LCM Dawn Patrol – 25.04.13 – Earnings! GS bull on equities, Verizon on Vodafone, ECB lending survey, Strategists forecasts… More!

Bonjour,

European stocks are seen mixed on Thursday, taking a breather following strong gains made in the past two sessions, with investors scanning through corporate results to see the impact of the region’s economic downturn.

Today’s topics will be Vodafone as Verizon is moving on (http://reut.rs/13wfkF0), bonds of the periphery following yesterday’s profit taking (http://reut.rs/10Bx31d) and earnings… On the macro front, the UK’s GDP number and US jobless claims are the two significant events.

SX5E Futures: 2647.00y 39.00. Support at 2633 then 2608. Resistance 2669 then 2692

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NEWS

Fiat may select New York as the primary exchange for itsstock after a planned merger with Chrysler Group – WSJ/BBG

EARNINGS

British American Tobacco 1Q Sales Beat Est.
British American Tobacco 1Q sales rise 5%, est. up 3.7%.
• Cigarette vols. from subsidiaries down 3.7% to 160b, total tobacco volumes down 3.4%
• 1Q Global Drive Brand cigarette vols. up 1%
• Confident of another yr of earnings growth
• Pricing environment strong
• If current FX rates persist for the rest of yr, FX headwind that hurt qtr will reverse

Atos 1Q rev. EU2.12b vs EU2.14b & reiterate forecasts: 1Q order entry EU1.99b, Free cash flow EU30m, net cash of EU258m at end of March
Bayer Revs and EBITDA slightly below estimates
Dassault Systemes 2Q Non-IFRS Rev., EPS targets below Ests.
ENI reported a weak set of 1Q13 results at the EBIT level (€3,792 mn, 9% below company-compiled consensus), although net income of €1,434 mn was 2% higher than consensus because of a lower tax rate. The low EBIT was mainly driven by a miss in E&P. GS reiterate Buy.
Essilor 1Q rev. inline & confirm forecasts: EU1.28b vs est. EU1.3b.
Gemalto posts a weak Q1 with Q1 revenues of €518m vs estimates of €535m. Also SIM cards sales disappoint as they only grew 1.5% vs 12% last year for the full year.
Logitech 4Q Loss $36M vs Net Income of $28M
Lonza Cuts 100 Jobs; Reiterates Ebit Forecast
Nobel Biocare 1Q Net Beats Est.; Reiterates Ebit Outlook
Pernod 3Q organic sales missed : up 6%, est. up 7.4% & confirm forecats
Randstad 1Q net & revs slightly below estimates.
Renault 1Q Rev. misses est; Reiterates FY targets.
Rhoen Klinikum 1Q Ebitda EU74.9m; Confirms FY Outlook, Sees 2013 profit EU110m +/-5%. Div. EU0.25 vs BDVD forecast EU0.35
Sabadell 1Q Net EU51.1 Mln; Analyst Estimate EU21.4 Mln
Software AG 1Q Rev. misses; 1Q Net In Line; Buys LongJump
Technip 1Q Net EU116m vs Est. EU122.4m; Confirms FY Targets Ebitda EU226.9m vs est. EU235m; Ebitda margin11.3% falls 36bps. Order backlog EU14.8b, of which EU6.8b subsea; 1Q intakeEU2.9b
Thales beat : 1Q Rev. EU2.76b vs Est. EU2.63b 1Q organic rev. growth 5% Y/y, 1Q order intake EU2.05b vs EU2.62b Y/y. Thales confirms 2013 goal of slight growth in new orders, stable sales, 5%-8% EBIT increase.
Tieto 1Q Net Beats Analyst Ests.; Keeps Guidance of Ebit Growth.
Volvo announce a big miss, truck orders rise: 1Q Pretax Loss Sk101m; Analyst Est. Profit Sk1.3b. 1Q truck orders: +11% to 61,045 (4Q: -10% to 52,145)

CURRENT STUFF

Vodafone. Reuters reports that Verizon plan to go hostile has hired advisers to prepare a possible USD100 billion cash and stock bid to take full control of Verizon Wireless from joint venture partner Vodafone Group Plc, two people familiar with the matter said on Wednesday. The article says that Verizon has not yet put forward a proposal to Vodafone but it has hired both banking and legal advisers for a possible bid, the sources said. Verizon hopes to start discussions with Vodafone soon for a friendly deal but is prepared to take a bid public if the British company does not engage in talks, one of the sources added. Link to full article (Reuters)

The ECB publishes its Q1 bank lending survey. According to the April 2013 BLS, the net tightening of credit standards by euro area banks for loans to enterprises declined in the first quarter of 2013 (to 7%, compared with 13% in the fourth quarter of 2012). Turning to loan demand developments, euro areabanks reported a broadly unchanged net decline in the demand for loans to enterprises in the first quarter of 2013 (-24%, from -26% in the fourth quarter of 2012).

