The (after) Dawn Patrol – 06.07.12 – On the NFP, the rate cuts. RCUBE adds to risk. JPM on Oil. More…

Bonjour,

Markets to continue down this morning with the futures on the FTSE down 0.37%. Asian markets down following the US, all disappointed by the lack of new liquidity related measures in Europe and despite the Chinese rates cut. IMF’s Lagarde says next outlook forecasts are likely to be lower than previous forecasts. China’s vice premier Wang Qishan has said trade growth could be weaker than the 10% target this year. Macro eyes on the NFP…

Buy Grifols, Consensus Still Too Low, Citi Says

Ericssonis a ‘Strong Buying Opportunity,’ sees re-rating at Citi; Overweight Ericsson, relative outperformance may continue, says JPM

PPR Cut to Neutral VS Outperform at Credit Suisse

AFTER HOURS

S&P closed off small although off its worst levels (Index didn’t close in the red since Thursday 29th june). There were a bunch of macro developments today but the broader market narrative still seems in place: Europe isn’t fixed but is on a path towards political and banking unity that could help remove the crisis as a systemic overhang. Central banks globally are easing, although not to the extent some investors are looking for.
Economic growth has been missing forecasts for so long that investors are now highlighting areas where numbers are coming in better (today the big highlight was US jobs where Challenger, jobless claims, and ADP were all encouraging). Corporate headlines are still pretty sparse as companies gear up for earnings season (AA kicks off the CQ2 season Mon) although investors are watching closely for any more preannouncements (there have been a lot so far this season).

The dollar outperformed during the whole day following a series of easing measures from central banks around the world. The EUR was the weakest G10 currency on the back off the ECB interest rate and deposit rate cuts.

CURRENT THEMES

On the NFP
It’s Friday, and it’s Pay(roll) day. Consensus expects 100,000 and anything below that will be disappointing. The whisper number is around 110k and yesterday’s ADP and initial jobless claims data were better than expected. Anything below 100k would be disappointing or could trigger some Fed action… Anyway, this is the BIG number the markets depend on…

On the rate cuts
Well yes, the market was disappointed by the ECB as some were looking for 50bps cut and some news on a new round of LTRO or another liquidity related tool. I was expecting something stronger… It doesn’t mean Draghi won’t do somehting soon. As he himself said the rate cut will only have a muted impact… As he didn’t seem too stressed about the urgency of action,

RCUBE

RISING RISK APPETITE

RCUBE expects NFP to be strong in the short term (maybe not today but over the next 3 to 6 mths). There are still some huge concerns on the markets as Earnings Revisons Ratios have recently rolled over despite the positive trend shown in the first quarter.
The CBOE equity put to call ratio is at a 17yr high highlighting investors defensive position. This combined with the lowest strategists Equity allocation skews mkt reaction to the upside. Equity upside is cheap.

BUY FOOTSIE
The Footsie is heavily geared towards Basic Resources and oil…
RCUBE buys UKX calls and take profits on the CAC futures. (therefore slightly adding to European equities).

BUY EM DEBT

RCUBE buys EMLC US ETF (EM debt in local currency).

STRATEGY

JPM (Lucas) Oil and Gas
Time to dip back into Big Oil
(copied/pasted)
Q2 results – oil price down, refining margins seasonally strong, LNG market tight – dividends in focus
We feel that the worst of the oil price correction that we anticipated is now behind us, although we cannot rule out further weakness should supply risks ease. Saudi, the oil market’s ultimate price moderator, faces a tricky balancing act given uncertainty overhanging Iranian oil exports. Following two consecutive quarters of market underperformance, we are thus ready to ‘dip our toes’ back into the sector, with a starting preference for names offering above-average yield with safe dividends and high impact H2 triggers – ENI and BP. Should the oil price show signs of stability above $90/bbl, we would also be tactically long RD Shell into its Q2 results which, although below Q1 levels, are likely to be much stronger than BP’s.

