The Dawn Patrol – 31.08.12 – On Jackson Hole, On the ECB banking Union. Iliad!! UBS world agenda and Citi’s European Portfolio… Have a great week end.

Howdy!

Markets seem like they will open slightly down following the US last night and Asia this morning. Iron ore continues to drop. Everyone is ready to listen (at 16:00 Paris time) to a bearded man who will speak from some place in Wyoming where indians and trappers used to hunt elks… Other things to look at today: German retial sales, Michigan confidence, Spanish details on the banks (14:00).

The future will be decided there:

ILIAD reported sales and profit that beat analysts; The Co. says it has 3.6 millilon subscribers; Confirms Sales targets for 2012,2015

HERMES Raises Sales Growth Target. Keeps outlook for operating margin “somewhere between the 2010 figure and the all-time high reached in 2011”

ESSILOR’s interim net profit rises 16%, outlook confirmed.

UPS/DOWNS : Roche & Shire are Barclayss top picks in Pharma universe – Carrefour u/g to EW from UW at Barclays, reiterate OW on WPP and Gemalto – MS reiterates its pref for Thales over FNC – ML maintains Buy on Pernod – JPM like US and EM exposure in Housing, reiterates OW on VIV and Pernod – Citi say ABI should trade on a higher P/E vs Nestle, reiterates Buy on ENEL on further dvd grwth and Buy on ENI – CS sees short term risk on Airlines from rising fuel prices d/g Air France to UW, d/g TEC to UW and u/g SPM to O/P.

CURRENT THEMES

On Jackson Hole
This is the big day. Depending on which strategist you read there are a range of options. From what we’ve seen this week, GS expects Mr Bernanke to reiterate the impact of monetary policy on the economy without giving clear hints while still hoping that the Fed finally integrates some kind of GDP or employment rate targets. MS thinks this could be the case too but since the Fed is a diverse group of people who tend to disagree it may be difficult to implement these targets but we could have hints towards their implementation. At JPM, there is no strong view as this is a speech and not a Fed meeting and Bernake didn’t use this event in the past to announce its policy. Anyway, we won’t have long to wait. The speech starts at 16:00 Paris time.

Jon Hilsenrath (Fed watcher at WSJ) is on the dovish side: Bernanke’s Dilemma Over His Legacy – http://on.wsj.com/PDEGYF

Morgan Stanley’s Reinhart Explains How Ben Bernanke Could Surprise Us Tomorrow – Business Insider http://read.bi/ON544T

In the meantime, here are some things you could do in Jackson Hole:
In the winter: http://bit.ly/ODVJOf and in the summer: http://bit.ly/RsEqfM.

On Europe
There is a very interesting article in the FT (Brussels pushes for wide ECB powers – FT.com http://on.ft.com/OB17OK). Apparently, the ECB is setting a plan to give the supervision banking powers to a new ECB supervisory board (23 members). So national government will no longer have the authority to recapitalise their champions.

OTHER STUFF

Medley Global Advisors says ECB is close to reaching a deal on a full-fledged bond program, even in face of Weidmann’s objections, Bloomberg reports

MNI China Business Sentiment Indicator falls to 47.54 in Aug., its lowest since January 2009

BOOK: You may have read it as students… I didn’t. Read The Fountainhead by Ayn Rand!

STRATEGY

UBS (Smithie) Weight Watcher
A World Agenda
This is a must have.
UBS gives all the key political and economic dates coming up, their importance and what to expect. It’s simple, easy and useful. They also give their view of the situation and their asset allocation. According to UBS, we’re at a crossroad and really hard to be bullish…

Citi (Cattley) Europpean Portfolio Strategist.
Pan European – Gâteau

Short growth/long debt — Global economy remains in structural de-leveraging phase. This means lower growth, higher macro risks, and challenges for investors.
Long growth/short debt — Investors should still position the other way: limit exposure to leverage and maximise exposure to growth. Defensive growth fits bill.
Defensive growth — Defensive growth strategies offer downside protection and exposure to upside opportunities. We’ve backed defensive growth for 3+ years.
How to play — Build earnings “call option” strategies. Look for companies with a proven 2008-09 earnings stop loss with strong expected forward growth.
More to go for — Defensive growth has enjoyed a re-rating over past 6-12 months. Some stocks still cheap vs own history, eg SAP, Bayer, Imperial Tobacco.
Earnings vs re-rating — Some now at top of valuation range, eg Inditex, Novo Nordisk, Unilever. Back earnings over re-rating for further price outperformance.

EUROPEAN EQUITIES

FINANCIALS

News

AXA and Sumitomo Mitsui Trust plan 100b yen fund for investment in Tokyo office buildings, Nikkei reports

Danske Bank consolidates covered bond ratings with S&P, Fitch

Reco

ADMIRAL: Nomura Still Expects Strong Earnings and Div. Growth at Admiral – PT raised to 1350p vs 1300p – Kept at buy

Admiral PT Raised 4% to 866p at Exane; Kept at Underperform

BNP tops the fully-loaded CET1 ratios of the 5 lenders at 8.9% at 2Q12, slightly above UBS at 8.8%, ING says.

