The Dawn Patrol – 05.04.13 – Lagardere, Rio, Alstom… BoAML Strategy, JPM likes ASML, MS cautious on Media.

Bonjour,

European stocks are set to open flat on Friday, halting a sharp two-session slide, although the pause could be short lived, with mounting concerns over the pace of the U.S. economic recovery in the wake of poor macro-economic figures. In Asia, the bird flu is coming back and hurts airline companies big time. We’ll also monitor tensions in Korea. In Portugal, there could be some news tonight on the legality of the 2013 budget.

SX5E Futures: 2560.00y -17.00, looks like opening around 2560. Supports at 2556 then 2524. Resistance at 2567 (intra day gap) then 2608/11

We remain in volatile territory (which doesn’t mean we want to play the VIX). Again, most strategist have some mitigated views with a positive view for the performance of the S&P for the full year (+10-12%) but are really concerned about Q2. There is still strong support from the so-called great rotation….
Tactically we’re looking at a put fly on the SX5E, cheap, no time decay, nice leverage.

MACRO data: German Factory Orders (12:00), Eurozone Retail Sales for February (11:00). US PAYROLL DATA at 14:40 (expected 190k).

NEWS

BRISA SHARES SUSPENDED FROM TRADING AT REQUEST OF REGULATOR

LAGARDÈRE TO DISPOSE OF ITS STAKE IN EADS BY JULY 31, 2013

ECB policy makers skirted a debate on how to boost lending to small and medium-sized cos. at their meeting yday because officials haven’t yet drawn up a proposal, said three people with knowledge of the deliberations

BMPS. The Bank of Italy has launched sanctions procedures against former directors, managers and auditors of Monte dei Paschi di Siena which could amount to some EUR 5m in fines following an investigation into derivatives losses. FT

Chinese airlines all lower, CSE Air suffering the biggest fall since 9/11, on bird flu fears

Fiat. Ferrari sales rose 40% in Japan last quarter. BBG

Telecom Italia board is said to consider M&A options next week.

Telefonica said to weigh sale of China Unicom stake.

Grohe owners said to mull IPO, sale of bathroom fixtures maker

Alstom Gets Contract in Saudia Arabia Worth EUR750M

Samsung preannounced results slightly ahead of consensus on Galaxy sales, stock trading unchanged

Rio +1.94% in Sydney after reports the company has hired an investment bank to sell its majority stake in the Northparkes copper mine in Australia. The Australian

CURRENT STUFF

US non-farm payrolls due out today are expected to show a March gain of 200,000 jobs according to Dow Jones’ survey of economists, or 190,000, according to Bloomberg’s. Both figures would see the unemployment rate hold steady at 7.7%. In February, NFPs posted a 236,000 gain. (Wall Street Journal)(Bloomberg)

To read:
– Will your Twitter feed make it onto Bloomberg terminals? (Financial Times)

· Draghi’s Post-Bailout Europe. (WSJ)

· What makes the French so unhappy? (FT)

STRATEGY

BoAML (Hartnett) Global Investment Strategy.

I read this piece yesterday which is a real good product. I’m not very familiar with BoAML… research.

Core View

We believe equities will outperform over the next year or two because we believe there is limited downside for bond yields, limited upside for commodity prices and the public is not “in” the stock market. A Great Rotation started a year ago when US real estate troughed. To gain exposure to the theme in 2013/14 buy “JGBs”, i.e. Japan, Germany and Bank stocks, the US$ and avoid levered areas of bond markets.

10 Trades for Spring
Tactical ways to navigate a more challenging Q2 and position for our core view…
1. Own volatility in Q2
2. Telecom & Utilities are the best defensive contrarian equity play
3. Sell Treasuries into Q2 strength
4. Long the US dollar versus commodities
5. High yield over high grade in 2013
6. Own Japanese financials
7. Buy German equities on Q2 weakness
8. Long US financials, short Canadian financials in 2013
9. Long US industrials, short European industrials
10. Long BRIC resources versus Emerging Markets in Q2

UPS&DOWNS

Media & Internet (MS, Wellington) Consolidation
Informa: OW to EW, PT 530p
UBM: OW to EW, PT 850p to 800p
12% Q1 Media sector performance was driven by greater advertising optimism but largely in the absence of eps upgrades. This partial rerating, and tougher trading comps, implies Q2 performance will be more muted. Our favoured picks are Reed Elsevier, Publicis, ITV, Eutelsat and Perform Group.

