The Dawn Patrol – 30.10.12 – MS nifty fifty list, GS earnings revisions, Spain?? A much more…

Howdy,

European markets indicated flat to slightly down as the sky falls on NY. USDJPY went from 79.97 to 79.45 in a blip as the BoJ QE was only Y11tn while the market was expecting more. Gold at $1710.19 and the EURUSD at 1.2919. Today, macro eyes on the Spanish GDP and CPI, the German unemployment rate and the EU consumer confidence. Another round of earnings this morning (please check with your local brokers…) and an Italian auction.

Really massive damages in NY: http://global.nytimes.com/

(Oh I finally saw 007. Entertaining and some amazing camera works and beautiful scenery, but it lacks something…).

HOT

UBS announced 10k job cut (widely exp) and reported CHF3.1bln impairment charge related to goodwill writedown & non-fin assets in IB (= net loss for Q3), likely see loss Q4 on restructuring.
DBK beats in terms of 3Q net income…equity & debt trading ahead of forecasts amid imrpoved market conditions, BAYER beat, GEBERIT cuts FY sales targets, SOW 3Q beats & raises some 2012 forecasts, TOMTOM missed est and cut forecasts, METRO reports a touch lower & confirms forecasts, Erste inline.
ENI Net profit of EUR 2.48 Bln ; 3Q Adj Net EU1.78B vs Analyst Est EU1.56B (I’m going to have a closer look at this one. I have it on my buy list).

TELEFONICA Raises Eu1.45b In German IPO, Trading Starts Tuesday

BAYER offering a 76% premium to buy Schiff Nutrition for $1.2bln. Increasing exposure in US healthcare.

S&P revised CREDIT AGRICOLE outlook to Negative from Stable.

RWE & EON announce sell Horizon to Hitachi for £696m
ALLIANZ Sees Yr Oper Profit Over EUR 9b, Est. EUR 8.57b

Vivendi in early talks With ILIAD to merge with SFR – Les Echos (

Chrysler reaffirms forecast for the year and expects FCF to be “well in excess” of $1b (Positive for FIAT)

According to an article in the Australian Financial Review yesterday evening, Holcim Australia has announced plans to cut 150 jobs and halt production at around 10% of its sites. The CEO said that the decision reflects factors such as a downturn in the mining sector and changing market conditions. This looks like being part of the large scale cost savings plan originally announced in May.

Europe’s Crisis Spawns Calls for a Breakup—of Spain http://on.wsj.com/Rt7G8V

UPS & DOWNS

MKS raised to Buy at Socgen whereas Barcap cut it to UW (I like AH vs MKS), MS stay long Conti into the company’s 3Q results call tomorrow, DSY cut to Neutral at HSBC, JPM keep pushing Sanofi citing growth potential beyond the patent cliff continues to be underappreciated.. GS reiterates Conviction Buy on Unibail and Fiat kept a Buy at UBS after Chrysler 3Q beat.
VOLKSWAGEN Pref Raised to Buy from Neutral at BofAML.
MARKS & SPENCER Cut To Underweight From Equalweight at Barclays

SANOFI (JPM, Vosser) OW – €68.35, PT €78.00)
Growth potential beyond the patent cliff continues to be underappreciated
As we approach 2013, with Sanofi exiting its patent cliff at a higher level of profitability we believe investor confidence in 2013 margins and growth will increase. In addition, we continue to believe that Lantus forecasts are too low, and hence we also see potential upgrades further fueling the re-rating. We set a new end 2013 price target at €78 (11.2x 2014E Business EPS, [previously 11.5x 2013E]) in-line with the sector and which implies 16% upside.

CURRENT STUFF

On the Spanish bad bank.
Spain’s so-called bad bank (aka SAREB) will buy billions of euros worth of distressed loans and foreclosed property from commercial lenders with a 63% discount on average. This discount could weigh on the finances of its weakest banks as the government decides whether to seek assistance from the euro zone’s bailout fund. “SAREB is looking to manage these problematic assets effectively and conservatively,” Mr. Restoy said at a news conference. “This must be a profitable company, so the use of public funds is minimized.”.
All in all, my feeling is that it’s positive, it’s more transparent than expected, the deep discount will help Spain to come back faster.

