The Dawn Patrol – 06.02.13 – ARCELOR=, VINCI-, VOLVO-, Mkts views, GS on EM consumer,


European stocks expected to open flat to slightly up following yesterday’s gains and on mixed earnings publications. Peripheral risks remain.

Today: German factory orders, Iceland’s central bank decides interest rates. Sweden, Germany sell bonds

In Biarritz, it’s the rainiest January since 1927! (I’m sure you didn’t know this).
And it feels like the longest winter here…


MITTAL: Numbers appear like a small miss on a top line with adjusted EBITDA of $1bn vs consensus of $1.25. In the guidance side, Mittal sees EBITDA 2012 above 2013 which is in line with expectations. All in all the stock should be OK today.

VINCI: Published numbers in line with expectations. EBIT/Net of €2,129m/€1,133 are in-line/slightly better. BUT guidance is cautious and Q4 order intake pretty slow too. Could see some pressure today. We’ll have more details during the conf call today. Valuation remains attractive and dividend is flat at €1.77.

Lundbeck Div. Misses Forecast; Keeps 2013 Outlook. Lundbeck 4Q Pretax Profit Dk209 Mln; Analyst Est. Dk415 Ml

BlackBerry Z10 Off to Good Start in Canada: Morgan Stanley

Syngenta FY net in-line with 9.50 dvd for ’12.

Handelsbanken 4Q net income inline.

Volvo missed on all fronts and see difficult 4Q (see read across in DAI).

GEA Group sales inline.

TIETO, 4Q looks like a miss although company raises dividend and sees 2013 EBIT improving.

MMM: +2% – announced a share repurchase program of $7.5Bln, boosts dividends 8%.

DIS: +1.5% – beats earnings and revenues estimates.

EXPE: +3.8% – tops revenues and EBITDA estimates, better-than-expected international gross bookings.

ZNGA: +5.1% – 4Q EPS $0.01 vs ($0.03), higher-than-expected revenues and EBITDA margins.


On Italy
Two new polls today: Ipsos has the Centre Left lead over the Centre Right alliance at 8.4 points which is a 3.4 point improvement after last week’s 5 point gap which led to the market selloff. Source The second poll is from and has the CL lead over the CR as increasing by 40bps since the last poll at the end of January. Source Bersani and Monti signalling an intention to make an alliance according to La Repubblica. Note Bersani is on RAI radio at 08.00 GMT today may give more details. Berlusconi appeared on the Public Channel 3 overnight (historically this channel has been center left leaning . The first impression from the press is that the outcome of the interview was negative over Berlsuconi’s pledge to cancel real estate taxes (light on detail on how this could be done).


On the Equity markets we’ve witnessed a strong rally since mid November. Since Jan 1, the trend remained upwards until yesterday’s big drop on Southern Europe political fears. The main theme pushing equities up is the rotation out of fixed income into equities. Fears of a Euro break up seem to have evaporated since the ECB intervention last year.

Monday’s fall may be seen as a wake up call. Some of our US clients now buying protection on the market as they anticipate a drop. Also FT article may add to nascent worries:
Brace for a stock market accident –

Looking at some key indicators:

Economic indicators are OK (PMIs)

European investors flows into equities up 12% YoY (€20bn in total, 15bn in Equities, 10bn in Equities ex ETFs).

Banks situation has massively improved.

European Q4/FY earnings are somewhat better than expected so far (66 companies reported) but earnings revisions for 2013 inching down.

Valuation (according to MS) back at 11.8x while average target is around 12x.

Sentiment is toppish and it seems that some are willing to take any kind of profit.

EURUSD valuation will hamper exporters growth.

Overconfidence in disappearance of systemic European risk.

Loans to corporate NOT accelerating.

