The Dawn Patrol – ILIAD+, GS dgrades RIO&BHP. MS likes TEF. JPM likes ING. GS likes HAVAS, ERICSSON and STM… I like Alice Smith.

European stocks are seen inching lower on Tuesday, adding to the previous session’s losses, as a controversial plan for a bailout of Cyprus involving a levy on bank deposits keep investors on edge.

SX5E futures 2642.00 -17.00. Support at 2608 then 2556. Resistance 2647 then 2669. Looks like opening around 2629
Gold is breaking up in EUR…

Today, we’ll again be hostages of a tricky political event as the Cypriots may vote on the bailout deal. According to Bloombeg, this will happen at 17:00 (Paris time) and according to the FT the tax on less than €100,000 accounts will be removed and increased to 15.6% on those above. Any variation on the theme of taxing people’s deposits may arise. I just can’t believe that there is no more social uprising in Europe…

Macro eyes on EU new car registration, Italian IP, Zew survey, the EZ construction output and in the US, housing starts. On the auctions side, we’ll get some Grrek bills, ESM bills and Spanish bills.

She’s not very famous yet, but I love her voice and in particular her song “Love Endeavour”.
Her new album is out today thanks to kickstarter (Ifeel like a producer).
http://www.alicesmith.com/ and to listen to her songs: http://fr.myspace.com/alicesmith

HOT STUFF

M&S bid speculation continues in the UK press overnight

Richemont. Institutional shareholder selling 7m shares. BBG

Ziggo shareholders are selling 40m shares to two institutions.

Iliad confirms 2015 target as net income beats estimates

Rio Tinto sees lower iron ore prices in the second half of the year

Goldman Cuts Iron Ore Price Forecast; Sell Rio Tinto, Cuts BHP

UBS Plans to Leave Euribor Contributor Panel, L’Agefi Says

ThyssenKrupp is preparing for a capital increase to raise its equity capital, which has been reduced due to losses. Handelsblatt

EU Feb. Car Sales Fell 10%; Ford, GM, Fiat Lead Drop (PEUGEOT -13.2%, RENAULT -8.6%…)

Brussels green light for Italy debt sale: “Italy is considering a substantial increase in sales of government debt to boost its recession-hit private sector after striking a deal with the European Commission that allows a relaxation of Rome’s fiscal targets.” (Financial Times)

CURRENT STUFF

Cypriot authorities rushed to renegotiate the terms of a €10bn bailout by moving to scrap its controversial levy on small account holders and instead seizing more from larger depositors and businesses. The parliamentary vote on the rescue deal was postponed a second day running and is now scheduled to take place today. In an attempt to win over the handful of votes needed, President Nicos Anastasiades suggested lowering the rate on smaller depositors to 3%, while those with over €500,000 would lose 15% and those in between would get a 10% cut. A eurogroup statement said there would be “more progressivity” introduced to the original scheme. (Financial Times)(FT Alphaville)(Wall Street Journal)

To read
German Economist: ‘Europe’s Citizens Now Have to Fear for Their Money’ http://bit.ly/15kFhqt

UPS & DOWNS

ING (JPM Huttner CFA) Moving to an Overweight rating and €9.5 Dec 14 price target from Not Rated
We believe that the main reason to OW ING now is that it offers strong value: stated tangible equity after deducting holding company debt of €10.5bn is €51.9bn; market cap is €23.7bn, so the ratio of market cap to stated tangible equity net of debt is just 46%. The value should be realized we believe by the EU-mandated sale of the insurance units (over 50% of all the legal units by end 2016), the repayment of the holding debt of €10.5bn and the recovery of bank earnings to €3.8bn 2015e from the 2012 low level of €2.2bn. In terms of potential upside to our target price we value the bank standalone at €8.3 per share which is 8x 2015e PE and so there is potential 33% upside just on the bank.

Telefonica (MS, Prota) Structural change in Spain, FCF growth, upgrading to OW
Spain’s move to a convergent, infrastructure-based market is good news for TEF. Fusion is already a success story and we see group revenues improving, margins staying strong, earnings stabilizing and FCF growth from 2013. Add in valuation appeal and an attractive DY, and we move OW.

Havas (GS, Jones) Buy: Add to Conviction List following underperformance of agency peers
We add Havas to the Conviction Buy List. The stock has underperformed its agency peers by 10% over the last 6 weeks, but we expect this to reverse after Havas’ forthcoming results, which we expect to contain reassuring outlook comments. PT is now 6.3.

STM and ERICSSON.
Following the ST ERICSSON breakup, GS likes Ericsson and STM more with respective price targets of SEK115 and €8.

BHP Cut to Neutral vs Buy at Goldman
Dufry Cut To Hold VS Buy at Deutsche Bank
Finnair Cut To Neutral VS Overweight at HSBC
Fresnillo Cut To Sell VS Hold at Deutsche Bank
Kaba Cut To Neutral VS Buy at UBS
Metro Added To Ubs’s European Key Call List
Metro Raised To Buy VS Neutral at UBS
Norsk Hydro Cut To Hold VS Buy at Nordea
Remy Cointreau Raised To Overweight VS Neutral at HSBC
Rio Cut To Conviction Sell VS Neutral at Goldman
Telefonica Raised To Overweight VS Equalweight: Morgan Stanley
Weir Group Cut To Hold VS Buy at Berenberg

OVERNIGHT MARKETS

Asian markets
Nikkei 225 up +230.11 (+1.88%) at 12,451
Topix up +16.95 (+1.65%) at 1,045
Hang Seng up +91.55 (+0.41%) at 22,175

US markets
S&P 500 down -8.60 (-0.55%) at 1,552
DJIA down -62.05 (-0.43%) at 14,452
Nasdaq down -11.48 (-0.35%) at 3,238

European markets
Eurofirst 300 down -3.27 (-0.27%) at 1,200
FTSE100 down -31.73 (-0.49%) at 6,458
CAC 40 down -18.56 (-0.48%) at 3,825
Dax down -32.15 (-0.40%) at 8,011

Currencies
€/$ 1.30 (1.30)
$/¥ 95.57 (95.17)
£/$ 1.51 (1.51)

Commodities ($)
Brent Crude (ICE) down -0.11 at 109.40
Light Crude (Nymex) up +0.05 at 93.79
100 Oz Gold (Comex) unchanged 0.00 at 1,605
Copper (Comex) up +0.50 at 342.20

10-year government bond yields (%)
US 1.97%
UK 1.91%
Germany 1.40%

CDS (closing levels)
Markit iTraxx SovX Western Europe +2.5bps at 100.92bp
Markit iTraxx Europe +3.45bps at 108.41bp
Markit iTraxx Xover +9.22bps at 413.37bp
Markit CDX IG +1.51bps at 80.25bp

Sources: FT, Bloomberg, Markit

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