The Dawn Patrol – 04.07.12 – On the ECB. MS German vs French consumer baskets (nice). GS no longer shorting the S&P. US closed today.

Bonjour,

Markets should be flat at the open and with low volume throughout the day as US markets are closed for Independence Day. Macro eyes on European PMIs and Retail sales and Germany 5y debt auctions.

VIX Declines 1% to 16.64, Lowest Since May 1

GeneraliCut To Sell VS Hold at ING; PT €9.5 VS €12
Technip was awarded a licence, basic engineering package, services contract for one of largest ethylene crackers in world in India
TF1 Raised To Buy VS Neutral at UBS
APPLE could launch a smaller iPad to compete with Google Nexus. Of course they could, but it’s only rumours… To play the Tablet/Smartphone wars: ASML, ARM and Dialog in Europe.

AFTER HOURS

U.S. stocks advanced, sending the SPX to a two-month high, after data showed factory orders topped estimates and as speculation grew that global central banks will act to spur economic growth. Commodity, industrial and technology shares had the biggest gains among 10 groups in the S&P 500. Alcoa Inc., Caterpillar Inc. and Apple Inc. advanced at least 1.1 percent.

The strength in gold and silver was interesting as they extend their gains from pre-Summit lows and most notable to us was the recoupling of risk assets broadly with equities. Gold and stocks are seemingly back in sync and so are (separately) the USD and 10Y Treasury yields.

CURRENT THEMES

On the ECB
It’s tomorrow… And yes the markets seems to be waiting for a cut (25bp to 0.75%) on the benchmark and deposit rates could be cut to 0 as well. European equities showed the best performance and yields on Italy and Spain dropped significantly. Rate cuts may also imply some weakness on the EURUSD and most commodities currencies.

STRATEGY

GS (Weisberger) Trade Update
I’m not sure what team at GS wrote this… Any way, they went short the S&P 500 on June 21 on poor economic data expectations and Eurozone’s sirtaki but they have been stopped out of their short S&P 500 recommendation (stop at 1364).

MS (Bizimana) Economics & Strategy
Sovereign Debt Crisis: The Squeeze on core consumers

In this 20 pages report, MS economists try to gauge the consumer behaviour to come following the squeeze on their spending power. The conclusion is to be long German consumer basket (including real estate) vs short consumer basket. Interesting to note that the Belgian consumers are the most vulnerable to stresses in stock markets and the Dutch have high household debt.
Another interesting play is the German residential property.
The key long ideas in the German basket: VW, BMW, Porsche, Continental, Deutsche Wohnen, GSW, Lufthansa, Sky, ProSieben and Freenet).
The French basket comprises among others: Essilor, PPR, TF1, Vivendi (not sure about this one), M6, JC Decaux (an old MS favourite), Remy Cointreau, L’Oreal, Carefour, Accor and Air France.

OTHER STUFF

On The Inevitability Of EU-thanasia (Charles Dumas and John Authers) | ZeroHedge http://bit.ly/N7UvbX

For the French readers, Jean-Jacques Netter writes every Tuesday a great summary of key strategists and economists views. Like the dawn patrol, but better written, and more thorough… Revue d’analyses financières | Atlantico http://bit.ly/Pa6N7F

EUROPEAN EQUITIES

FINANCIALS
– Barclays’ ex-CEO Robert Diamond appears before the U.K. Parliament’s Treasury Select Committee
– Standard Chartered sets up Islamic consumer bank hub in Malaysia
– Commerzbank considers overhaul at retail business
– KBC tolddeveloper June 29 it would seek an order to shut down Treasury Holdings unless €20 million were paid within 21 days under loan guarantees to various Treasury cos.
– DNB ASA exposed in the bankruptcy of Swedish pleasure boat maker Nimbus, controlled by Altor, Bloomberg reports
– Generali Cut To Sell VS Hold at ING; PT €9.5 VS €12
Buy Lloyds, Well Positioned on Capital, UBS Says
– Allianz most preferred European Insurer at ING
– Generali leastpreferred European Insurer at ING
– Aegon Cut To Hold VS Buy at ING; PT Maintained at €4

INDUSTRIAL/MINERS/SERVICES
– Fiat’s CEO says it has the cash resources to complete Chrysler’s acquisition and that it will buy Chrysler’s stake under the right conditions; Chrystler FY Oper. Profit may exceed $3 billion; Fiat 500 is U.S. “market leader” in its segment, Bloomberg reports; Fiat may close a second Italian factory as European auto deliveries sink for fifth straight year
– Mercedes-Benz USA June combined sales rose by 12.5%
– Peugeot is discussing buying Fiat’s stake in Sevelnord plant, located in the North of France
– Volvo has to pay $1.5 million in civil penalties on its’10, ’12 recalls as it failed to report 6 calls in 2012 and 1 call 2012 in timely manner
– Glencore-Xstrata‘s deal was approved by Australian regulators, Bloomberg reports
– Technip was awarded a licence, basic engineering package, services contract for one of largest ethylene crackers in world in India
– Rexam agreed to sell its Personal Care operations to two separate buyers for a total of $709 million
– ArcelorMittal is to cut its European administrative staff, Les Echos Says
– ThyssenKrupp is considering short work hours due to the weak steel market, Bloomberg reports
– Wendel‘s sale of its Materis division is said to have stalled after low bids
– Linde Cut To Neutral VS Outperform at Credit Suisse
– Subsea 7 Cut To Neutral From Buy at Nomura
– Kuehne+Nagel Intl Raised to Overweight From Neutral at JPMorgan

UTILITIES/OIL/HEALTHCARE/CHEMICALS
Investigation by Norwegian financial services regulator suggests news of oil finds may have been leaked into market ahead of official announcements
– Bayer acquires AgraQuest for $425 million plus milestone payments
– E.ON Cut to Sell VS Neutral at Citi; Cut to Neutral VS Overweight at JPMorgan
– DNO starting drilling at Tasour-27 in Yemen after leaving for more than a year due to political unrest
European Oil Services Cut to Neutral from Bullish at Nomura
– Galp Energia rolled over back on to Bofaml Europe 1 List
– Coloplast Cut to Neutral from Overweight at JPMorgan

TMT
– Vodafone and Hutchison Whampoa are in talks to combine their phone networks in Ireland, Bloomberg reports
– Deutsche Telekom received the approval by the German Federal Network Agency to sell broadband connections to partners at a discount
– Bouygues Telecom is to cut 556 jobs through voluntary departures
– France Telecom’s CEO says he would like to stay on as CEO when his mandate expires in 2014, Echos Says

RETAIL/CONSUMER/LUXURY
– H&M in talks for ESPN Zone spot in Times Square
– Tesco Cut To Sell From Hold at ING
– Morrison Cut To Hold From Buy at ING

SMALL/MIDCAPS
– Parmalat completes its acquisition of Lactalis American Group for $904 million
– Gemina’s ADR says Aelia offered it €229.4 million for its retail unit
– Close Brothers Rated New Buy at Berenberg; PT 865p
– Henderson Group Cut to Equal-Weight at Morgan Stanley
– Moneysupermarket.com Raised To Buy VS Neutral at UBS
– Phoenix Group Raised to Buy from Hold at Berenberg
– Tf1 Raised To Buy VS Neutral 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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