The Dawn Patrol – 31.07.12 – On the Fed and the ECB. MS on the impact of negative rates, JPM on the process of the EFSF. Earnings…


Markets to open slightly up as Asia continues on its upward trend with no major catalyst. Lots of earnings today again. Macro eyes on German employment, EU CPI, US CaseShiller Housing, Chicago PMI and US Consumer confidence. Of course, the FOMC meeting starts today… ALSO, we’ll watch the SNB reserve data to see how many billions have been put in play to weaken the CHF. (Breaking The Peg At The Swiss National Bank Of Europe | ZeroHedge

Big miss for UBS (2Q pre-tax loss CHF130m in IB vs profits exp), Commerzbank profit falls short of est. on Ukraine Bank sale, DBK 2Q Net missed but already pre-announced, HeidelbergCement targets higher margins after profit increases, Safran 1H net beat, ABI 2Q net beat est but missed on revs and org. growth, BAY beat and raise FY guidance, MEO report 2Q net loss vs profit exp but beat on EBIT, IFX 3Q profit slightly better than exp & confirms margins



STX: -2.8% – Seagate Boosts Qtr Div To 32c/shr, From 25c, Bdvd Est. 25c. Seagate 4Q Adj. EPS $2.41, Est. $2.46. STX 4Q adj. rev. $4.48b vs est. $4.54b. 4Q adj. gross margin 33.6%, est. 33.7%, saw 33.6%

APC: +3% – Anadarko 2Q Adj. EPS 85c, Est. 77c


On the Fed and the ECB
This week starts to feel like the last chance Texaco. There is a lot of hope built in these markets that the Fed and the ECB will do something… It’s not entirely clear what this something will be or even when will it be. The options are limited and a growing number of investors start to doubt their effectiveness. I won’t try to guess what will be announced.

On the Fed, GS (Stehn) expects some easing via another round of asset purchased (Treasuries and/or MBS), or use of the Fed’s discount window or a cut in the Interest Rate On Excess Reserves…
As we’ve seen yesterday, MS sees a 20% probability of action.

On the ECB, there has been so many political meetings, that we can only expect more noise around these with some EU leaders agreeing to do something and an obscure German specialist saying it’s not possible. But given Draghi’s recent comments and activity, and the fact that no one really denied the right for the SMP and EFSF to buy bonds, we may have something along these lines (JPM). Will it be enough?
Heat Rises on Central Banks –


MS (Van Steenis) Banks/Economis/Rates
What could the impact of negative rates be?
(copied/pasted) The potential im pact of negative rates on banks’ willingness to lend and on European rates curves is a key risk. We are cautious this would lead to any material increase in lending in the near term, but we think it could have a material im pact to richen collateral in Northern European markets.

JPM (Panageas)
The process for the EFSF to buy Spanish sovereign bonds.
Given recent media reports, we examine the approval process and other potential hurdles faced in having the EFSF purchase Spanish soveriegn debt

Spain’s recently approved bank bailout allows the possibility that €30-40bn of excess funds are used for other purposes, including bond purchases. Spain would have to formally request this and negotiate a new MoU, but extra conditionality could be light. We estimate it could take as little as 1-2 weeks to approve small-scale secondary market purchases by the EFSF in Spain, and would only need approval from a 9-member special parliamentary panel in Germany. It would be challenging for the EFSF to ramp up its issuance significantly in order to fund such purchases, but coordinated ECB intervention could “get around” this capacity problem while at the same time adding a layer of fiscal accountability. If the ESM is approved by the German constitutional court in September, fresh capacity would come online




Deutsche Bank 2Q Investment Bank Pretax Profit Misses Ests ; CBS rev. down 11% to EU3.5b; 2Q CBS Pretax Eu357 Mln vs. Est. Eu835 Mln; 2Q Equity Trading Eu546m vs. Est. Eu562 Mln ; DBK said last week that 2Q net fell to EU700m, pretax fell to EU1.0b and CT1 ratio rose 0.2 ppts to 10.2%; credit provisions were EU400m; stock fell ~4.1% next day

Erste 2Q Net EU107.1m vs. Est. EU103m ; 2Q NII EU1.315b vs est. EU1.315b ; 2Q loan-loss provisions EU401.2m vs est. EU429m ; 2Q f&c income EU435.2m vs est. EU430m ; 2Q trading income EU27.9m vs est. EU39m ; FY op. profit outlook cut, to be “somewhat behind” 2011; previously said FY op. results wouuld be stable vs. 2011

