The Dawn Patrol – 05.03.13 | RWE+, HSBC-, Deutsche Post=, JPM downgrades Arkema, GS likes Casino… More.

Bonjour,

(as always, should you have comments, feedbacks or if you don’t like skiing/surfing/cycling/flyfishing, let me know…)

European stocks are seen rising on Tuesday, tracking gains on Wall Street and in Asia fuelled in part by fresh assurances of accommodative monetary policy from the U.S. Federal Reserve. Gains could be limited, however, ahead of Markit services PMI data for Italy, France, Germany and the euro zone.

SX5 Futures: VG1 Index 2624.00y +7.00. Support at 2633 then 2608. Resistance 2669 then 2701. Looks like opening around 2640.

Today, we’ll monitor the PMI services in Europe (between 9:45 and 10:00) for Italy, France, Germany and the EC. In the US, we’ll also have the ISM nonmanufacturing composite. The Ecofin ministers meet in Brussels and we should get some comments on Ireland and Portugal debt relief.

Going skiing soon? Try this: http://www.skieur.com/guide-ski-2013

And a nice video here:

China leadership say they aim to increase the budget deficit by 50%. Prada +4.8% traded at a new high overnight in HK after the China leadership said they would increase their budget deficit by 50%.

France eyes tougher merger rules: “The key measures proposed by the Autorité des Marchés Financiers include increasing to 50 per cent the minimum acceptance threshold at which any takeover offer can be made for a company. This brings it in line with UK takeover rules that are designed to ensure that target shareholders get a fair price for their shares.” (Financial Times)

PSA Peugeot Citroen CEO Philippe Varin says nationalization “not on the agenda,” Sueddeutsche Zeitung reports, citing interview.

China Sets 2013 Goal for GDP Growth at 7.5% vs Median Est. 8.1%

HSBC falls 1.3% in pre-mkt trading in Hong Kong after co. said FY pretax profit dropped 5.6%

Deutsche Post Beats 4Q, 2012 Net Ests.; Misses BDVD Forecast. Deutsche Post sees 2013 Ebit of EU2.7b to EU2.95b; est. EU2.87b; sees 2012 rev. increasing.

Apple’s market cap fell below $400bn on Monday for the first time in more than a year.

Oerlikon 2012 EBITDA, sales beat estimates

RWE 2012 recurrent net income EU2.46b, down 0.9% Y/y.
• FY net income EU1.31b, down 28% from year ago
• 2012 FY operating result EU6.42b vs est. EU5.97b, up 10% Y/y
• 2012 Ebitda EU9.31b vs est. EU8.76b; Ebitda rises 10% from year ago
• 2013 outlook for FY Ebitda EU9b; operating result to be below 2012 level, recurrent net income seen stable, CEO Peter Terium says
Will sell their upstream activities, could be worth 50% of RWE market Cap. POSITIVE.

CURRENT STUFF

Italy. Overnight new news, according to Corriere, President Napolitano is considering former Minister for Internal Affairs Cancellieri as the new PM ( another name cited by Repubblica is Stefano Rodotà) in case a first attempt with Bersani fails. Also, Monti invites Grillo, Berlusconi, Bersani to separate meetings to discuss Italy’s EU priorities.

China Markit Services PMI comes in at 52.1 from 54 in January, similar to the trend of the official Services PMI we saw on Sunday. Whilst the reading fell 1.9 points the survey continues to point to modest business activity increases across both manufacturing and service sectors in February. Output has now increased at the composite level for six consecutive months and rose modestly in February, however, the rate of expansion eased from January The HSBC Markit China Composite Output Index posted 51.4 in February, down from January’s two-year high of 53.5.

China is retaining its GDP growth target of 7.5% for 2013, while the inflation target will be lowered to 3.5% from 4% and fiscal the budget deficit will rise by about half. In remarks prepared for the opening of the country’s annual parliament meetings on Tuesday, outgoing Premier Wen Jiabao said China would target a 2013 fiscal deficit of Rmb1.2tn ($192.8bn), or about 2% of GDP, compared to the 2012 deficit worth of 1.6% of GDP. Announcements regarding railway construction and raising the bond issuance limit for local councils were also made by government agencies. The country is increasing its defence spending by 10.7%, in line with the past two decades of double-digit growth. (Reuters)(Financial Times)(Bloomberg)

