20.06.12 – On Los Cabos, the FOMC, the Rating Agencies. MS on Euro, Barclays’ investors survey. JPM on Luxury. and more…

Bonjour,

Europe set for slight higher start as FT cites chatter from G20 that Merkel may move decisively within days: either at a meeting in Rome on Friday or at EU summit next week. ECB holds non-rate setting meeting today, while BoE MPC mins will also be released. BoE’s King hinted that more conventional QE is likely, but poss now as to whether BoE will purchase a wider range of assets, given low gilt yields. Macro eyes on US FOMC rate decision as hopes of further operation Twist continue. BofA-ML believes a dovish statement and negative forecast revisions appear the most likely outcome. Separately, Greece is thought to be close to forming coalition government.

Apparently German government official says there were no discussions at G20 meeting about any plans to use EU’s rescue funds to buy the bonds of crisis-hit members (bumble bore)…

Vivendi Added to Credit Suisse Europe Focus List

AFTER HOURS

ADBE: -3.5% post. Adobe 3Q Adj. EPS May Miss Est; 2Q Adj. EPS Beats. Adobe sees 3Q adj. EPS 56c-61c vs est. 61c. 2Q adj. EPS 60c vs est. 59c, saw 57c-61c.

Investors are kind of looking through all the piecemeal European noise (Greece, Spain, etc) and instead are anticipating a broader policy response from officials (this is why the Spanish 10yr yields aren’t spooking markets too much for now and why the increase in German bund yields is being taken as a positive). The June 28-29 EU Leaders Summit will be an important event and the press is filled with enough “chatter” about possibilities to help keep a bid to risk

CURRENT THEMES

On Los Cabos
(G20 bid to cut cost of euro borrowing – FT.com http://on.ft.com/LCVFcx) The G20 asserts Europe will take all necessary steps to lower the borrowing costs of Spain and Italy and break the loop between banks and sovereigns. Mr Monti raised the possibility to use the ESM to buy bonds on the open market and Mrs Merkel may be willing to do more according to one source. There is no specific action mentioned in the communiqué: “towards that end, “we support the intention to consider concrete steps towards a more integrated financial architecture, encompassing banking supervision, resolution and recapitalization, and deposit insurance…”

And after the G20 in Los Cabos, some may fly direct to the Earth Summit in Rio.

The Communiqué: http://bit.ly/M2w8LW

On the FOMC
This will be an expanded format meeting (Paris Time) – 18:30 statement, 20:00 forecast update, and 20:15 Bernanke press conf. Right now, there isn’t a clear consensus on what happens although if the Fed does anything, most think it would just be a (Treasury) Twist extension. A lot of people think they do nothing officially on the policy front but will “verbally ease”.
As stated here yesterday, MS and GS both expect a mix of QE3 and an extension of Operation Twist. BUT it’s not priced in the markets, so any actual easing may be positive. Verbal ease could do it too… But if nothing comes out in this direction… Adios.

On the Rating Agencies
This is not relevant to anything, but just to highlight the irony of it. The European MPs woted new rules for the rating agencies and asked them to set fixed dates every year when they can change bonds ratings. They also want the ratings agencies to rate the companies only on the company pusblished financial information.

STRATEGY

MS (Andreopoulos) Global Economics
Euro 2012: The Fina

It feels like this piece has already been mentioned here… Anyway, MS reiterates that the only lasting solution to save Europe are:
– Fiscal Union
– Banking Union
– A lender of last resort for sovereigns.

BARCLAYS (Robinson) Global Macro Survey
Eurozone woes prompts investor caution
This report was published on Friday. §Investors are more cuatious about prospects for global asset prices according to this Barclays survey conducted the week ot the 7th of June. Investor cuation can be seen in both asset allocation and positioning. 38% of respondents expect high quality bonds to be the best performing asset class over hte next quarter vs 24% for Equities. In March it was 12% and 24% respectively. 64% of FX investors see the Euro crisis as the main risk to markets. AND 58% expect at least one country to leave the Euro area in the next year (vs 39% a month ago)… Finally investors see US prospects as pretty strong.

OTHER STUFF

Forget EURIBOR And Basis-Swaps; EUREPO Curve Inversion Signals Major European Funding Stress | ZeroHedge http://bit.ly/M5MC8m
Wednesday FOMC Preview: Wall Street Economists Predict Fed Stimulus – Business Insider http://read.bi/KSDkc5
Citi’s Tom Fitzpatrick: We Have Reached A Critical Point In The Crisis, Things Could Get A Lot Worse – Business Insider http://read.bi/LjIBw2

EUROPEAN EQUITIES

JPM (Flouquet) Luxury Uncovered.
China: Short and long term reasons for the deceleration in luxury sales

As most European luxury houses have shown a deceleration in sales in China over recent months. Melanie looks at the reasons (long and short term) that explain this trend and the demographic challenges. Most of the reasons are short term such as a temporary colling of gift giving ahead of the change in govt (and in light of recent bribery scandals). And property market problems. Most also try to convince the market of a switch from the Chinese consumer to the Chinese tourist… But not really convincing… And finally, Mélanie argues that the demographics in China may not be that compelling with too few non graduates and too many white collar workers entering the market.

