The Dawn Patrol – 20.11.12 – MS global outlook, the Fiscal Cliff, what HFs do, Ups&Downs…. buy AAPL (and RIMM, and GOOG, and Samsung)…

Bonjour,

Markets to open slightly down after Moody’s downgraded France and a nice rebound in the US markets. APPLE was strong yesterday and it’s not over, iPhone 5 pre orders start today in China and the Q1 (24/01) numbers will be strong (I write this in the first paragraph as you may not read the rest…). Asia strong too last night. Gold at $1732.98, the EURUSD at 1.2786. Today macro eyes on the German PPI and the US housing starts. Auctions: EFSF and Spain.

CARREFOUR sells 60% stake in Carrefour Indonesia (POSITIVE! high price).
France will reduce EADS stake from 15% to 12% whereas Germany will own 12% acc to Handelsblatt.

CREDIT SUISSE restructuring as had been speculated combining private banking & asset mgmt to form one new Private Bank & Wealth Mgmt unit
CELGENE & SANOFI executives charged in insider trading case
HOCHTIEF PLANS to cut 700 Jobs – Wirtschaftswoche
ING agrees to sell Thai Investment Management Unit to UOB
BNP, SOC. GEN. CREDIT AGRICOLE: While the Moody’s sovereign downgrade shouldn’t come as a shock the headline to weigh on sentiment. French bank shares have performed very well vs. sector, and would expect some profit taking. All three banks are already rated A2 at Moody’s with the former at stable outlooks, only CASA is on negative outlook.
ITALIAN BANKS: Moody’s say the Italian banking system outlook remains negative and adverse trends remain.
CNOOC
accepts new Canadian terms to win Nexen deal nod – Rtrs http://t.co/pMFkiYGZ
XSTRATA/GLENCORE EGM and court vote today. Timings: Tue Nov 20, 9am (CET) Glencore general meeting Tue Nov 20, 2pm (CET) Court meeting -Tue Nov 20, 2:15pm (CET) Xstrata EGM.
VOLVO : Komatsu making some more constructive comments overnight flagging that >20 ton excavators sales in China now seeing +ive growth YoY with potential 10-20% sales grth in ’13 in China vs. prior flat guidance. >30 ton sales however remain in double-digit decline. Also news that working hours in China also up to 165hrs vs. 150-155 during June-Sept. Total CE = c25%-30% EBIT at Volvo. Rate OW
VEOLIA has announced the name of the new COO in charge of cost cutting, Francois Bertreau who was at French transport & logistics group Norbert Dentressangle for the past 15 years.

UPS & DOWNS

Air France Cut to Sector Perform from Outperform at RBC Capital
Berkeley Group L/T Returns Undervalued, JPMorgan Says
Buy Vodafone, Citi Says After CFO Sales Briefing
E.ON AG RWE Named a Least Preferred Stock at Citi
Elekta Raised To Strong Buy VS Buy at Swedbank
Enel Green Power PT Cut to EU1.84 vs EU1.9 at Goldman
Exor Cut to Neutral from Buy at UBS
Exor Cut To Neutral VS Buy at UBS
Ferrexpo Assumed Equalweight at Morgan Stanley
Fiat Cut to Neutral from Buy at UBS
Hufvudstaden Cut To Hold VS Buy at Nordea
IAG Raised to Outperform from Underperform at RBC Capital
ING Raised to Buy From Hold at Societe Generale
Intercontinental Hotels Group Raised to Overweight at Barclays
Pge Cut To Sell VS Neutral at Goldman
Provident Financial Raised To Neutral VS Sell at Citi
Subsea 7 Raised To Neutral VS Underperform at Credit Suisse

CURRENT STUFF

On France
I don’t understand what this country’s politicians are really trying to achieve…
France suffered the second downgrade of its sovereign debt rating this year when Moody’s, the US rating agency, removed its triple A ranking on Monday night.” S&P cut France’s rating earlier this year. (Financial Times)

