The Dawn Patrol – 19.06.12 – RCUBE on UST10y. On Los Cabos, the Fed. MSFT’s iPad killer. GS’ Hatzius on the Fed.

Bonjour,

Europe set for slighty higher start as G20 leaders meet in Mexico. The summit is telling Europe it must do more to get its house in order, while Europe has vowed to move towards a more closely integrated banking system. IMF’s Lagarde says member states have promised US$456bn for its new crisis fund. Spain to auction E3bn in t-bills today. Macro eyes on German ZEW + UK CPI.

In US, May building permits and housing starts are due.

AFTER HOURS

ORCL: published its 4Q12 after the close with sales/EPS of $10.9bn/82c vs expectations of $10.89bn/78c. The numbers were published 3 days early and an ever younger looking Larry Ellison announced an addition $10bn share buy back. The shares rallied strongly after hours.

MSFT
: Shares up after hours during their own special events where thay announced two new and very promising products. One will be a Microsoft tablet with a powerful Intel chip and the second one a slighlty lighter one running on ARM. Clearly a positive for both INTEL and ARM (and I think ASML…). These are really good products in terms of capabilities, design and I/O compared to the iPad. The tablets come with smart covers that include keyboards and trackpads. A smart move to promote a promising Windows 8… (And I am or I was a big fan of Apple since before you wre born).

RCUBE

RCUBE goes short Treasuries (10y). A large gap has opened between yields and leading indicators. Inventory cycle has rebounded while trasury have melted in the meantime. And looking at RCUBE piece, there are many leading indicators where such a gap is obvious;.

CURRENT THEMES

On Los Cabos
We should get some announcement and statements today from the Eurozone members to take all neccessary measures to save the Euo. According to the FT, the process was much more harmonious and the communiqué agreed before the summit. The focus is to break the link between the sovereigns and banks.
“As part of measures to fight the fire of a eurozone meltdown, the International Monetary Fund announced late on Monday that the total additional funds pledged to the IMF had increased from $430bn to $456bn, almost doubling its lending capacity.”

On the Fed
Se below for GS expectations. MS is the other Fed watcher looking for some sort of QE3 of $475bn with $200bn in MBS and $275$ in Treasury purchase. BoA ML expects QE3 to come later in early fall. JPM expects an extension of Operation Twist much later (2014).

But the currently most watched Fed Watcher, Jon Hilsenrath (WSJ: Fed Wrestles With How Best to Bridge U.S. Credit Divide – WSJ.com http://on.wsj.com/MJVImd) doesn’t really give a clear hint. He praises the Fed policies so that normal american people can get access to credit: “”If you don’t need the money, you can get it all day long,” he said. “Thank you, Ben Bernanke.”.

STRATEGY

GS (Hatzius) US Daily
FOMC Preview: QE or not QE
GS is one of the few bank (with MS) to expect an easing move on June 20 in response to the weaker economic data and the situation in Europe. GS sees a new asset purchase program that involves an expansion of the balance sheet. It also says that an extension of Operation Twist or lengthening of the guidance on the rates to go beyond late 2014.
In terms of the size, GS expects either stocj of purchases of around $400-600bn over 6-9 months or a flow of perhaps $50_75bn/month. It expects the purchases to be sterilised which could put upward pressure on the very short end on the curve (1-4 weeks maturity).
BUT Mr Hatzius doesn’t expect this additional easing to be very effective. A large program focused on mortgages would help but it wouldn’t be very powerful. Fiscal policy would be better or purchases of non govt guaranteed assets.

EUROPEAN EQUITIES

FINANCIALS
– Julius Baer has ~SF1b in excess capital, may have to raise new equity to buy BofA’s int’l wealth management unit, Cheuvreux says
– Barclays lowers most 2012, 2013 EPS ests by ~2%-3% on avg., cuts some price targets based on recent euro movement, “general macro slowdown” particularly in Europe
– Santander says 2012 shareholder remuneration is about EU60 Cents
– UniCredit
’sCEO says that internal reorganization announced soon
– Aviva and Hermes Asset Management are urging stock exchanges to improve the way companies report on sustainability issues, leading calls from investors to introduce common international standards
– Stanchart Upgraded To Buy From Neutral at BofA

