The Dawn Patrol – 08.02.13 – ENI, ALU by MS, PEUGEOT, Italy, ECB, a new recipe… Bon Week End.


European stocks are seen rising on Friday, halting the week’s slide as robust trade data from China boosts sentiment and eclipses simmering worries over the euro zone economic outlook. Data showed Chinese exports grew 25 percent in January from a year earlier versus a forecast of 17 percent in a Reuters poll while imports climbed 28.8 percent, highlighting robust domestic demand. MSCI Asia Pacific Index pares decline to 0.3%, after falling as much as 0.7%, led by industrials stocks, after China’s imports rose 28.8% in Jan., exports +25%, both exceeding ests.

Macro eyes on: German Trade Balance, French Government Balance, Italian IP.

Ce Week end:




Émincés de dinde au beurre de cacahuètes et jus d’ananas. Moi j’ai aimé et elle m’a dit qu’elle avait aussi beaucoup aimé…


EU member states continue to wrangle over the 2014 budget with creditor/net payers arguing for less of an increase (apart from France who wants to pay more and continue to benefit from CAP) and debtor/net receivers of funds who of course want to see more cash. None of this is very relevant for markets today or in the short term.

Obama says he is prepared to do “big deal” on budget and deficit to get beyond governing by crisis caused or helped U.S stocks rally after our close.

PEUGEOT. PSA Peugeot Citroën’s 2012 results to be published on 13 February 2013 will include an impairment charge of EUR4.1bnon the assets of the Automotive Division reflecting the impact on the Group of the deterioration of the European market, according to an announcement by the company. This measure will not involve any cash-out, nor will it affect either the Group’s liquidity or its solvency.

Eni declares there was no involvement of directors and managers in Saipem’s activities in Algeria, currently under investigation. (

LinkedIn shares rose as much as 11% in after-market action as the company reported earnings excluding one-time items of 35 cents a share on revenue of $303.6 million. The results easily surpassed the forecasts of analysts surveyed by FactSet, who forecast LinkedIn to earn 19 cents a share on almost $280 million in revenue for the quarter ended in December.

Sony -6% in Tokyo after posting an unexpected quarterly loss and cut sales forecast.

VW (MAN, Scania), Volvo, Daimler: Brazil heavy truck sales were down over 16% y/y through January. Among the Europeans, Scania bucked the market trend, growing 16% y/y for the month, while Daimler sales slipped nearly 36% y/y. VWs other truck brand, MAN, saw sales drop by 25%, while rival Volvo recorded an 11% decline for the same period y/y.

Software AG to Spend up to EU180m on Buyback

Hugo Boss 4Q Adj. Ebitda, Rev. Beat Ests.

John Lewis Weekly Sales Rise 8.7% to GBP175m

Richemont Nominates Fornas to Board, to be Co-CEO From April 1

VIVENDI, UBISOFT: Activision Blizzard Inc. closed the year with strong earnings growth, but the uncertain outlook for the videogame industry weighed on the company’s outlook, even with its blockbuster properties such as “Call of Duty” and “World of Warcraft.”


On Italy
Today is the last day polls can be published ahead of the Italian general election on 24 – 25th February. So far today we have two new polls. We concentrate on the more reliable (and better reputational) Ipsos poll for Sole24Ore which shows the Centre Left lead over the Centre Right at just 6.6 points versus 8.4 points in their last poll earlier this week. ( still shows Bersani with an 87.4% probability chance to be the next PM.

On the ECB (GS)
As widely expected, the ECB left rates unchanged and gave no hint of any imminent change to its monetary policy stance or further non-conventional measures. The Governing Council views the repayment of central bank liquidity as a sign of normalisation and does not seem overly worried about a potential rise in money market rates on the back of a decline in excess liquidity. However, the appreciation of the Euro is viewed with more concern. While Mr. Draghi repeated the well-known stance of the ECB that it does not pursue an exchange rate policy, he also made clear that the exchange rate “is important for growth and price stability”. The updated staff projections in March are likely to be an important determinant of whether the Governing Council responds to the appreciation or no

On India
India 2013 growth lower than forecast. Yesterday India’s government today projected FY13 growth (year-ending March 2013) at 5 oya%, to the dismay of markets who expect growth to be closer 5.5%.

