The Dawn Patrol – 07.11.12 – He Lost! LCM/RCUBE Monthly report, On Greece, on the Chinese handover… More!

Bonjour,

European markets to open flat to slightly up. USD weakened on speculation Obama’s re-election increases the chances of the US continuing its monetary easing policies. The S&P future has rallied from the lows, it traded at 1412 at 3am and has since rallied 5 points as the networks called the victory but is still indicating a lower opening. Asia flat over the night. Gold at 1725.75 and EURUSD back up at 1.2868. Today, we’ll watch EZ retail sales, German IP, US MBA mortgage apps and consumer credit. Germany to sell €4bn of 5yr notes.

Another day with lots of earnings, call me if you want to know more.

He lost! Currently second in the ASP WCT rankings, Kelly Slater struggled to find a rhythm in his Round 4 bout against Adriano de Souza, finishing equal 9th overall. Despite Slater’s early exit from the event, a ninth-place finish replaces his last-place injury points from Brazil, exponentially narrowing the ratings gap with Parkinson, the current leader.

L’OREAL missed on organic growth & confirms 2012 outlook, TEF sales and net inline , confirms outlook & reiterate dvd for 2013, ALO 1H profit beats whereas HOLN missed 3Q net, BNP PARIBAS 3Q net comes in above estimates, first glance the IB beats, CARLSBERG 3Q sales first glance beat, VEOLIA 9-month rev. EU21.6b with net financial debt at end of Sept. EU15.2b, MUNICHRE announced strong beat and raised FY profit targets
BHP BILLITON hunts for new chief: The miner is quietly looking for a successor to Marius Kloppers “in what could herald a further shake-up in the leadership of the global mining industry following a five-year period of stability”. The process is at a very preliminary stage and could take 12 to 24 months to play out, sources said.
PEARSON said exploring FT sale as CEO leaves
DANONE : FT says activist investor Peltz has bought a 1% stake and is expected to call for cost cuts and more disciplined use of cash. The article says he is supportive of the CEO and seeks talks. Goes onto say he is bringing attention to the undervaluation rather than a call for radical action.
BOUYGUES seeks to undercut Iliad with low cost offer according to Les Echos

UPS & DOWNS

MITTAL raised to Buy at Socgen, MS keep UW on FORTUM after CMD, JPM reiterate OW on MT, TDC and PNDORA. GS like NVTK, upgrade SOW to Buy and reiterate Sell on SZG. Bernstein says DTE is its top picks in Telecoms (OW with 12e pt)

JPM on Property : Stay the course but beware castles made of sand; upgrade PSP to OW (N)

AB FOODS PT Raised to 1,500p VS 1,380p at Nomura, Stays Buy
Arcelormittal Raised To Buy VS Neutral at BofAML; Upgraded at BofAML on Lower Chance of Rights Issue; Raised To Buy From Hold at SocGen
Arkema PT Raised to Eu100 VS Eu75 at Berenberg, Stays Buy
Babcock Cut To Neutral VS Buy at UBS
Buy Gas Natural, Valuation Attractive, Nomura Says
Coloplast Cut To Hold VS Buy at SEB
INMARSAT Cut to Neutral VS Buy at UBS
Rexel Raised To Buy VS Neutral at BofAML
RYANAIR PT Raised to Eu5.4 From Eu4.9 at Nomura, Stays Neutral

LCM GLOBAL MACRO MONTHLY REPORT

LCM – Rcube – Global Macro Monthly Report – November 2012

The report is out. Plenty of gerat macro data and a special focus on lending conditions in the US, EM and EZ. Guess who looks bad? Europe… And worse? France…

We’re still positive on Equities and emerging markets ones in particular. In this month’s report, we focus on the FED Senior Loan Officer Survey which shows that US banks are still easing their lending standards. The same trend is visible in Emerging Markets showing that the easing from EM Central banks is channeling throigh to the real economy. The EM bank funding conditions is now at a two year high.
Although the situation has improved gobally and risks have abated in Europe, the ECB’s lending survey is not as bright as the one we can observe in the US or in EM. Eurozone commercial banks have tightened their lending standards and demand for corporate loans remains close to historical lows. The crash in Spanish real estate definitely didn’t help, but, we’re currently more worried about France. Demand for loans from French corporates has crashed.

CURRENT STUFF

On Greece (JPM)
Today the Greek PM, Samaras will seek parliamentary approval of austerity measures agreed with the Troika in what will be the first step to gain access to further EU bailout funds. The austerity package will be debated in parliament from 10am with a roll-call vote expected after 8pm Athens time (6pm GMT). A simple majority is all that is needed, last week our political analyst Alex White estimated 129 law makers are expected to vote against the package, Samaras’s ND can count on 124 in total supporters from their own ranks meaning they need just 6 votes from PASOK (currently have 32 seats) to carry the bill. And so, the vote is expected to pass today, yesterday the GGB strip traded back at the recent all time highs (26+) in a vote of confidence ahead of the vote. The next event will be parliament debate and vote on the new budget on Sunday followed by a Eurogroup meeting next Monday where we would hope the disbursement is approved. Note form Alex White published last week on the issue

Buy Italy, Sell France – it’s the smart money’s new euro-zone convergence trade. http://t.co/E2c0ilvJ

STRATEGY

GS TOP of MIND
Demystifying the China Handover.

GS published yesterday a great piece on the leadership handover in China. They give some interesting prospective through an interview with a Chinese political expert, Mr Vhneg Li and try to assess the impact of the changes on financial assets, and more importantly on the Yuan and the Equities. Worth a look.

Historically, equity returns in China from October/November to March (from the Party Congress to the National Congress) were negative or muted. Returns after the 3rd Plenary Session (held in October of the following year), however, tended to be better. However, the sample size is limited.
We believe that investors have very low expectations regarding structural reform policies in China over the coming quarters. A-share investors are pessimistic regarding the cyclical recovery path as well (while H-share investors are somewhat more positive). Thus, if some pro-growth cyclical policies continue to be carried out or some reforms kick off, it could be a boost to performance (particularly for A-shares).
We feel meaningful China equity re-rating is contingent on reform progress, for both A-shares and offshore.
For other regional equity markets, the growth trajectory of China is more important than (but related to) the political transition. The US and European equity markets are more likely to reflect news regarding the upcoming US election, fiscal cliff issues, and ongoing EU concerns than they are the leadership transition.

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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