The Dawn Patrol – 11.04.13 – Roche, Golf, JPM on IBs, GDF. GS on bevs, Media, Oil. JPM piece on X-assets R2, GS on the BoJ impact…

Bonjour,

European markets should open flat today after yesterday’s rally… But who knows with the strength of the underlying liquidity, great rotation etc… we could have another up day. Stick to FCF growers, stick with the companies with pricing power and EM or US exposure…

On the macro data front, we’ll focus on the German and French Inflation and the US Jobless Claims. Italy to sell €7.5bn of 2016/2017/2028 bonds.

It’s Masters’ Time!
I’ll have a Mister Palmer with ice.
http://yhoo.it/10UXaeD

 

NEWS

ROCHE is posting some good numbers as Tamiflu sales boost sales. Positive guidance too. In a normal environment, there could be some profit taking, but as investors chase the good names, it may continue to rallye (up 50% since June).

Axa agrees to sell a U.S. unit and transfer certain obligations to Protective Life for USD 1.06bn.
Air France Delays Some Airbus A380 Deliveries, La Tribune Says
Deutsche Telekom sweetens MetroPCS terms in ‘best, final offer’ to merge its T-Mobile division.
Cyprus told by European partners that it must follow through on commitments to sell gold and other state assets worth EU1.8b to overcome its debt crisis
KPN shareholders vote in favor of 3b-euro share sale

China’s M2 growth picks up and new loans data show credit flowing above forecast estimates: China’s M2 money supply came in at 15.7%oya in March (consensus: 14.6%), compared to 15.2%oya in February.

ECB’s Asmussen: urges rapid completion of banking union

CURRENT STUFF

On Cyprus (and on the move on Gold)
Cyprus has agreed to sell gold worth €400m from its reserves as part of its contribution to the bailout, roiling the precious metal markets as investors feared it could set a precedent for other troubled eurozone countries. Gold prices fell 1.65% on the news, which would see 10 tonnes sold from the Cypriot central bank’s total holdings of 13.9 tonnes. It would be the first such sale by a country seeking international assistance since the Asian financial crisis in 1997-98, when South Korea asked the public to donate jewellery to the central bank for the good of the nation. (Financial Times)(Reuters)

On the golf trader
Trader who received KPMG tips issues apology: Bryan Shaw, a trader who said he received insider tips from fired KPMG LLP partner Scott London, apologised and said he’s been cooperating with the Justice Department and US Securities and Exchange Commission. Shaw said he “profited substantially” from trades based on non-public information and, “I cannot begin to apologize for my incredibly stupid actions.” (Bloomberg)

On the Fed (from yesterday)
FOMC minutes released early went to bank staff:
The accidental release of the rate-setting meeting minutes 19 hours early on Tuesday went to Congressional staffers and also to staff at Fifth Third, Barclays, Regions Financial, Wells Fargo, Citi, UBS, US Bancorp, Goldman, JPMorgan and PNC Financial. “The potential damage may have been limited by the fact that the minutes contained no explosive revelations. It showed participants were ready to slow the QE3 programme of asset purchases in the summer or early autumn. Weak payrolls data, however, may already have changed plans.” (Financial Times)

UPS & DOWNS

Global Investment Banks. (JPM, Abouhossein and Team) publish a 300+ page report, and analyse the evolving business model of Investment Banks to a changing global IB landscape, triggered mainly by regulation. So far, we believe IBs have successfully reacted to confirmed regulatory changes by cutting RWAs and costs. However, we analyse the key regulatory ‘curve’ balls put in front of the IB industry in an uncoordinated manner by local regulators. Overall, our analysis concludes that the viability of running a global Tier I IB business as part of a universal banking business is starting to be put in question with new uncoordinated regulatory proposals starting to add to on-going headwinds in our view. The key question in our view remains whether IBs can make an adequate ROE for shareholders? We continue to prefer Tier II IBs over Tier I. We see Tier I IBs as un-investable at this point with a risk of spin-off from universal banks based on new regulatory proposals.

Europe: Beverages (GS Collett) Last orders: US$400 bn of M&A in European beverages
With debt cheaper than ever and gearing below average, we expect M&A in European bevs to increase. We incorporate US$400 bn of potential acquisitions for 2013-2020, 102% of mkt cap and examine company specific strategic requirements vs potential assets.

