The Dawn Patrol – 27.06.12 – On Italy vs Germany, Profit Warnings, Soros, Ray Dalio, Facebook… No strategy but some ratings changes.

Bonjour,

Markets to open slightly up, with the SX5E future indicating +0.57% before the EU summit as more and more leaders are becoming vocal on the subject… and no, they don’t seem to agree. Today, we’ll watch the Italian business confidence index, German June CPI, the Italian inflation linked bonds auctions and Standard Chartered Q2 revenues. Also, Mrs Merkel will meet Mr Hollande tonight.

GERMANY downgraded by Egan Jones from AA- to A+.
K+S Raised to Buy from Underperform, Added to Europe 1 at BofA
SBM Offshore Removed from Conviction Buy at Goldman; Kept at Buy

CURRENT THEMES

On Italy vs Germany
Mario Monti is trying to put pressure on Angela Merkel before the summit as he announces he will continue to push Italy’s proposal to use Eurozone funds. The German Bundesbank President, Mr Weidman said that ideas such as the ones proposed by Mr Monti were attempts to get aid without having to meet the conditions imposed in Sueddeutsche Zeitung today.

On Profit Warnings
(from Sarah). The flow of profit warnings is accelerating. We had Danone, P&G, SKF, Philip Morris all saying that sales in Europe would be below their forecasts. This morning, we have Salzgitter (steel producer), Zumtobel (lighting).

On Soros
With the EU summit set to start on Thursday, pressure is on European leaders to find a way out of the euro crisis. Investor George Soros is pessimistic that a solution will be found and says time is extremely short. In an interview with SPIEGEL ONLINE, he warns that Germany could develop into a hated, imperial power.”
George Soros on the Euro Crisis | George Soros http://bit.ly/LO1cx3

On Ray Dalio
“…we think the popular assumption that the Germans and the ECB (which requires agreement of the key factions within it) will come through with the money to make all these debts good should not be taken for granted.”…”This “fat tail” event must be considered a significant possibility.” http://bit.ly/NLh6w5

On Xstrata/Glencore
The $65bn merger is in now at risk as Qatar (who holds 11%) want the bid to be increased by 16%. Glencore is offering 2.8 of its shares for each of the miner’s but Qatar said an exchange ratio of 3.25 per share “would provide a more appropriate distribution of benefits of the merger”. Other investors have already asked for a better ratio for Xstrata.

On Facebook
GS initiates with a Buy/Neutral and $42 PT. MS initiates at OW with $38 PT. Barclays is at Equalweight/Positive and $35PT. For MS, it represents 34x 2014 PE with 33% EPD growth CAGR to 2016.

EUROPEAN EQUITIES

FINANCIALS
U.K. auto insurers are to post losses as costs outpace prices, says the Times
– Standard Chartered
sees high single-digit income growth in 1h
– Commerzbank
’snew segment real Estate and ship finance won’t go ahead as planned
– Royal Bank of Scotland cancels Wimbledon hospitality in wake of a computer glitch; itis considering whether to sue CA Technologies after a computer update blocked access to the bank accounts of millions of customers, FT reported
– BNP loses two Geneva-based commodities bankers, Reuters reports
– Allied Irish plans “a number of longer-term solutions” to help customers experiencing difficulty with mortgage repayments
– KBC Bank Ireland says it is piloting medium-term mortgage arrears resolution options with a number of its customers who are experiencing difficulty in meeting repayments
– Lloyds
banking may announce “broad commercial terms” of deal to sell the 630 branches as early as today, FT reports
– Old Mutual
Initiated at Equalweight at Barclays; PT 180p
– Aviva Cut to Hold from Buy at Jefferies

INDUSTRIAL/MINERS/SERVICES
– Aeroports De Paris cuts its 2015 target for return on assets; forecast for return on assets is now between 4.5% and 5% in 2015, down from a prior estimate of 5.4%
– VEOLIA’s Transdev’s recovery plan has been rejected by the Caisse des Depots et Consignation, les Echos reports
– Glencore’s16.9b pound ($26.4b) offer for rest of Xstrata is in doubt after the target’s second-largest shareholder Qatar Holding demanded the bid be increased by 16%
– Kingfisher’slessors take back 32 planes after default, Times says
– Renault
is to sell more than 50% of cars outside W. Europe in 2013; Co. has laid off 1,600 out of 1,800 workers at Santa Isabel de Cordoba in Argentina for at least two weeks because of slumping sales in Brazil, Les Echos reports
– Safran may supply Lockheed in face of Dassault’s opposition, reports les Echos
– Siemens
’ CEO sees ‘no way around’ fiscal union
– Technip
was awarded 2 contracts for petrochemical complex in Russia
– Syngenta and Intergrain enter into a Barley Breeding Pact
– Infineon Cut To Neutral From Overweight at JPMorgan
– Aker Solutions Raised to Conviction Buy from Neutral at Goldman
– K+S Raised to Buy from Underperform, Added to Europe 1 at BofA
– Daimler PT Cut to Eu40 VS Eu52 at Bernstein

UTILITIES/OIL/HEALTHCARE/CHEMICALS
– Spain’s Health Ministry plans today to present the regions with a list of 456 drugs that will no longer receive public financing in a bid to save more than EU440m, El Pais reports
France seeks to raise EU500M with an oil product tax that will be based on value of stocks of oil products and will affect both refiners and distributors, Tribune Says
– BHP BILLITON is unlikely to approve major projects until end of FY13, JPMorgan says; Co. says Escondida Copper output guidance for FY12 remain unchanged
– Roche is to close its Nutley, New Jersey R&D site in a cost saving move
– Elekta
Rated New Neutral at Nomura
– Elan
PT Raised to $22 VS $15.50 at Berenberg, Stays Buy

TMT
America Movil expanded its stake in Royal KPN to 23% through share purchases
– TDC wins 22-year license for 4 of the 5 blocks sold in Danish auction for DKK627.8m ($105.5m)
– Kabel Deutschland Initiated At Hold at Jefferies; PT Eu46.4

RETAIL/CONSUMER/LUXURY
– Adidas is subject to Germany’s Federal Cartel Office complaints regarding its plan to regulate more strongly how its goods are sold on Ebay or Amazon by third parties, the FT reports

SMALL/MIDCAPS
– Salzgitter no longer sees break-even for steel unit this year
– Votorantim Cimentos is to receive assets in China, Spain, India, Morocco, Tunisia, Turkey, Peru in exchange for its Cimpor stake, reports Bloomberg
– Premafin
holders seek EGM on repealing capital increase plan
– Pennon will be added to FTSE 100 index as of June 29 when International Power is deleted, FTSE says
– Chime Communications
says its Chairman Bell sold 726,797 shrs at 147p/shr.
– Cobham Cut to Sell vs Hold at SocGen, PT 205p
– Halma
Cut To Neutral From Overweight at JPMorgan
– SBM Offshore Removed from Conviction Buy at Goldman; Kept at Buy
– OC Oerlikon Corporation
Initiated at Buy at Berenberg, PT CHF10.30, Initiated Buy At Berenberg, PT CHF10.30
– F&C Rated New Buy at Jefferies, PT 120p
– Acomo Cut to Hold From Buy at ING
– Mobistar PT Cut 17% to Eu30 at Exane; Kept at Neutral

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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