To Read
EU leaders haggle over budget tightening. EU leaders bargained into the early hours of Friday morning as they tried to reach agreement over how deeply to cut the bloc’s seven-year, trillion-euro budget.

Martin Wolf thinks the unthinkable. (Financial Times)


JPM (Firescu) JPM Volatility
Further Convexity and Credit-Equity Opportunities

Buy SX5E Jun13 Varswap and Sell SX5E Jun13 Volswap
Buy SX7E Jun13 105% Call
Buy ACA FP Jun13 Volswap (2.5 cap) versus Sell BNP FP Jun13 Volswap (2.5 cap)
Derivative Strategy and Ideas: European banks credit-equity update. In our last Equity Derivatives Outlook we commented on the outperformance of credit over equity in European financials. We have since witnessed some material shifts in the market condition. According to our CEV model, whereas the Euro STOXX 50 and iTraxx Main have traded more or less closely with each other, the SX7E and iTraxx Senior Financial have decoupled. The equity implied CDS is trading too tight relative to the iTraxx Snr Fins. As a reminder, the CEV model computes the implied default probability (defined as the stock price going to zero) based on equity prices and implied volatility, then translates the default probability into spread terms. The equity implied spreads, after calibration, can be compared to the market CDS to determine the rich/cheapness of credit risk premium relative to the equity risk premium.


Alcatel-Lucent(MS, Meunier) CEO departure changes the game – Upgrade to OW
UW to OW, PT €0.80 to €2
We are upgrading ALU to Overweight – we believe the shares will be seen as attractive again, as the company starts to generate sustainable cashflow.

PSA Peugeot-Citroen (MS, Lembke) €5bn Writedown…and a Bearish Message on Europe
The key takeaway from PSA’s ad-hoc conference call in our view is not the €4.7bn asset writedown, but rather the reason: Management no longer expects a recovery of the EU car market in either the near or more distant future – a scenario we explored in depth in our FY13 outlook. We stay UW.

Buy BNP, Results Should Confirm Capital to Support Growth: BofA. BofA says expects a 9.8% Basel III ratio in Q4, can absorb any tightening of regulation or additional volatility. Q4 forecast 5% ahead of consensus driven by CIBD.


GEA Raised to Buy VS Hold at Deutsche Bank

Gas Natural Raised To Overweight VS Equalweight: Morgan Stanley

Enagas Cut To Equalweight VS Overweight at Morgan Stanley

Smiths Group Cut Neutral VS Buy at UBS

Telecom Italia 2012 Ebitda Eu11.7 Bln; Analyst Est Eu11.8 Bln

HeidelbergCement Cut to Hold VS Buy at Berenberg

ENI Cut to Neutral VS Buy at Citi


Asian markets
Nikkei 225 down -134.38 (-1.18%) at 11,222
Topix down -7.67 (-0.79%) at 961.51
Hang Seng up +25.63 (+0.11%) at 23,202

US markets
S&P 500 down -2.73 (-0.18%) at 1,509
DJIA down -42.47 (-0.3%) at 13,944
Nasdaq down -3.35 (-0.11%) at 3,165

European markets
Eurofirst 300 down -3.84 (-0.33%) at 1,148
FTSE100 down -66.92 (-1.06%) at 6,228.42
CAC 40 down -41.85 (-1.15%) at 3,601
Dax up +9.67 (+0.13%) at 7,590.85

€/$ 1.341 (1.36)
$/¥ 93.43 (93.85)
£/$ 1.57 (1.57)

Commodities ($)
Brent Crude (ICE) up +0.66 at 117.90
Light Crude (Nymex) up +0.30 at 96.13
100 Oz Gold (Comex) up +1.10 at 1,671
Copper (Comex) unchanged 0.00 at 372

10-year government bond yields (%)
US 1.96%
UK 2.13%
Germany 1.6%

CDS (closing levels)
Markit iTraxx Europe +2bps at 118.8bp
Markit iTraxx Xover +5.5bps at 455.0bp
Markit CDX IG +0.3bps at 89.6bp

Sources: FT, Bloomberg, Markit


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