The Dawn Patrol. recos: Chesapeake, Renault, Voestalpine, Microsoft, GDF.


European Markets to open up on better Chinese trade data. Today, we’ll monitor the ECB, the BoE, the Spanish bond auction, the French and German CPIs.

No change expected in the ECB or the BoE.


Asian markets
Nikkei 225 up +73.91 (+0.70%) at 10,652
Topix up +11.08 (+1.26%) at 890.13
Hang Seng up +203.62 (+0.88%) at 23,422

US markets
S&P 500 up +3.87 (+0.27%) at 1,461
DJIA up +61.66 (+0.46%) at 13,391
Nasdaq up +14.00 (+0.45%) at 3,106

European markets
Eurofirst 300 up +7.78 (+0.67%) at 1,168
FTSE100 up +45.02 (+0.74%) at 6,099
CAC 40 up +11.57 (+0.31%) at 3,717
Dax up +24.64 (+0.32%) at 7,720

€/$ 1.30 (1.31)
$/¥ 88.16 (87.87)
£/$ 1.60 (1.60)

Commodities ($)
Brent Crude (ICE) up +0.10 at 111.86
Light Crude (Nymex) up +0.36 at 93.46
100 Oz Gold (Comex) unchanged 0.00 at 1,655
Copper (Comex) up +1.25 at 366.90

10-year government bond yields (%)
US 1.87%
UK 2.05%
Germany 1.48%


ARCELORMITTAL Offer size increased to $4b, Equity piece $1.75bn (104m shares at E12.83) and MCN’s $2.25bn(6% coupon, 3yr maturity, min conversion E12.83). Mittal family took $300m Equity and $300m MCN. Moves from a balance sheet to earnings story. 2013 cons EBITDA is $8.2bn (JPM $8.5bn), although market has refused to trade this level until balance sheet concerns overdone. As focus shift to earnings MT can trade E15 into numbers on Feb 6.prices $2.25b of notes, increasing offering size

MAN SE, VOLKSWAGEN will offer to buy out remaining MAN shareholders to take full control of the German truck maker, it said late yesterday. BBG

Marks & Spencer 3Q Like-for-like UK Sales -1.8% ; M&S 3Q Same-Store U.K. Sales Miss Ests

RT (RUBY TUESDAY). The restaurant chain was down 7.3% after hours on lowered guidance.

SANTANDER to offer 0.633 own shares for each Banesto share. BBG

SUEDZUCKER 3Q sales beat, net income misses; sticks to outlook.

SWATCH 2012 gross sales CHF 8.14bn, beating estimates. Says ‘positive growth’ over the first ten days of January.

Telenet FY Rev. Rises 8.2% to About Eu1.49 Bln; Est. Eu1.48 Bln

TELENET preliminary revenue, adjusted EBITDA beat analyst estimates.

Tesco 6-Wk U.K. Comp Sales Rise 1.8%; Est. Rise 1%

France’s FSI May Help Buy Alcatel Submarine Cable Unit


On China
China’s trade figures beat expectations:
Chinese exports and imports rebounded strongly in December, pointing to solid economic growth both in China and abroad. Exports rose 14.1%from a year earlier, the fastest in seven months and well above November’s 2.9% pace. Imports increased 6% in December from a year earlier after flatlining in November. It was the biggest year-on-year increase since May and easily beat a Bloomberg economists’ median forecast of 5%. (Financial Times)(Bloomberg)

On banks
Morgan Stanley to cut jobs, especially senior US ones:
Morgan Stanley is to cut 1,600 jobs in institutional securities group, one of its most prominent businesses. The job cuts amount to about 6% of the total headcount in the bank’s group. About half of the job losses would be in the US. “The redundancies will also include a large slice of highly paid senior bankers from the ranks of Morgan Stanley’s managing directors and executive directors.” (Financial Times)

On the VIX
Vix plummets to 5½-year low: Wall Street’s “fear index” has tumbled to a fresh low as investors turn increasingly positive on the outlook for global stock markets. (Financial Times)(FT Alphaville)

On Europe
Europe update from S&P – "Eurozone Could Start To Overcome Debt Crisis In 2013" – "2013 could mark the start of the region sustainably overcoming the market volatility and fragmentation that has affected it over the past few years. It could also see the return of some so-called "program countries" such as Ireland and Portugal, to more substantial primary issuance in the capital markets….European leaders have laid, or at least announced, much of the groundwork for the eurozone to emerge from its lingering crisis. We believe that economic rebalancing has still some way to go and will seriously challenge political leaders.


