The Dawn Patrol – 08.04.2013 – JPM shorts CAC vs SX5E. Portugal’s new cuts. TNT off GS list. More….

Howdy,

European equities were likely to edge higher on Monday, with expectations that central banks would continue their liquidity support after recent poor data prompted investors to take advantage of a one-month low in share prices. There isn’t much today to worry about, the JPM piece on France vs the SX5E is worth a read. Nothing you don’t know, but maybe this time it’ll work…

Today, we’ll focus on the German IP at 12:00. There isn’t much more really. And there is Alcoa’s numbers tonight…

I know! It’s NOT FUN. But hey!!! Summer is coming and unless you (and only you can do it) do something about getting back in shape you’re not going to enjoy your holidays.

Stay fit! Eat healthy!
http://www.fitnessblender.com/v/exercise-detail/Cardio-Kickboxing-plus-Abs-and-Obliques-Workout/fb/

 

NEWS

North Korea May Conduct Joint Missile-Nuclear Test This Week, South Says

Lexus Dethroned by BMW Seeking Under-50s Buyers With IS: Cars

Billionaire George Soros Says China Must Change Growth Model

Soros Says Next Year to Be Turbulent, Euro at Center of Storm

Fidelity Worldwide May End Stock Loans Program, FT Reports

Technip Wins Offshore Contract From Total in Congo

Tesco Seen Facing GBP1b Writedown on U.S. Investments: Telegraph

Credit Agricole Chief Plans to Cut Costs 15% by 2016: FT

Barry Callebaut 1h Ebit Chf173.8m; Analyst Est. Chf178.8m

‘Survivor’ Deaths Blur TF1 Stock View as French Blockbuster Hit

Credit Agricole is looking to cut costs by 15% between now and 2015-16, with the goal of returning ROE to around 12%

TNT. UPS said it appealed to the EU regulator’s January decision to block its USD 5.16bn bid for TNT Express. BBG

Pearson. Barron’s believes the has 20-25% upside if investors are willing to wait for the USD 230m restructuring to take effect.

Vodafone. Barron’s is positive on both Verizon and Vodafone but prefers the latter, saying the ADRs could reach the mid USD 30s. They also say a deal where Verizon buys Verizon Wireless could happen soon, with the JV worth as much as USD 300bn

Vodafone. Sunday Times : Vittorio Colao is in line for a £6m share windfall amid mounting speculation that the mobile phone company is nearing a money-spinning exit from America

CURRENT STUFF

Greek Bank Merger Halted (WSJ). Greece’s two largest lenders are heading for state control after their merger was halted by the government over the weekend.

Portugal announces fresh austerity cuts to offset court ruling: Portugal’s prime minister Pedro Passos Coelho said the government would have to cut spending on health, education and social security to meet requirements of the country’s bailout programme, after the country’s constitutional court on Friday night ruled that cuts to state pensions and public sector wages were unconstitutional. The proposed pension and wages cuts were estimated to account for about a fifth of the €5bn savings targeted from austerity measures this year, in order to comply with an adjustment programme and efforts to regain international bond market access by September. However the new cuts are likely intensify opposition pressure on the government to resign, potentially opening the way to an early general election.(Financial Times)(Wall Street Journal)

China’s local government debt could be twice as big: “China’s local governments may have more than 20 trillion yuan ($3.2 trillion) of debt, former Finance Minister Xiang Huaicheng said, almost double the figure given in a 2011 report by the National Audit Office.” (Bloomberg)

To read
Central banks move into riskier assets. (Financial Times)

STRATEGY

JPM (Matejka) European Equity Strategy
French stocks: time to sell?

I didn’t have time to read the whole piece, but in a few words, Mislav first looks at the French situation vs the rest of Europe. PMI numbers were worse, French consumption is holding better, but it’s also the one country where the fiscal tightening is increasing and we know what the political situation is like. He also notes that the CAC constituents are not pure French plays with 2/3 of revenues coming from abroad, but the correlation with the French PMI remains strong. Also in the note, JPM put a list of French stocks in which the French government is a stakeholder.
Long Eurostoxx50 vs CAC might be an attractive trade.