UBS 2Q rev. CHF6.41b vs est. CHF6.89b.; 2Q Oper. Income CHF6.41b vs. est. CHF6.89b ; 2Q Net attributable CHF425m vs. est. CHF1.09b; Trading income CHF951m vs est. CHF1.41b; investment banking pretax loss CHF130m vs est. profit CHF388m; fees and commissions CHF3.65b; Lowers balance-sheet targets for group and for investment bank


Bankia is in talks with Chinese and Latin American groups to sell 300 bank branches, Bloomberg reports

Commerzbank sells ~96% of Ukraine’s Bank Forum saying that the sale leads to an extraordinary charge of EU86m in 2Q and that pre-tax profit to be impacted by ca. EU286m when transaction closes

ROYAL BANK OF SCOTLAND is in talks with officials toward Libor settlement, reports the WSJ


Hammerson Cut To Neutral VS Buy at UBS

Unibail-rodamco Cut To Sell From Hold at SocGen

Santander Raised To Buy From Sell at Berenberg

Standard Chartered’s base case for unchanged Fed policy and significant ECB easing suggests considerable room for volatility on an absolute basis, and even more so on a relative basis, it says in note.



HeidelbergCement 2Q Oper. Income Beats Ests; 2Q Oibd EU698m vs. est. EU679m; Rev. EU3.78b vs. est. EU3.67b; Net EU184m vs. est. EU191m; Profit from cont. ops EU235m; Net debt cut by EU456m Y/y ; confirms FY goal for sales, operating profit to rise; says savings program is ahead of schedule.

Safran 1H Adj. Net Tops Estimate; Sales EU6.4b vs est. EU6.44b and yr ago EU5.6b; 1H adj. net income EU411m vs est. EU406.3m and yr ago EU317m; Aerospace Propulsion EU3.27b vs est. EU3.31b (52.1% of total FY rev.); Aircraft Equipment EU1.78b vs est. EU1.77b (26.4% of total FY rev.); Defense & Security EU1.36b vs est. EU1.35b (21.4% of total FY rev.); Confirms FY guidance taking into account solid 1H performance, new currency assumptions; FY rev. to increase in low double-digits; FCF expected to represent about third of recurring op income


BAE Systems was selected by South Korea to complete a 1.3t won project to upgrade aging KF-16 fighter jets

Volkswagen recently accelerated interest in Alfa brand and willing to buy a Fiat plant in Italy, Bloomberg reports


Air France Raised to Hold VS Sell at Deutsche Bank

Alstom PT Cut 16% to Eu38 at Morgan Stanley, Stays Overweight

Daimler Raised to Equalweight from Underweight at Barclays

Michelin Cut to Neutral From Overweight at JPMorgan

Ryanair Cut To Market Perform VS Outperform at Raymond James

Saipem PT Cut to EU52 vs EU53 at Goldman Kept at Buy; PT Cut 1% to Eu42.5 at Exane Kept at Outperform

Tenaris Removed From Selected Underperformers At Mediobanca

Zardoya Otis PT Cut 7% to Eu6.5 at Exane, Kept at Underperform;




Bayer 2Q Revenue Eu10.2 Bln vs. est. Eu9.75 Bln ; 2Q Ebitda Ex-items Eu2.17 Bln vs. est. Eu2.08 Bln ; 2Q Core EPS EU1.47 vs est EU1.37 ; Raises Sales, Earnings Forecasts For 2012 ; sees increase in FY Ebitda before special items by high-single-digit percentage vs “slight improvement” previously


AstraZenecaand Bristol-MyersSquibb said that Onglyza (saxagliptin) 5 mg demonstrated improvements across key measures of blood sugar control vs placebo in adult patients with type 2 diabetes at high risk for cardiovascular disease

BP and Sempra announce the construction of a $250m wind farm


Air Liquide Raised to Outperform VS Neutral at Credit Suisse; Unattractive, Nomura Says After 1H

Lundin Petroleum Raised To Buy From Reduce at Nomura

Statoil Cut to Hold from Buy at Deutsche Bank

Total Raised to Neutral from Reduce at Nomura



Infineon 3Q Oper Profit Eu126 Mln vs. Est. Eu114 Mln; sees 4Q sales flat to down slightly Q/q vs est. ~1% decline, reports 3Q revenue EU990m vs est. EU969.5m.; Sees FY Revenue Down 3%, to Cut Investments Next Year


