The Dawn Patrol – 08.03.13 – GS Asset Allocation, US banks, MS on EU Banks, more…


European stocks were seen opening higher on Friday, buoyed by fresh signs of Chinese economic growth and on expectations of a further pickup in U.S. employment. The US banks stress tests revealed some surprises for GS. Citi came out first.

SX5E Futures: 2687.00y 8.00 Support at 2669/71 then 2633. Resistance remains at 2701 then 2753. Looks like opening just under there at around 2696

TODAY, the key data is the NFP at 14:30 (165k expected). Other data include: The Spanish and German Industrial Output.

And the Dawn Patrol is off skiing tomorrow for a week…
In the meantime, if you have 5 minutes to spare, please visit this webiste and give heartily:
And keep on exercising! Life is short and it’s much better when you’re in great shape.


Blackrock’s Larry Fink said he wouldn’t be surprised to see a ~5% correction in the market. He says internally at Blackrock the company has seen a slowdown of equity ETF inflows over the last 10 days. Fink still sees stocks outpacing other asset classes going forward CNBC

EADS. Lagardere CEO sees sale of stake by end of July

Airbus CEO Says Wing Crack Problems Now ’Fully Understood’: FT

Google Overtakes Apple as Largest Holding in U.S. Mutual Funds

Apple: lowers iPad sales previsions and Taiwanese data points to a worse slowdown in iPhone 5 sales (Oh my…)

Bankia in Talks With 20 Funds to Sell Habitat, Expansion Says

Telecom Italia reports EUR 1.6b net loss for 2012 on goodwill write-downs

France Telecom. The French state-owned strategic investment fund will take a EUR 2.5bn hit to reflect the drop in value of its 13.67% France Telecom stake, Le Figaro

Texas Instruments, mid Q update, overall call was positive, nudges guidance to upper end of range, says strength is most notable in the industrial market

FT’s Lex Column:
CARREFOUR: Asset sales lift profits but investors want more sustainable improvements.
LINDE: Lincare acquisition has doubled healthcare-related sales at industrial gases group .


On the ECB

(by GS) The ECB left rates on hold at its March meeting and did not signal that a change in the monetary policy stance was imminent. There was also no hint of further non-conventional measures. The Governing Council, it seems, views past non-conventional measures as sufficient to overcome, slowly but steadily, the fragmentation in financial markets and banking systems. This does not mean that the Governing Council would not consider easing further should either the data disappoint or financial conditions tighten meaningfully. But, at least for now, there is no sense of urgency on the side of the GC.

On US Banks
The Fed published the result of their banks stress test and 17 of 18 banks modeled passed although Morgan Stanley and Goldman Sachs’s estimate of CT1 after assuming a deep global recession and/or external shock scenario came in below markets expectations. Goldman would suffer a USD20bn loss in the depths of the hypothetical crisis and its ratio of CT1 against risk-weighted assets would fall to 5.8 %, compared with a minimum requirement of 5 %, the Fed said. Morgan Stanley’s capital ratio would fall to 5.7 %.

On China
China’s exports far exceeded expectations for February, with 21.8% growth compared to a median forecast of 8.1%. However imports fell 15.2%, compared to a median forecast of -8.5%. For January and February combined, exports rose 23.8% and imports rose 5%. (Bloomberg)


GS (Nielsen) GOAL: Asset Allocation Update.
Upgrading commodities to a 3-month overweight after the sell-off

Macro outlook: Global growth recovery with near-term risks
We expect global growth to improve from 3.0% in 2012 to 3.3% in 2013 and to accelerate further to 4.1% by 2014. Near term, we believe risks remain elevated although not as high as last year. In Europe the hung parliament in Italy, large funding needs of Spain in a fragile funding environment, and the likely need for bank recapitalization in Cyprus are sources of risk. In the US, politics around and impact of fiscal tightening remain uncertain.
Our views across asset classes Equities: We are overweight over 12 months and expect a rebound in global growth, accelerating earnings growth and declining risk premia to drive returns. Over 3 months we expect consolidation and are neutral. Commodities: We believe the recent sell-off in commodities is overdone and upgrade to overweight over 3 months. We expect tight inventories to support backwardation and high roll yields in oil markets and expect copper to rebound in the near term on improving demand fundamentals. We expect long-dated oil-prices to be well-anchored around US$90/bbl due to the gradual supply side response to high prices in recent years. Corporate credit: We expect already tight IG spreads to narrow slightly as still sluggish growth, lower tail risks than last year and QE feed the search for yield. Credit metrics should remain strong as a whole, especially for US financials, and while we expect increases in leverage as firms look to exploit low yields, we think these increases should be modest. Government bonds: Bond yields remain low on an absolute basis, and when benchmarked against macro fundamentals. We expect a gradual rise from here, but risks are skewed towards a faster correction.


