose 10bps yesterday and is still rising this morning. Spanish Yields at 6.64%, Italy at 6.137. So, the spreads are coming down, but because of German yields rising. Why? Asset allocation moves? The creation the European redemption fund.

 

RCUBE

Global Update
In this piece, RCUBE looks at the main global issues. Despite China’s rate cut it’s too early to turn bullish on Chinese or EM equities, Cyril wants: A stronger credit channel (not there yet), a steeper yield curve (we’re going in the right direction) and better bottom up newsflow (ie earnings).

On Europe and Greece, and using the online sports (and almost anything else) betting company, we can see that the trend seems to be favouring ND vs Syriza now. It may not be a relevant indicator, but interesting to watch. RCUBE is warmer on European Equities (currently long), the Greek elections is one big hurdle.

On the US, RCUBE looks at some confidence indices and loan growth and things looks more optimistic for the economy (Capex, jobs, profits).

STRATEGY

JPM (Dion) Global Quant Strategy.
Market Timing Model.
JPM presents a step by step summary of its methodology in building a market timing model.

EUROPEAN EQUITIES

FINANCIALS
Some of the European banks are becoming short on collateral to pledge with the ECB, unless they can deliver and sell some of their assets, Fitch says
Banks are in substantially better position than when heading into the sub-prime crisis, says Fitch
EWP Outperforms Spain Benchmark Even With Santander Top Holding
– SANTANDER
and BBVA are rating above Spain’s sovereign rating by Fitch as most of these banks’ business is located outside Spain
BARCLAYS’s three big businesses recorded an ROE of 15% or better in 1Q, Bloomberg says; Barclays keep a 13% ROE target; its CEO says asset sale environment is difficult at the moment
– ING willhave to pay $619m to settle U.S. probe on sanctions compliance
– Danske Bank PT Raised to DKK106 vs DKK101 at Morgan Stanley
– Swedbank
PT Raised to SEK119 vs SEK117 at Morgan Stanley
– Intesa Sanpaolo Named a Least Preferred Stock at Citi
– Credit Suisse PT Cut to CHF23 vs CHF24 at Morgan Stanley
– Deutsche Bank PT Cut to EU41 vs EU43 at Morgan Stanley
– SEB PT Cut to SEK49 vs SEK53 at Morgan Stanley
– Svenska Handelsbanken PT Cut to SEK256 at Morgan Stanley
– Experian PT Raised to 1,160p VS 965p at HSBC, Stays Overweight
– KBC Initiated Overweight at HSBC, PT Eu19

INDUSTRIAL/MINERS/SERVICES
– PIRELLI
best hedge given tire volumes are not picking up, says Bloomberg
– Saab Auto Administrator says deal reached to sell company
Buy EADS, Weak Euro Offer Strategic Options, UBS Says
– Sodexo
Initiated at Neutral at JPMorgan; PT EU60

UTILITIES/OIL/HEALTHCARE/CHEMICALS
– BAYER
’s senior representative, Philip Balke, takes over from Greg BAbe, who is retiring
– Sanofi’sUnit Genzyme’s patent for kidney disease drug was ruled valid
– Siemens Removed From UBS’s European Key Calls List
– SSE
Upgraded to Overweight from Equalweight at Barclays; Reinitiated at Outperform at Exane; PT 1,680p
– Centrica Reinitiated at Underperform at Exane; PT 280p; Cut To Neutral From Overweight at HSBC

TMT
– France Wants to Repatriate Phone Co. Call Centers, Echos Says
– WPP’s
AGM, scheduled for today, could see shareholders rejecting the remuneration plan which could leed to WPP’s relocation to the U.S., Berenberg says
– Telefonica says the U.K. Authority has approved its EU40b debt prospectus
– Telegraph
says Standard Life, Co-operative Asset Management oppose renumeration report
– Independent News says its number of directors has fallen below the minimum level of 5 required
– ROYAL KPN saw 7.9% of its shares purchased by America Movil
– Vivendi Raised to Buy at Jefferies, PT EU15
JP Morgan says it prepared to invest in Technicolor on basis of revised terms
– Telekom Austria PT Cut to Eu8.5 VS Eu9.5 at HSBC, Stays Neutral

RETAIL/CONSUMER/LUXURY
– Inditex 1Q Ebitda EU764m vs. est. EU684.5 ; 1Q Net Eu432m vs. Est. Eu380.7m ; 1Q gross margin 60.2%, est. 59%, was 58.8% Y/y
– CARREFOUR’s asset sale in Colombia and Brazil to Wal-Mart is slowing as Wal-Mart has to deal with deteriorating conditions in Europe.
– Morrison Supermarkets Cut to Neutral From Overweight at HSBC
– Tesco Raised to Overweight From Neutral at HSBC
– Tate & Lyle Raised to Buy vs Neutral at Citi

SMALL/MIDCAPS
– Cision
settled, last night, with News Corp.’s Dow Jones paying a “significant sum” to settle claim based on reproduction, distribution and misuse of news content
– Banif
’s 30% remaining stake in Brazilian brokerage were bought by Caixa Geral, Portugal’s state-owned lender
– BANK OF CYPRUS and CYPRUS POPULAR BANK were downgraded by Moody’s as there exists increasing risk linked to the Greek exit from the euro area
– Arseus to Sell Up to EU225m 2017 Notes, Gets EU300m Facility
– Premafin’’sshareholders approved the reserved capital increase
– SAS Raised to Buy vs Neutral at Citi
– Valiant Petroleum Initiated Buy At Jefferies, PT 560p
– Trevi PT Cut to Eu5 VS Eu7.2 at Goldman; Kept at Neutral
– Deutsche Euroshop Cut To Sell From Hold at ING
Mercialys Raised To Buy From Hold at ING
– TalkTalk Cut to Neutral vs Buy at Goldman
– Resolution Raised to Buy vs Neutral at UBS
– Phoenix Group PT Cut to 445p vs 540p at UBS

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