The Dawn Patrol – 09.11.12 – ACA bad, NOVO up… Citi’s 17 names, GS on Q3 earnings.

Hello,

European markets indicated flat. S&P took another dive last night and broke throught the 200 DMA as the fiscal cliff is dangerously looming. EUR trades at a months low (1.2764), Gold

The Week End is coming, have nice meals with family and friends, relax and continue to exercise. If in Paris, the Hopper exhibition is really nice (and quick) but still too crowded. Saw Argo last night and it’s definitely worth watching… Enjoy.

In terms of strategy, every piece I read is really getting more and more worried about France. As some strategists, including RCUBE are pushing for EM equities, it may be time to short France and go long EM? Or just play the EM exposure again… If you have to stick with France, I like PERNOD, EADS, VIV, CARREFOUR, LAGARDÈRE (new!). I’m still worried about ILIAD.

EUROPEAN EQUITIES

EU Earnings: Lafarge 3Q EBITDA inline with est and still aims 1bn asset sales by end of the yr, CREDIT AGRICOLE reported bigger losses (2.85bn vs 1.88bn est) ALV reports solide numbers & confirms forecasts whereas GENERALI missed est., TIT inline with est.
NOVARTIS’S Xolair fails to win UK HealthCost Agency’s backing
NOVO NORDISK Wins FDA Panel vote on new longacting insulins (negative for Sanofi)
BP Gulf settlement ruling imminent: “BP Plc and lawyers representing over 100,000 individuals and businesses claiming economic and medical damages from the 2010 Gulf of Mexico oil spill on Thursday urged a U.S. judge to approve a proposed $7.8 billion classaction settlement.”
DBK reassures won’t need bailout – coCEO
HSBC HMRC said to be investigating HSBC: “The tax authorities have obtained details of every British client of HSBC in Jersey after a whistleblower secretly provided a detailed list of names, addresses and account balances earlier this week.” Daily Telegraph
BANCO POPULAR said to secured EU8b in underwriting commitments, article says DB and UBS underwriters. FT
AVIVA to sell U.S. unit at “substantial discount,” CFO
DIAGEO seen paying $1.8 bln for United Spirits stake – WSJ
SUEZ ENVIRONNMENT beats VEOLIA to New Delhi water contract for 12 years is to improve water distribution in the Malviya Nagar area of New Delhi, Le Figaro reports. Contract worth EU75M, Le Figaro says.

MS reiterate OW on EADS despite cash concerns, AEGON cut to Neutral at BofAML, Bernstein initiates OW on IFX (TP €7.70), JPM downgrade HEI to Neutral on valuation & growth, E.ON cut to Neutral from Outperform at Exane

Citi lists 17 stocks to own in bad markets: ANDRITZ, ORASCOM CONSTRUCTION INDUSTRIES, LVMH, PERNOD RICARD, ESSILOR, EADS, PPR, SAIPEM, FIAT INDUSTRIAL, LUXOTTICA, PKO BANK, JERONIMO MARTINS, URALKALI, MAGNIT, INDITEX, AMADEUS, SWEDISH MATCH

CURRENT STUFF

On China
Retail sales for October come in +14.5% YoY with IP at 9.6%, both ahead of consensus estimates, FAI also slightly ahead at +20.7% YoY. There is still some momentum in the Chinese economy

To read
Nice summary by WSJ What is the Fiscal Cliff? http://tinyurl.com/brsxzwpSwiss National Bank under attack : http://www.voxeu.org/article/swissnationalbankunderattack#.UJykhipnfLU.twitter
Fed Watch: Europe Back In The Spotlight Economist’s View http://economistsview.typepad.com/economistsview/2012/11/fedwatcheuropebackinthespotlight.html#.UJykNmv_yZk.twitter
Schumer says it is a myth that extending the Bush tax cuts will help grow the economy http://on.wsj.com/VKEzmb
Gillian Tett says to expect a lengthy period of brinkmanship at the edge of the fiscal cliff http://on.ft.com/Uz2b7O
Paul Krugman says the Democrats may be in a stronger position once the US has fallen off the cliff http://nyti.ms/XoDJMx
The US has more in common with heavily indebted southern European countries than it might like to admit. Spiegel http://bit.ly/QsFw1j

STRATEGY

Nomura Stategy : Bullish on Europe – increase the beta of recommended portfolio

They think fund managers are too defensively positioned and will be forced to rebalance if there is any further near-term market strength; hence we are increasing the beta of our recommended portfolio (up 6.8% vs market YTD, with a 1.26 beta). Bullish on European equities given that the tail risk that was priced in has yet to be adequately removed. Their indicators of sentiment paint a bleak picture of investor confidence, usually a good time to invest.

GS (Walterspiller) Strategy Espresso
3Q Eargings Tracker.

The European earnings season continues to be on the negative side, but showing some improvements compared to last quarter. 160 companies that had at least two estimates (out of a total 230 we expect to include) have reported 3Q results. 36% of companies reporting have beaten estimates by more than 5% (below the average over the past 12 quarters of 43%) and 36% have missed estimates by more than 5% (compared to 37% historically). On an absolute basis, 46% of companies have beaten estimates, while 54% have missed.
Revisions:Earnings estimates declined by 0.7% over the last month. 2012 earnings growth is expected to be 2.7% (our topdown forecast stands at 5%). Since the beginning of the year, consensus expected growth has been revised down by more than 12 percentage points.
Sectors: Insurance and Oil & Gas have had the best results so far this season while Food & Beverages and Media have had the worst.

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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