EUROPEAN EQUITIES

FINANCIALS
– AVIVA said it is now selling as many as 37 million shares in Delta Llloyd, reports Bloomberg
– Caixa reduces its holding in Abertis to below the 30% bid threshold
– Societe Generale cuts funding to the Greek unit Geniki, says Reuters
– UNIPOL is exempted from mandatory bid for Milano, Regulator says
– UniCredit denies the report that said it wanted to replace the head of its German unit HypoVereinsbank with investment bank chief Jean Pierre Mustier, says Reuters
– Barclays Cut To Market-perform VS Outperform at Bernstein

INDUSTRIAL/MINERS/SERVICES
– Air France-KLM June Passenger Traffic Rises 4.6%
– Peugeot 1H deliveries fall 13% on slumping demand; sales declined to 1.62 million light trucks vs 1.86 million vehicles in 1H 2011
– Volkswagen, by paying 1 share in addition to EU4.46b in cash for 50.1% of Porsche, it doesn’t own, avoids additional tax bill of >EU900m
– Rio Tinto’s workers have agreed to a new labor accord at Alma Smelter
– SGS acquires Life Science Consultancy Company Exprimo NV
– Thales’s Alex Dorrian and Blaise Jaeger are to quit the board:, says La Tribune
Buy ArcelorMittal, Equity Raise Unlikely, UBS Says
– Bureau Veritas Cut To Underweight from Equalweight at Morgan Stanley
Buy Grifols, Consensus Still Too Low, Citi Says
– GKN Raised to Neutral VS Underperform at BofAML
– Intertek Cut To Underweight VS Equalweight at Morgan Stanley
– Thyssenkrupp Cut To Hold VS Buy at SocGen
– Wolseley Cut To Equalweight VS Overweight at Morgan Stanley

UTILITIES/OIL/HEALTHCARE/CHEMICALS
– Areva-Siemens to get €125 million from TVO following ruling
– GDF Suez, along with other companies, obtained the negociating right to buil and operate 450,000kw fossil-fuel plant in estimated 100b yen ($1.3b project) project to build a power plant in Mongolia, Nikkei reports; GDF Suez’s subsidiary Electrabel says a 10-year extension of Tihange 1 atomic reactor requires return on investment as cost estimated at more than EU500m in capital spending
– Roche’s Avastin for breast cancer in setback in the UK, reports Reuters; wins FDA Approval for DNA test for transplant patients
– Lundbeck is close to the low end of the forecast range, CEO tells
– ROYAL DUTCH SHELL’sArtic barge was delayed in Seattle due to inspection, reported the Times;
– RWE is asking for Net4Gas bids by July 22, reports Reuters
– Astrazeneca Cut To Hold VS Buy at Jefferies
– BAE’s valuation already factors in significant caution, says Jefferies
– Fortum Cut To Sell VS Buy at Deutsche Bank
– UCB Cut to Sell VS Neutral at Goldman

TMT
– Telecom Italia Media 1H Ad sales are up by 16%, Bloomberg Reports
– Telefonica has no plans to list its digital unit “at the moment,” says its CEO
– Deutsche Telekom’sT-Systems unit won an extension of a 1 billion-euro ($1.2 billion) deal to manage the data center infrastructure of Royal Dutch Shell
– Ericsson is a ‘Strong Buying Opportunity,’ sees re-rating at Citi; Overweight Ericsson, relative outperformance may continue, says JPM
– SAGE Raised to Buy From Hold at Berenberg

RETAIL/CONSUMER/LUXURY
– AB Foods agreed to buy Elephant Atta and smaller related ethnic flour brands from Premier Foods for GBP34m in cash
– Fielmann Cut To Underweight From Neutral at HSBC
– PPR Cut to Neutral VS Outperform at Credit Suisse

SMALL/MIDCAPS
– Bumi says that it is reasonable to expect 2012 earnings to gain over 2011
– Dno International offers to buy Calvalley for C$2.30 per share
– Ion Beam sees €9m gain on Canadian sale, reports Bloomberg
– Nobel Biocare’s CFO is to leave the company
– Aveva Group Raised To Buy From Hold at Berenberg
– Carillion Cut To Sell VS Neutral at UBS; Cut To Sell From Hold at Liberum
– Dunelm’scash return is looking likely in the near-term, Nomura says
Kloeckner Cut To Sell VS Buy at UBS; Removed From UBS’s M&A Watch List
– MAN Group Cut to Hold From Buy at SocGen
– Moneysupermarket.com Rated New Buy At Westhouse, PT 153p
– Morgan Sindall Raised To Buy From Add at Numis
– Travis Perkins Cut To Underweight at Morgan Stanley

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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