The Dawn Patrol – 18.01.13 – MS short term picks. MS on banks. INTEL, CHINA Strong… Many reco changes.

Bonjour,

European stocks are seen flat to slightly lower on Friday, set to trim the previous day’s gains, while resource-related shares could find support in data showing China’s economy regained speed in the final quarter of last year.

Today, we’ll monitor the Italian Industrial orders, US retail sales, University of Michigan.

OVERNIGHT MARKETS: UP

Asian markets
Nikkei 225 up +232.77 (+2.19%) at 10,842
Topix up +16.94 (+1.90%) at 907.40
Hang Seng up +187.73 (+0.80%) at 23,527

US markets
S&P 500 up +8.31 (+0.56%) at 1,481
DJIA up +84.79 (+0.63%) at 13,596
Nasdaq up +18.46 (+0.59%) at 3,136

European markets
Eurofirst 300 up +5.59 (+0.48%) at 1,166
FTSE100 up +28.38 (+0.46%) at 6,132
CAC 40 up +35.62 (+0.96%) at 3,744
Dax up +44.33 (+0.58%) at 7,735

Currencies
€/$ 1.34 (1.34)
$/¥ 90.08 (89.86)
£/$ 1.60 (1.60)

Commodities ($)
Brent Crude (ICE) up +0.10 at 111.20
Light Crude (Nymex) up +0.03 at 95.52
100 Oz Gold (Comex) down -3.10 at 1,687
Copper (Comex) unchanged 0.00 at 364.70

10-year government bond yields (%)
US 1.88%
UK 2.03%
Germany 1.55%

CDS (closing levels)
Markit iTraxx SovX Western Europe +0.55bps at 99.83bp
Markit iTraxx Europe -1.07bps at 102.97bp
Markit iTraxx Xover -8.66bps at 420.4bp
Markit CDX IG -1bps at 87.66bp

Sources: FT, Bloomberg, Markit

FITNESS BLENDER
I mentioned this exercise on Monday… I tried it on Wednesday… and it still hurts.. TRY IT!

HOT STUFF

INTEL: Sales/EPS of $13.5bn/46c vs estimates of $13.5bn/45c. Slightly better earnings, but the outlook was lower and the shares fell 5% after hours. Weighing on shares, the midpoint of the company’s first-quarter revenue forecast of $12.7 billion came in slightly below the consensus estimate of $12.9 billion. The company also said gross margins fell to 58% from the third quarter, driven primarily by “aggressive tactical actions” to reduce inventory levels. (Intel Architecture $12.35B . PC Client $8.51B vs StreetAccount consensus $8.56B. Data Center $2.83B vs SA $2.77B. Other Architecture $1.02B vs SA $1.19B)

AMEX: Meanwhile, shares of American Express shed 1.1% at $60.09 in light volume after the credit-card company said fourth-quarter profit fell 47% because of expenses.

UNITED UTILITIES Accepts Ofwat’s Revised License Proposals

GLENCORE, XSTRATA to Extend Merger Deadline to March 15

PEUGEOT Seeks More Flexible Labor Agreement in France: Les Echos

DELTA LLOYD Says No Need For Takeovers to Grow, Telegraaf Says

PPR Could Merge Fnac With Metro’s Media Markt, L’Agefi Says

RIM Raised to Buy on IPhone, Android Opportunity: Jefferies

CARREFOUR CEO is ‘Comfortable’ With Profit Forecast: Les Echos

BARCLAYS May Cut as Much as 10% of Global Staff, N.Y. Post Says

CURRENT STUFF

China’s GDP grew 7.8% in 2012, the lowest annual rate in 10 years. However fourth quarter growth was slightly higher than consensus forecasts at 7.9%, and ended an almost two-year run of declining quarterly growth numbers. (Financial Times)(Bloomberg)

UPS & DOWS

EUROPEAN BANKS (MS, Van Steenis)
Out of the Bermuda Triangle

EU banks have been adrift in a ‘Bermuda triangle’ for many investors, buffeted by the severe forces of sovereign stress, deleveraging and financial repression. While still at ‘high seas’, we think the market may underestimate that each is continuing to ease, enabling rehabilitation & opportunity.

Credit Suisse Group (MS, Lam) Upgrade on cost conviction
EW to OW, PT SFr25.50 to SFr30

We upgrade CS to OW on higher conviction of executing gritty cost cuts. We think CS may raise targets & further 10-15% EPS upside is plausible. Even on flat 12e revenues, we think ~14% ROTE is possible, limiting downside. Our PT & divi increase, and we now see more 12-month upside than at UBS.

ALFA LAVAL Cut To Neutral From Buy at Goldma

ARCELORMITTAL Raised To Neutral From Sell at Goldman

ASHMORE Cut To Neutral VS Buy at UBS

BG Group Raised to Outperform vs Sector Perform at RBC Capital

CARREFOUR PT Raised 2% to Eu22 at Exane; Kept at Outperform

CREDIT AGRICOLE PT Raised 9% to Eu8.2 at Exane; Kept at Neutral

CREDIT AGRICOLE Rated Neutral At JPMorgan

CREDIT SUISSE Raised to Overweight at Morgan Stanley on Costs

CRH Raised to Neutral from Underperform at Exane

DNB Cut to Neutral VS Buy at Citi

EASYJET Raised to Overweight at HSBC; RYANAIR Cut to Underweight

ENEL Cut to Sell from Neutral at UBS

EXPERIAN Cut To Equalweight VS Overweight at Morgan Stanley

FERROVIAL Cut To Neutral VS Buy at UBS

GEMALTO PT Raised to Eu46 VS Eu37 at Berenberg; Kept at Sell

HOLCIM, BUZZI, ROCKWOOL BUILDING Materials Top Picks At Exane

L’OREAL Raised To Overweight From Neutral at HSBC

MEDIASET PT Raised to Eu2.6 VS Eu1.9 at Berenberg; Kept at Buy

MEGGITT Raised To Overweight From Equalweight at Barclays

METRO Cut To Underperform VS Neutral at Credit Suisse

NATIXIS Assumed at Neutral at JPMorgan

PRYSMIAN PT Raised to EU21.6 vs EU17.5 at Goldman

SAINSBURY Added To Conviction Sell List at Goldman

SAINT GOBAIN Cut to Underperform from Neutral at Exane

TOPDANMARK Cut to Underweight from Neutral at JPMorgan

TRYG Cut to Underweight from Neutral at JPMorgan

UPM Cut To Sell VS Hold at Nordea

ZODIAC AEROSPACE Cut To Equalweight From Overweight at Barclays

STRATEGY

MS (Ben Britz) Conviction into Earnings: 10 Stocks with Near-term Catalysts
We highlight ten names for which Morgan Stanley Research analysts have high conviction going into earnings season. Analysts expect the shares to move materially over the next 15-60 days on upcoming results or imminent news flow during the period. Each view is backed by a Research Tactical Idea (RTI), which is a short-term call on price performance on an absolute or relative (to the industry or sector) basis.
Featured Names: CGG VERITAS, FIAT INDUSTRIAL, FORTUM, GN STORE NORD, HOLCIM, MICHELIN, PUBLICIS GROUPE, ROCHE, SUEZ ENVIRONNEMENT, WILLIAM HILL

HAVE A GEAT WEEK END.

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