The Dawn Patrol 22.01.13 – JPM on Telcos, GS&MS on Pearson. ALSTOM -1%, SIEMENS nbrs out,

Bonjour,

European stocks are seen flat to slightly lower on Tuesday, slipping from the previous session’s gains as investors await quarterly results from a flurry of U.S. bellwethers such as Google and Johnson & Johnson.

Today, we’ll monitor the Zew survey (Germany and EZ), the US Chicago Fed indes, Richmond Fed Activity, Exisiting Home sales.
European Debt Auctions today: Spain sells bills, ESM sells bills, Germany sells 10y I/L bonds

BOOK TO READ

Started this book, it’s really good. (available on Kindle – Click for link).

.,.”extremely timely…irreverent but thought-provoking examination of the goings on in international finance today… packs a serious punch.” (“The Independent”)

 

OVERNIGHT MARKETS: MIXED

Asian markets
Nikkei 225 down -48.83 (-0.45%) at 10,699
Topix down -6.87 (-0.76%) at 898.29
Hang Seng up +55.83 (+0.24%) at 23,647

US markets
S&P 500 up +5.04 (+0.34%) at 1,486
DJIA up +53.68 (+0.39%) at 13,650
Nasdaq down -1.29 (-0.04%) at 3,135

European markets
Eurofirst 300 up +2.89 (+0.25%) at 1,167
FTSE100 up +26.57 (+0.43%) at 6,181
CAC 40 up +21.45 (+0.57%) at 3,763
Dax up +46.63 (+0.61%) at 7,749

Currencies
€/$ 1.33 (1.33)
$/¥ 89.12 (89.58)
£/$ 1.59 (1.58)

Commodities ($)
Brent Crude (ICE) up +0.33 at 112.04
Light Crude (Nymex) down -0.01 at 95.55
100 Oz Gold (Comex) up +4.50 at 1,691
Copper (Comex) down -0.90 at 365.45

10-year government bond yields (%)
US 1.86%
UK 2.08%
Germany 1.59%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.1bps at 98.95bp
Markit iTraxx Europe -1.88bps at 102.05bp
Markit iTraxx Xover -7.59bps at 416.34bp
Markit CDX IG -0.5bps at 87.16bp

Sources: FT, Bloomberg, Markit

HOT STUFF

RIM Jumps After CEO Says Hardware Sale Possible: Toronto Mover – Bloomberg. http://bloom.bg/VWH7xa

Novartis Gets EU Approval for Meningitis Prevention Vaccine

EADS will meet or beat earnings and sales goals at its 4 main units when it reports figures for 2012, CEO Tom Enders says

Vivendi’s SFR Sees Tough Year in Telecoms, CEO Tells Parisien

Suez Env Not Seeing Drop in French Water Margins, Figaro Says

FRANCE TELECOM, the Frech govt denies that Stéphane Richard would be replaced by Anne Lauvergeon.

Portugal outlook remains negative by S&P; ratings affirmed. BBG

(Bloomberg) Siemens profit from cont. ops remained at previous year level of about EU1.3b, Handelsblatt reports, without saying where it obtained the information.

• Special items weigh on earnings, delayed delivery of new generation ICE trains to Deutsche Bahn may be carry special costs “in three-digit million” range, Handelsblatt says

• Exit from solar business to also weigh on earnings, Handelsblatt says

• Revenue in 1Q was stable at around EU17.9b, Bloomberg est. EU18.2b (15 ests.); new orders to be “significantly higher” than revenue, Handelsblatt says

• SEE: GE Profit Tops Estimates as Industrial Growth Beats Finance

(Bloomberg) Alstom Expects Strong 4Q Orders, 3Q Sales Misses Est.

• 3Q sales EU4.92b, up 1% Y/y, vs est. EU5.15b

• 3Q orders EU5.05b, up 3% Y/y, vs est. EU5.06b

• Backlog at EU52b as of Dec. 31

CURRENT STUFF

BoJ adopts 2% inflation target and unlimited asset purchases: The Bank of Japan has moved to open-ended monetary easing, while yielding to the government’s call for a higher, harder target for inflation, in its strongest show of commitment to ending years of corrosive deflation. The bank is adopting a 2% inflation ‘target’, in contrast to the previous 1% price ‘goal’, and from January 2014, when its current Y101tn round of asset-purchases had been set to expire, it will begin buying Y13tn ($146bn) of mostly short-term government debt each month until that inflation target is met. (Financial Times)(Wall Street Journal)

