The Dawn Patrol – 01.02.13 – LVMH-, BT+, ELUX-, MS on Tech,

Bonjour,

European markets set to open higher as investors hope for better non farm pay rolls later today. Mining stocks should benefit from the rise in Metals prices but this may be offset by the poor Chinese PMI which just came out at 50.4 for Jan vs 50.6 for Dec.

Today, macro eyes on PMI Man in Europe and CPI – NFP, US PMI, Michigan, and ISM.
US Earnings before the open: AON, BEAM, BEN, BT, CVX, IR, LEA, LM, LYB, MAT, MRK, NOV, NWL, TDW, TSN, XOM

Why you don’t want to go surfing in big waves: http://vimeo.com/58530221#

If you’re not into surfing, but into glamourous Hollywood: The Red Carpet Project: http://www.nytimes.com/projects/oscars/red-carpet-history/?ref=arts

(I prefer Surfing).

HAVE AN AMAZING WEEK END! Cook some cheeseburgers, go to the movies, spend time with the family and the loved ones and take time to exercise…

HOT STUFF

BT 3Q Adj. EPS Beats; Reiterates FY Forecasts

Danone won’t attempt hostile takeover of Yakult, Nikkei says

DE LA RUE Says Trading Has Been In Line With Estimates

EADS. Airbus has studied alternatives to lithium-ion batteries for its A350, has time to make changes based on problems grounding Boeing 787, CEO Fabrice Bregier told journalists. Reuters

Electrolux 4Q Net Misses Est.; Sees Europe Mkt Staying Weak

FERRAGAMO FY12 sales in line, up 17% reported, +13.4% organic, as expected an acceleration in 3Q after softer trend, retail LFL came in broadly as expected at +8% in 4Q. Europe better, Japan weak.
Credit Agricole take EU2.68B goodwill writedown in 4Q
Metlife buy BBVA’s Chilean pension business for about $2bn
Barclays in Qatar loan probe : UK authorities are probing an allegation that Barclays loaned Qatar money to invest in the bank as part of its cash call at the height of the financial crisis in 2008, which enabled the bank to avoid a UK government bailout.
Roche’s anti-tumor drug Avastin fails for 2nd time in 2 mos. to win backing of U.K.’s health-cost regulator as a treatment for ovarian cancer in a draft decision.
Samsung doubles market Share in Tablet PCs as Apple holds lead

LVMH Q4/FY headlines suggest c1.5% profit and c5% net income consensus miss, with weak Fashion + Leather margin.

RIO +1.3% in Sydney two points to note 1) Iron Ore printed +2% at $152.5 2) Oyu Tolgoi produced its first copper conc today.

THALES The management is about to announce a new organisation according to Les Echos

Crédit Agricole is poised to issue a profits warning, which could come as soon as today, linked to reducing the amount of goodwill on its books. Shares in the French bank closed 1.5% lower on Thursday on fears that the bank would warn investors that it would not meet consensus estimates. (Financial Times)

CURRENT STUFF

China’s official manufacturing PMI unexpectedly fell: The measure edged down to 50.4 in January from 50.6 in December. In remaining above the midpoint of 50 for the fourth consecutive month, the reading still signalled an expansion in activity but at a slightly reduced pace. However another survey by HSBC/Markit Economics suggested a growing rate of expansion, rising to 52.3 from 51.5 in December. (Financial Times)(Bloomberg)

Other Asian countries Manufacturing PMIs: today Taiwan came in at 51.5 from 50.6 in December, South Korea’ s fell two tenths to 49.9 however the countries January trade data showed a bigger increase in exports and imports than estimated.

‘London Whale’ sounded alarm on bets: “The JP Morgan trader known as the “London whale” tried to alert others at the bank to mounting risks months before his bets ballooned into more than $6 billion in losses, according to people familiar with emails reviewed by J.P. Morgan and a U.S. Senate panel.” In one email, Bruno Iksil told another trader the size of his bets was getting “scary”. (Wall Street Journal)

UPS&DOWNS

TNT Express N.V. (GS, Woodman) Buy: Undervalued restructuring opportunity; up to CL Buy from Neutral
Upgrade TNTE to CL Buy (was Neutral). We believe the potential for restructuring of the business and removal of Brazilian and Chinese losses is not reflected in its share price. 12M PT €7.9 valued on 6.0x 2014E EV/EBITDA.

DEUTSCHE BANK (JPM, Abouhossein) Upgrading from UW to N: Capital improvement on track
We upgrade DB from UW to Neutral – since mid-Oct. 2012, DB has underperformed our Global IBs coverage by -14%, Eurobanks by -7% and is up only +5% on an absolute basis. Our global IB pecking order remains i) UBS, ii) CSG, iii) MS, iv) DB, and v) GS – as we seek exposure to Tier II FICC restructuring and Wealth Management gearing. DB stock price value is not based on earnings valuations in our view – otherwise we would argue DB is a very cheap stock. The key issue for us remains capital at risk and hence the high implied CoE. We introduce our 2015E based Price Target of €38, up from €35 previously.

