LCM (after) Dawn Patrol – 03.05.13 – Earnings… GS on High divs, Barclays strat, Week End edition.

Aloha,

A rally in European stocks towards 2013 highs is expected to peter out on Friday ahead of U.S. monthly jobs data set to confirm the world’s biggest economy has been losing steam.

Today, we’ll turn our eyes back to the US with the NFP number out at 14:30. This will be the key event of the day… Another large number of earnings this morning, I’ll get a summary for Monday, it’s just too much.

DATA:
(I’m working on this table)…

Time Event Survey Actual Prior
10:30 UK PMI Services Apr 52.4 52.4
10:30 UK Official Reserves (Changes) Apr $202M
11:00 EC Euro-Zone PPI (MoM) Mar -0.20% 0.20%
11:00 EC Euro-Zone PPI (YoY) Mar 0.60% 1.30%
11:00 EC European Commission Releases Economic Growth Forecasts
14:30 US Change in Nonfarm Payrolls Apr 140K 88K
14:30 US Two-Month Payroll Net Revision Apr
14:30 US Change in Private Payrolls Apr 150K 95K
14:30 US Change in Manufact. Payrolls Apr 5K -3K
14:30 US Unemployment Rate Apr 7.60% 7.60%
14:30 US Avg Hourly Earning MOM All Emp Apr 0.20% 0.00%
14:30 US Avg Hourly Earning YOY All Emp Apr 1.90% 1.80%
14:30 US Avg Weekly Hours All Employees Apr 34.6 34.6
14:30 US Change in Household Employment Apr -206
14:30 US Underemployment Rate (U6) Apr 13.80%
16:00 US Factory Orders Mar -2.90% 3.00%
16:00 US ISM Non-Manf. Composite Apr 54 54.4

WEEK END

RESTO: Racines 2. More bourgeois than the original, much nicer design, great food. 39 Rue de l’Arbre Sec, Paris 75001.

EXPO: Rock n’Roll. Jean-Marie Périer’s top pictures in a great gallery. Polka Galerie, 12 rue St Gilles, 75003 Paris.

BIBLIO: The Rider by Tim Krabbe – The best cycling novel ever written (why not?).

MUSIC: Get Lucky Daughter Cover, this is not the one you hear everywhere, it’s a cover… (http://bit.ly/18gLjNf)

News

Earnings

BNP+, BELG+, SKYD+, ADS+, VK=, O2D=

BNP small beat coming from particularly low costs (3% below cons) and provisions, offsetting lower than exp revs .
Vallourec Net inline, beats on EBIT, confirms guidance – watch the pair vs TEN.
Belgacom 1Q Ebitda EU441m vs Est. EU438.6m; Postpaid ARPU -14%
Sky Deutschland 1Q Ebitda Beats Ests; Confirms Full Year Outlook
Adidas sales inline at 3.75bn, better margins, confirms outlook
Telefonica Deutschland 1Q Sales Meet Estimates
Veolia Environnement raising its net cost cut target to EU750m in 2014 from prior EU470m. 1Q adj. operating cash flow EU541.5m. 1Q sales EU5.76b vs est. EU5.84b
Man Group First-Quarter Assets Dip to $54.8b as Outflows Pick Up
GN Store Nord 1Q Net, Sales Beat Ests.; Keeps FY Outlook
CGG 1Q Net EU79m; Backlog Rises to $1.4b at End 1Q, Up 11% Q/q

Special situations

Glencore Xstrata Plc hired two former Xstrata Plc executives as division heads amid the departure of a number of senior managers as it completed the takeover of the coal exporter – Bbg
Hugo Boss shares offered at EU89.25-EU90.50 in Placing
Generali in exclusive Talks for U.S Reinsurance Unit Sale Sole
CSN said to be leading bidder for ThyssenKrupp Americas Plants
Bharti Airtel
to receive $1.26bn Qatari investment after missing profit estimates

STRATEGY

GS Strategy Matters: Yielding to high dividend yield stocks in Europe – 10 reasons why
We continue to like high dividend yield stocks. In the US they outperformed strongly since 2010 as investors moved up the risk curve in search of yield. European high dividend yield stocks are attractive but investors need to screen for growth.

10 reasons why to yield to high dividend yield stocks in Europe
(1) European dividend yields are the highest globally.
(2) Opportunity set for picking high yield stocks better in Europe.
(3) High dividend yield stocks at a discount vs. a premium in the US.
(4) Dividend yield advantage vs. the market is higher in Europe.
(5) European dividend swaps are pricing better growth going forward.
(6) There is attractive dividend growth in some sectors in Europe.
(7) Financials getting more investable, still selective on banks.
(8) High yield stocks likely to continue to outperform credit.
(9) Outflows from credit might find their way into equity income.
(10) Pension and insurance are finally starting to buy equities.

BARCLAYS European Strategy Elements: Is the outperformance of defensive sectors here to stay?
With lead indicators rolling over, an earnings season that looks lacklustre and central bank-driven reflation (Yieldfall) seemingly the only positive driver of markets, is there any reason for investors to consider moving out of defensives? We think so. Prefer financials: Given the wide divergence in the valuation of economically sensitive sectors, we would prefer Banks and Insurance to Industrials and Chemicals. We believe that the driver of outperformance here could be a pickup in relative profitability.

