The Dawn Patrol – 05.12.12 – Strategists sectors preferences for 2013. JPM on Capital Goods and more.





Markets indicated to open up this morning. The fiscal cliff continues to weigh on sentiment and in Europe the banking union project is stalling (not surprising).

Gold went below 1700 last night and is now around $1700.

Today, we’ll monitor the Markit PMI services indices in China, the US, EU. On the auction side, Spain to sell 3, 7 and 10 y bonds.



Another great app for today (Christmas coming)




Germany’s ten largest banks have EUR98bn in outstanding credit to the global shipping industry, more than double the value of their holdings of Greece, Ireland, Italy, Portugal and Spain debt, NYT said, citing Moody’s Investors Service.

PANDORA (the Us internet Radio) sanks after hours For fiscal 2013, Pandora foresees a per-share loss of 9 cents to 12 cents a share on sales of $422 million to $425 million. Wall Street’s average call was for a loss of 6 cents and revenue of $429.3 million.

TUI TRAVEL boosted by early bookings. Underlying pre-tax profits rise 8% in the year to September 30.

DEUTSCHE POST issues €2bn debtin convertible bonds to tackle pension costs

NOKIA Is Said to Reach Deal With China Mobile on Lumia 920 with a modified design. It also signed a deal to sell and lease back its headquarters in Finland, in a bid by the handset maker to raise much-needed cash.
ALCATEL-LUCENT : Moody’s downgrades Alcatel’s rating by on enotch to “B3”



ARM HOLDINGS PLC (GS, Schafer) Buy: Raising 12-month price target to £10; structural Buy thesis intact
GS raises their 12m PT from 750p to 1000p based on improved momentum in smartphones from China, a higher blended market share and superior pricing power contributing to higher royalties. They extended their 10yr DCF of royalties from 2010-2020E to 2012E-2022E.




On the Banking UnionSchäuble puts brake on banking union: The German finance minister voiced longstanding concerns, such as opposition to the ECB supervising all 6,000 eurozone banks, but in stronger terms. However his calls for “creative” solutions to legal issues gave some hope that a compromise was possible when finance ministers meet again on the eve of next Wednesday’s summit. (Financial Times)


On European Banks
Commerzbank, BNP Paribas, Soc. Gen and Credit Agricole are looking to repay LTRO loans early. Based on a poll conducted by analysts at Morgan Stanley, European lenders are expected to repay a total of about €80 billion of the ECB loans in early 2013. Most of that is likely to come from northern European banks, the analysts said Tuesday. (WSJ)


On the Fed
Fed eyes more long-term debt for banks (FT) :  US bank regulators are examining proposals to force the largest and most complex financial institutions to fund themselves with more long-term debt, joining fellow bank supervisors that hope to make it easier to wind down failing institutions. Increased issuance of long-term debt could gradually lessen banks’ reliance on short-term funding markets, where borrowing generally is cheaper. The development, if finalised, could impact bank profitability.


On Rogue TradersEx-trader charged over $1bn Apple scheme: “A former trader at Rochdale Securities was arrested by federal agents and charged with fraud after an alleged attempt to profit from a $1bn purchase of Apple stock, which backfired and left the US trading group in distress.” (Financial Times)




A quick table with strategists sector preferences for 2013. Will update this afternoon.






JPM like ROCHE (best earning visibility among the 5 Euro. Large Caps : JPM projects 10%  Core EPS growth in 2013 and a ‘12-‘17E CAGR of 7%) and GAS NATURAL is their top pick in the Utilities, remain cautious on E.ON and RWE.

BNP + BG Group + Compass added to Citi’s focus list whereas Saipem and Stan removed.
Bernstein say WPP+PUB inexpensives and kept outperform.
UNIBAIL cut to UW at MS and AKZA to UW at HSBC.

GS Recommendations  : INFINEON removed from CL but remains Buy, Reiterate Buy on ARM Holdings, Ryanair up to Buy, PANDORA up to Neutral, ZON MULTIMEDIA remains Neutral


JPM on European Capital Goods (Andreas Willi) : 10 themes & 12 stocks that can make a difference in 2013
They maintain their constructive view on the Sector for the near term and see up to ~10% further re-rating potential as global manufacturing lead indicators improve driven by an end to destocking. However, the medium term outlook ismore mixed and they look  to take some profits in H1 2013. This is not the beginning of a new cycle with industrial capex  close to peak and margins not far off past peak. Their top-picks are IMI, Melrose, Schneider, Spectris and Volvo. They would viewpotential near term cyclical performance  of ABB, Alstom, Siemens and Philips as a reason to review holdings in these stocks  given anticipated medium term combination of low growth and increased competition.




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