The Dawn Patrol – 07.09.12 – On Spain. Forex targets. JPM more bullish, MS more bearish. Have a great Week End.

Bonjour,

Markets to open up following yesterday’s rally after the ECB meeting and Asia as well with Shanghai up 4% as the NDRC (http://bit.ly/RS0MHQ) approved further infrastrucutre spending. Today, we’ll focus on US NFP (14:30) which are expected to come in at 130k, but given the recent data we should have some positive surprises.

PEUGEOT leaves the CAC Index it entered in 1987 (when the index was created) and its replaced by SOLVAY

Ups and Downs

Credit Agricole Raised to Neutral from Underweight at JPMorgan and upgraded from UW to OW at MS. Legal & General Cut To Neutral VS Outperform at Credit Suisse. Barclays Raised To Buy VS Hold at Deutsche Bank. FRANCE TELECOM Added To Ubs’s Least Preferred List. Continental Cut To Neutral VS Buy and Faurecia Cut To Sell VS Neutral at UBS.

AFTER HOURS

AMAZON slightly up on the launch of its new Kindles which geekly speaking have some really nice specs at a very nice price. I love this company, why is it soooooo expensive?

SMITH & WESSON up 20% after markets on raised sales and earnings guidance.

AUDIENCE down 60% as it announced its voice processing technology may not be used in the next iPhone.

APPLE is in talks to license music for an online radio service similar to the one operated by Pandora Media. (Wall Street Journal)

CURRENT THEMES

On Spain’s reluctance to ask for aid.
Mario saved the day as the plan is in line with what was expected and fears regarding the size or the seniority of bondholders have now been eased. Rajoy gives a slightly different picture. Apparently the conditionality is stricter than what we (editorial we) thought and more importantly it’s stricter than what Spain was expecting. Madrid just doesn’t want to suffer the same fate as Ireland and Greece did with a squad of “Men in Black” from the ECB, IMF and European Commission.

This morning’s article in the FT highlights the details of the situation (Rajoy stance sets stage for EU stand-off – (FT.com http://on.ft.com/TpyoCz).

STRATEGY

FOREX

Personnally, I’m really struggling to understand where the EURUSD is going. Browsing through FX strategists pieces, it’s becoming the norm to be long EUR vs USD. GS is clearly bullish with a target at 1.30. JPM has a Sept target of 1.22 and then 1.24 in December. MS is now looking for 1.19 for Q4 and 1.24 Q3…

JPM (Lee) US Equity Strategy
Stay Constructive on tS&P 500.

High Yield’s “P/E” at 14.5x means S&P can go higher, US construction led recovery led by housing is replacing manufacturing as the driver, we see “melt up” into election, HF beta shows funds still underweight, EASI shows continued upward momentum. Stay Cyclical. “We have been bullish on 2012 over the course of the year, provided incremental reasons to own equities. Given our view of a continuing melt-up, we believe the right tilt is Cyclicals and Energy and Financials. For the past six weeks, these groups have been leading the S&P 500. Given the steadily improving US economic data, coupled with bold steps by the ECB, likely continued policy support in the U.S., and underinvestment by investors broadly, we see a chase into Cyclicals continuing. Small-caps are also looking incrementally attractive.

MS (Parker) US Equity Strategy
This is a 73p presentation, so I won’t go through it now. But it’s a negative call.

Our Bull-Base-Bear Case Scenarios Show Risk-Reward Is Skewed to the Negative – Our View Is that the Next Double Digit Move in the Market Is Down – Not Up.

EUROPEAN EQUITIES

Credit Agricole S.A.(MS, Thibault Nardin) Emporiki Disposal Still Mispriced – OW
The dis p osal of Em p oriki should be a game changer for CASA’s shares. We think the stock has become investible again, with ~30% upside potential to our base case despite the recent rally. Upgrade to OW, the stock is trading on 0.5x P/NAV for ~11% RONAV.