The FSA is preparing to crack down on asset managers using investors’ money to pay for access to chief executives after discovering that some are spending “tens of millions of pounds” a year on corporate access. The regulator’s asset management chief, Ed Harley, said the use of client commissions was ‘hard to justify” and raised the prospect of multimillion-pound fines. (Financial Times)(FT Business blog)

UPS&DOWNS

Autos & Auto Parts (MS, Pearson) North Europe the New Risk
France is driving less. Britons get less car for their pound. And German dealers are buying as many cars for themselves as customers. As risks shift to N. Europe and Geneva opens its doors to a dearth of new product, we cut ‘13e EU demand to -6% (was -4%). Sector multiples look at risk short-term. We prefer the self-help/secular stories at VW, Volvo, Conti & Renault (all OW). We are more cautious on tyres and EU-geared OEMs, including Fiat Auto, PSA (both UW) and Michelin (EW).

Arkema (JPM, Evans) Cautious short term with a slow start to the year likely- As earnings may fall in 2013, downgrade to Neutral
2013 may prove to be a down year for earnings. In our view, Arkema’s end markets are likely to remain soft with, for example, weakness in High Performance Materials (Performance Products) and ongoing delays in new oil and gas projects. In addition, the comparison will be challenging given the absence of the significant currency gain and first time acquisition contribution seen in 2012. We see limited opportunity for material organic growth for now. We cut our 2013 EBITDA forecast 5%, 2014 4%, leaving us –10% versus 2013 consensus of €1,049m, -11% versus 2014 consensus of €1,116m. We lower our Dec-13 DCF price target to €72 from €75 and downgrade to Neutral.

Casino (GS, Walding) Buy: Better deleveraging to drive faster EPS growth; re-iterate CL Buy
Reiterate CL Buy on Casino following strong FY12 results, showing better than expected EBIT performance and faster deleveraging than we had anticipated. This supports our thesis. We now forecast 15%+ EPS growth in FY13 and 20%+ in FY14.

Arkema Cut to Neutral vs Overweight at JPMorgan
Belgacom Cut To Sell From Hold at ING
Debenhams Cut To Neutral VS Buy at Citi
DNB Raised to Buy VS Neutral at UBS
Fresenius SE Cut to Equalweight VS Overweight at Barclays
GN Store Nord Rated New Overweight at Barclays
Kabel Deutschland Raised To Hold VS Sell at Berenberg
Rentokil Cut To Neutral at Credit Suisse, PT 95p
SEB Cut to Neutral VS Buy at UBS
Sonova Rated New Equalweight At Barclays
TDC Raised to Overweight VS Equalweight at Morgan Stanley
Telenor Raised To Overweight VS Equalweight at Morgan Stanley
Thyssenkrupp Raised To Neutral VS Underperform at BofAML
William Demant Rated New Underweight At Barclays
WPP Cut to Sell VS Hold at Berenberg

OVERNIGHT MARKETS: UP

Asian markets
Nikkei 225 up +54.92 (+0.47%) at 11,707
Topix down -3.43 (-0.35%) at 988.82
Hang Seng up +52.24 (+0.23%) at 22,590

US markets
S&P 500 up +7.00 (+0.46%) at 1,525
DJIA up +38.16 (+0.27%) at 14,128
Nasdaq up +12.29 (+0.39%) at 3,182

European markets
Eurofirst 300 down -0.28 (-0.02%) at 1,168
FTSE100 down -32.97 (-0.52%) at 6,346
CAC 40 up +9.85 (+0.27%) at 3,710
Dax down -16.48 (-0.21%) at 7,692

Currencies
€/$ 1.30 (1.30)
$/¥ 93.07 (93.46)
£/$ 1.51 (1.51)

Commodities ($)
Brent Crude (ICE) up +0.44 at 110.53
Light Crude (Nymex) up +0.20 at 90.32
100 Oz Gold (Comex) up +7.00 at 1,579
Copper (Comex) up +2.65 at 350.95

10-year government bond yields (%)
US 1.87%
UK 1.92%
Germany 1.42%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.56bps at 103.59bp
Markit iTraxx Europe -1.68bps at 116.22bp
Markit iTraxx Xover -5.96bps at 448.08bp
Markit CDX IG -1.55bps at 84.77bp

Sources: FT, Bloomberg, Markit

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