The Dawn Patrol – 03.09.12 – On the Markets, On China. JPM’s View and European Strategy. GS on Europe. MS’ Bartsch on the ECB…

Guten Tag,

Markets indicated flat…. Asian markets up despite the wek Chinese PMIs on hopes of more action from the Chinese govt. Today, we’ll look at the Euopean PMIs from Italy, France, Germany and the UK. Some bills auctions by France and the Netherlands and bonds by the Belgians. On the political agenda discussions on the Bank Union.

HAVAS 1H revenur rise 8.4% to €829 mln; 1H net rises 5.7% to €56mln; 20% increase in net earnings per share to 0.15 cents (€);

Ups/Downs: REP cut to Neutral vs Buy at Nomura, ILD cut to Neutral at MS and raised to 140 at Exane, Havas cut to Neutral at Citi, Ocado added to UBS least pref Food retailers replacing Carrefour, Barcap reiterates OW on BHP and Pernod, ARM & CSR cut to Sell at DBK, Citi remains positive on BAY and increase pt to 75e and keep sell on Solvay, JPM keep OW on MKS and PNN.

CURRENT THEMES

On the Markets
Back to school. The summer is over (except in the US which are closed today). The last few days showed very little volume and liquidity as most were still away or waiting for Bernanke’s speech like a divine intervention. Of course the Fed will do all it can to promote growth and lower unemployment in the US. But the main worries are still here: the European crisis, the Chinese slowdown and the fiscal cliff. The market rallied over the summer on no real real facts expect Draghi’s proposals and intervention. We’re lucky to have Draghi. The calendar is busy, the sentiment is slightly more positive after Jackson Hole but risks remain high…

Get you agendas ready. There are a lot of things coming up. Keep the UBS world calendar on your desks…

On European equities, I like the call by Citi on Long Growth/Short Debt and Defensive Growth…

On China
The August PMI is out and disappointing at 49.2% vs 50% expected. After seasonal adjustments, the number is 50.1 vs 51 in July. Apparently all sub sectors of the PMI are disappoiting and new orders in particular.

STRATEGY

GS (Oppenheimer) European Equity: Risk vs Opportunities.
This is a 46 p presentation.

Recommendations
Long EM exposure relative to Eurozone exposure
Long Eurozone exposure relative to US exposure
Long High Dividend Yield and Growth

JPM (Loeys) The JPM View
Adding Risk in the US

Asset allocation –– Cover long EMFX funded in euros and instead go outright long US equities as US has least event risk in September, upside risk on the economy and a more supportive central bank.
Economics –– Upside risks on US, due to better consumption, are offset by downside risks on China and Japan to keep our global growth forecasts and risk balance unchanged.
Fixed Income –– Portugal 2-yr yields include some 3% in EMU exit premium, making a clear case for new ECB SMP buying.
Equities –– Overweight US industries that benefit from sustained housing recovery.
Credit –– US HY and CMBS should benefit from any move to QE3, and are less exposed to event risk in Europe.
Currencies –– Shorts on EUR/USD are about 75% covered.
Commodities –– Stay OW energy vs. base metals.

It seems like JPM is quite optimistic on the next Fed meeting. The main argument here is that US policy makers are the most eager to boost growth compared to the rest of the world. Jan expects Mr Bernanke to “enxtend rate guidance for another year”.

JPM (Lee) US Equity Strategy
Reasons to Stay Constructive.

We remain constructive on equities as we continue to see the positive combination of (i) better than expected US fundamentals, supported by construction activity; (ii) relative valuation support by strong performance in credit; (iii) investor positioning which is still UW equities. Bottom line: we recommend buying dips and still see a strong rally into early November, peaking around 1475. We remain constructive. We would also be cycling into Cyclicals. This week, we highlighted how we believe we are early in a 3-5 year construction upcycle led by residential construction.

JPM (Matejka) European Equity Strategy
Mislav is getting bolder: “The moment of truth is upon us”… In this European Chart book, Mislav expects markets to continue to rally in the short term (if the ECB plays the game) and then come down over a 6 to 12 months basis. The main headwinds are:
1. Renewed rise in US gas prices
2. Chine backdrop remains poor
3. Credit growth in the EU doesn’t pick up as banks lack capital.
The EPS expectations for 2013 remain unrealistic… Top plays: US and consumer plays (hotels, travel, Media, Autos and IT. OW Energy, OW Insurance and within defensives, OW Staples. UW Value. There are some other subtleties, between each EU region to OW or UW. Call me for more…

MS (Bartsch) EuroTower Insights
Walking on a Highwire.

Elga comments on the next ECB meeting. No major announcement or actions to be announced, thus Mario Draghi will remain vague on the parameters. MS, however expects a 25bp cut in all key rates, including the deposit rates, but no LTRO.

OTHER STUFF

The Inexorable Disappointment Of The Earnings ‘Hope’ Cycle | ZeroHedge http://bit.ly/OPmhwe

Spain: For Whom The Bell Now Tolls | ZeroHedge http://bit.ly/RbDD2q

The new Cat Power Album is out: Cover Story: Cat Power | Features | Pitchfork http://bit.ly/O68Edy

EUROPEAN EQUITIES

FINANCIALS

NEWS

– Spain to recapitalize Bankia after 4.45b-euro loss; A government aid request from Spain would not automatically trigger a rating cut, Moody’s said

– France is to rescue the CREDIT IMMOBILIER DE FRANCE; French CIF rescue guarantee may reach €20bln, Reuters says; Credit Immobilier de France would have defaulted today in the absence of the guarantee, Les Echos reports

Banco Santander plans closures or cuts in areas that don’t directly support the 173 bank branches it acquired in the deal, Bloomberg reports

Commerzbank’s cost-cutting plan may include job cuts and branch closures, Welt am Sonntag reports

Credit Suisse is to move back-office jobs from Singapore, says the FT

Fondiaria-SAI and Unipol Gruppo Finanziario offer unexercised rights to stock in auctions starting today and ending Sept. 7.

