19.06.12 – On Greece, the Fed, the Danish Krone and Tech. JPM’s View.

Bonjour,

Europe set for higher start after pro-bailout parties in Greece secured victory in Greek election, helping Bunds ease lower as euro breakup fears recede somewhat. New Democracy won 29.7% of the vote, ahead of Syriza on 27%. ND expected to lead a coalition gov’t with Pasok and its believed a renegotiation of the current loan conditions will be a focus. IMF said will work with the new Govt to help it achieve its goals. In France, Hollande’s Socialists won majority in France’s lower house. G20 summit today + tmrw in Mexico where leaders may confirm commitment to increasing IMF firepower.

CURRENT THEMES

On Greece
The Sirtaki is a very long dance. Selection of the right partner is key. ND, PAsok and the Democratic Left could have formed a coalition more than a month ago, but they preferred to keep on dancing. We’ll see what comes out, but most forecasters are pretty optimistic on the issue. It’s not a huge victory for ND, but much better for international lenders than a Syriza victory. Now Syriza needing to be part of a coalition is not paramount but would be better than a weak ND government with Pasok support.

On the Fed
The members of the Fed will certainly have more info to think on after yesterday’s elections and today’s sunny gathering in Los Cabos, but it’s not clear and there is no clear consensus on the Fed’s next move. This week’s meeting (19th and 20th) may however bring some aggressive QE and an extension of Operation Twist according to the FT’s columnist Gavyn Davies: Fed doves ready to act | Gavyn Davies http://on.ft.com/MAkvg0

On Denmark and the Krone
Could the Krone’s peg to the Euro be cracked by the crisis? Several players want the CHF to crack too. The head of Denmark’s central bank has warned that the Krone is under intense upward pressure from investors seeking a safe haven in Europe and I guess players trying to crack the peg. Soros once avised not fight a CB who wants to lower its currency… Some people getting burned on the Swiss Francs already, the Krone may be the next target… And the Bulgarian Lev is also an interesting spot.

On Tech
Just a heads up… ASML’s 2012 estimates boosted at MS by 17% as the Intel vs ARM race continues… PT raised from €40 to €48. I’ve always liked this company and its management, and rumours of a new tablet by MICROSOFT this week may just be what the market needs to buy some non Apple Tech…

STRATEGY

JPM (Loeys) The J.P. Morgan View
If only it were only Greece

Asset Allocation –– Modest defensive positions.
• Economics –– Every day another forecast cut.
• Fixed Income –– UK credit easing highlights broadening shift to looser monetary policy.
• Equities –– A higher chance of a positive outcome in Sunday’s Greek elections coupled with very underweight investor positions are raising interest in market rebound baskets. Our delta one team has constructed 3 baskets under tickers: JPUSCLNG (US), JPEUCLNG (Europe) and JPHACLNG (Asia Pacific).
• Credit –– First week of inflows into US HY credit funds for five weeks.
• Foreign exchange –– Stay defensive, and use a dollar sell-off on any good Greek election outcome to reset hedges against a difficult summer in Europe.
• Commodities –– OPEC leave their production target unchanged but we continue to believe the “OPEC put” will keep oil prices from a sustained fall

JPM (Matejka) European Equity Strategy

Weaker EUro – An Eventual positive for Earnings, but not for Equities while it is falling.

Mislav believes the short squeeze on the Ruo will play out in a few days. But even if the Euro drops, he warns that when it happens, the markets drop too. At least it’s been the case over the last 4 years. Financials displayed an inverse correlation to the DXY. Also EM currencies are falling too and some faster the the Euro such as the BRL or the INR.
He reiterates his main calls: OW Germany, prefer US exposure and avoid the cyclical plays on EM and Europe.

EUROPEAN EQUITIEs

FINANCIALS

– Axa’s private equity raises $7.1b to larget LBO selloffs, says the FT

– Generali PT Cut 5% to EU10.5 at Exane; Kept at Underperform

INDUSTRIAL/MINERS/SERVICES

– Bollore is to oversee Havas France reorganization, Figaro Says

EADS may invite S. Korea to take part in joint production of the Eurofighter jet as part of its bid for S. Korea’s jet procurement, Bloomberg reports

– Glencore agrees with Canada’s Minister of Industry to extend review period of proposed acquisition of Viterra by an addtl 30 days past June 18

– Sodexo says that it signed agreement to buy 100% of Mexican voucher provider Servi-Bonos

– Wolseley’scash return are increasingly likely, Jefferies Says; Buy Wolseley as the stock could be worth GBP50, Citi Says

Buy Michelin volume comps get easier from here, Citi Says

– ASML Holding PT Raised to EU48 vs EU40 at Morgan Stanley

UTILITIES/OIL/HEALTHCARE/CHEMICALS

Portuguese regulator confirms 6.9% Y/y gas rate increase for homes

– Roche bought rights to experimental drug for Alzheimer’s disease from AC Immune, its second deal with the Swiss company

– Total may seek a new Norwegian tax deal if oil falls further, reports Bloomberg

– Fresenius SE says its key shareholders tendered 12.45% of Rhoen

– Vestas’ takeover could materialize without any upside for existing shareholders as dilutive events are possible in the meantime

– Eni reaches formal accord to sell its Snam Stake to Cassa Depositi

Buy Grifols, Citi Says After Investor Day

– Veolia Transdev could be bought by Caisse Des Depots, Echos Says

– Gas Natural SDG Raised to Buy From Hold at SocGen

TMT

European mobile telephone providers may enter a phase of consolidation amid slowing customer growth, the need to cut costs and the expansive demand of new, faster networks, the New York Times reported

– VIVENDI’s board will be joined by Vincent Bollore later on this year reports the WSJ

– RCS’ April-May print ad revenue falls faster than in 1Q

Germany’s KfW Group sounding out investment banks for possible sale of stake in Deutsche Post, Reuters says

– Telenet says BlackRock has 3.03% stake

– Telefonica PT Cut to EU11 vs EU13.5 at Nomura; Kept at Reduce

– Modern Times Group PT Cut 7% to SEK410 at Exane

RETAIL/CONSUMER/LUXURY

– Campari May Seek Acquisitions, reports Bloomberg

– Swatch Group Initiated at Buy at Berenberg; PT CHF475

SMALL/MIDCAPS

– Melrose has been talking to Elster Group for three weeks about making a possible bid of more than $2 billion, the Sunday Bloomberg reported

– Safilo’sagreement relates to redundancies caused by not renewing Armani license

– Banco BPI plans to repay states fund as soon as possible

– Renishaw Initiated At Neutral at Credit Suisse; PT 1,530p

– Halma Upgraded To Outperform From Neutral at Credit Suisse

– Avangard Initiated Buy At ING

Premier Farnell raised to overweight at Barclays

– Prime Office Reit-ag Initiated At Hold at Deutsche Bank

– Persimmon Added to UBS’s Most Preferred List

– Carillion Added to UBS’s Least Preferred List

– Piaggio PT Cut to Eu2.6 VS Eu2.7 at Banca Akros; Kept at Buy

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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