ASML (JPM, Deshpande) Share price provides opportunity. With orders already low, expect virtually stable 1Q13 orders We believe that 4Q12 order weakness marked the end of the declines in forecasts and we see no imminent order decline in 1Q13. In contrast to recent share price weakness we see an improvement in the ‘13 capex backdrop for ASML. We now expect global semi capex to be down only 1% vs. our previous expectation of 5% decline due to higher spending indications from Intel, Global Foundries and Samsung. Despite the fact that the stock is trading at 23x PE, it is doing so on trough EPS. With our bull case / blue sky peak EPS of €7.3 / €9.65 we see current price weakness as an opportunity to buy.

Global: Technology: Wireless Testing (GS, Covello and other teams) Framing the Competitive Landscape
In this report we work with various teams across different sectors and geographies to speak with most of the key players across the Wireless Testing industry and shed light on what we see as a generally attractive growth opportunity.

ANGLO AMERICAN RAISED TO HOLD VS SELL AT SOCGEN
ASOS CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANLEY
BT CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANELY
CREST NICHOLSON RATED NEW ADD AT NUMIS, PT 352P
DAILY MAIL PT RAISED TO 800P VS 545P AT MORGAN STANLEY
DOCDATA RAISED TO BUY FROM HOLD AT SNS SECURITIES
DRAX RAISED TO OVERWEIGHT VS NEUTRAL AT HSBC
ENRC RAISED TO BUY AT LIBERUM
ENRC RAISED TO BUY VS NEUTRAL AT UBS
EXXARO RESOURCES CUT TO EQUALWEIGHT AT MORGAN STANLEY
GRAFTON CUT TO SELL VS HOLD AT BERENBERG
GROUPE BRUXELLES LAMBERT RAISED TO BUY VS HOLD AT SOCGEN
HENDERSON CUT TO UNDERPERFORM VS HOLD AT JEFFERIES
IBERDROLA RAISED TO BUY VS NEUTRAL AT BOFAML
KAZMUNAIGAS CUT TO SELL VS NEUTRAL AT UBS
KOFAX RAISED TO BUY VS HOLD AT JEFFERIES
LADBROKES CUT TO HOLD VS BUY AT DEUTSCHE BANK
MEGAFON CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
MOBILE TELESYSTEMS RAISED TO OVERWEIGHT AT JPMORGAN
MONDI RATED NEW EQUALWEIGHT AT ABSA CAPITAL; PT 900P
NEXT CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
NORD GOLD CUT TO HOLD VS BUY AT SOCGEN
Sorin Raised to Outperform vs Neutral at Exane
STOLTNIELSEN RAISED TO STRONG BUY VS BUY AT NORDEA
STRATEC BIOMEDICAL RAISED TO HOLD VS REDUCE AT COMMERZBANK
TELE2 CUT TO NEUTRAL VS BUY AT SWEDBANK
WESTERN ASSET MORTGAGE CUT TO HOLD VS BUY AT JEFFERIES
WOLSELEY CUT TO HOLD VS BUY AT BERENBERG

OVERNIGHT MARKETS: MIXED

Asian markets
Nikkei 225 up +375.66 (+2.97%) at 13,010
Topix up +36.60 (+3.53%) at 1,074
Hang Seng down -528.90 (-2.37%) at 21,809

US markets
S&P 500 up +6.29 (+0.40%) at 1,560
DJIA up +55.76 (+0.38%) at 14,606
Nasdaq up +6.38 (+0.20%) at 3,225

European markets
Eurofirst 300 down -12.65 (-1.06%) at 1,181
FTSE100 down -76.16 (-1.19%) at 6,344
CAC 40 down -28.80 (-0.77%) at 3,726
Dax down -57.36 (-0.73%) at 7,817

Currencies
€/$ 1.29 (1.29)
$/¥ 96.88 (96.33)
£/$ 1.52 (1.52)

Commodities ($)
Brent Crude (ICE) up +0.13 at 106.47
Light Crude (Nymex) up +0.03 at 93.29
100 Oz Gold (Comex) down -0.60 at 1,551
Copper (Comex) unchanged 0.00 at 334.55

10-year government bond yields (%)
US 1.76%
UK 1.74%
Germany 1.24%

CDS (closing levels)
Markit iTraxx SovX Western Europe +0.34bps at 103.72bp
Markit iTraxx Europe -0.41bps at 120.32bp
Markit iTraxx Xover +4.23bps at 479.38bp
Markit CDX IG -1.23bps at 88.02bp

Sources: FT, Bloomberg, Markit

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s