Renault (MS, Lembke) Still the Industry’s Best Turnaround – Stay OW
While concerns on EU car sales and FCF may dominate short-term, RNO is still the industry’s best turnaround story, we think. With model momentum building, Samsung woes easing and new structural cost reductions underway, a look beyond wellflagged risks may provide an attractive entry point.

voestalpine (MS, Haissi) Risk-Reward less attractive – downgrade to EW
We cut VOE to EW, as valuation is less appealing with the shares up 20% from recent lows. We expect a 1Q13 cyclical bounce (on apparent demand), but underlying drivers are set to stay subdued. We see a risk its growth ambitions may limit FCF generation. VOE remains our sector top pick.

Microsoft (MS, Holt) Heading into a Transitional Period; Downgrading to EW
MSFT is far too cheap, has multiple non PC drivers and an attractive 3.5% dividend yield. However, Win 8 is disappointing, the PC market will remain weak for awhile and margins are likely capped. As such, the stock is likely range-bound and we see better potential in names like SYMC and ORCL.

GDF SUEZ (JPM, Casali) High yield comes at the expense of future growth. Downgrade to Underweight.
We estimate that the continuation of GDF’s current dividend policy will be funded by disposals (now) and capex cuts (in the future) to the tune of €1.3bn pa (36% of the dividend) until 2017. Given its highly capital intensive growth model, this is bound to erode future growth (JPMe 0.4% ’12-17e EPS CAGR). We believe GDF’s investment case to be fundamentally unattractive and its premium multiples unjustified; we downgrade to UW (from N) with a Dec-13 TP of €14 (vs. €19 previously). Holders should switch into Gas Natural.

CHESAPEAKE ENERGY (JPM, Allman) Upgrading to Overweight; Near-Term Financials Better than We Had Modeled

We are upgrading CHK to Overweight from Underweight based on improved financials. We think CHK has reduced spending and costs successfully, but part of the improved financials could be asset sales beyond what the company has disclosed publicly. We recognize that financial risk remains and that the stock is not cheap, but we think an improved financial picture will likely help the stock outperform.

Alent Rated New Buy At BofAML, PT 370p

Alstom Raised To Buy From Neutral at Citi

Atos, Cap Gemini Cut To Equalweight at Morgan Stanley

Brenntag PT Raised 17% to Eu125 at Exane; Kept at Outperform

Buy ArcelorMittal, Covenant Breach Very Unlikely, UBS Says

CGG Veritas Raised to Neutral VS Sell at Citi

CGGVeritas Cut to Underweight from Equalweight at Barclays

Credit Suisse Raised to Buy from Neutral at Nomura

Delta lloyd Raised To Overweight VS Equalweight: Morgan Stanley

DNB ASA Cut to Neutral From Outperform at Exane

Dunelm Raised To Buy VS Neutral at Citi

E.ON Raised to Equalweight from Underweight at Barclays

Eurocash Rated New Overweight at JPMorgan; PT PLN60

Ferrovial PT Raised 12% to Eu14.1 at SocGen, Stays Buy

Finmeccanica PT Raised to EU6 vs EU5 at UBS; Kept at Buy

Fresenius Medical Care Cut From Outperform at Credit Suisse

G4S Raised to Top Pick VS Outperform at RBC

GDF Suez Cut to Underweight From Neutral at JPMorgan

Gemalto Cut To Neutral From Outperform at Exane

Infineon PT Raised to Eu9 From Eu7 at Goldman, Stays Buy

Lonmin Removed From Goldman Conviction Sell List, Stays Sell

Melrose Raised To Buy VS Neutral at Citi

Outotec PT Raised to Eu45 VS Eu38 at BofAML, Stays Underperform

Philips Electronics Raised To Buy VS Neutral at BofA Merrill

RWE Cut to Underweight from Equalweight at Barclays

Schneider Electric Cut To Neutral From Buy at BofAML

SEB AB Raised to Outperform From Neutral at Exane

SKF Cut to Underperform From Neutral at BofAML

Sodexo Raised To Buy From Neutral at Citi

Spectris Cut To Underperform From Neutral at BofAML

Standard Chartered Raised To Buy From Hold at SocGen

STMicro PT Raised to Eu8 VS Eu6.1 at Goldman; Kept at Buy

Suez Environnemt Reinstated Underperform at BofAML

UBS Keeps Fiat at Neutral

Veolia Environnement Reinstated at Underperform at BofAML

Vesuvius Rated New Neutral At BofAML, PT 400p

Vesuvius Rated New Neutral At Nomura; PT 400p

Voestalpine Cut To Equalweight VS Overweight: Morgan Stanley

Wirecard Rated New Neutral At Exane

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


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