The Dawn Patrol – 14.09.12 – On Equity inflows, on Greece, on the Fed. JPM raises its S&P target, MS presents its views. El Erian is grumpy. More…

Aloha,

Market to open up as the US markets reach new highs since Dec 2007. Every asset will continue to rally, we still like Gold, EM and some tech names. Financials should benefit from this Bernanza. We’ll look at the EZ Employment, the CPI, the US retail sales and Michigan’s confidence index. The Euro leaders meet today for the Ecofin. Remember to exercise and rest this week end.

This Dawn Patrol may look long, but it’s only nice charts.

Ups/Downs

EON cut to Sell at Berenberg, MNOD raised to Buy at BofaML, VTB cut to Sell at GS, UBS downgrade DBK to Neutral vs Buy and Sell on Socgen with 20e pt, Bernstein reiterate UW on NOKIA, JPM reiterates OW on PFC and DANSKE, ABB raised to Outperform at Exane.

CURRENT THEMES

On Equity INflows
By Weiyi Lim

(Bloomberg) — Global equity funds lured the largest weekly inflows this year amid speculation the U.S. Federal Reserve will introduce a third round of asset purchases known as quantitative easing, according to Citigroup Inc. Equity funds attracted $12.1 billion in the week ended Sept. 12, Markus Rosgen and Yue-Hin Pong, analysts at the brokerage, wrote in a report today. Global emerging-equity funds lured $390 million, according to the report, which cited data compiled by EPFR Global.

On Greece
Just because we speak less of Greece doesn’t mean things are better. An IMF member said “Greece will require additional financing, which may take the form either of official sector involvement or of additional loans, hopefully on more favourable terms”. And Draghi: “Greece can remain a euro-zone member but must “fundamentally change its policies. And this is what everybody is telling them to do.”

On the Fed
It’s a Bernanza for Gold, Silver, commodities and stocks I guess. As Jon Hilsenrath previewed in yesterday’s article, the Fed went on with a program to inject $40bn in mortgages backed securities every month. This program comes on top of the operation Twist ($45bn every month) and will run until every American has a job. GS must be happy, Michael Woodford (the economist who advocated for QE with a target) and investors should be happy. Now we may have to fear inflation, but in the main time, keep your Gold exposure (GDX, GLD, SLW, GG, NEM and GOLD), buy an iPhone 5, buy some AAPL, some Dialog Semi and ARM. I still don’t know what to do with EURUSD, although I would be a seller but I’ve been a seller for 6 months.

There are so many articles on the subject, all say approximately the same things. El Erian is not happy with it. He wanted the Fed to lower the interest on excess reserves so that banks could lend more and he wanted a specific economic target. QE3 is a sign of the Fed’s policy purgatory | The A-List http://on.ft.com/UapYuM

Citi On QE3 – Less Flavor, More Calories | ZeroHedge http://bit.ly/PowCMq
Hilsenrath’s article: Fed to Buy More Bonds in Bid to Spur Economy – WSJ.com http://on.wsj.com/U0vBPa

STRATEGY

JPM (Lee) US Equity Strategy FLASH
Raising short-term target to 1495 (from 1475). Still cycle into Cyclicals. 27 ideas.

Equity markets are in the midst of melting up, something we postulated was highly likely in late July (see The case for a melt-up… dated 7/27/12) based on the combination of (i) improving US construction activity, particularly housing; (ii) accommodative central banks and stabilization in Europe; (iii) attractive relative value with HY as the leader; and (iv) investor positioning that was defensively skewed.

MS (all) Global Economics & Strategy.
You’ll find on MS website a 135p presentation by all MS economists and strategists on the next big things: global growth, Europe and their outlooks on FX, FI, Equities.

Four Macro Stories Matter Most for Markets Right Now

1. Global growth slowdown, with no clear signs of inflection
• Policy is not unconstrained, even in EM, so limited catalysts for a strong turnaround
• Aggressive monetary easing would modestly help EM and only reduce tail risks in DM
2. EM growth slowdown may not just be cyclical, as structural challenges become evident
• Policy easing should help the recovery, but the export growth model is breaking down and increased internal demand has yet to replace it
• EM is still at risk from the 3Ds: the downturn in DM, deleveraging by European banks, and a demand for US dollars
3. Eurozone crisis is far from resolved
• There are few details yet on a banking union, and no progress on a fiscal union; political backsliding is a real possibility
• Even with institutional reform, the region is stuck in recession, while the banking market risks further fragmentation
4. Challenges to the US outlook: optimism should be tempered
• The housing market has bottomed, but the recovery is likely to be very tepid
• The 5% fiscal cliff looms in 2013 and political gridlock doesn’t bode well for an easy resolution
• Other positives — manufacturing strength and cheap energy — are at best long-term stories, while labor market challenges will linger

