The Dawn Patrol – 09.04.13 – Chinese inflation OK, Alcoa OK, EADSD placing, MS on SAP, MS on Low Cost airlines…


European stocks are seen rising on Tuesday, adding to the previous session’s gains, as a strong start of the U.S. earnings season and benign Chinese inflation data lifted investor sentiment. Today, there isn’t much really. We’ll get the French business confidence, UK’s IP and the US JOLTs data. On the corporate side, watch the EADS placing (revised range €37.35-37.45).

These British Newspaper Front Pages Show Just How Controversial Margaret Thatcher Was
You may all be too young to remember her…


SocGen May Cut 600-700 Jobs by End of Year, Echos Says
China March Consumer Prices Rise 2.1% Vs Est. 2.5%
EADS Offers Jets to Switzerland Below Cost of Gripen, Blick Says
IAG Annual Report Values Vueling at EU11 a Share, Expansion Says. Spain’s Grupo Empresas Matutes says no plan to make rival bid for airline Vueling. BBG
Natixis Aims to Close ‘Bad Bank’ in Mid 2014, Les Echos Says
Repsol makes natural gas discovery in Algeria. BBG
Generali picks two bidders for US Life Reinsurance unit, said to be Scor and a US rival. Reuters

ALCOA Q1 better at the EPS level at 11c vs 8c but it was lighter at the revenue level. Stock down 1% after mkts.

Shares of J.C. Penney lost 7% to $14.73. The stock had initially surged by as much as 12% after CNBC, shortly after the closing bell, said Johnson was leaving the company. It reversed lower after J.C. Penney issued a statement saying he had been replaced by the man he succeeded, Mike Ullman III.

Lagardere said it’s exiting EADS through stake sale valued at about EU2.3b. Societe Generale, Credit Agricole, Merrill Lynch are offering 61.1m EADS shares for Lagardere’s holding unit Sogeade in EU37.35-EU37.45 apiece price range, term sheet obtained by Bloomberg News shows.


Chinese inflation slows in March: “Consumer prices rose 2.1% in March from a year earlier, below expectations and down from a ten-month high of 3.2% in February when China celebrated its Lunar New Year. Food price inflation, which had surged to 6% year on year in February, fell back to a pace of 2.7%. Looking past the seasonal rise and fall in prices caused by the holiday, Chinese inflation has remained mild this year. The average increase in consumer prices in the first quarter was 2.4 per cent, up only a little from the final quarter of 2012. Analysts said the subdued inflation was a reflection of how the Chinese economic recovery has been steady but unspectacular.” (Financial Times)

On the Fed

ChairmanBen Bernanke spoke last night at a three day Atlanta Fed event taking place in Stone Mountain, Georgia and whilst he didn’t speak about the economic outlook in any great detail he did say “the economy is significantly stronger than it was four years ago, although conditions are clearly still far from where we would all like them to be.” . Yields on the UST10 fell further overnight (currently yield 1.7417%) after this comment was took as a signal of room for further improvement in the economy which markets assume means the Fed will keep on buying.


Buy Barclays Ahead of Earnings, Best Positioned: JPMorgan

Says Barclays is best positioned within the domestic UK banks following the recent FPC comments; remains top pick alongside Standard Chartered within UK.

• Sees shares as attractively valued for long term investors and not discounting the earnings recovery ahead from cost-cuts and growth in higher RoE UK retail and commercial businesses: JPM

• 1Q due April 24: Bloomberg data

Airlines (MS, Butcher) LCCs 2020 – Expanding Horizons & Attractive Returns
Resuming Ryanair with OW, PT €7.50
easyJet: OW, PT 1,060p to 1,375p
LCCs remain our preferred long-term structural play in the EU Airline market, with key drivers improving competitive dynamics, addressable market expansion and further ancillary revenue angles. We believe both EZJ & RYA will able to return at least 50% of current market cap on a 2020 time frame.

SAP AG (MS, Wood): 1Q checks mixed; can RoW offset Europe?
OW, PT €73 | MS Best Idea
Topline recent vs. margins: We think expectations into 1Q have fallen on weak sector results, and we believe the street licence number looks achievable, even if our checks have been mixed. Street margins do appear more challenging, which could partially offset upside from a licence beat. However, we believe the mid-term set-up at SAP is solid and would consider buying on dips

below €60.

Banco Popular Raised To Equalweight VS Underweight at Barclays
BBVA Raised to Equalweight VS Underweight at Barclays
Campari PT Raised to Eu6.4 VS Eu5.8 at Nomura; Kept at Neutral
Easyjet PT Raised to 1,375p VS 1,060p at Morgan Stanley
Erste Rated New Buy At UBS, PT Eu28
Europe LCC Airlines Raised to Attractive at Morgan Stanley
K+S Cut to Sell From Buy at Berenberg
Luxottica Rated New Neutral At JPMorgan, PT Eu40
Raiffeisen Rated New Neutral At UBS, PT Eu27.80
Randstad Cut To Underperform VS Neutral at Credit Suisse
Ryanair Resumed Overweight at Morgan Stanley
Sandvik Cut To Neutral VS Buy at Citi
Syngenta Raised To Buy From Hold at Berenberg
Yara Rated New Buy At Berenberg


Asian markets
Nikkei 225 up +6.44 (+0.05%) at 13,199
Topix down -5.64 (-0.51%) at 1,096
Hang Seng up +200.04 (+0.92%) at 21,918

US markets
S&P 500 up +9.79 (+0.63%) at 1,563
DJIA up +48.23 (+0.33%) at 14,613
Nasdaq up +18.39 (+0.57%) at 3,222

European markets
Eurofirst 300 up +2.58 (+0.22%) at 1,165
FTSE100 up +27.16 (+0.43%) at 6,277
CAC 40 up +3.30 (+0.09%) at 3,667
Dax up +3.89 (+0.05%) at 7,663

€/$ 1.30 (1.30)
$/¥ 99.26 (99.35)
£/$ 1.53 (1.53)

Commodities ($)
Brent Crude (ICE) up +0.52 at 105.18
Light Crude (Nymex) up +0.25 at 93.61
100 Oz Gold (Comex) up +1.90 at 1,574
Copper (Comex) unchanged 0.00 at 336.80

10-year government bond yields (%)
US 1.74%
UK 1.71%
Germany 1.25%

CDS (closing levels)
Markit iTraxx SovX Western Europe -1.6bps at 101.37bp
Markit iTraxx Europe -2.1bps at 116.57bp
Markit iTraxx Xover -1.42bps at 476.95bp
Markit CDX IG -1.49bps at 85.45bp

Sources: FT, Bloomberg, Markit


Leave a Reply

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

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

Google+ photo

You are commenting using your Google+ 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 )


Connecting to %s