LCM Dawn Patrol – 14.05.13 – EADS+, Daft Punk, MS on Deutsche Post, GS on Lafarge… More…

Bonjour,

European stocks are seen inching higher on Tuesday, reversing the previous day’s dip and rising towards recent multi-year highs, although gains could be limited ahead of a string of European macroeconomic data. Asian shares rose for a second day and the yen strengthened slightly, after better than expected US retail sales. The MSCI Asia Pacific index was 0.2% higher as gains were limited by fears that positive data may lead the Fed to scale back its bond-buying. The Nikkei was 0.13% higher.

Today we’ll focus on CPI in Germany, EU IP and Zew Survey (all data in a neat table at the end). ECB’s Asmussen speaks in Berlin after the close and Netherlands, U.K., Norway sell bonds.

It’s coming!
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NEWS

Portugal. FinMin says Troika has approved all new budget measures.
Monte Paschi
seen posting 4th straight loss on lending income
Barclays investor suit over libor dismissed by U.S. judge
Betfair says CVC Capital Partners talks ended
AstraZeneca, Cubist, Astellas said to make bids for Optimer
Constellium begins IPO of class A ordinary shrs
Groupe Bruxelles Lambert selling 2.7% of GDF Suez in placement
Technip wins Statoil Contract for Norne Field Gas Risers
Vodafone. $7bn Verizon Mobile dividend unveiled. Use of proceeds to be confirmed at the FY results next Tuesday
Commerzbank announce they offer 20 new shares for 21 held as details of the rights issue are released.
Solvay Q1 results. EBITDA came in at €454m, +3% vs. consensus at €440m but down 12% year on year.

EARNINGS

K+S 1Q Sales, Ebit Ahead of Estimates, Confirms 2013 Outlook
Deutsche Post 1Q Profit Beats Estimates; Confirms Outlook
Merck KGaA 1Q Adj. EPS Beats Est.; Sees 2014 Forecast in 2013
Intesa’s Banca IMI 1Q Net Income Falls 38% to EU145m
Celesio 1Q Adj. Ebitda Declines 10% Y/y; Reaffirms 2013 Targets
Agfa-Gevaert 1Q Net Loss EU12 Mln Vs EU20 Mln Loss
Evotec 1Q Rev. EU17.1m; Confirms 2013 Forecast
OMV 1Q CCS Ebit EU851m Beats Ests., Net Misses; Gearing at 15%

EADS 1Q Ebit, Rev. Beat Ests.; FY Outlook Reaffirmed
Numbers look good at the top and EBIT line, but clearly below ests at the cash level. Estimates were for 1.5 to 2bn of neg FCF and it comes at -3.2bn on working capital build up. The rest is positive, but this FCF may put some pressure on the shares today
• 1Q Ebit EU741m, est. EU607m.
• Rev. EU12.4b, est. EU12b
• Net EU941m
• FCF -3.195b
• Outlook reaffirmed
• Feb. 28 outlook: FY moderate rev. growth; gross orders ~700 aircraft; Ebit EU3.5b, EPS EU2.50 (both ex-items, EPS prior to buyback); FCF breakeven
• Call 10:30am +44 20 7153 9154 or 877 423 0830 pin 824146#.

CURRENT STUFF

Yesterday’s price action on BTP doesn’t look great. BTPs broke their upside trend in abs and RSI divergence rel to Bund. With all the positive newsflow already priced in, with BTP-Bund spread back to yearly low, I stay cautious here. It corresponds with the switch from Financials/Autos into Food/Pharma that I am observing on rotation chart since Thursday last week.

France is preparing to tax smartphones, tablets and all other internet-linked devices to help fund the production of French art, films and music. The proposal was made in a government-commissioned report that was broadly endorsed by the Hollande administration. (Financial Times)

EU Closer to Chinese Telecom Probe. The EU’s trade chief is inching closer to launching a probe into Chinese network-equipment suppliers, despite concern among European telecom-gear makers that it could prompt a backlash. (WSJ)

Hedge funds that were once bearish on the euro have turned bullish. (Financial Times)

Selling the Australian dollar, buying the Mexican peso to trade China slowdown. (Wall Street Journal)

UPS&DOWNS

Deutsche Post AG (MS, Butcher) Increasing Confidence in Cashflow – Upgrade to OW
We have been modest in our assumptions for DP CF evolution in the past. Conversion of EBITDA to Op CF has not been a strong point. However, our work on the parcel pricing trends, China Express and new guidance on provisions & pensions increases our confidence in FCF yield – move to OW.