RANDSTAD Cut To Hold VS Buy at Deutsche Bank
DIA cut to Neutral at Nomura, Bernstein upgrade ABI to Outperform, JPM like Mittal ahead earnings (OW) and still see value on Snam & Terna, MS reiterate OW on RDSA as underlying progress which was reflected in a 5% dividend increase (but cut to UW at ML) , reiterate OW on Maersk based on cheap valuations and has a tactical Buy on Swatch, BNP raised to Buy at Socgen while DB upgrade Sweda to Buy. DB like as well ADEN/RAND.
GS : TNT Express up to CL Buy, reiterate CL Buy on BSkyB, Fortum and Atlas Copco, reiterate Sell on Snam and RD Shell, reiterate Buy on Infineon, VTG down to Neutral, initiate on Talanx with a Buy

STRATEGY

JPM (Shepherd) Gold in 2013.
Investor and central bank appetite for gold in a negative real interest rate environment should see the gold price higher through 2014. We forecast gold to average c$1,763/oz. (+6%) in 2013. SA gold shares struggled in 2012 and their ratings remain depressed as a result of a difficult business environment in SA. We see increased risks of industrial unrest, high wage inflation and adverse regulatory changes for local mines. The SA mining industry is in crisis, in our opinion. We continue to expect our non-SA gold share picks, African mid-tier miner Randgold Resources and Turkish junior Koza Gold to outperform gold (12m). We still prefer the metal/ETFs to the major SA gold shares that we cover while labour climate, costs and regulatory uncertainties persist.

(from JPM)

U.S Asset Managers Weekly Funds Flow: AMG/Lipper released mutual fund flows data for the week ending January 30th , 2013. Total mutual fund sales (incl. ETFs) were the best since the first week of January. Although we continue to believe that the data isn’t conclusive, one is definitely seeing the signs one would expect from investor engagement into equity funds. Not only are equity sales accelerating, but we are seeing fixed income sales decelerate. The issue remains that if investors are engaging, such engagement is fragile, and therefore difficult to pay up for in asset management stocks.
Equity funds (ex-ETFs) saw a robust $5.8bn of net inflows last week, vs. $3.7bn of inflows in the prior week. Domestic equity funds saw $2.9bn of net sales last week, vs. $1.4bn of net inflows in the prior week. Non-domestic equity funds saw $2.9bn of net inflows, vs. $2.3bn of inflows the week before.
Taxable bond fund (ex-ETFs) sales have declined for three straight weeks, reporting inflows of $2.9bn, vs. $3.5bn of net sales the week before. Long-term municipal funds saw $0.6bn of net inflows last week, vs. $0.8bn of sales in the prior week.
Money funds saw modest net sales last week, posting $0.9bn of net new inflows compared to $4.8bn of outflows in the week before. Weaker money fund sales are typical in January.
Asset managers’ fund returns last week were positive, up 0.2% on average. S&P 500 was up 0.5% during the week. Asset manager returns so far this year are strong. GAMCO (+5.7%) has started the year strongly with best QTD returns, followed by AMG (+4.5%). Lazard is the worst performer (+1.1%) QTD.

MS (Huberty) US TECH

US Macro Datasets Show Signs of Improvement
While technology hardware spending data points remain mixed, broader macro dataset highlight a rate of change improvement. We continue to favor companies on the right side of disruptive trends in mobile, analytics, and big data.

Y/Y declines in computers and related product shipments ease in December. According to the US Census Bureau, computers and related product shipments by US manufacturers declined 16.0% Y/Y in December, improving from -23.2% in November while Y/Y comparisons were unchanged. We estimate that this category is comprised of PCs and servers (45%), storage devices (25%), and peripherals (30%). The run rate improvement is consistent with EMC’s backend loaded quarter and coincides with easier Y/Y PC growth comparisons. According to NPD, PC unit growth turned negative in December 2011, setting up for easier comparisons, which is potentially contributing to the improving data points. New orders of computers and related products also showed a slight improvement, declining 17% in December compared to -19.4% in November despite Y/Y comparisons getting two points tougher.
4Q GDP data also points to a rebound in enterprise tech hardware spending. According to the Bureau of Economic Analysis, private non-residential fixed investment in computers and peripheral equipment grew 2.5% in 4Q, improving significantly from the 10.5% decline in 3Q while Y/Y comparisons remained largely unchanged. However, the 2.5% growth is below the 4.3% average over the past eight quarters. Notably, Y/Y comparisons get tougher in 1Q13.

OVERNIGHT MARKETS: MIXED

Asian markets
Nikkei 225 up +91.91 (+0.83%) at 11,231
Topix up +3.56 (+0.38%) at 943.81
Hang Seng down -90.21 (-0.38%) at 23,639

US markets
S&P 500 down -3.85 (-0.26%) at 1,498
DJIA down -49.84 (-0.36%) at 13,861
Nasdaq down -0.18 (-0.01%) at 3,142

European markets
Eurofirst 300 down -6.56 (-0.56%) at 1,165
FTSE100 down -46.23 (-0.73%) at 6,277
CAC 40 down -32.92 (-0.87%) at 3,733
Dax down -35.26 (-0.45%) at 7,776

Currencies
€/$ 1.36 (1.36)
$/¥ 92.16 (91.72)
£/$ 1.59 (1.59)

Commodities ($)
Brent Crude (ICE) up +0.27 at 115.82
Light Crude (Nymex) up +0.03 at 97.52
100 Oz Gold (Comex) up +0.30 at 1,661
Copper (Comex) unchanged 0.00 at 372.35

10-year government bond yields (%)
US 1.99%
UK 2.11%
Germany 1.68%

CDS (closing levels)
Markit iTraxx SovX Western Europe +1.52bps at 102.57bp
Markit iTraxx Europe +1.39bps at 112.29bp
Markit iTraxx Xover +3.28bps at 442.88bp
Markit CDX IG -1.18bps at 88.95bp

Sources: FT, Bloomberg, Markit

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