FINANCIALS

NEWS

Ex-UBS trader Adoboli’s $2.3b trading-loss trial to begin next week

HSBC Opens Branch in Tangshan, Hebei Prov., in China

MAN Group Hires Ex-pimco Bond Chief Sudesh Mariappa

Deutsche Bank Probed on Energy Market Manipulation; Deutsche Bank to Cut More Jobs, Handelsblatt Says

Nomura, UBS, Credit Suisse Prepare for European Job Cuts

FSA’s Turner Tells Barclays It Needs to Change Culture

UBS Cuts China 2012 GDP Forecast to 7.5% From 8%

Lloyds CEO Wants U.K. Watchdog to Prevent Mis-selling

Reco

Bank Saint Petersburg Cut to Underweight at Barclays

Credit Agricole Raised to Neutral from Underweight at JPMorgan

DNB ASA PT Raised 4% to Nok84 at Exane; Kept at Outperform

Legal & General Cut To Neutral VS Outperform at Credit Suisse

Pzu Group Rated New Neutral At Exane; PT Pln367

Barclays Raised To Buy VS Hold at Deutsche Bank

INDUSTRIAL/MINERS/SERVICES

NEWS

Xstrata CEO Mick Davis has encouraged Glencore and Qatar’s sovereign-wealth fund to work out their differences ahead of a shareholder vote on this year’s largest takeover: people familiar with the situation; Glencore-Xstrata merger is expected to fail when it goes before XTA shareholders.

BMO Cuts Glencore Net Present Value by 12% on Increasing Costs

Prysmian to Buy Global Marine Systems Energy for EU53m

Germany’s state-owned development bank is selling 5% Deutsche Post stake for at least 942m euros

Deutsche Lufthansa canceled >1,000 flights as main cabin crew union started its biggest strike ever

Aluminum Demand Is Strong, Rio Tinto Alcan CEO Cote Say

BHP Has Strong Financial Flexibility, S&P Says

Reco

Meggitt Raised To Buy VS Neutral at Citi

Bouygues Removed From Ubs’s Least Preferred List

Hochtief Cut To Hold From Buy at SocGen

ThyssenKrupp Sees FY12 Ebit Loss at Americas Steel Unit: FTD

UTILITIES/OIL/HEALTHCARE/CHEMICALS

News

BP Deepwater Horizon Crude Oil Found on Louisiana Coast, BP Aimed to Blame Rig Workers for Spill.

Lundbeck Makes EU10m Equity Investment in Biotie

RECO

Elekta Rated New Overweight At Barclays; PT Sek382, Reinstated Buy at BofAM

TMT

Reco

France Telecom Added To Ubs’s Least Preferred List

RETAIL/CONSUMER/LUXURY

RESULTS

News

Peugeot dumped from CAC 40 index as carmaker’s value dwindles

Volkswagen cuts 2012 sales target by 300,000 vehicles

JCDecaux Signs 5-Year Extension for New York Airports

Reco

SCA Raised to Overweight from Neutral at JPMorgan

Continental Cut To Neutral VS Buy at UBS

Faurecia Cut To Sell VS Neutral at UBS

Reed Elsevier NV Added to Ubs’s European Key Call List

SMALL/MIDCAPS

NEWS

Banco Comercial Says Share Sale to Add 90 Bps to Capital

Seat Pagine Gialle Completes Financial Restructuring

Benetton to Open 40 Micro Stores in Japan, Asahi Says

Reco

Gedeon Richter Cut To Hold From Buy at UniCredit

Oriflame Rated New Sell At Goldman, Sk220

Audience Cut To Underperform VS Outperform at Credit Suisse

Econocom PT Raised to Eu24 VS Eu21 at ING, Stays Buy

Aquarius Platinum Reinstated Underperform at BofAML

Lonmin Reinstated Underperform at BofAML

Asos Rated New Buy At Jefferies

Dixons Retail PT Raised to 16p VS 9p at JPMorgan

Geox PT Cut to Eu1.7 VS Eu1.83 at Goldman; Kept at Sell

Simcorp Raised To Hold VS Sell at Nordea

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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