INDUSTRIAL/MINERS/SERVICES
– Xstrata must hurdle the open-pit ban in its Philippine based project
– PSA Peugeot Citroen
French registrations slid 14.4% in the first half of June, La Tribune reports; Peugeot is selling its Falcon jet in the context of cost-cutting actions, reports Les Echos;
– Renault is considering adding two upscale brands and further expanding in emerging markets to decrease the automaker’s reliance on Europe’s shrinking volume car market
– Airbus may get EASA’s approval for New Wing by July, Tribune Says
– Volvo Cut to Neutral From Overweight at HSBC, PT SEK85
– Alfa Laval
Cut to Neutral From Overweight at HSBC, PT SEK 130
– Fraport Upgraded to Overweight from Neutral at JPMorgan

UTILITIES/OIL/HEALTHCARE/CHEMICALS
– An agreement was reached with Irish Pharmaceutical Healthcare Association on interim drug price reductions, Irish Health Minister James Reilly says
U.K. natural gas for next-day delivery was little changed as pipeline imports from Norway and the Netherlands dropped amid a decline in demand. Next-day power advanced
– SANOfi
and Merrimack entered into a Right of Review Agreement on June 17
– Roche Holding said formed alliance with Seaside Therapeutics to develop treatments for fragile X syndrome and autism spectrum disorders, reports Bloomberg
– Merck KGaA
who planned to close the Geneva headquarters of its Serono unit said Participants in task force show interest in proposal by employees committee, particularly proposal to create cluster of biotechnologies, Bloomberg reports
– EDF Energy
selects Bouygues as this joint venture is the preferred bidder for a civil work contract to build a new nuclear power station at Hinkley Point C in Somerset, U.K
-Total will continue curbing emissions to mitigate the environmental impact of its operations despite the financial crisis that’s roiling markets, said CEO
– GDF Suez is dealing with government caps on prices in France and Belgium, losing a 1.8 billion-euro ($2.3 billion) wind-farm project in France it spent five years preparing, and an early shutdown of as many as three atomic reactors in Belgium
– OMV Petrom is to invest EU800k/y-EU1.2b/y through 2021


TMT
– Havas
is to reorganize its French unit under one banner, Les Echos Says
– Elekta Buys Radon Ltda. in Brazil
– KPN saw 8.5% of its shares bought by America Movil
– Schibsted Rated New Hold at Deutsche Bank
Sell Ericsson asConsensus Expectations Too High for 2012 at SocGen

RETAIL/CONSUMER/LUXURY
Carlsberg A/S plans to finance takeovers through borrowed funds, a model the world’s fourth-largest brewer says won’t jeopardize its investment-grade rating.
– Danone cuts 2012 operating target 50bps on “swift deterioration” in consumption in Southern Europe, especially Spain; cost inflation also stronger than anticipated
– Assa Abloy
Rated New Overweight at HSBC, PT SEK220
– WM Morrison
Buys Back 1m Shares at Avg Price 278.5562p/Shr
– Colruyt Cut to Underperform vs Hold at Jefferies
Dufry Rated New Neutral at Citi; ‘a Good But Unlikely Combination,’ Citi further says

SMALL/MIDCAPS
– Monte Paschi
may seek state aid through Tremonti bond
– One Fifty One
sells its 12.3% stake in Irish Continental Group
– Schmolz+Bickenbach
said the board of directors has decided not to extend the both CEO’s and CFO’s employment contract
– Cobham names Bob Murphy to replace Andy Stevens as CEO
– Wilhelm Wilhelmsen buys35.4% stake in the oil services group NorSea
– Carrefour Property Development
says it CEO has resigned
– Talktalk PT Raised to 225p VS 166p at Jefferies, Stays Buy
– Buzzi Unicem Rated New Neutral at UBS; PT EU7.2
– Bumi Rated New Overweight at JPMorgan; PT GBP5.20
– Austrian Post Cut to Equalweight at Morgan Stanley
– Italcementi
Rated New Sell at UBS; PT EU3.4
– Vienna Airport Raised to Neutral from Underweight at JPMorgan
– SNS Reaal Groep Cut to Neutral from Buy at BofA
– Dixons Retail Upgraded To Neutral From Underperform at BofA
– Prisa Raised to Neutral vs Sell at UBS

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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