House Republicans on Monday introduced a bill to extend temporarily the debt limit, which will be voted on tomorrow. Congress would have until April 15 to come up with a budget agreement and if they do not lawmakers’ salaries will be withheld in an escrow account. (Financial Times)

European (lack of) writedowns questioned: Regulator Esma has questioned why big European companies had only written down 5 % of their goodwill assets since the beginning of 2011. (Financial Times)

Direct bank recaps news: No agreement from the Ecofin meeting in Brussels on whether the ESM van recap banks directly of course. Schaeuble says member states must bear responsibility in bank recaps. “ We mustn’t relapse to create incentives that fall under the heading of moral hazard,” Schaeuble said. “We must keep decision-making power and liability close together.” French Finance Minister Pierre Moscovici said the new ESM tool is important and needed to safeguard the financial system. “We can’t have a mechanism that is weak and unreadable,” Moscovici said. “Having that direct recap is part of this banking union. Priority means let’s go fast. Let’s be really ambitious.”

UPS & DOWNS

European Telcos (JPM, Wittig) 2013 outlook: Deflationary momentum threatening stabilisation hopes.
Still favour growth over value
Following a challenging 2012 where the European Telco sector under-performed the wider market by 19%, early 2013 seems to have kicked off more robustly. Reasons in our view include 1) consolidation and takeover hopes (EU, AT&T), and 2) perceived reduced risk to 2013 forecasts, following some cautious guidance and widespread downgrades, and 3) hopes that the year after next (in this case 2014) could bring earnings stabilization.

RENAULT (MS, Lembke). MS is Ow on Renault, but is cautious on the very short term on the level of inventory.
We believe the share price will fall relative to the industry over the next 30 days. This is because the stock has traded up recently, making short term valuation much less compelling. We still regard Renault as the industry’s best turnaround story and the stock thus remains a key OW in Autos. Yet, we are alarmed about the level of inventory at RNO revealed by our AlphaWise French car dealer survey and believe this, together with concerns on FY ’11-13 FCF guidance, may negatively impact the shares at Q4 12 results (Feb 14th). Based on our proprietary survey of 221 French dealers, Renault distributors on avg. hold 63 days of stock (industry avg. 41). More than 50% carry >1.5 months and a sheer 1/3rd reported >2.5 months inventory on their lots. Inventory at dealers has been on the rise and whilst this may have allowed RNO to protect its own FCF, an overhang could be seen as a key negative. We estimate that there is about a 70% to 80% or “very likely” probability for the scenario.

Pearson (GS, Padiachy) Buy: Short-term headwinds but long-term attractions; reiterate Buy
We reiterate our Buy rating on Pearson, as we believe the market has now discounted pressure on short-term estimates and additional restructuring costs and is not factoring in attractive long-term positioning.

Pearson: (MS, Wellington) UW, PT 1,227p
Another EPS downgrade highlights the tricky stage Pearson is going through as it faces a tough US environment, copes with business model change and invests in digital and emerging markets.

Actelion Cut To Neutral From Outperform at Exane
ASML Raised to Hold VS Sell at Deutsche Bank
BBVA Cut to Hold VS Hold at Deutsche Bank
BT Group Resumed at Overweight at JPMorgan; PT 280p
De Master Blenders 1753 Cut To Hold From Buy at Deutsche Bank
Enel Green Power Rated New Buy at SocGen; PT EU1.77
Fidessa Rated New Sell At UBS, PT 1,420p
Henderson Group Cut to Sector Perform at RBC Capital
Kuehne + Nagel Cut From Outperform to Underperform At Credit Suisse
Luxottica PT Raised to EU36 vs EU31 at Berenberg; Kept at Buy
National Grid Raised To Outperform From Underperform at Exane
NYSE Euronext Raised to Buy From Hold at Berenberg
Remy Cointreau Raised to Hold from Sell at SocGen
Richemont Cut From UBS’s Most Preferred List, Hermes From Least
Rightmove Raised To Buy VS Neutral at UBS
Roche Cut to Neutral at Exane; PT Raised 4% to CHF205
Sandvik Raised To Outperform From Neutral at Exane
Shire PT Raised 14% to 2,400p at Exane; Kept at Outperform
SKF AB Cut to Neutral from Buy at Nomura
Telekom Austria Raised To Neutral From Underweight at JPMorgan
Vimpelcom Raised To Overweight From Neutral at HSBC
Wirecard Cut To Hold From Buy at Berenberg

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