The Dawn Patrol – 03.10.12 – On France… MS big Metals report; JPM GMOS. HPQ… And a nice app to wake up feeling relaxed.

السلام عليكم,

Markets to open slightly up according to the European futures. Asia was strong after the Romney/Obama debate and despite a massive strike in Indonesia. In the US, the S&P was uo 0.36% with banks and homebuilders up, but Tech was the laggard because of HPQ warning. Today, please read the summary on the big Metals report by MS, watch the ECB rates announcement, the BoE rates annoucement and in the US, the jobless claims and FOMC minutes. Big French and Spanish bonds auctions

Last week, I told you about FitBit, today, you should download SleepTime, it will help you monitor your sleep and wake you in the ligh sleep cycle…


Hot corporate newsflow :
European EBA giving update on banking cap raising plans 4 still failing: Cyprus Bank Pop, Bank of Cyprus, Monte dei Paschi + Nova Maribor the 4 Spanish ones exceed.
Singapore pressuring StanChart over governance: Temasek Holdings has been expressing its discomfort with the banks governance and is pressuring it to appoint more independent directors, people familiar with the investment company said.
Liberbank sells its 5% stake in Enagas via bookbuilding shares offered at 15.30-15.50
Bank foundations, holding total of 12% of UniCredit, to discuss dividend prospect, bank reorganization Messaggero
Unilever is looking for a buyer for its Skippy peanut butter brand (I wish could buy it, or at least the chunky one), which may fetch $300m to $400m.
Banco Santander SA and Deutsche Bank AG will lead the sale of new shares to fund a 2.5 billion-euro ($3.2 billion) capital increase for Banco Popular SA, Expansion reported.

Ups/Downs :

Enis pt raised to 21.2 vs 20.5 at CS, Tatnef & Bashneft cut to Sell at UBS whereas TNKBP raised to Buy, HEI kept as top pick in building mat. At GS, DTE raised to Buy at DB, JPM expect strong earnings from SREN and upgrade DLAR to OW. MS keep UW on SAND due to its mining exposure and UW on CRH reiterated. MS prefer BARC to DBK on deleveraging & ringfence. FirstGroup Raised to Equalweight at MS


Romney basically won last nights debate: Mitt Romney was widely viewed as more successful in the first US presidential debate of this campaign, in which he focused on weak growth and high unemployment. Two of Barack Obamas top campaign advisers conceded that Romney won on style, even as they said the president won on substance. Many observers were baffled that Obama failed to mention Romneys 47% gaff. Romneys chances of being elected president rose to 32% from 25% on Intrade after the debate. Obama and Romney Hold First Debate

Ahead of late trading, U.S. blue-chip stocks closed higher, with modest gains following upbeat data on U.S. private-sector job growth and activity in the services sector.
KFRT: -1.2% Kraft Foods Groupa spin off of Kraft Foods, saw an unusual spiketo $58.54 at the market open, before quickly falling back to regular levels. Nasdaq said it is canceling some trades above $47.82 and investigating the potentially erroneous transaction.

XHB: +2.22% Lennar , Pulteand DRHorton soared after a report that showed home prices are coming off the bottom faster than expected. Home prices climbed 4.6 percent in August from a year ago, the largest year-over-year gain in six years, according to market researcher CoreLogic.

NFLX: +10.84% Netflixsoared to lead the S&P 500 gainers after Citi reiterated its “buy” rating on the online movie streaming company despite some risk surrounding the company’s growth prospects.

BBY: +4.66% Best Buyjumped after Reuters reported the consumer-electronics retailer’s founder Richard Schulze and at least four other private-equity firms are examining the company’s books, which could lead to a $11 billion buyout.

HPQ: -12.96% The company pegged its fiscal 2013 per-share profit at between $2.10 and $2.30. Excluding restructuring costs and other items, the company expects profit of between $3.40 and $3.60 a share, well below average analyst expectations of $4.18, according to surveys by Thomson Reuters.

MAR: Marriott shares picked up 1.9% at $39.72 as the company said it made $143 million, or 44 cents a share, in its third quarter. A year ago, it lost $179 million, or 52 cents a share, and its adjusted loss in the year-earlier period was 29 cents a share. Analysts polled by Thomson Reuters had expected earnings for the most recent period to come in at 40 cents a share.


On France
Nothing much to say. Just remember that the Pigeons founders don’t want you to demonstrate this week end. Apparently, the government is ready to discuss some changes in this new tax law that was decided at another politicians’ heavy lunch and planned on the back of greasy napkin…


JPM (Loeys) Global Markets Outlook and Strategy
The Economy The rise in the September Global PMI adds further confidence that the deceleration in global economic activity that began earlier this year has bottomed and is on the verge of a rebound.
Asset allocation The main source of value in markets is the presence of high equity and credit risk premia relative to the falling volatility of markets and fundamentals. Weaker economic growth is a negative for risk markets, but weak growth by itself is not as it lowers volatility, which supports earning high risk premia. We thus stay significantly overweight credit and equities against bonds and cash.
Cross asset volatility strategy Selling credit vol has been the most consistently profitable strategy of monetizing volatility risk premia across asset classes. CDX HY and Brent oil straddles have the highest implied-to-realized ratios currently.
Fixed income We remain broadly neutral on duration and focus on spread compression trades.
Credit Stay up in yield, US HY loans and European high yield are most attractive on a carry-to-risk basis. Stay long US CMBS with the Fed at work in mortgage markets.
Equities Focus on sectoral trades. Momentum, positions and PMI changes point to a cyclical tilt. OW in US financials and materials vs. utilities. Stay OW US housebuilders to position for a solid US housing recovery.
Currencies We keep limited USD shorts, against NZD and EM FX.
Commodities We expect a modest rebound in the global economy over the coming months. This coupled with super easy monetary policy and a higher central bank tolerance for rising inflation expectations makes us more positive on metals. We are long base and precious metals but short agriculture.

MS (Richardson) Global Metals Playbook: 4Q12
Return of the Cycle.

This is a massive 80 pager. Peter gives his views on metals, and for him commodity prices are returning to their long term pattern of cyclicality, lower real prices, weakening terms of trade, and differentiated sector performance.
Precious metals: Amid this important transition in the global economy, gold and silver are the stand-out exposures. We expect a range of central bank policies and strong investor demand to underpin positive absolute price performance in both metals and a relative outperformance in silver. We expect platinum prices to benefit from continuing labour unrest in South Africa.
Base metals: While base metal prices have bottomed on shortcovering, the weaker metals (aluminium, nickel, lead, and zinc) remain vulnerable to renewed concerns over global growth. We continue to favour exposure to copper and tin.
Bulk commodities: Iron ore and coking coal fell later than metals, and we expect them to recover later, to lower levels than we had forecast previously. The mined energy price outlook is subdued

Commodity exposures by sector:

Our stand-out sector exposure in the current environment is in precious metals, with silver, gold and platinum all expected to provide absolute positive performance, and relative outperformance from silver. We remain cautious on LME metals other than copper and tin, as aluminium, nickel, lead and zinc remain oversupplied and vulnerable to renewed growth concerns after the recent shortcovering rally. In bulk commodities, iron ore and metallurgical coal prices appear to have troughed but any recovery will be to lower levels than previously forecast.

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


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