European stocks are seen flat to lower on Thursday after setting five-year highs in the previous session, with disappointing earnings muting a recent rally that has been fuelled by monetary stimulus. Most Asian markets gained on positive cues from Wall Street and yet another economy, Japan, showed signs of economic recovery after it posted its Q1 GDP. China rose on optimism for better corporate earnings.
Today, the focus will be on euro zone and U.S. inflation data as well as the Philly Fed business index, with European shares having shrugged off weak GDP data in the previous session. European CPI may lead to further weakness in the Euro. And the main question these days remain about the Fed’s tapering strategy, will it occur? What would be the impact, is it going to be like 1994?
(check the table at the end).
50 richest athletes in America
Sports Illustrated’s Fortunate 50 ranks the wealthiest athletes by calculating salaries and endorsements.
Chinese FDI misses forecasts: Foreign direct investment in China in April was 0.4% higher than a year earlier, short of March’s 5.7% gain and Bloomberg consensus estimates of 6.2% growth. (Bloomberg)
Cisco’s results were robust and in after market trading the stock is definitely getting squeezed higher (+8%). Product order growth is now +4% after flat growth in the last two quarters and the compares will get better in the next nine months.
Novartis May Bid for Actavis, Person Familiar Says (WSJ)
Vivendi : Activision Blizzard Inc has halted discussions on buying back shares held by parent company Vivendi amid a disagreement on price. (BBG)
Technip : awarded contract for a polyethylene expansion project in Canada (BBG
Oerlikon mulls purchase of Sulzer’s Metco unit: Handelszeitung
Brazil raised a record R$2.8bn in its first auction of licences for oil exploration blocks in fiveyears, with oil majors including ExxonMobil, Chevron and BP winning blocks, as well as BG Group of the UK.
Antofagasta 1Q Sales, Profit Decline on Lower Prices
Aviva 1Q New Business Up 18% to GBP191m; IFRS NAV Up 9% to 302p
CNP Assurances 1Q Net Falls 16% to EU230 Million
Glanbia Reiterates FY Adj. EPS Growth Outlook of 8% to 10%
Richemont FY Net Beats Analyst Ests.
RTL Group 1Q Net EU133m vs EU112m; Revenue EU1.33b vs EU1.32b
Travis Perkins Says FY EPS Should Be Broadly In Line With Ests.
Wirecard 1Q Net Income Rises 7%; Sticks to Forecast
Bloomberg Global Poll is out! (http://bloom.bg/10zSqsF). And investors are sooooo bullish and they like US and Japanese equities…
Spanish banks are bracing themselves for a fresh financial hit, amid rising pressure from the Bank of Spain on lenders to write down the value of their €200bn portfolio of restructured loans to the country’s troubled companies and struggling households. The move could see NPL ratios rise further. (Financial Times)
Banks sue Lisbon over ‘toxic’ asset allegations: JPMorgan Chase and Banco Santander have filed lawsuits in London Portuguese state-owned companies as a bitter legal tussle intensifies over derivative contracts the Lisbon government has described as “toxic”. Portugal’s treasury secretary, said in April that Lisbon would take legal action against the two banks after two months of attempts at renegotiating the contracts failed to produce an agreement. (Financial Times)
Brazil raised a record R$2.8bn in its first auction of licences for oil exploration blocks in five years, with oil majors including ExxonMobil, Chevron and BP winning blocks, as well as BG Group of the UK. (Financial Times)
Soros Leads Gold-Stake Cuts Before Bear Market Drop (Bloomberg)
Alstom (MS, Uglow): Margin Conviction Significantly Reduced – Move to EW
Downward revision to the margin outlook surprised us and may reflect execution of large orders in Renewables & Grid. We think the valuation discount will only be removed with EPS upgrades, which we now see pushed out 6-12M. Move to Equal-weight.
Alstom (GS, Costa) Sell: Derailing; reiterate Sell
We reiterate our Sell on Alstom. Despite recent underperformance we still see 9% 12M downside. We believe order momentum has peaked and EM competition continues to rise, as a consequence we see risk on earnings and no room for multiple expansion.
Lundbeck (JPM, Gordon) Initiating at OW, with Dkr149 PT.
Buying for Brintellix depression; 2013 approval, strong launch beyond. Initiating at Overweight, with a Dkr149 PT, c.30% u/s, as we expect upcoming US Brintellix approval to secure a return to strong growth from 2016 onwards. Lundbeck is a Danish Mid-cap Pharma company focused on the treatment of Central Nervous System disorders.