Italy’s new prime minister lost no time in calling for an easing of austerity policies. Enrico Letta, a veteran centre-left politician, outlined a programme of institutional reforms and measures to create employment, saying that “Europe’s policy of austerity is no longer sufficient”. (Financial Times)

Merkel faces austerity politics squeeze: “In the campaign for September’s parliamentary poll, Ms Merkel risks being squeezed between the centre-left Social Democrats (SPD), calling for more emphasis to be put on growth, and a new anti-euro party campaigning for the return of the Deutschemark.” (Financial Times)

Pressure is mounting on the ECB to cut interest rates next week, after Germany’s poor Ifo business confidence survey yesterday. (Financial Times)(Wall Street Journal)

STRATEGY

GS (Nielsen) Global Opportunity Asset Allocator.
Macro outlook: Closer to an improvement in global growth

We expect global growth to improve from 3.0% in 2012 to 3.2% in 2013 and to accelerate further to 4.1% in 2014. US growth is likely to see a soft patch in 2Q13 and 3Q13 as the fiscal retrenchment impact peaks before reacceleration in 4Q13. In Europe and China we expect sequential growth improvements from here, though very muted in the case of Europe. The risks we emphasized last month have played out to some extent with the haircut on deposits in Cyprus and weaker US data, leaving less uncertainty going forward.
Our views across asset classes
Equities: We upgrade equities to overweight over 3 months, and remain overweight over 12 months. Returns should be supported by a rebound in global growth, accelerating earnings growth and high risk premia.
Commodities: We expect a rebound in copper over 3 months, see less potential for a near-term rebound in oil, expect poor performance for agriculture on a 6-12 months horizon under normal weather conditions and are structurally negative on gold. Aggregating this, we see limited return potential for the asset class and downgrade to neutral over 3 months.
Corporate credit: We expect already tight IG spreads to narrow slightly as still sluggish growth, lower tail risks and QE feed the search for yield. While we expect increases in leverage as firms look to exploit low yields, we think these increases should be modest.
Government bonds: Bond yields are low on an absolute basis, and when benchmarked against macro fundamentals. The recent decline in yields has left an even more compelling case for our underweight.

Strategists’ Forecasts for European Equity Benchmarks in 2013

(all end 2013 except MS rolling 12 month)

Firm European Index 2013 Close Implied Move
Goldman Sachs Stoxx 600 310 5.4%
Bank of America Stoxx 600 315 7.1%
Exane BNP Paribas MSCI Europe 104 2.9%
Barclays Stoxx 600 330 12.2%
Citigroup Stoxx 600 330 12.2%
Deutsche Bank Stoxx 600 315 7.1%
JPMorgan MSCI Europe Local 1,185 -2.9%
UBS Stoxx 600 286 -2.8%
SocGen Stoxx 600 278 -5.5%
Natixis Stoxx 600 300 2%
HSBC Euro Stoxx 50 2,900 7.6%
Commerzbank Euro Stoxx 50 2,800 3.9%
Nomura Euro Stoxx 50 3,050 13.1%
Macquarie MSCI Europe Local 1,220 0.0%
Morgan Stanley MSCI Europe Local 1,230 0.8%**
UniCredit Euro Stoxx 50 2,700 0.2%
Credit Suisse Euro Stoxx 50 2,750 2%
Average 3.8% 3.8%

Source: Bloomberg

UPS & DOWNS

Credit Suisse Group (JPM, Abouhossein) Attractive even assuming declining top line Private Banking margin estimates: Remain OW
CSG reported strong set of Q1 13 results which were better than consensus with the big positive being IB cost management as well as FICC revenues driven by EM and securitization revenues – CSG currently is in the sweet spot in terms of FICC business mix in our view. Post Q1 13 results, we leave our 2013E fully diluted EPS unchanged at SF2.80. We also leave our 2014-15E estimates unchanged at SF3.15 and SF3.40, respectively, and our 2015E earnings based Dec-14 SOP PT at SF34.

ABB RAISED TO HOLD FROM SELL AT DEUTSCHE BANK
ACCOR CUT TO NEUTRAL VS BUY AT UBS
ASML RATED NEW OVERWEIGHT AT HSBC, PT EU63
COMPUTACENTER CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
DE MASTER CUT TO NEUTRAL VS BUY AT NOMURA, PT EU12
DIALOG SEMI CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
FINMECCANICA CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
IPSOS RAISED TO OVERWEIGHT VS NEUTRAL AT HSBC
KAP RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
METSO RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
NESTE OIL CUT TO BUY VS STRONG BUY AT NORDEA
NORBERT DENTRESSANGLE RAISED TO BUY VS HOLD AT SOCGEN
NYRSTAR PT CUT TO EU4 FROM EU4.50 AT ING
REDROW CUT TO NEUTRAL VS BUY AT CITI
SAFRAN RAISED TO BUY VS NEUTRAL AT CITI
TEMENOS RAISED TO BUY VS NEUTRAL AT UBS
WHITBREAD RAISED TO BUY VS HOLD AT DEUTSCHE BANK

OVERNIGHT MARKETS: MOSTLY UP

Asian markets
Nikkei 225 up +60.14 (+0.43%) at 13,904
Topix up +5.01 (+0.43%) at 1,169
Hang Seng up +246.54 (+1.11%) at 22,430

US markets
S&P 500 up +0.01 (0.00%) at 1,579
DJIA down -43.16 (-0.29%) at 14,676
Nasdaq up +0.32 (+0.01%) at 3,270

European markets
Eurofirst 300 up +8.79 (+0.74%) at 1,192
FTSE100 up +25.64 (+0.40%) at 6,432
CAC 40 up +59.89 (+1.58%) at 3,843
Dax up +100.82 (+1.32%) at 7,759

Currencies
€/$ 1.30 (1.30)
$/¥ 99.39 (99.47)
£/$ 1.53 (1.53)

Commodities ($)
Brent Crude (ICE) up +0.42 at 102.15
Light Crude (Nymex) up +0.41 at 91.84
100 Oz Gold (Comex) up +17.70 at 1,441
Copper (Comex) unchanged 0.00 at 315.80

10-year government bond yields (%)
US 1.71%
UK 1.71%
Germany 1.24%

CDS (closing levels)
Markit iTraxx SovX Western Europe +0.24bps at 95.82bp
Markit iTraxx Europe -1.19bps at 106.28bp
Markit iTraxx Xover -1.76bps at 431.99bp
Markit CDX IG -0.74bps at 80.02bp

Sources: FT, Bloomberg, Markit

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