Reco

Banco Santander Cut To Hold VS Buy at ING

Intesa only buy-rated Italian banks at Nomura

Raiffeisen Cut To Underperform VS Neutral at Macquarie

INDUSTRIAL/MINERS/SERVICES

NEWS

Airbus CEO wants to give more autonomy to factory managers in terms of purchasing, resource management and quality control, Les Echos reports

Holcim aims to increase op profit CHF1.5 Bln by 2014 Vs 2011

Glencore is continuing to stick to terms of a $33b bid for Xstrata, resisting mounting pressure from shareholders to sweeten the offer 4 days before investors vote: person with knowledge of the matter

Xstrata’s biggest shareholders will ask for board changes if Glencore’s planned takeover of the company collapses next week, the Times reported

Siemens has threatened U.S. employees considering representation by the United Steelworkers union with “negative consequences,” Bloomberg says

TECHNIP differs from many other French industrial groups, as shares have risen more than a third in past year amid decline in country’s manufacturing base, FT reports

Reco

Aeroports De Paris PT Cut 1% to EU74 at Exane

UTILITIES/OIL/HEALTHCARE/CHEMICALS

News

Fresenius decided against reviving bid for German competitor Rhoen-Klinikum, capping more than 4 months of jockeying over the top spot in Germany’s hospital market, Bloomberg says

Novartis says COPD data further demonstrate portfolio potential

Novo Nordisk said experimental insulin degludec passed review by Japan’s First Committee on Drugs and is awaiting official approval from Ministry of Health, Bloomberg said

Royal Dutch Shell will get 1-yr air permit compliance order for drilling-related activities in Chukchi Sea off Alaska; the co. is redeploying full personnel to 2 drill rigs in east Gulf; the co. wins a contract to explore for oil in TUnisia

Total is lowering retail fuel prices at its own gas stations, but as a wholesaler it will continue to sell to other stations at the top price, Le Parisien reported

RECO

Galp Energia Raised To Buy From Neutral at Nomura

Gazprom Neft Raised To Overweight at Morgan Stanley

Repsol Cut To Neutral From Buy at Nomura

TMT

News

Samsung Electronics will take the “necessary legal measures” to keep its products available in the U.S., Bloomberg says

WPP looking for at least 2 new non- executive board members after a majority of co.’s shareholders voted against pay packages, Sunday Telegraph says

Reco

ARM Cut to Sell VS Hold at Deutsche Bank

Iliad Cut To Equalweight VS Overweight at Morgan Stanley

Iliad PT Raised 4% to Eu140 at Exane; Kept at Outperform

RETAIL/CONSUMER/LUXURY

News

Campari says that it has reached an acquisition agreement with the holders of 81.4% of Jamaican rum maker Lascelles DeMercado that values the company at $414.8m.

Diageo may pay 30b rupees for up to 27% stake in United Spirits / United Spirits denies report of stake sale to Diageo

Pernod Ricard will continue paying down debt as debt lowering is a priority, Investir reported; the Co. has no plans for a large deal in S/T, CFO Gilles Bogaert told FT Deutschland

Reco

Carrefour exits UBS least preferred European food retailers

Morrison Supermarkets Cut To Neutral From Buy at Nomura

SMALL/MIDCAPS

RESULTS

HAVAS 1H revenur rise 8.4% to €829 mln; 1H net rises 5.7% to €56mln; 20% increase in net earnings per share to 0.15 cents (€);

NEWS

Mediaset Espana Comunicacion’s Telecinco channel and state-owned La1 shared the lead of Spain television ratings in August with a 12.2% share each

NRJ Group increased advertising rates by 30% over the past year and aims to raise domestic market share to 13% from 11.7%, Le Figaro said

Sulzer will report better results in the second half of the year compared with the first half, CEO Klaus Stahlmann

Synairgen is in talks with potential partners following the results of a study of an experimental drug targeting infections that trigger asthma attacks, the CEO said

Reco

Baloise PT Cut to Chf105 VS Chf115 at Berenberg; Kept at Buy

Boiron Raised To Hold From Sell at SocGen

Boskalis PT Raised to Eu36 VS Eu32 at ING, Keeps Buy

CMB Cut to Sell From Hold at IN

Credem PT Raised to Eu3.2 VS Eu2.7 at Nomura; Kept at Neutral

CSR Cut to Sell VS Hold at Deutsche Bank

Havas Cut To Neutral VS Buy at Citi

Havas PT Cut 6% to Eu4.8 at Exane; Kept at Outperform

Imagination Rated New Hold At Deutsche Bank, PT 590p

Ocado Added To UBS Least Preferred European Food Retailers

Orascom Construction Cut To Neutral VS Buy at Citi

Pop. Emilia Cut To Reduce From Neutral at Nomura

Pop. Milano Raised To Neutral From Reduce at Nomura

Rubis PT Raised 6% to Eu53 at Exane; Kept at Outperform

– Morgan Stanley says Rhoen-Klinikum may fall to ~EU14.5 after Bloomberg report saying Fresenius said to decide against reviving bid

Somfy PT Cut 22% to Eu144 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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