The Dawn Patrol – 19.09.12 – Inditex beats. Japan QEs too. MS’ clients poll. Rest is same old same…

Good morning,

Nothing really exciting happening today. People are waiting for their iPhones to arrive and check the rumoured features of the iPad Mini (http://tcrn.ch/T1UgVG) . Asian markets up as Japan keeps rates unchanged (0.10%) and goes full speed into QE by increasing its assets purchases by $700bn (where is all this going to end? Inflation??). Gold is up 0.25% to 1,776.38. Today we’ll monitor EU construction output, US housing data and some bonds auctions in Germany and Portugal.

INDITEX beats (again) 1H consensus
Stronger FY organic growth for ZODIAC
SMITHS FY EPS 92.6p; Analysts Est. 91.4p
FTE may be preparing dividend cut acc to Les Echos
BP in talks to sell Texas City refinery : MARATHON exploring a $2.5bn deal for troubled plant
– Merkel resolve for Pan-European projects tested with EADS- BAE
HEINEKEN says Thai Billionaire supports its APB Takeover offer
UBS said to plan about 90 investment-bank job cuts in Europe – as rumoured last week
LONMIN Workers End 6-Week Illegal Strike After 22% Pay Rise
DIRECTV said to contemplate Bid for VIVENDI’S GVT Division
PORSCHE ruling today expected : A court in Braunschweig announces the ruling in two cases against Porsche SE this morning. The plaintiffs in the two cases seek compensation for EUR 1.6m and EUR 3.1m of losses they suffered from investments in VW.
Ups/Downs
EIFFAGE rated OW at HSBC, HOLCIM raised to OW at JPM and reiterate OW on EDP + ASML, ZODIAC cut to Hold at DB, EVRAZ rated UW at Barcap, KGF cut to Neutral at Nomura, LUXOTTICA rated OW at Berenberg. Bouygues Cut To Neutral From Overweight at HSBC. Vinci Rated New Neutral At HSBC, PT Eu39. SES PT Raised to Eu24 From Eu22 at SocGen, Stays Buy.

 

 

 

AFTER HOURS

MSFT: Microsoft increased its quarterly dividend by 15 percent to 23 cents a share from 20 cents a share.

Stocks finished mildly in the red, extending the pullback to two consecutive sessions. There have been plenty of headlines in the last ~72 hours and some of them have been used to explain the recent weakness but in realty very little “new news” has occurred so far this week. Eco growth remains sluggish (listen to the FEDEX call) outside of housing (see NAHB), earnings are more negative than positive (see FDX, NUE), and Europe is still troubled but a lot more stable than it was just a few weeks ago. For the second straight day we saw a low conviction rotation of money out of cyclical sectors and into more defensive sectors

We are starting to hear from more and more Fed officials in the wake of last week’s QE3 decision. So far, no one has said anything controversial (i.e. hawks are hawkish and doves dovish). Bernanke is scheduled to meet w/the Senate Finance Committee Wed (at 10:30pm CET) to discuss recent policy decisions (per Bloomberg).

CURRENT THEMES

On Oil
Saudi Arabia offers more oil: Saudi Arabia has offered its main customers in the US, Europe and Asia extra oil supplies through the end of the year, a sign the world’s largest exporter is worried about the impact of rising prices on the global economy. The nation last month produced 9.9m b/d, but the senior official said that Riyadh was now again pumping around 10m b/d. “We are consulting our clients about their oil needs and telling them we are ready to supply more,” a senior official said. (Financial Times)

On Europe
Greece should finalise its €11.5bn spending cuts plan by Sunday and hopes to meet the promised targets to get aid. France should do the same…
EU CRISIS ROAD MAP: Key Milestones Ahead – WSJ.com http://on.wsj.com/QYMYib

On QE3
Very interesting article in the FT by Martin Wolf. Is QE3 riskless? No. Does it makes sense? Yes, because the results of doing nothing would be far worse. Some extracts:

“The Fed’s plan is to buy mortgage-backed securities of the government-sponsored agencies, Fannie Mae and Freddie Mac, at a rate of $40bn a month. It will continue to lengthen the maturity of its assets and reinvest the principal repayments from its holdings of agency debt and mortgage-backed securities in yet more agency securities. These actions will raise the Fed’s holdings by about $85bn a month and so should, it argues, put downward pressure on long-term interest rates, support mortgage markets and help to make broader financial conditions more accommodative. Above all, the Fed is committed to continuing with this policy until the labour market improves substantially.”
“It is the demand, stupid.”
“Will the Fed’s new approach work? On this, there must be questions.”
Bernanke makes an historic choice – FT.com http://on.ft.com/T1NxuS

STRATEGY

MS (Secker) European Equity Strategy
Conflicting messages from interactive polling at our Global Strategy & Economics Day – 13th September, London.

Key observations:
Under-invested bulls. Positive sentiment towards risky assets, but most have lower than normal risk exposure.
Complacency about risks of US or global recession.
Fears over the fiscal cliff impact, but only 20% of attendees see a 50% chance of global recession.
Europe – value to shine through the gloom. Europe to be the best poerformer followed by AM with gains of 0-10%.
EM – growing uncertainty about the long-term.
Consensus is bearish on commodity sectors.

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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