LCM Dawn Patrol – 07.05.13 – Bad: JCDecaux, ALSTOM, Lafarge. Good: AXA, Carlsberg, SocGen… More…

Bonjour,

European stocks are expected to open flat to lower on Tuesday, with a consolidation of the previous week’s gains set to continue as British traders return to their desks, and the earnings reports of some of Europe’s biggest banks are likely to be in focus. The main topic is Mr Draghi following his comments that the ECB is ‘ready to act again’ if needed.

In terms of data, we’ll look at the German and French IPs (all data below)..

NEWS

Santander the bank is said to be close to selling a stake in its asset management business to two American private equity heavyweights

Australia’s central bank cut rates to a record low. The RBA cut by 25bps to 2.75%. (Statement)

Vodafone’s tax liability in the event of a sale of its VZW stake may be less than thought. Vodafone may not owe any UK tax and only USD 5bn in the US. If VZW were to IPO, the other option for monetizing the business, Vodafone’s liability could wind up being much larger. Bloomberg

EARNINGS

Adecco 1Q Sales Match Est; Sees Conditions Improving at Year-End
Alstom Cuts Op. Margin Forecast, Will Stay Stable in 2013-2014
Carlsberg 1Q Sales, Profit Beat Ests., Keeps Outlook Unchanged
Commerzbank 1Q Oper Profit, Trading Profit Beat Estimates
Credit Agricole 1Q Net EU469m vs Est. EU374.4m; CT1 Ratio 9.6%
Endesa 1Q Ebitda, Net Income Below Estimates
Heidelberger Druck 2012 Rev. In Line; Reports Negative Cash Flow
JCDecaux. Poor set of earnings and below the guidance given in Feb. Should see some d/grades today. (-1%)
Lafarge 1Q Ebitda Below Estimates; Says FY Outlook Unchanged
Legrand 1Q Sales Increase 0.6% Y/y, Confirms 2013 Targets
Lundin Petroleum 1Q Net $48.2m Vs $48.8m
Munich Re 1Q Net Income Beats Estimates; Co. Sticks to Outlook
ProSiebenSat.1 1Q Sales Beat Estimates, Confirms 2013 Outlook
SocGen 1Q Net EU364m vs Est. EU317m; CT1 Under Basel III 8.7%
Symrise 1Q Ebitda In Line, Repeats Aim to Outperform Market

ALSTOM. Profit Warning. The H2 numbers are below estimates and the company cuts its guidance by ~10% to about €1.5bn vs ests of €1.65 at the operating level. Cash flow is below too.

Credit Agricole 1Q net up 51% vs EU311m Y/y. All in all in line, it seems that retail is in line and costs better, while the IB and AM are below.
• 1Q CIB net fell 50% to EU238m vs est. EU193m
• Capital mkts rev. -31%
• Corp. lending sales -14%
• Co. seeking to reach 12% RoE in M/T
• Basel III CT1 ratio end March 9.6%; yr-end goal 10%
• Profit at regional banks network -7.7% to EU343m
• LCL French consumer-banking unit profit -15%

SocGen 1Q Net EU364m vs Est. EU317m; CT1 Under Basel III 8.7%
• CIB net up 41% to EU494m vs est. EU289m
• Global mkts rev. EU1.44b, down 13%
• Co. booked EU1.05b of costs related to revaluation of own debt, plans EU900m of extra cost savings by 2015
• Booked gain EU377m in 1Q from sale of Egyptian business
• Confirms Basel III CT1 target of close to 9.5% by end of yr
• French consumer banking net down 22% to EU256m vs est. EU264m
• Cost-income ratio fell in all businesses

Axa SA’s first-quarter revenue rose to 28.9 billion euros ($37.8 billion) from 28.1 billion euros a year earlier, the Paris-based insurer said in a statement today.
• Axa’s life-and-savings annual premium equivalent rises 9%, helped by protection-and-health policies: insurer says
• Axa’s asset-management businesses had total first-quarter net inflows of 8.4 billion euros
• Axa’s Solvency I ratio at 228% at March 31

CURRENT STUFF

The IMF warned that Greece’s debt remains “much too high” and European commitments to lighten it are welcome. The report highlights the need for future “official sector involvement” in Greece’s bailout. (Wall Street Journal)

Draghi talked up ECB’s readiness to act in a speech yesterday: “”We will watch all the incoming data on the euro-area economy in the next weeks and if necessary we’ll be ready to take further action,” Draghi said, departing from a prepared speech at LUISS university in Rome to emphasize a point made last week at the ECB’s monthly news conference.” (Wall Street Journal)

Former KPMG auditor friend agrees to plead guilty: “The California jeweler who gave a former KPMG auditor cash, an expensive watch and concert tickets in exchange for inside information about public companies agreed on Monday to plead guilty to one count of conspiracy to commit securities fraud, according to court papers. Bryan Shaw, the jeweler who took tips on Herbalife, Skechers and other companies from his one-time golfing buddy Scott London, agreed to pay around $1.3 million in restitution and will continue to cooperate with the government as part of a plea deal with federal prosecutors, according to the documents.” (Reuters)

US pension fund sues big banks over CDS ‘dominance’: The class action antitrust suit filed by the Sheet Metal Workers Local No. 33 Cleveland District Pension Plan pension fund accuses banks including Citigroup, Deutsche Bank and JPMorgan of engaging in “anti-competitive conduct” when it comes to CDS contracts. The fund said it had entered into CDS deals with Citigroup. It claims buy-side CDS market participants must “participate in an inefficient market” due to the dominance of large financial institutions. (Financial Times)

UPS&DOWNS

esure (JPM, van Embden) Benefitting from opportunities in UK

Motor market – Initiate with Overweight
esure is well placed to benefit from the opportunities in the UK insurance market. A low risk underwriting portfolio, fully scal able infrastructure and a business model that drives ancillary revenue growth should allow esure to grow in a softening UK motor market. Given esure’s distinctive portfolio of motor underwriting risks, we see the Co benefitting more from regulatory change than many peers. We expect 12% CAGR EPS growth in the next three years. Moreover, we believe excess capital build-up will be returned to shareholders through special dividends. This makes an estimated 8% dividend yield in ’14e (5% in ’13) highly attractive relative to peers.