Europe: Media: Advertising (GS, Jone) CL Buy Havas; potential opportunity WPP
Overall new business activity was slightly softer in March at $870 mn, compared to the historical average of $1.4 bn. This follows two strong months in January and February, after a weak 2H12, reflecting a mixed current advertising environment.

Europe Energy: Oil – Integrated (Oil, della Vigna) 1Q preview: Volumes still declining, earnings down 19% yoy
As 1Q has come to an end, we update our estimates for the sector to reflect the actual macro environment as well as company specific events. Net income is down 19% yoy as margins in the sector continue to deteriorate driven by higher costs.

AB FOODS CUT TO HOLD VS BUY SOCGEN
ADVA OPTICAL CUT TO SELL VS HOLD AT HAUCK & AUFHAUSER
Air France-KLM Rises; Kepler Says Stock Has Appealing Upside
ANGLO AMERICAN RAISED TO BUY VS HOLD AT INVESTEC
ANGLOGOLD ASHANTI CUT TO HOLD VS BUY AT SOCGEN
Atlantia Raised to Equalweight at Morgan Stanley
BALFOUR BEATTY RAISED TO BUY VS HOLD AT BERENBERG
BEZEQ CUT TO NEUTRAL VS BUY AT CITI
BHP BILLITON RAISED TO BUY VS HOLD AT INVESTEC
CENTAMIN CUT TO SELL VS HOLD AT SOCGEN
DE MASTER BLENDERS CUT TO HOLD FROM BUY AT ING
EXXARO RESOURCES RAISED TO BUY VS HOLD AT INVESTEC
FRANCE TELECOM RAISED TO BUY VS HOLD AT SOCIETE GENERALE
FREENET CUT TO HOLD VS BUY AT WARBURG
GDF SUEZ RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
GERRESHEIMER CUT TO HOLD VS BUY AT HAUCK & AUFHAUSER
HANDELSBANKEN CUT TO UNDERPERFORM VS MARKET PERFORM AT KBW
Investec Raises Miners After Positive Chinese Indicators
JCDecaux Slumps; Cut to Neutral at Natixis, PT Lowered to EU21
KUMBA IRON ORE RAISED TO BUY VS HOLD AT INVESTEC
LANSON RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
Laurent-Perrier Raised to Equalweight at Barclays
MARSHALLS CUT TO ADD VS BUY AT NUMIS
MD MEDICAL CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
METTLER-TOLEDO CUT TO NEUTRAL VS BUY AT GOLDMAN
Nyrstar Advances After Being Raised to Buy at Deutsche Bank
Reckitt Benckiser Raised to Equalweight at Barclays
RETROSCREEN VIROLOGY CUT TO HOLD VS BUY AT NUMIS
SAVE CUT TO HOLD VS ADD AT BANCA IMI
Sorin Rated New Buy at Citi; PT EU2.6
TELIASONERA CUT TO HOLD VS BUY AT NORDEA
WILLIAM DEMANT CUT TO UNDERPERFORM VS NEUTRAL AT EXANE

STRATEGY

I like ZeroHedge, and this post on Gold made me smile.
http://www.zerohedge.com/news/2013-04-10/goldman-buying-gold-selling-treasurys-muppets-whom-it-advises-do-opposite

GS (Wilson) The market consequences of the BoJ regime shift
A sea change from the BoJ (extracts)

We still see scope for the Yen to weaken and for Japanese stocks to rise, even with legitimate uncertainty that the inflation target can be reached quickly. Our framework for looking at ‘liquidity trap’ exit suggests that the market has not yet fully reflected the recent policy shift in its expectations of longer-dated inflation. The notion that FX and equity markets can continue to move even after the announcement of a large policy shift would be consistent with the evidence from US and UK unconventional easing.The importance of the BoJ’s shift extends beyond Japan’s own markets in ways that mostly reinforce our core views.
This should help to underpin a move to fresh highs in global equity markets, as long as the global growth environment does not deteriorate further.

JPM (Kolanovic) Update no Cross Asset Correlations.
JPM published a great report yesterday showing the recent evolution of cross assets correlations.

The average level of correlations across asset classes has more than doubled from ~20% in 2000-2005 to ~50% over the past five years. While a large part of the correlation increase was due to macro volatility post-Lehman, correlations have been on a secular rise due to changes in market structure. In 2013, we are seeing weakening of several cross-asset correlations. In this report we analyze these recent trends and provide our outlook.

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