The Dawn Patrol – 09.10.12 – On Europe, the IMF cut, US Results. MS European themes. Great deal on wheels.

Bonjour,

European markets to open flat/slightly up. China was up strongly on the news of a new $366bn infrastructure plan and rumours of another RRR cut.Today we’ll wait for the Italian deficit, the UK’s iP, the NFIB small business optimism. There are some European leaders meeting other European leaders and Angela will be in Athens to quell the protests… or not… And US Q3 results start tonight… with ALCOA, YUM! and CHEVRON.

for the France based cyclists, there’s a nice sale of Reynolds wheels on Private Sport Shop

Givaudan 3Q sales meet ests, keeps midterm targets

Sandvik board stopped CEO Faxander’s plans to sell unit, which has value of about SK10b

STMicroelectonics and the French state are in talks on research and development investments at a nanotechnology plant in Crolles, southeastern France

As rumoured yesterday, PPR board will meet today to discuss about FNAC options. IPO ? the most likely acc to local press (= 34% of 2011 revs)

EADS/BAE said to plan request for extra time (highly exp as deadline at UK takeover ends tomorrow). BAE investor opposition to the EADS deal is mounting, with more than 30% of shareholders expressing significant concerns. (FT)

HTC shares plunged after the Taiwanese smartphone maker reported its Q3 net income was 79% lower than the same period in 2011.

Suzuki Motor said sales to dealerships in China in September fell 42.5 percent from a year earlier

Ups/Downs :

JPM remain OW on Volvo and Scania ahead earnings and keep OW on MKS. Mitchells & Butlers raised to OW at Barcap, Sage cut to Neutral at ML, Nestle raised to Buy at Socgen, Bernstein reduce estimates on Bayer & BASF and cut INTC to UW. UBS reiterate Buy on RIO after US site tour (I like RIO/BLT pair), Diageo citing Jose Cuervo upside and ENI on improved outlook. JPM on SMid Metals & Mining : U/g AMAG to OW, d/g FXPO & NWR to UW, TALV to N. MS upgrades Vinci from EW to OW on valuation and lag and sells Ferrovial (OW to EW).

CURRENT STUFF

On Europe
Juncker says he’s quite happy with Greece’s progress so far. The €4.3bn of Portugal’s package was cleared for release. Benoit Coeure in a speech says the banking union will be a game changer.

On World’s growth
The world economy will grow 3.3 % this year and 3.6 % next year, the IMF said today, compared with July predictions of 3.5 % in 2012 and 3.9 % in 2013. China’s estimate was cut by 0.2% point each year to 7.8 % in 2012 and 8.2 % in 2013. Whilst this story makes lots of headlines today the IMF’s new forecasts are in fact they are still higher than were the street already is. As a read across J.P. Morgan’s equivalent forecasts are for +2.4% global growth in 2012, +2.6% growth in 2013 and for China +7.6% and +8% for 2012 and 2013 respectively.

On US Q3 results
As stated above, we start this very important Q3 season tonight with CVX, YUM and AA. We’ve had some significant profit warnings already (UPS, FEDEX, HPQ…) and earnings estimates have been lowered somewhat for this Q (not for 2013 yet). This will be key as it remains the only theme that investors haven’t really focused on yet as a big fear. We’ve had Europe, the Fiscal Cliff, China and the US elections. But this is real, this is business, this is the real economy… So stay tuned, I’ll keep you updated with previews and (if you’re kind enough) reviews…

Interesting reading …
– Big deals going extinct? E&Y survey finds 84% of executives only planning on deals worth $500 million or less. http://t.co/2YsLyYRr
– Why is Merkel visiting Athens on Tuesday? http://t.co/gedVT6Za
– Don’t bet on the dollar collapsing http://on.ft.com/R7DB0A
– US hedge funds increase leverage in August, but levels still far off pre-crisis and even 2011 peak report http://reut.rs/WIIrSl
– ESM Investor Presentation http://t.co/1o8IBgqCSTRATEGY

STRATEGY

MS (Patel) European Strategy
Identifying consensus geographical themes within European equity markets
MS analysed performance and valuation trends of their geographic exposure baskets to identify consensus regional preferences among European equity investors.
The themes they highlight this quarter are:
#1 Appetite for US exposure (MSSTREUS) beginning to wane.
#2 Investors remain lukewarm on European exposure (MSSTDEUE).
#3 Long Developed Europe vs. US trade still offers an attractive entry point.
#4 Policy developments have renewed appetite for the periphery (MSSTPERI), especially exporters (MSSTPEEX).
#5 Increased interest in China plays (MSSTRECH), particularly those investment-related (MSSTINCH).
#6 Preference for DM-consumer (MSSTCODM) over EM-consumer (MSSTCOEM).
#7 UK consumer-exposed stocks (MSSTDCUK) have been the best performers over the last 3M.

Max Kamir

Louis Capital Markets UK,LLP

Authorised and regulated by the FSA and Banque de France

3941 rue Cambon

75001 Paris

T +33 (0)1 53 45 10 74

E mkamir
I http://www.louiscapital.com

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