JPM (Loeys) The J.P. Morgan View
Can do vs that’s all we have

Asset allocation –– The uncanny similarity to the Q1-to-Q2 slowdown in data and equity markets of the past three years does indeed raise the risk of a correction. We stick to a medium-term strategy of overweighting US and Japanese equities over bonds as we consider value more reliable in this cycle than short-term signals.
Economics –– This week’s central bank meetings are showing a stark gap between the do-what-it-takes-and-more attitude of the BoJ and the that’sall- we-have defense for inaction by the ECB. US Q1 is now tracking 4%. Weak-ish job data confirm the slowdown we are getting to 1.5% in Q2.
Fixed Income –– BoJ revolution heralds more bull flattening in Japan, and intensifies search for carry elsewhere.
Equities –– OW Japanese equities. UW Euro area equities.
Credit –– Hard-currency fund flows are supporting EMBIG.
Currencies –– Re-enter today JPY shorts vs USD, AUD and BRL.
Commodities –– Stay underweight vs. other asset classes. Within commodities, we focus on relative supply conditions.

JPM (Barr) Economics Special Report ‘The Euro Area after Cyprus’
implications of a special case, our analysis suggests Cyprus is likely to prove a special case and speculation that Malta and Luxembourg are similar cases are wide of the mark The broader implication of events in Cyprus is likely to be an increase in banks’ wholesale funding costs (we calculate 90bps according to analysts from our credit team. This would likely be passed onto customers meaning yet more delay to credit easing so badly needed in the periphery). Although we do not anticipate a systematic premium in deposit rates post Cyprus, there is likely to be a significant behavioural change.

UPS&DOWNS

EU Tyres (MS, Spina) Pressure Increases – Restructuring Ahead?
Pirelli’s postponement of its Industrial Plan, along with recent comments from Michelin and Conti, suggests rising probability of tyre industry restructuring in H2 that is not in consensus. Should supply really be reduced, so would risks on pricing, paving the way for a potential rebound in tyre stocks. We see more relative safety in selected OEMs, notably VW, BMW and RNO. Nokian our top UW.

TNT Express N.V. (GS, Woodman): Catalysts passed, focus shifting to delivery; off Conviction Buy List
Removing from Conviction Buy List. Three of four positive catalysts have now occurred, with the investment thesis moving to one of delivery. Estimates unchanged but PT falls owing to additional capex spend plans. Retain Buy rating; 12-month PT €7.1.

AIR FRANCE CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML

ASOS CUT TO HOLD VS BUY AT SOCGEN

ELEMENTIS RATED NEW BUY AT JEFFERIES; PT 305P

ENRC RAISED TO NEUTRAL VS SELL AT CITI

FFIV STREET WRAP: Barclays Says All Tech Sector May See Pressure

Fiskars Raised to Hold from Sell at Nordea

INTESA, UNICREDIT CUT TO SELL VS HOLD AT BERENBERG

KERRY CUT TO SELL VS NEUTRAL AT GOLDMAN

Lanxess Cut to Neutral vs Buy at Nomura

PRADA CUT TO EQUALWEIGHT AT BARCLAYS; PT HK$80 FROM HK$68

SPIRENT CUT TO NEUTRAL VS BUY AT UBS

TNT EXPRESS REMOVED FROM CONVICTION BUY AT GOLDMAN; STILL BUY

UNITED INTERNET RATED NEW OVERWEIGHT AT MORGAN STANLEY

VICTREX RATED NEW HOLD AT JEFFERIES; PT 1,760P

WILLIAM DEMANT CUT TO HOLD VS BUY AT SEB

OVERNIGHT MARKETS: UP

Asian markets
Nikkei 225 up +309.48 (+2.41%) at 13,143
Topix up +25.32 (+2.37%) at 1,092
Hang Seng up +23.76 (+0.11%) at 21,751

US markets
S&P 500 down -6.70 (-0.43%) at 1,553
DJIA down -40.86 (-0.28%) at 14,565
Nasdaq down -21.12 (-0.65%) at 3,204

European markets
Eurofirst 300 down -18.44 (-1.56%) at 1,162
FTSE100 down -94.34 (-1.49%) at 6,250
CAC 40 down -62.68 (-1.68%) at 3,663
Dax down -158.64 (-2.03%) at 7,659

Currencies
€/$ 1.30 (1.30)
$/¥ 98.54 (97.84)
£/$ 1.53 (1.53)

Commodities ($)
Brent Crude (ICE) up +0.58 at 104.70
Light Crude (Nymex) up +0.25 at 92.95
100 Oz Gold (Comex) up +0.20 at 1,576
Copper (Comex) unchanged 0.00 at 334.00

10-year government bond yields (%)
US 1.70%
UK 1.63%
Germany 1.22%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.75bps at 102.97bp
Markit iTraxx Europe -1.65bps at 118.67bp
Markit iTraxx Xover -1.01bps at 478.37bp
Markit CDX IG -1.08bps at 86.94bp

Sources: FT, Bloomberg, Markit

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