EUROPEAN BANKS (MS, Van Steenis and everybody else) Valuation & Best Ideas Into Our Conference

Morgan Stanley publishes a 146 pager on its EUROPEAN FINANCIALS CONFERENCE which will start on the 19th.
Revisiting Most & Least Preferred ahead of conference
Most Preferred: BNP, BARC, CS, DNB, EBS, STAN, SDR, SBER. (we switch into DNB from SWED, into EBS from KBC and add STAN) Least Preferred: BP, POP, CBK, BME, MPS & SAB.
Growing Differentiation aids stock picking
Our key call for 2013 was we “expect greater differentiation in 2013 as prices don’t reflect the broad spread in banks’ stage in recovery, deleveraging, dividend paying ability and their strategic responses.”. Our conviction in this has grown: intra-sector correlation has fallen ~10% in the last 2 months and sovereign risks reduced further from OMT/LTRO, as EU banks are now navigating ‘out of the Bermuda Triangle‘ of the worst of the severe forces of sovereign stress, deleveraging and financial repression.
Weak backdrop leaves some banks still at “high seas”
Our outlook for bank earnings continues to be plagued by a weak economic backdrop, weak loan growth, deleveraging, low/negative rates, and higher bad debts. As a result, we are on average ~13% below consensus 13e & 7% for 14e for Eurozone banks.

Publicis & WPP (JPM, Lo Franco) Long-awaited multiple re-rating has just begun
We reiterate our positive view on PUB/WPP and are more bullish on share price upside following good ’12 results, reassuring FY13 outlook & reiteration of operating margin growth. Our theory remains unchanged (see reports published Sep. ‘12 and Dec ‘12), that even in an uncertain macro environment ad agencies should be able to deliver c10% EPS12-14e CAGR leading to a 1-year forward multiple re-rating towards historical levels of 15x-16x. We continue to believe that agencies, and in particular PUB/WPP, are less cyclical than perceived and are more predictable businesses than in the past. We see PUB/WPP EPS12-14e 9.3%/10.2% CAGR on: i) 3.9%/3.5% organic revenue CAGR; ii) 50bps/100bps 12-14e margin uplift (with further potential upside going forward); and iii) bolt-on acquisitions (not included in our forecasts).

Europe: Tobacco (GS, Cazzol) Fundamentals unchanged post 2012 results; BAT still our top pick
As we update our estimates and price targets following FY12 results and recent currency volatility, BAT (Conviction Buy) remains our top pick within our European tobacco coverage. We maintain a Buy rating on Swedish Match and remain Neutral on Imperial.

ABB Removed From Citi Focus List Europe
C&C Group Cut to Underweight VS Neutral at JPMorgan
Campari PT Cut to Eu5.8 VS Eu6 at Nomura; Kept at Neutral
Campari PT Raised to Eu5.6 VS Eu5.5 at SocGen; Kept at Sell
Centrica Cut To Neutral VS Overweight at JPMorgan
Centrica Removed From JPMorgan Analyst Focus List
Delhaize Raised To Buy VS Hold at Deutsche Bank
Delhaize Raised To Hold From Sell at ING
Halma Raised To Overweight VS Equalweight at Barclays
Hochtief Raised To Buy VS Hold at SocGen
IMI Cut to Hold VS Buy at SocGen
Norsk Hydro Rated New Sell At SocGen, PT Nk23
Schroders Raised To Neutral VS Sell at UBS
Siemens Added To Citi Focus List Europe
Upm Cut To Neutral VS Buy at UBS


Asian markets
Nikkei 225 up +259.67 (+2.17%) at 12,228
Topix up +14.87 (+1.48%) at 1,019
Hang Seng up +283.29 (+1.24%) at 23,055

US markets
S&P 500 up +2.80 (+0.18%) at 1,544
DJIA up +33.25 (+0.23%) at 14,329
Nasdaq up +9.72 (+0.30%) at 3,232

European markets
Eurofirst 300 down -0.78 (-0.07%) at 1,185
FTSE100 up +11.52 (+0.18%) at 6,439
CAC 40 up +20.02 (+0.53%) at 3,794
Dax unchanged 0.00 (0.00%) at 7,940

€/$ 1.31 (1.31)
$/¥ 95.28 (94.81)
£/$ 1.50 (1.50)

Commodities ($)
Brent Crude (ICE) down -0.36 at 110.79
Light Crude (Nymex) down -0.22 at 91.34
100 Oz Gold (Comex) unchanged 0.00 at 1,575
Copper (Comex) up +0.10 at 350.25

10-year government bond yields (%)
US 2.00%
UK 2.01%
Germany 1.49%

CDS (closing levels)
Markit iTraxx SovX Western Europe -2.47bps at 98.8bp
Markit iTraxx Europe -3.52bps at 107.95bp
Markit iTraxx Xover -14.5bps at 416.74bp
Markit CDX IG -1.12bps at 82.62bp

Sources: FT, Bloomberg, Markit


One comment

  1. Abbou · · Reply

    Merci. Tres bon ski

    Envoyé de mon iPhone

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