Lafarge (GS, Morgan): Removing from Conviction List post outperformance; Reiterate Buy
We remove Lafarge from the Conviction List post recent outperformance. Since being added to the list it is +15.5% vs. the FTSE World Europe 5.7%. We reiterate our Buy rating: with 11% potential upside it is our top pick in large cap building materials.

United Kingdom: Banks: 1Q13 report card (GS, Thomasen) Cumulative losses, capital, core returns: Lloyds vs. RBS
During 1Q13, Lloyds Banking Group and Royal Bank of Scotland continued to broadly track our 2013-2015 projections for non-core losses and regulatory capital. However, core returns fell short of our steady-state projections, most notably at RBS.

CGG Veritas (JPM, Dobbing) A post Q1 re-modelling of the new structure highlights conservative guidance
Buy Following a thorough review of our financial forecasts for CGG we leave our 2013 operating profit more-or-less unchanged, but downgrade 2014 by 16%, largely on weaker volumes & profitability within Equipment, where we now assume little growth.

BIC CUT TO NEUTRAL VS OUTPERFORM AT EXANE
BOVIS HOMES CUT TO NEUTRAL VS BUY AT BOFAML
DEUTSCHE POST RAISED TO OVERWEIGHT AT MORGAN STANLEY
GRONTMIJ CUT TO HOLD VS BUY AT ING
HALFORDS GROUP RAISED TO NEUTRAL VS UNDERPERFORM AT EXANE
LAFARGE REMOVED FROM CONVICTION BUY AT GOLDMAN; STILL BUY
LONMIN RAISED TO BUY VS SELL AT SOCGEN
POLYUS GOLD CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
RIO TINTO CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
SANDVIK CUT TO NEUTRAL VS BUY AT BOFAML
SANLAM RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
SMITH & NEPHEW CUT TO HOLD VS BUY AT BERENBERG
TUI TRAVEL CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
VEDANTA CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS

MACRO DATA

Time Event Survey Actual Prior
01:01 UK RICS House Price Balance Apr 2% 1% -1%
01:50 JN Domestic CGPI (YoY) Apr -0.20% 0.00% -0.50%
08:00 GE Consumer Price Index (MoM) Apr F -0.50% -0.50%
08:00 GE Consumer Price Index (YoY) Apr F 1.20% 1.20%
08:00 GE CPI – EU Harmonised (MoM) Apr F -0.50% -0.50%
08:00 GE CPI – EU Harmonised (YoY) Apr F 1.10% 1.10%
08:00 JN Machine Tool Orders (YoY) Apr P -21.50%
08:45 FR Current Account (EURO) Mar -4.9B
10:00 IT CPI – EU Harmonized (YoY) Apr F 1.30% 1.30%
11:00 EC Euro-Zone Ind. Prod. sa (MoM) Mar 0.50% 0.40%
11:00 EC Euro-Zone Ind. Prod. wda (YoY) Mar -2.00% -3.10%
11:00 EC ZEW Survey (Econ. Sentiment) May 24.9
11:00 GE Zew Survey (Current Situation) May 9.8 9.2
11:00 GE ZEW Survey (Econ. Sentiment) May 40 36.3
13:30 US NFIB Small Business Optimism Apr 90.3 89.5
14:30 US Import Price Index (MoM) Apr -0.50% -0.50%

OVERNIGHT MARKETS: UP SLIGHTLY

Asian markets
Nikkei 225 up +19.04 (+0.13%) at 14,801
Topix up +0.79 (+0.06%) at 1,233
Hang Seng down -28.13 (-0.12%) at 22,962

US markets
S&P 500 up +0.07 (0.00%) at 1,634
DJIA down -26.81 (-0.18%) at 15,092
Nasdaq up +2.21 (+0.06%) at 3,439

European markets
Eurofirst 300 down -2.44 (-0.20%) at 1,231
FTSE100 up +6.78 (+0.10%) at 6,632
CAC 40 down -8.63 (-0.22%) at 3,945
Dax up +0.70 (+0.01%) at 8,279

Currencies
€/$ 1.30 (1.30)
$/¥ 101.60 (101.77)
£/$ 1.53 (1.53)

Commodities ($)
Brent Crude (ICE) up +0.03 at 102.85
Light Crude (Nymex) up +0.19 at 95.36
100 Oz Gold (Comex) up +4.40 at 1,439
Copper (Comex) down -2.95 at 333.25

10-year government bond yields (%)
US 1.91%
UK 1.90%
Germany 1.36%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.3bps at 89.59bp
Markit iTraxx Europe +3.96bps at 96.82bp
Markit iTraxx Xover +13.5bps at 396.2bp
Markit CDX IG +1.46bps at 73.48bp

Sources: FT, Bloomberg, Markit

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