The Dawn Patrol – 12.09.12 – On a very important day, On China. Bernstein Strategy piece. JPM on Media.

Bonjour

Markets flat to up this morning in a eventful day as we’ll get the Banking Union proposal, the German vote on the ESM, Dutch elections and the iPhone 5 launch. Asia (ex China) up with stimulating comments from the Chinese Premier. The EURUSD at 1.2873! Gold at 1,737… Today, macro eyes on the EZ IP for July, UK jobless claims, the FOMC meeting starts. Also, Italy to sell bills around 11:00 and Germany to sell bonds around 11:30.

Hot corporate newsflow :

REPSOL said to receive at least 6 offers for LNG assets

GLENCORE may near XSTRATA deal prize with Qatar taking back seat

VODAFONE investors said to face longer wait for VERIZON dividend

– LeFigaro reports France ready to open door to shale gas exploratio

Ups/Downs :

(Several profit taking recommendations on periph banks fyi) VOD cut to Neutral vs Buy at Nomura, BBVA cut to EW and SAN upgraded to EW at MS whereas ICAP cut to UW, Subsea7 raised to OW at MS, Henkel rated Buy at Berenberg, Assa Abloy raised to Buy at BofA/ML, Bernstein keep OW on XTA, LVMH cut to Neutral at ML, BT pt increased to 300p vs 2500p at CS and VIE pt cut 12% at Barcap, UCG cut to Neutral and ISP to Sell at Citi, WOS cut to Neutral at UBS. JC DECAUX raised to OW vs Neutral at JPM.

FACEBOOK regained some colours last night as Zuckerberg said that the company is about to make a lot more money on mobile than on its desktop business. The fight for your mobile space is on… And as Apple’s new iOS is much more integrated with Facebook, there could be some truth in there. Time to buy FB? I really don’t know, I use it with AdBlock.

CURRENT THEMES

On a very important day…
It’s the 12th of September… On the menu today: the European Banking Union at 9:00 which will be faced by criticism and will take a while to be approved… Then we have the German Constitutional Court ruling on the ESM and the Dutch elections… And then Apple’s launch of my next phone. And it’s such a great phone that it will save America (How the New iPhone Could Help Boost GDP – WSJ.com http://on.wsj.com/QEk7PN).

More seriously, the details of the banking union proposal may be really important as they can help the banking sector to continue to rally. So keep an open eye (the good one) on this. I’ll try to update you.

On China
Wen Jiabao yesterday said “Be it monetary or fiscal, we still have ample strength” at the World Economic Forum yesterday. We should have more rate cuts going forward as inflation remains stable. But the main question people ask now is where in the world is Xi Jinping? (Chinese Mystery: Where Is Jinping? – WSJ.com http://on.wsj.com/QO3bmL). The next Chinese PM skipped meetings with Hilary Clinton and no one saw him for a while.

On the iPhone 5
Will you buy it? It doesn’t change a lot frm the iPhone 4s. It’s going to be more cumbersome in the pocket. You don’t really need a larger screen. The Samsung offering is pretty darn good. It will be faster than the iPhone 4s. So… No you really don’t need this new phone. If you want to replace your iPhone 3Gs, then yes. If you use Google, get an Android… Will I get one? Of course…

OTHER STUFF

In the FT, Martin Wolf looks back at the situation in Europe and the ECB’s OMT plan. He gives Kudos to Draghi, but blames the European politicians for their lack of action and their slow moves. He also admits, that although Draghi probably did the right thing and has strong arguments, he still needs European leaders to act as well, and this may not even be sufficient to save the Euro. What happens if a country doesn’t meet the conditions to be lent by the ECB? Then it’s too late… Draghi alone cannot save the euro – FT.com http://on.ft.com/QEgVDV

and this too: Managing a fragile Eurozone | vox http://bit.ly/U77JXo

STRATEGY

Bernstein (Zlotnikov) Equity Portfolio Strategies.
Is it time to Focus on Value Strategies?

I have to admit, I’m really not familiar with Bernstein strategist, but I find this piece to be really interesting. It makes sense. Here they try to identify areas of the market that have largely discounted the evidence of decelerating economic growth, and could have trading upside in response to monetary or fiscal stimulus.
They analyse global inventory levels, pricing, growth expectations, and valuation dispersions. Pricing Power is key. In that sense, many other strategists have used the same approach (MS and Citi), but they go deeper by adding inventory and valuation dispersion. Europe is worth looking at because of margins improvement despite top line deceleration and valuation dispersion. Then they give plenty of charts to prove their point and finally two list of stocks to look at…

A list of Attractively valued Stocks and stocks with Unattractive valuation: bottom 3 within sector on normalised PE, LBO Value or implied RoE…

In the first list, you’ll find (Europe): Deutsche Bank, BP, Total, Nokia (may be not such a great idea…), AstraZeneca,

EUROPEAN EQUITIES

MEDIA (JPM, Filippo Pietro Lo Franco). European Media Strategy and Data Watch

Two key themes with four top picks to play the media sector

The Media sector is outperforming MSCI EU for a third year in a row YTD (+5%), driven by cyclical stocks (+10%), while defensives have slightly underperformed (-0.3%). We see two key themes with four top picks to play the media sector: i) Ad agencies are less cyclical than perceived and therefore deserve a multiple re-rating (top picks Publicis/WPP); ii) Two restructuring stories which should be less impacted by the macro trends and should provide good cash returns (top picks Reed and Vivendi). We downgrade Informa, Mecom and Xing to N from OW as we see better opportunities elsewhere in each subsector: We prefer Reed to Informa, Moneysupermarket to Xing, and see continued pressure on Mecom ad trends. Following the significant decline in its share price since May 2012, we upgrade JCDecaux from N to OW, which we continue to see as an attractive long term growth story despite short term weakness in ad trends that are likely to persist in H2 12.

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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