The Dawn Patrol – 28.08.12 – The Mood in NY. BAM’s “Code Red”; JPM ups cyclicals, GS’ Hatzius on Jackson Hole, RCUBE in the WSJ. MS likes Reckitt.

Bonjour,

Markets to open slightly down as caution remains ahead of the Jackson Hole event. Lots of earnings this week from French corporates. Today, my sore eyes will focus on EU M3, consumer condidence, Spanish bills and Italian bonds sales.

What to do in Jackson Hole

CREDIT AGRICOLE: Hard to read earnings as there are plenty of one offs, but the bottom line looks better than consensus expectations. Still no announcement on Emporiki and this will remain the sole price driver. 2Q rev. drops 14% €4.75b vs. est. €4.49b. ; 2Q op. income falls 71% to EU315m ;2Q Net Eu111m vs. est. Loss €19m; ACA FP took €427m impairment on Intesa shares; 2Q CIB net EU296m; ACA FP gave Emporiki EU2.3b of new capital in July; Greece cost was EU370m in 2Q; no decision reached on unit.

Reco changes: GSK cut to N at UBS, ASML cut to sell at DB, Beiersdorf Raised To Buy From Hold at Deutsche Bank, Henkel Raised To Buy From Hold at Deutsche Bank, Kingfisher Cut To Underperform From Buy at BofA. MS on BHP, RIO and Anglo (iron ore prices continue to drop but remain OW on BHP). And a good piece by Sjogren on Reckitt.

CURRENT THEMES

The mood in NY (by LCM)
We are in the peak US vacation week and London was off for a bank holiday so volumes and liquidity are very thin. News flow was similarly subdued with the next major catalyst not until Friday (Jackson Hole) and investors are therefore passing the time debating all the possible permutations that may come out of the ECB and Fed. Sentiment isn’t “bullish” in that most people are still pretty cautious on the macro outlook although many seem to have resigned themselves to the futility of “fighting the Fed” (or “fighting the ECB”) in the near-term.

STRATEGY

There was a good piece by BoAML last week: “Code Red”.
Economist Michael Hanson points out an interesting circular relationship between the stock market and Fed policy. There are some who believe the Fed will not launch QE3 so long as stock prices remain high, yet the stock market is high because it anticipates QE3. Should the Fed disappoint at the September 12-13 FOMC meeting, the risk of a stock sell-off is high. S&P 500 support on a correction is in the 1360-1325 area. Additional support is at 1300-1250.

JPM (Matejka) European Equity Strategy
Tactically move Cyclicals to N from UW, keep preference for US vs China plays.
How will double digit EPS growth projections for 2013 be met?
Mislav is right… The rally is only based on multiple expansion and hopes of margins expansion. However he upgrades cyclicals from UW to N (up Discretionary, down Pharma) on stabilised PMIs. He won’t move to full OW as China is still not acting on growth. Highlighted names: BMW, CON, GKN, PSON, PUB, SAP, SESG and WPP.

GS (Hatzius) Jackson Hole Preview: Strategy, not Tactics.

Bernake will hold his “Monetary Policy Since the Crisis” speech on Friday at 16:00 Paris time. GS doesn’t expect much in terms of actionable announcements or tactics. The speech will be more about what we’ve learned from the Fed’s past move (GS gives a list). There could be some changes in the Fed’s strategy that GS has been highlighting for a while such as GDP target or emplyment targets. GS describe these as unconventional unconventional easing, but they make sense. In terms of stance, GS continues to see the same guidance to mid 2015 for low rates to be announced at the next FOMC meeting. Finally, a return to QE is possible particularly if August employment data is poor.

RCUBE likes Gold miners.
http://online.wsj.com/article/SB10000872396390443713704577603780785839936.html

EUROPEAN EQUITIES

FINANCIALS

Results

Credit Agricole 2Q rev. drops 14% €4.75b vs. est. €4.49b. ; 2Q op. income falls 71% to EU315m ;2Q Net Eu111m vs. est. Loss €19m; ACA FP took €427m impairment on Intesa shares; 2Q CIB net EU296m; ACA FP gave Emporiki EU2.3b of new capital in July; Greece cost was EU370m in 2Q; no decision reached on unit