On Spain
There are two noteworthy brokers reports this morning on Spain. One from UBS arguing that the storm is coming with the EC report on nov 7 the catalyst. The Spanish situation is deterioorating rapidly in terms of cash and the political backdrop is not great. The EC will publish its report on the 7th of Nov, and it will show its growth and deficit forecasts.
On the other hand, GS expects Spain to seek financial support in the coming weeks.

On Sandy
http://www.businessinsider.com/battery-park-flooding-2012-10

STRATEGY

GS launches a new Emerging Markets Macro daily (to replace the EM daily comment). This morning has some interesting comments and partial answers to the questions we’re all pondering: Is the EM cycle turning? Is the China slowdown over? Can EM provide a stronger domestic impulse? etc…
On China, GS says that they believe that growth is now bottoming out and we may see further improvement…

GS (Garzarelli) Global Markets Daily
Primary Market Support: Options for Spain

On our estimates, US TY10 already discount a ‘bad’ outcome for the ‘fiscal cliff’.
USTs are as stretched as they were in Oct-98, ahead of a period of negative returns.
We review and assess the primary market support options available to Spain.
We expect the BoJ’s asset purchases to be scaled up, and possibly extended.
The Eurogroup meets Wednesday to discuss options for Greece’s debt relief.
US and Chinese macro data this week should point to growth stabilization.

MS (Carr) European Strategy
Refreshing our Nifty Fifty+ basket

As you may have seen MS refreshed its list of Nifty Fifty+ European names. Looking for companies offering quality, growth and yield as well as GARP names. Growth is the new focus here, and I like that…
MICHELIN, AMEC, EADS, CONTINENTAL, BG GROUP, SCHNEIDER ELEC., ADIDAS, TECHNIP, ROLLS-ROYCE GRP, SWATCH GROUP, SAIPEM ORD, G4S, RICHEMONT (FIN), STANDARD CHART., AGGREKO, LVMH, SONOVA HOLDING, ARM HOLDINGS, LUXOTTICA GROUP, FRESENIUS MC, DASSAULT SYSTS., WPP, SHIRE, SAP STAMM, PUBLICIS GROUPE, BAYER, NOVOZYMES B, NEXT, NOVO NORDISK B, GIVAUDAN, BRIT. AMER. TOBAC., ASTRAZENECA, SYNGENTA, HEINEKEN NV, NOVARTIS, HEIDELBERGCEMENT, TATE & LYLE, ROCHE, HOLCIM, IMPERIAL TOB. GRP, SANOFI, CRODA INTL., SABMILLER, GEA GROUP, RIO TINTO PLC, SWEDISH MATCH, WOLSELEY, TELENOR, DIAGEO, BAE SYSTEMS.

GS Watterspiler) Strategy Espresso
3Q12 Earnings Tracker

Yesterday’s MS earnings tracker was great. Here is the GS one.
Stoxx 600 Results update:

The European earnings season has been weak so far. 95 companies have reported 3Q results that had at least two estimates (out of a total 230 we expect to include). 33% of companies reporting have beaten estimates by more than 5% (below the average over the past 12 quarters of 43%) while 35% have missed estimates by more than 5% (compared to 37% historically). On an absolute basis, 45% of companies have beaten estimates while 55% have missed.

The average equal-weighted EPS surprise has been -5.3%.This is comparable to the previous earnings season (2Q 2012: -4.4%) and below the 5-year average (0.8%). Results are more resilient on a cap-weighted basis with only 24% of the reporting market capitalization missing estimates by more than 5%. On a cap weighted basis, the average surprise has been -1.2% (2Q12: -1.2%).

On sales, 24% of companies reporting have beaten estimates by more than 2% and 31% have missed estimates by more than 2%. The average sales surprise has been -0.9%.

Revisions:Earnings estimates declined by 0.2% over the last month. 2012 earnings growth is expected to be -2.2% (our top-down forecast stands at -5%). Since the beginning of the year consensus expected growth has been revised down by more than 12 percentage points.

Sectors: Healthcare and Insurance have had the best results so far this season while Basic Resources and Technology have had the worst.

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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