EUROPEAN EQUITIES

FINANCIALS

RESULTS

NEWS

Allianz Says Board Member Wemmer, CFO Baete to Swap Jobs

Deutsche Bank Wants Competitors to Share Software: FT

Aviva Abandons Bid for Fund License in China, IBT Reports

French Banks Initiated Cautious At UBS

Monte Paschi CEO Says No Contact With New Investors: Sole

Reco

Vienna Insurance Group Rated New Buy At Nomura, PT Eu45

SocGen Restarted Sell at UBS, PT Eu20

BNP Paribas Rated Neutral at UBS, PT Eu40

Deutsche Bank Cut To Neutral From Buy at UB

Svenska Handelsbanken Cut To Sell VS Hold at Nordea

INDUSTRIAL/MINERS/SERVICES

RESULTS

NEWS

BAE Systems Sets Conditions on Merger With EADS, FT Says

Eads German Aerospace Official Seeks Emission Suspension: Reuters

France Wants To Have 9% Stake in Eads-bae, Tribune Say

No U.S. Strategic Buyer Will Emerge For BAE Systems, RBC Says

Siemens May Win 1.6B Ringgit Malaysia Train Supply Deal: Edge

Reco

Norilsk Nickel Raised To Buy VS Neutral at BofAM

ABB Raised to Outperform From Neutral at Exane

Alfa Laval Raised To Neutral From Underperform at Exane

Kazakhmys PT Cut to 800p VS 925p at Nomura, Stays Neutral

Vopak Cut To Reduce VS Hold at ABN

Intertek Cut To Neutral From Overweight at HSBC

SGS Cut to Neutral From Overweight at HSBC

UTILITIES/OIL/HEALTHCARE/CHEMICALS

RESULTS

News

Lundbeck to Halt Sale of Leukemia Drug Elspar: Capital.gr

ENI: Italy State Lender Says It Sold 1.7% of ENI on Market

PGNiG Says Stored Gas Impairment Possible in 2H, Parkiet Says

Greenpeace Says It Shut Down 51 Dutch Shell Petrol Stations

RECO

E.ON Cut to Sell From Hold at Berenberg

Verbund Cut To Sell From Hold at Berenberg

Novartis Added To Ubs’s Most Preferred List

TMT

RESULTS

News

Fastweb to Invest EU130m in FTTS Expansion in Italy by End 2013

Telecom Italia Names Peluso CFO

STMicro Names New Strategy Officer, to Present New Plan in Dec

Aegis/Dentsu Completion Highly Likely on U.S. Approval: C.Suisse

Swisscom Appoints Mario Rossi as New CFO

Reco

SES Raised to Outperform VS Neutral at Credit Suisse

RETAIL/CONSUMER/LUXURY

RESULTS

News

Ruerup Seeks End of Lufthansa Conflict Late Oct.: Tagesspiegel

Unilever to Build 300m Yuan Plant in Sichuan Province: Daily

Carlsberg Objects to Proposed Russian Ban on Plastic Bottles

Reco

Pirelli PT Raised to Eu10.4 From Eu8.7 at SocGen, Stays Buy

SMALL/MIDCAPS

RESULTS

Club Mediteranee Third-Quarter 2012 Revenue EU332M, Up 2.7%

Gerry Weber 3Q Rev. Beats; Co. Raises FY12 Rev. Forecast

NEWS

Montea Signs First Tenant for Future Phase 3 of Brucargo West

Aer Lingus Gets Industrial Action Notice From SIPTU

Deutsche Beteiligungs Swings to 3Q Profit From Year-Earlier Loss

Hikma Fails to Win Panel Vote for 1 Use of Blood Pressure Drug

DS Smith Added to Ubs’s UK 1st XI, Replaces BAE

Reco

Uniqa Rated New Neutral At Nomura, PT Eu10

Stagecoach Cut To Neutral VS Buy at Citi

National Express Raised To Buy VS Neutral at Citi

EI Towers Rated New Buy at Berenberg, PT Eu25

M6 Cut To Equalweight From Overweight at Barclays

Daily Mail Cut To Equalweight VS Overweight at Barclays

Globo Rated New Outperform At RBC, PT 55p

OTHER STUFF

Even the waves will benefit from QE3:

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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