News

Credit Agricole gave Emporiki €2.3b of new capital in July

SocGen‘s traders based in Paris are being offered salary increases of between 20% and 30% to transfer to London, Les Echos reports

Reco

Allianz PT Raised to Eu113 VS Eu109 at JPMorgan

Vienna Insurance PT Raised 4% to EU40.7 at Barclays

INDUSTRIAL/MINERS/SERVICES

News

Airbus nears $7b Filipino order despite U.S. lobby, says Reuters

Ferrovial is considering bidding for airports in Brazil, El Economista said

GBL Managing Director Gallienne sells EU363,935 worth of stock

Maersk line aims to raise rates as much as 10% next year; the co. also plans increase on N. America routes in April

Ryanair is seeking regulatory approval for its proposed takeover of Aer Lingus by asking at least six airlines to operate alternative services on some of the Irish flag carrier’s routes, such as London to Dublin, the FT reported

Siemens filed the suit last week against the city of Lille after losing a €266m train order, Financial Times Deutschland said

Reco

Seadrill Cut To Hold From Buy at Carnegie

Kazakhmys PT Cut to 900p VS 1,100p at Citi, Stays Buy

S&P revised Volkswagen outlook to Positive; Ratings- affirmed

UTILITIES/OIL/HEALTHCARE/CHEMICALS

News

Astrazeneca names Pascal Soriot CEO from October 1

GDF Suez’s Tihange-2 safety check results are due on Sept. 18; Doel-3 Reactor decision will not be seen before end of November

Novartis’ Jakavi wins the first EU approval to treat Myelofibrosis

ROYAL DUTCH Shell is among the companies interested in Myanmar offer of oil and gas exploration blocks, says Reuters; the co. CEO said that high demand for oil over the next 10 years will boost crude prices.

Reco

Glaxosmithkline Cut To Neutral From Buy at UBS

Tullow Oil PT Raised to GBP19.20 vs GBP18.20 at Barclays

TMT

Reco

ASML Cut to Sell From Hold at Deutsche Bank

RETAIL/CONSUMER/LUXURY

News

Carrefour exits Singapore, shuts two stores, Bloomberg reports

Colruyt Retail Chief Frans Colruyt sells €190,083 of stock

Reco

Beiersdorf Raised To Buy From Hold at Deutsche Bank

Henkel Raised To Buy From Hold at Deutsche Ban

Inditex PT Raised to Eu100 VS Eu88 at ING, Stays Buy

Kingfisher Cut To Underperform From Buy at BofA

SMALL/MIDCAPS

Results

Ipsen 1H Rev. Beats; 1H rev. EU629.8m vs est. EU607m ; Adj. EPS EU1.02 vs est. EU1.1 ; Now sees 2012 Specialty Care drug sales growth Y/y at upper range of prev. range of 8% to 10%; Reiterates sees Primary Care drug sales decrease Y/y ~15%; Reiterates sees recurring adjusted operating margin ~15% of its sales

UBI 1H total revenue rises 5.2% to EU1.79b.; 1H Net Income Falls to EU159.5m From EU251.7m; 1H net interest income EU1.03b vs EU1.04b; 1H net commissions EU586.1m vs EU586.6m ; 1H trading income EU105.4m vs EU7.2m ; 1H tax burden benefited from EU73.7m positive effect; 1H loan loss provisions EU334.4m vs EU263.5m; Core T1 at June 30 10.24%; 9.01% at March 31; Says had EU17.9b in Italy govt bonds at June 30; Outlook: says won’t make 2H forecast due to volatility; Previous guidance: higher recurring net income in 2012

NEWS

Henderson CEO sees competition boosted by New U.K. rules

Vestas confirms “information in the market,” says it has “ongoing dialogue” with Mitsubishi Heavy Industries on potential strategic cooperation

Reco

Afren and Dragon Oil Cut to Neutral at Credit Suisse

Debenhams Cut To Neutral From Buy at BofA

Devro Raised To Buy From Hold at SocGen

Hiscox PT Raised to 473p VS 435p at JPMorgan, Stays Neutral

Lancashire PT Raised to 930p VS 890p at JPMorgan

Net Entertainment Cut To Hold From Buy at Carnegie

Nkt Holding Cut To Hold From Buy at Carnegie

Vienna Airport Raised to Neutral from Reduce at Nomura

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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