ABB CUT TO NEUTRAL VS BUY AT CITI
ABERTIS CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANLEY
ACTIVE BIOTECH CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
AGEAS PT RAISED TO EU33.50 FROM EU32.50 AT ING
ALSTOM CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANLEY
AZ ELECTRONIC RATED NEW OVERWEIGHT AT MORGAN STANLEY, PT 360P
COFINIMMO RAISED TO NEUTRAL VS SELL AT GOLDMAN
EDF CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
EMLAK KONUT REIT RAISED TO BUY VS NEUTRAL AT UBS
FLUGHAFEN WIEN CUT TO NEUTRAL VS BUY AT UBS
GEOX CUT TO SELL VS NEUTRAL AT CITI
HOCHTIEF AG RAISED TO BUY VS HOLD AT BANKHAUS LAMPE
HSBC CUT TO HOLD VS BUY AT DEUTSCHE BANK
HSBC PT RAISED TO HK$101 VS HK$92 AT BARCLAYS, KEPT OVERWEIGHT
LEROEY SEAFOOD CUT TO BUY VS STRONG BUY AT NORDEA
LIFE HEALTHCARE CUT TO NEUTRAL VS BUY AT UBS
LUNDBECK RATED NEW OVERWEIGHT AT JPMORGAN; PT DKK149
PGE RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT MORGAN STANLEY
PGS RAISED TO BUY VS NEUTRAL AT UBS
PIONEER FOODS CUT TO UNDERWEIGHT AT MORGAN STANLEY
POLARCUS RATED NEW BUY AT UBS, PT NK9.5
SAFARICOM CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANLEY
SALZGITTER CUT TO SELL VS BUY AT DZ
STAGECOACH CUT TO UNDERWEIGHT VS NEUTRAL AT HSBC
THYSSENKRUPP RAISED TO BUY VS HOLD AT SOCGEN
TW TELECOM CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANLEY
GS (Wilson) Global Economics Weekly
The post-crisis shift in fund flows: Implication across assets
Risk appetite for fixed income has grown
The dramatic growth of retail demand for fixed income assets to the detriment of equity has been one of the most salient post-crisis developments. This shift in fixed income allocations, which has largely benefited corporate bonds, has fuelled concerns among fixed income investors about the risk of an abrupt reversal of fund flows. The flipside of these concerns is a certain amount of enthusiasm among equity investors about the prospect of a ‘Great Rotation’ from fixed income into equity.
Little risk to corporate bonds from the ‘Great Rotation’
In our view, the ‘Great Rotation’ will likely skip the corporate bond bucket in fixed income. Perhaps more importantly, even if we thought the ‘Great Rotation’ would cause mutual fund outflows from the corporate bond market, we do not think the corporate bond market is at much risk from a rotation out of fixed income mutual funds. Our assessment of the evidence leads us to conclude that for both equity and fixed income ‘flows don’t matter’, that is: the price impact of fund flows is negligible. This evidence is robust to numerous checks.
Global Technology Outlook: Entering a New Era of Cash Returns for Tech – Barcap
Entering a new era of cash return: We believe it is time for technology companies to get much more serious about returning cash to shareholders if they want to be investable in today’s market. We acknowledge that investors are afraid of major secular shifts such as the rise of the public cloud, Software-as-a-Service (SaaS), and the sudden maturity of the smartphone market. Given these concerns, 2013 has been a challenging year for Technology as the S&P 500 IT Index increased 7.9% year-to-date vs. 14.5% for the S&P 500 (a rally since mid-April has closed some of the gap). Most large tech companies tell a tale of “cloud opportunities”, which if true, mean that many can keep revenues stable and deliver more cash to shareholders in this low interest rate environment.
|01:50||JN||GDP Deflator YoY||1Q P||-0.90%||-1.20%||-0.70%|
|01:50||JN||GDP Annualized||1Q P||2.70%||3.50%||0.20%|
|01:50||JN||Gross Domestic Product (QoQ)||1Q P||0.70%||0.90%||0.00%|
|06:30||JN||Industrial Production YOY%||Mar F||—||-6.70%||-7.30%|
|06:30||JN||Capacity Utilization (MoM)||Mar F||—||-0.80%||0.70%|
|06:30||JN||Industrial Production (MoM)||Mar F||—||0.90%||0.20%|
|11:00||EC||Euro-Zone CPI – Core (YoY)||Apr F||1.00%||—||1.00%|
|11:00||EC||Euro-Zone CPI (MoM)||Apr||-0.10%||—||1.20%|
|11:00||EC||Euro-Zone CPI (YoY)||Apr F||1.20%||—||1.20%|
|14:30||US||Consumer Price Index (YoY)||Apr||1.30%||—||1.50%|
|14:30||US||CPI Ex Food & Energy (MoM)||Apr||0.20%||—||0.10%|
|14:30||US||Consumer Price Index (MoM)||Apr||-0.30%||—||-0.20%|
|14:30||US||Initial Jobless Claims||May-11||330K||—||323K|
|15:45||US||Bloomberg Consumer Comfort||May-12||—||—||-29.5|
OVERNIGHT MARKETS: MIXED
Nikkei 225 down -174.88 (-1.16%) at 14,921
Topix down -17.68 (-1.41%) at 1,235
Hang Seng up +82.80 (+0.36%) at 23,127
S&P 500 up +8.44 (+0.51%) at 1,659
DJIA up +60.44 (+0.40%) at 15,276
Nasdaq up +9.01 (+0.26%) at 3,472
Eurofirst 300 up +9.04 (+0.73%) at 1,246
FTSE100 up +7.49 (+0.11%) at 6,694
CAC 40 up +16.17 (+0.41%) at 3,982
Dax up +23.31 (+0.28%) at 8,362
€/$ 1.29 (1.29)
$/¥ 102.20 (102.21)
£/$ 1.52 (1.52)
Brent Crude (ICE) down -0.39 at 103.29
Light Crude (Nymex) down -0.31 at 93.99
100 Oz Gold (Comex) down -1.80 at 1,395
Copper (Comex) down -0.10 at 326.60
10-year government bond yields (%)
CDS (closing levels)
Markit iTraxx SovX Western Europe -0.06bps at 89.39bp
Markit iTraxx Europe -1.81bps at 94.19bp
Markit iTraxx Xover -2.27bps at 385.73bp
Markit CDX IG -1.12bps at 71.63bp
Sources: FT, Bloomberg, Markit