On the Fiscal Cliff
Politico.com editorial claim the ‘Fiscal Cliff’ discussion is “already over”. “We’ve said it before but it bears repeating: there seems little chance the cliff battle will go near or past the Dec. 31 deadline. Nearly every signal from Republicans suggests they understand they have lost the war over taxes going up on the wealthiest Americans and are just trying to figure out how to get the least objectionable deal…it’s clear from polling that the GOP will get the blame if taxes go up on everyone on Jan. 1 and any subsequent damage to the economy and markets will fall squarely at the party’s feet. Republicans are no longer ignoring such polls.

On Hedge Funds
GS analyses the positions of 696 hedge funds with $1.3 trillion of gross assets at the start of 3Q 2012 ($834 billion of long stock and ETF holdings and an estimated $434 billion of short positions). Net exposure rose to 48% but turnover of fund positions fell to a new low. The average hedge fund underperformed the S&P 500 YTD (6% vs. 14%) through November 2nd. Overweight positioning in the Consumer Discretionary sector represents a risk to 2013 hedge fund returns because pending tax increases may affect consumer spending patterns next year.

To Read
Most shorted CAC40 names http://www.dataexplorers.com/news-and-analysis/france-divides-opinion
Central Banks’ Gold Likely Gone-Eric Sprott | Greg Hunter’s USAWatchdog http://usawatchdog.com/central-banks-gold-likely-gone-eric-sprott/#.UKqmRdxgbpM.twitter …
FT’s Gideon Rachman says Europe would lose if Britain left the union http://on.ft.com/UEFLBW
The new Spanish eviction freeze can’t be a substitute for real mortgage reform, WSJhttp://on.wsj.com/WhocZV
Spiegel says Merkel’s government will resist a debt haircut and the inevitable realization: We’re all going to have to pay for Greece http://bit.ly/RQ7KQP

STRATEGY

MS (Fels) The Global Macro Strategist
The Global Macro Analyst
2013 Outlook: Stuck in the Twilight Zone
The global economy looks set to remain stuck in the ‘Twilight Zone’
that divides sustainable expansion from renewed recession. We now forecast global GDP to grow by barely more than 3% in 2013, the same as this year and exactly halfway between the 2.5% recession threshold and the 3.7% long-term trend.
What’s changed? Our base case 2013 global GDP growth forecast has come down from 3.3% to 3.1% (2012 unchanged at 3.1%), reflecting downward revisions in the euro area, the UK, CEEMEA, Japan and Brazil and slight upward revisions in China and India. A first peek into our 2014 crystal ball suggests a return to above-trend global growth of 4.0%. But the road to that point is long and winding.
Policy make or break: Our ‘Twilight’ base case crucially assumes only moderate fiscal tightening in the US, successful ECB action on rates and OMT, and gradual progress on structural reforms in EM. Such policy action, combined with further global monetary easing, should promote a bottoming of global growth in 1H13 followed by a moderate re-acceleration.
Two alternative scenarios – ‘Night’ and ‘Day’: Without appropriate policy action, however, a renewed global recession would likely unfold. Our ‘Night’ scenario has global GDP growth plunging to 2% in 2013, with full-blown recessions in the US, Europe and Japan and more fragility in EM economies. Conversely, in our ‘Day’ scenario, more decisive policy action in the major countries than we assume in our ‘Twilight’ base case propels a more rapid acceleration to almost 4% GDP growth already in 2013.
Stay ready to switch between scenarios: With policy action still pending, Europe and Japan currently in recession, US GDP tracking below 1% in 4Q, and the transition to new growth models still sputtering in many EM countries, the next several months may feel more like our ‘Night’ scenario. Yet, investors have to be nimble and prepared to switch between ‘Night’, ‘Twilight’ and ‘Day’ depending on policy developments. More than ever, we are all slaves to policy.

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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