GS (Trivedi) Gauging the mood of the EM consumer
We construct a new aggregate consumer confidence indicator for emerging markets, based on individual indicators from 17 major EMs. The indicator helps to: (1) explain private consumption expenditure and domestic demand in EMs; and (2) provide distinct information from the services and manufacturing PMI surveys in EMs and from consumer confidence sentiment in DMs. The most recent observations show a marked improvement in EM consumer confidence in the last few months of 2012 and coming into 2013.

GS (Walterspiller) FY2012 Earnings Tracker.
Stoxx 600 Results update:
The European earnings season has been positive so far and shows continued improvement compared to 3Q. 65 companies have reported their full-year results (out of a total 492 we expect to include). 46% of companies reporting have beaten estimates by more than 2% (better than the average over the past 12 quarters of 42%) and 31% have missed estimates by more than 2% (compared to 37% historically). On an absolute basis, 57% of companies have beaten estimates while 43% have missed. The average equal-weighted EPS surprise has been +2.2%.This is better than the previous earnings season (3Q 2012: +0.5%) and above the 5-year average (+0.8%).
This is slightly more positive than what MS was saying yesterday…


DIAGEO (JPM, Webb) Continuing to deliver.
Diageo continues to deliver operational performance in line with its medium-term guidance, or even slightly ahead of it in terms of profit growth. This is above its historical performance, reflecting its success in re-balancing the business towards growth markets, predominantly through organic growth, supplemented by acquisitions. This is now being fully supported by price increases, with overall group price/mix improvement of +4% in H113 having predominantly consisted of price rather than mix, with the US having seen the most significant improvement here.

GS add SBRY to conviction Sell list and add MUV2 to CL Buy as structural earnings improvement not in the price, MS turns OW on Schroders (HGG, EMG least preferred) and has a tactical Buy on Ziggo. IPSEN added as a JPM Investment opportunity, KPN cut to UW at ML (a bit late?), Suez Env. Rated Buy at Berenberg while Centrica downgraded Hold and RWE+EON reinitiated at Sell.

Ashmore Cut To Equalweight VS Overweight at Morgan Stanley
Autogrill Raised To Outperform VS Neutral at Mediobanca
Bank Of Ireland Cut to Underperform VS Neutral at Credit Suisse
Givaudan Raised To Neutral VS Underperform at BofAML
KPN Cut to Neutral VS Outperform at Credit Suisse
Meggitt Cut To Neutral VS Buy at UBS
Publicis Groupe PT Raised 7% to EU60 at Exane
Schroders Added To Ubs’ Least Preferred List
Schroders Raised To Overweight at Morgan Stanley
Telecity Raised To Buy VS Hold at Jefferies
UniCredit Removed From Europe 1 List at BofAML


Asian markets
Nikkei 225 up +426.28 (+3.86%) at 11,473
Topix up +31.25 (+3.33%) at 970.95
Hang Seng up +197.28 (+0.85%) at 23,346

US markets
S&P 500 up +15.58 (+1.04%) at 1,511
DJIA up +99.22 (+0.71%) at 13,979
Nasdaq up +40.41 (+1.29%) at 3,172

European markets
Eurofirst 300 up +3.56 (+0.31%) at 1,154
FTSE100 up +35.92 (+0.58%) at 6,283
CAC 40 up +34.79 (+0.95%) at 3,695
Dax up +26.43 (+0.35%) at 7,665

€/$ 1.36 (1.36)
$/¥ 93.85 (93.61)
£/$ 1.57 (1.57)

Commodities ($)
Brent Crude (ICE) up +0.08 at 116.60
Light Crude (Nymex) up +0.03 at 96.67
100 Oz Gold (Comex) up +0.40 at 1,673
Copper (Comex) unchanged 0.00 at 376.15

10-year government bond yields (%)
US 2.01%
UK 2.13%
Germany 1.66%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.49bps at 105.39bp
Markit iTraxx Europe -2.24bps at 115.07bp
Markit iTraxx Xover -5.21bps at 448.4bp
Markit CDX IG -1.59bps at 88.51bp

Sources: FT, Bloomberg, Markit


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