Credit Suisse Raised To Hold From Sell at ING

INDUSTRIAL/MINERS/SERVICES

News

– Qatar’s rejection leaves Glasenberg to decide on Xstrata offer; Schroder’s Buxton says that he will vote against current Glencore-Xstrata merger

Aeroports De Paris confirms targets for 2012 and 2015

ArcelorMittal contract talks have stalled, WSJ says

Lufthansa cabin crews plan Frankfurt strike today on pay

Rio TINTO’s potential expansion, which isn’t yet approved by the board, is robust “under any probable macro-economic event,” Sam Walsh, chief executive officer of Rio’s iron ore unit, said

Saipem Raised To Outperfrom VS Neutral at Credit Suisse – PT Raised to Eu44 VS Eu40

Technip Cut To Underperform VS Neutral at Credit Suisse

Reco

Air France Cut to Underperform From Neutral at Credit Suisse

CRH PT Cut to Eu12 VS Eu14 at Berenberg; Kept at Sell

Vopak Rated New Outperform At Credit Suisse; PT Eu70

UTILITIES/OIL/HEALTHCARE/CHEMICALS

News

EDF can’t get license for its new U.S. nuclear unit, Bloomberg says

Galp workers may go on strike for 3 days starting on Sept. 17, Bloomberg says

Royal Dutch Shell wins U.S. permission to start limited prep work for drilling off North Coast of Alaska, Bloomberg reports

RECO

– Southern European utilities is still excessively geared, says UBS

Enel PT Raised to EU3.6 vs EU3 at Citigroup; Kept at Buy

ENI Raised to Equalweight from Underweight at Barclays

EDP Renovaveis Added to Most Preferred Utilities at UBS

Fresenius SE has reasonable, long- term outlook with or without Rhoen, still many scenarios which could play out, SocGen says in note dated Aug. 30.

Fresenius SE Rated New Overweight at HSBC

Fresenius SE & Co. Rated New Buy at SocGen, PT Eu120

Fresenius Medical Rated New Buy at SocGen, PT Eu76

Gas Natural Fenosa Cut To Neutral From Buy at UBS

GDF Replaced with SSE in Most Preferred Utilities at UBS

SSE Raised to Buy from Neutral at UBS

Terna Cut to Neutral from Buy at UBS

TMT

RESULTS

ILIAD reported sales and profit that beat analysts; 1H sales rise 39% to €1.44bn; 1H revenue jumped 39 percent to 1.44 billion euros ($1.8 billion). Net income fell 45% to 80 million euros because of startup costs on mobile (analysts had projected profit of 75 million euros on sales of 1.37 billion euros); The Co. says it has 3.6 millilon subscriber; Confirms Sales targets for 2012,2015

News

Apple is accused of infringing a patent for video-compression technology in a lawsuit brought by a trust associated with France’s Alcatel-Lucent

Lenovo is to expand smartphones to India, Philippines and Indonesia, Bloomberg says

Philips Electronics’ TV venture with TPV Technology has been narrowing its losses past few months, Bloomberg reports

Samsung didn’t infringe Apple patent, Tokyo court says

Telekom Austria plans extraordinary shareholder meeting in second week of October to vote on America Movil’s Oscar Von Hauske joining supervisory board, Bloomberg reports

Reco

Gemalto PT Raised 6% to Eu70 at Exane; Kept at Outperform

WPP PT Cut to Gbp865.00 VS Gbp910 at Berenberg; Kept at Hold

WPP PT Cut 4% to 1,020p at Exane; Kept at Outperform

RETAIL/CONSUMER/LUXURY

RESULTS

HERMES Raises Sales Growth Target as 1H Rev., Oper. Profit Rise ;1H rev. EU1.59b, up 21.9% y/y at current FX as first reported July 19;1h Operating Income Eu510.9m vs est Eu502m; 1h Net Income Eu335.1m vs est Eu320.7m ; Raises target for consolidated annual sales growth to ~12% from 10%, citing 1H sales; Keeps outlook for operating margin “somewhere between the 2010 figure and the all-time high reached in 2011”

News

De Master Blenders 1753 is to join Aex-index effective Sept. 24

Reco

Carrefour Raised to Equalweight from Underweight at Barclays

Pernod-Ricard still showing robust profit growth, says JPMorgan

Pernod-ricard PT Cut 1% to Eu95 at Exane; Kept at Outperform

SMALL/MIDCAPS

RESULTS

Lagarder Net sales EU3.39b, down 0.2% Y/y on like-for-like basis; Recurring media EBIT came out at €112m, down €56m reported and €21m excluding PMI and Russian radios.; 1H net income group share EU36m vs EU28m Y/y; Net debt EU1.73b, stable Y/y; Publishing unit net rev. down 2.4% Y/y on like-for-like basis, Active unit rev. down 3.7%, Services unit rev. up 2.4%, Unlimited rev. down 5.2%; Reiterates 2012 recurring media Ebit target

Strabag 2Q revenue fell 5% to EU5.5b; 2Q EBITDA fell 65% to EU90.5m; 2Q Loss EU7.7m vs. EU106.6m Net Income, Output fell 1%; 2Q per share loss 7c vs 94c EPS; Strabag on July 25 cut 2012 Ebit guidance to EU200m from EU300m;

NEWS

Lagardere wants to restart Canal plus IPO, Les Echos says

Maurel & Prom reported a 64 percent drop in first-half net profit after year-before asset sales weren’t repeated

O’Key is to invest in small store format near Moscow, says Reuters

Tomtom to be deleted from Aex-index effective Sept. 24

Reco

Buzzi Unicem Cut To Equalweight VS Overweight: Morgan Stanley

Catlin Cut To Equalweight VS Overweight at Morgan Stanley

Deutsche Euroshop Raised To Buy From Neutral at BofAML

Eurofins Scientific PT Raised 9% to EU120 at Exane – Kept at outperform

Eurofins Scientific Cut To Neutral From Overweight at HSBC

Lonmin miners charged with the deaths of those shot by police, reports the BBC

Neste Oil Raised To Buy From Sell at Goldman Sachs

Wendel PT Cut 13% to Eu62 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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