FINANCIALS
European banks have issued only $40bn in senior unsecured debt since the start of April, well below the same period in past years, the FT says
Moody’s to publish next week assessment of impact on Spanish bank ratings stemming from announcement on June 13 to downgrade by 3 notches Spain’s government bond ratings
– Credit Suisse’sboard will be backing Brady Dougan despite a tough few days for the bank’s chief executive, the WSJ says
– Allianz Belgium is to acquire Mensura’s Insurance operations
– Aegon targets 10%-12% Return on Equity by 2015; expects to achieve majority of EU100m Dutch cost reduction in 2012;may exit some Spanish ventures after consolidation cajas
– Swiss Life Raised to Buy vs Neutral at UBS

INDUSTRIAL/MINERS/SERVICES
– RYANAIR said it will make an all-cash offer of EU1.30/shr for AER LINGUS, valuing it ar EU694m
Rio Tinto names Kim Truter managing director of Argyle Mine; commits $4.2b to develop its Tier One Iron Ore Business
– Billerud will to merge with Korsnas and announced rights issue of SK2b
– Geberit Raised to Neutral vs Sell at Citi
– Holcim Upgraded to Buy from Sell at Berenberg
– HeidelbergCement Kept as Preferred Name in Cement at Berenberg
– Pirelli kept at Outperform at Exane which sees good entry opportunity

UTILITIES/OIL/HEALTHCARE/CHEMICALS
– Sanofi’sCEO sees ‘bolt-on’ deals worth $1b-$2b Y/y principally in emerging markets
– Merck trade union UNIA plans strike today to protest Swiss site closure
– Petrofac and its partner Schlumberger were declared selected bidder on Panuco integrated production service contract in Mexico
– AREVA is backed by China for its Westinghouse for U.K. Nuclear Bids, reports Telegraph
– Total Reinstated at Underperform at BofA; PT EU37
– E.ON Upgraded to Buy, RWE Raised to Neutral at Nomura
– Novozymes Initiated Buy At ING, PT Dk222
– Grifols PT Raised to Eu19.25 VS Eu18 at Deutsche Bank

TMT
– Royal KPN’s CEO is running out of time to persuade shareholders to ignore a €2.6 bn ($3.3 bn) offer for a stake in the Dutch phone company by Carlos Slim’s AmericaMovil SAB, reports Bloomberg
– Eutelsat isto buy GE-23 satellite orbital rights for $228m from GE Capital, deal seen closing in 2H; Eutelsat PT Cut 5% to EU31 at Barclays; PT Trimmed to EU27.5 vs EU31.5 at Morgan Stanley
– British Telecom sells $1.25 Billion of debt in a two-part offering
– Dassault Systemes Raised to Buy vs Neutral at Citi
– Ziggo Price Est. Raised to EU29 vs EU26.5 at ING, Buy Maintained
– Vivendi Added to Credit Suisse Europe Focus List
– Deutsche Telekom Upgraded to Outperform at Bernstein
– Bouygues PT Cut 9% to Eu21 at Exane; Kept at Neutral
– France Telecom PT Cut 8% to Eu12 at Exane; Kept at Outperform

RETAIL/CONSUMER/LUXURY
– Electrolux may move as AHAM-6 shipments for washers, dryers, dishwashers, refrigerators, freezers, ranges and ovens rose by 0.9% in May in Nth. America
– Danone Cut to Underperform from Buy at BofA; PT Cut to EU52 vs EU55 at Morgan Stanley; Buy, Long-term Attractions Remain Intact, Citi says; Danone Cut to Neutral vs Buy at UBS, Overweight Danone, Sector Contagion Fears Overdone: Barclays says initial fears of contagion across Consumer Staples space appear overdone
– Whitbread ratedOverweight,Stays Top Pick, Barclays Says After 1Q

SMALL/MIDCAPS
– Catalana isto buy 100% of Groupama’s Spanish unit for EU404.5 Mln
– Funcom is to sell up to 4m new shares in a private placement
– Impregilo will sell its non-core assets, including Ecorodovias unit, if the group led by Salini Costruttori decides to take the control of the company
– Zon Multimedia says Cinveste sold its 2.82% stake
– Unipol-Fondiaria deal is seen to be getting government nod, reports Reuters
– Latecoere plans to hire 400 people worldwide this year
– TUI Travel Rated Neutral at Nomura; PT 168p
– Okey Cut To Neutral From Outperform at Credit Suisse
Buy Stagecoach, FY to Reassure, UBS Says
– Deutsche Wohnen PT Raised to EU13.1 vs EU13 at Morgan Stanley
– Buzzi Unicem Raised to Hold from Sell at Berenberg
– Italcementi Raised to Hold from Sell at Berenberg
– Thomas Cook Group Rated Reduce at Nomura; PT 6p
Buy Perform, More M&A May Add Further 20%, UBS Says
– Bechtle PT Cut 5.1% to Eu37 at Deutsche Bank, Stays Buy
– Delticom PT Cut 8% to Eu83 at Exane; Kept at Outperform

 

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