France Telecom Kept at Underweight on Cash Flow at JPMorgan

GN Store Cut to Hold VS Buy at DNB Markets

ITV Cut to Sell VS Hold at Deutsche Bank

JCDecaux PT Cut 5% to Eu19 at Exane; Kept at Neutral

SAGE Cut to Neutral VS Buy at UBS



AB Inbev 2Q Adj. Ebitda, Organic Vol., Rev. Miss Ests; 2Q Rev. $9.87 Bln vs. est. $9.92 Bln; 2Q Adj. Ebitda $3.59 Bln vs. est. $3.66 Bln; 2Q Adj. EPS $1.22 vs. est. $1.08; 2Q organic rev. growth 4.7%; 2Q organic vol. growth -0.1%, est. up 1.3%; says tougher industry in most of Southern Cone, flat industry in Canada affected volume performance in LAS, Labatt.

Hugo Boss 1h Sales Eu1.09 Bln vs. Est. Eu1.07 Bln ; 2Q Sales EU485m vs. Est. EU463m ; 2Q Net Eu40.2m vs. Est. Eu37m

Metro 2Q Ebit Ex-Items Beats Est. ; 2Q rev. EU15.8b vs. est. EU15.8b; 2Q Ebit ex-items EU314m vs. est. EU301m; 2Q net loss EU20m vs. est. EU91m profit; Confirms 2012 forecast that sales will rise, Ebit will remain at same level as 2011 (in 2011 EU2.37b); Will continue with cost reduction plans, focus on even stronger LFL growth


– A race for a dwindling number of brewing assets in high-growth emerging markets is spurring beer

makers to take full control of joint ventures to keep them out of the hands of competitors.

ConAgra Foods says purchase of Unilever North American frozen meals unit doesn’t change fiscal 2013 financial goals, Bloomberg reports

Marks & Spencer is offering private-equity shoppers the biggest bargain in more than seven years as its shares are selling at 55% below their pre-recession peak.


Reckitt Benckiser PT Raised 3% to 3,500p at Exane



Acea 1H rev. EU1.69b, up 5.2% Y/y ; 1H Ebitda EU320.7m vs est. EU321.7m. ; First-Half Net Income EU34.1M.

Ciments Francais 2Q Net EU74.4m vs EU90.1m Y/y ; says should be able to maintain FY Ebitda at 2011 level.

Imtech 1H Net Is in Line With, Sales Beat Ests.; sales EU2.62b vs. est. EU2.54b; net EU62m vs. est. EU62.3m; Ebita EU134m ; repeats forecast of further Ebita growth in 2012 through organic growth, acquisitions; Maintains 2015 strategic growth plan targets

Italcementi 1H rev. EU2.3b vs est. EU2.31b. ; 1H Net Loss EU37.5m

Wirecard Prelim. 2Q rev. EU94.1m vs est. EU95.3m ; Prelim. 2Q Ebitda EU26.2m vs Est. EU26.3m ; Confirms forecast for FY Ebitda EU103m-EU115m ; Full earnings report Aug. 14


Alpha Bank is close to an agreement to buy Emporiki Bank, Credit Agricole’s Greek unit, Bloomberg reports

Fal Oil General Manager leaves as Co. seeks to repay debts

FINMECANICA results are to show that there has been a 11% debt increase, Bloomberg reports

Gimv Buys 25% Stake In ARS T&tt for Undisclosed Amount

SGL cuts FY Ebit forecast to ~EU160m from EU165.5m


Alstria Office Raised To Buy at Deutsche Bank

Ansaldo Added To FTSE MIB Long Selection at Mediobanca

Aperam PT Cut to Eu13.5 VS Eu16 at Nomura, Rates Buy

Banesto PT Cut 28% to Eu2.3 at Exane; Kept at Underperform

Impregilo and Marr Added To Selected Underperformers at Mediobanca

Lottomatica Removed From FTSE MIB Long Selection at Mediobanca

Man Group Removed From UBS’s Most Preferred List

Ophir Energy Cut To Reduce From Buy at Nomura

Prosegur PT Cut 3% to Eu3.7 at Exane; Kept at Neutral

Viscofan PT Raised 7% to Eu40 at Exane; Kept at Outperform

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


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