HellermannTyton Group Plc (GS, Wyman) Buy: Tied to growth; initiating coverage with a Buy rating
We initiate coverage of HellermannTyton with a Buy rating. Our 6m multiple-based price target is 275p. Key catalysts are urbanization and increasing content penetration, driving organic growth above underlying industrial production.

ADMIRAL GROUP CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
ADP Cut to Market Perform vs Outperform at Raymond James
ADVANCED INFLIGHT RAISED TO HOLD VS SELL AT DZ BANK
DAIMLER CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
ESURE RATED NEW OVERWEIGHT AT JPMORGAN, PT 331P
GLENCORE XSTRATA RATED NEW NEUTRAL AT GOLDMAN; PT 370P
HELLERMANNTYTON GROUP RATED NEW BUY AT GOLDMAN; PT 275P
HELLERMANNTYTON RATED NEW OVERWEIGHT AT JPMORGAN; PT 240P
IMAGINATION TECHNOLOGIES CUT TO NEUTRAL VS OUTPERFORM AT EXANE
JCDECAUX CUT TO SELL VS HOLD AT SOCGEN
MIGROS TICARET RAISED TO BUY VS NEUTRAL AT CITI
RBS CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
STATOIL CUT TO NEUTRAL VS OUTPERFORM AT EXANE
STORA ENSO RAISED TO BUY VS UNDERPERFORM AT BOFAML
Suez Environnement Cut to Neutral at Citi; PT Raised to EU12
TELENOR CUT TO HOLD VS BUY AT BERENBERG
Transneft Cut to Neutral vs Buy at Citi; PT Raised to RUB71,500
VALLOUREC RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN

STRATEGY

JPM (Matejka) Euope Equity
Equity Strategy: May Chartbook

Still going against the typical seasonality trends Mislav Matejka May and June were historically by far the worst months for equities, with the highest probability of a down move. In spite of this, we continue with our call that one should not expect a correction this time around. We believe that the US is unlikely to go through a “double dip” scare similar to the prior 3 years. House price appreciation is the crucial difference from the past, in addition to very low jobless claims prints. Periphery is remarkably stable, technicals are not stretched, commodity selloff is a positive for growth and asset reflation is powerful, despite being well documented. We expect peripheral spreads to tighten further, which should help peripheral equities, and Banks in particular. We reiterate a pair trade started on 15th April of long Mining vs Capital Goods. Beyond a few weeks of reversal, we expect Defensive leadership to resume on a 6- to 9-month horizon. We note that Staples EPS momentum vs the broad market remains resolutely positive

DATA

Time Event Survey Actual Prior
01:01 UK BRC Shop Price Index YoY Apr 0.40% 1.40%
01:01 UK Lloyds Employment Confidence Apr -41 -45
08:45 FR Trade Balance (Euros) Mar -5500M -6011M
08:45 FR Central Govt. Balance (Euros) Mar -27.1B
08:45 FR Industrial Production (MoM) Mar -0.30% 0.70%
08:45 FR Industrial Production (YoY) Mar -1.40% -2.50%
08:45 FR Manufacturing Production (MoM) Mar -0.50% 0.80%
08:45 FR Manufacturing Production (YoY) Mar -3.60% -1.90%
12:00 GE Factory Orders MoM (sa) Mar -0.50% 2.30%
12:00 GE Factory Orders YoY (nsa) Mar -2.90% 0.00%
16:00 US IBD/TIPP Economic Optimism May 47.5 46.2
16:00 US JOLTs Job Openings Mar 3770 3925
21:00 US Consumer Credit Mar $15.500B $18.139B
UK New Car Registrations (YoY) Apr 5.90%

OVERNIGHT MARKETS: UP

Asian markets
Nikkei 225 up +440.41 (+3.22%) at 14,134
Topix up +31.86 (+2.76%) at 1,185
Hang Seng up +31.13 (+0.14%) at 22,946

US markets
S&P 500 up +3.08 (+0.19%) at 1,618
DJIA down -5.07 (-0.03%) at 14,969
Nasdaq up +14.34 (+0.42%) at 3,393

European markets
Eurofirst 300 down -0.97 (-0.08%) at 1,218
FTSE100 up +60.75 (+0.94%) at 6,521
CAC 40 down -5.91 (-0.15%) at 3,907
Dax down -10.21 (-0.13%) at 8,112

Currencies
€/$ 1.31 (1.31)
$/¥ 99.03 (99.33)
£/$ 1.55 (1.55)

Commodities ($)
Brent Crude (ICE) down -0.39 at 105.07
Light Crude (Nymex) down -0.68 at 95.48
100 Oz Gold (Comex) down -3.80 at 1,464
Copper (Comex) unchanged 0.00 at 331.00

10-year government bond yields (%)
US 1.75%
UK 1.73%
Germany 1.25%

CDS (closing levels)
Markit iTraxx SovX Western Europe -3.16bps at 90.47bp
Markit iTraxx Europe -4.03bps at 91.52bp
Markit iTraxx Xover -9.67bps at 377.71bp
Markit CDX IG -0.86bps at 70.62bp

Sources: FT, Bloomberg, Markit

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