CURRENT STUFF

On US Banks
JP Morgan devised ‘manipulative schemes’: “Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath.” The bank is under by at least eight US regulators. (New York Times)

On Europe
Slovenia issued $3.5bn of bonds on Thursday, ameliorating concerns that it will have to be bailed out by the eurozone to pay for its banking sector clean-up. The bond sale had been scheduled for Tuesday but was delayed after Moody’s that day cut the country’s credit rating to “junk”. However demand for the five and 1o year bonds was even stronger than when the book had first been closed. (Financial Times)

On Italy
Italy wants to join ‘virtuous’ deficit club: Fabrizio Saccomanni, finance minister in the country’s new coalition government, talked of joining a “small group of virtuous countries” that have met Europe’s budget targets said Italy is committed to remaining within that limit. Saccomanni and Enrico Letta, the new prime minister, have stressed their commitment to keeping Italy within the 3% budget deficit limit this year, even while promising to cancel tax increases imposed by Mario Monti’s previous technocrat government. (Financial Times)

On the ECB
ECB Watch: Standing Ready to Act (by Daniele Antonucci at Morgan Stanely). Rate cut – as expected: In line with our and market expectations, after substantial economic weakness and the recent inflation undershoot, the ECB reduced the refi rate by 25bp to 0.50% and left the deposit rate unchanged at zero. To maintain a symmetric corridor, the Bank also cut the marginal lending rate by 50bp to 1%. According to ECB President Mario Draghi, there was a very strong prevailing consensus for a cut and, within that, a prevailing consensus for only a one-quarter reduction, i.e., some favoured a bigger rate cut.

UPS&DOWNS

L’Oreal (GS, Edwards): Off the Conviction List following outperformance; remains Buy
We remove L’Oreal from the Conviction List as a result of recent outperformance following a multiple re-rating. We continue to see upside to forecasts however, as cash is deployed and maintain our Buy rating.

Volkswagen (GS, Burgstaller): Guidance no longer looks conservative; maintain Buy on valuation
Although we see VW as one of the best positioned global automotive companies, we see more fixed cost headwinds and no longer view the company’s 2013 EBIT guidance as conservative. We retain our Buy rating, still seeing significant value at current levels.

AFRICAN BANK INVESTMENTS CUT TO NEUTRAL VS BUY AT UBS
AFRICAN BARRICK GOLD CUT TO SELL VS NEUTRAL AT GOLDMAN
ANDRITZ RAISED TO BUY VS HOLD AT BERENBERG
ANDRITZ RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
ANGLOGOLD ASHANTI CUT TO SELL AT GOLDMAN
APR ENERGY RAISED TO NEUTRAL VS SELL AT UBS BFW7:02
ARCELIK CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
COMPASS GROUP RATED NEW BUY AT SOCGEN, PT 970P
DRILLISCH CUT TO HOLD VS BUY AT BERENBERG
FREENET CUT TO HOLD VS BUY AT BERENBERG
GLENCORE XSTRATA RATED NEW OUTPERFORM AT CREDIT SUISSE; PT 400P
L’OREAL REMOVED FROM CONVICTION BUY LIST AT GOLDMAN; STILL BUY
SAINSBURY CUT TO NEUTRAL VS BUY AT CITI
SANDVIK AB CUT TO NEUTRAL VS BUY AT NOMURA
SANDVIK RAISED TO NEUTRAL VS SELL AT UBS BFW7:01
SIBANYE GOLD RATED NEW SELL AT GOLDMAN
SODEXO RATED NEW HOLD AT SOCGEN, PT EU66
TENARIS CUT TO NEUTRAL VS OUTPERFORM AT EXANE
THYSSENKRUPP RAISED TO BUY VS SELL AT UBS BFW7:04
VALLOUREC RAISED TO NEUTRAL VS REDUCE AT NATIXIS
VALLOUREC RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
VALLOUREC RAISED TO OUTPERFORM VS NEUTRAL AT EXANE
Veolia Raises Cost-Cut Target to EU750m, Confirms ’13 Forecasts

OVERNIGHT MARKETS: UP

Asian markets
Nikkei 225 down -105.31 (-0.76%) at 13,694
Topix down -5.09 (-0.44%) at 1,153
Hang Seng up +155.40 (+0.69%) at 22,824

US markets
S&P 500 up +14.89 (+0.94%) at 1,598
DJIA up +130.63 (+0.89%) at 14,832
Nasdaq up +41.49 (+1.26%) at 3,341

European markets
Eurofirst 300 up +5.00 (+0.42%) at 1,207
FTSE100 up +9.42 (+0.15%) at 6,461
CAC 40 up +2.01 (+0.05%) at 3,859
Dax up +48.00 (+0.61%) at 7,962

Currencies
€/$ 1.31 (1.31)
$/¥ 97.95 (97.95)
£/$ 1.55 (1.55)

Commodities ($)
Brent Crude (ICE) down -0.22 at 102.63
Light Crude (Nymex) down -0.19 at 93.80
100 Oz Gold (Comex) up +4.50 at 1,472
Copper (Comex) up +4.55 at 315.00

10-year government bond yields (%)
US 1.62%
UK 1.63%
Germany 1.17%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.3bps at 93.63bp
Markit iTraxx Europe -4.75bps at 95.55bp
Markit iTraxx Xover -15.55bps at 387.38bp
Markit CDX IG -3.5bps at 74.27bp

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