The Dawn Patrol – 18.09.12 – On Spain, On the Markets. Arkema, Schneider and many other changes…

Bonjour,

Markets expected flat today. We’re still in this hangover period of what was a nice party (too much liquidity), but it’s not over, it’s just Spain who is ruining the mood by not asking for a fix. Today, we’ll watch UK CPI, the ZEW (11:00), the Spanish bonds auction (around 11:00 too). In the US, the Current Account Balance and the NAHB Housing Index.

Ups and Downs

MS downgrades SCHNEIDER (See below) WENDEL Cut To Hold From Buy at SocGen. UNILEVER Added To Ubs’s Most Preferred List; Replaces NESTLE. HANDELSBANKEN Cut To Neutral VS Buy at UBS 7:39. NORDEA Raised To Buy VS Neutral at UBS 7:39. UBS cuts LVMH to N from B, raises RICHEMONT to B from N and cuts SWATCH to N from B. Also, HERMES PT Raised to Eu220 From Eu150 at UBS. UBS PT Raised 22% to Chf11 at Barclays, Stays Underweight. SocGen upgrades L’OREAL from N to OW. MS lists 4 EUROPEAN STAPLES town, 4 to avoid over next 3-6 months: 4 to own: ORIFLAME, IMPERIAL TOBACCO, PERNOD, DIAGEO. 4 to avoid: UNILEVER, BEIERSDORF, L’OREAL, DE MASTER BLENDERS.

ARKEMA. I know I advised to take profits a few days ago ahead of today’s investor day. Reading the press release, it seems they’re trying to please investors and it will go against my call as they increase the payout ratio to 30% and significantly incerase the dividend. They are confirming previous target. Shares up. My mood down.

EU27 New Car registrations down 8.9%

AFTER HOURS

Volume on the NYSE: 665m shares vs 704m shares 2w average

Stocks snapped a four-day rally Monday, pulling back from Fed-fueled multi-year highs, amid fresh geopolitical worries and following a drop in oil prices. Apple crossed $700 a share in after-hours trading after closing at a new all-time high after the tech giant said iPhone 5 sales set a record over the weekend. Stocks took another leg lower around 2pm ET as oil briefly plunged $4 to below $95 a barrel. Some traders passed around rumors about a “fat-finger” trading error, while others buzzed about a potential release from the Strategic Petroleum Reserve. CME Group said it is “unaware of any technical issues” regarding the crude price drop and the White House said there are no immediate plans to make changes to the SPR.
NFLX: -5.7% – Netflixslumped to lead the S&P 500 laggards after Macquarie initiated coverage of the online movie streaming company at “underperform.”

CURRENT THEMES

On Spain
Same. Markets want Spain to ask for aid, and we’ve seen the yields going back up again. Nothing to worrisome for now, the rally is still in place despite the current pause.

On the Markets
We are entering a quit period in terms of macro data and given the strong performance recently, we should see a bit of a pause. The sentiment is still positive and it’s time to adjust the strategy. Chasing the laggards may not be the best investment strategy, but there are many analysts and sales people starting to advise to take profit on the best performers (the way I do on Arkema). Keep the dividend payers, keep the providers and leaders of the tablet wars, keep the names with defensive growth.

Here is a summary of all leading strategists fears: The #1 Threat To The Market – Business Insider http://read.bi/Rl2neV

On Gold: MORGAN STANLEY: ‘Fed Action Is A Game Changer For Gold’ – Business Insider http://read.bi/Ui6Wpe

EUROPEAN EQUITIES

SCHNEIDER (MS, Uglow).OW to EW, PT: €55 to €54
Upside Potential Reflected Now – Downgrade to EW.

Ben has been very bullish on this same for some time. Yes the all market is bullish now, so the premium should be raised as well, but still, he prefers to take profits as we reach his PT. The downgrade is based on Risk Reward, there are more risks forward as well: construction dynamics in France, the automation industry turning negative and a potential shift towards acquisitions.

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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