The Dawn Patrol – 01.11.2012 – On China PMI, On Europe, On BG. Poor Asian tech and poor turkeys…

Good morning,

Asian consumer stocks were lower after ugly numbers from Panasonic & Sony (down by -20% and 4% resp.), but most indices were slightly higher and the Shanghai Composite surged 1.8% after positive Chinese PMI data (expanded for 1st time in 3 months: Oct PMI 50.2 above 50 sugg expansion v 49.8 in Sept; HSBC Markit PMI at 8-month high). US Stocks closed out the day essentially unchanged during a very quiet session (Volume on the NYSE: 852m shares vs 732m shares 2w average).Tech traded lower although most of the underperformance was due to AAPL weighing on the sector (-~2%). Today we’ll watch the UK PMI and US ADP Employmen rate.

CARREFOUR agrees to sell Malaysia Retail Unit to Japan’s Aeon
RHOENKLINIKUM Board to name Martin Siebert New CEO – FTD
REMY COINTREAU enters exclusive talks to Buy Cognac-Maker Larsen
PROSIEBEN said to select 3 Bidders for Nordic Sale Process
PANASONIC shares fell steeply on its increased loss warning, and the company announced it would suspend its dividend for the first time since 1950. It will lose almost $10bn this year in as it “cleans house of poorly performing operations, writing down billions of dollars of goodwill and assets in its mobile and energy units while its new boss readies for a fresh bout of restructuring”
CIC to buy stake in Heathrow: China’s sovereign wealth fund, China Investment Corp, confirmed in a statement today it would buy a 10% stake in Heathrow Airport Holdings.
UNITED considers replacing 747s with A350s: “United Continental is in talks with Airbus SAS about buying A350-1000 jets, a step toward the first US purchase for the planemaker’s largest twin-engine model, people familiar with talks said.”
NOVATEK drop as much as 3.4% on Inter RAO Gas sales report – now buying ~30% of Novatek gas – Rosneft signed 25-yr contract to supply gas to Inter RAO from 2016 that may be worth at least 2.5t rubles ($80b),

UPS & DOWNS

MS keep OW rating on CON on better FCF and EPS, coupled with upside to tyre profits from the recent first snowfalls in Europe and remain OW on Barclays as they see UBS’ recent actions as providing a revenue opportunity to Barclays in FICC, and giving cover for ambitious restructuring. MS keep UW on CRH as they are cautious on numbers. JPM remain UW on AAL as CEO departure not sufficient to reverse underperformance and OW DPW as Ongoing Express outperformance / re-emergent operational gearing in Q3 likely to support valuation. Richemont raised to Buy from Underperform at BofAML

AFTER HOURS

V +1.8% on earnings and A share repurchase program. BMC +2.7% on news of USD 1bn buyback. ZUMZ -11% on reduced forecast. CRUS +0.9% on higher-than-expected forecast.
NFLX +13.88% – Netflix surged after widely-followed investor Carl Icahn disclosed a 9.98 percent stake in the movie-streaming website in a 13-D filing
FB: -3.79% – Facebook dropped after the social-networking giant’s lock-up period expired, allowing employees to start selling restricted stock in the company. Employees were able to sell their vested shares on Monday, but were unable to do so due to the market shutdown. About 234 million shares held by employees are eligible for sale in the public market.

CURRENT STUFF

On China
China final October PMIs: The HSBC/Markit reading (based on a larger SME category) beats and comes in at 49.5 (eight month high) from a 49.1 estimate (from the flash) and 47.9 in September. It was however the 12th straight month below 50. The official manufacturing PMI comes in also higher MoM at 50.2 from 49.8 in September, firmly back in expansion mode.

On Europe …
Principle haircuts to Greece Eurozone loans said to be off the table. EU’s Rehn still expects final decision on Greece can be made at Nov 12th Eurogroup meeting

Big defeat for Cameron as House of Commons votes against EU Budget plan. Some members of Cameron’s Conservative party said to have defected, voting against the EU budget, wanting a cut in real terms.

On BG Group
Citi cut pt to 1380p vs 1530p but kept at Buty – MS lower pt to 1300p vs 1450 and maintain EW – JPM keep it OW as they see market’s negative reaction excessive – resources and portfolio attributes largely intact – Bernstein reiterate O/P reducing target price from £20.20/share to £19/share, leaving 66% upside to the current price. GS reiterate Buy citing Short-term disappointment vs. long-term growth. ML downgrade from Buy to Neutral. Exane cut its pt by 14% to 1500p and keep O/P

Other stuff
EU Short Selling Regulation taken over by ESMA, to come into effect on 1 Nov http://www.esma.europa.eu/page/Short-selling

Also EU legislation which bans naked CDS to go into effect today.

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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