LCM Dawn Patrol – 27.05.13 – Bid on Club Med, JPM’s Loeys thinks it’s just a correction,


Euro zone stocks were expected to rise on Monday, staging a technical rebound in a quiet session with the U.S. and UK markets closed. Japan is dropping another 2.5% this morning (20mins before close) While the rest of Asia is holding up. Euro zone blue chips recorded their first weekly loss in a month on Friday, but the Euro STOXX 50 index managed to close the week off its lowest point, which corresponded to a support level marking the index’s February peak, suggesting residual appetite for shares.

This is going to be very quiet… No data, no volume, no big news… Time to tidy up your desks and read research…

Hotel Aire de Bardenas.
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If you’re in the Basque country, or if you’re looking for something different, Hotel Aire in the desertic Bardenas park in Spain.



Club MED Says Axa Private Equity, Fosun to Make Friendly Bid
EDF to sell 49% SSE stake to EPH for EU400m
Bankia to sell City National in Florida to BCI for $883m
Legrand’s share buyback program was approved after a shareholder meeting.
Intesa Won’t Remain Telecom Italia Investor Forever: Ansa
British Gas, by the 2nd half of this yr, will rank only behind No. 1 Petrobras as the biggest oil producer in Brazil – Nelson Silva, CEO for the company in Brazil
Thales wins EU109m Egypt railroad signaling contract.
Lloyds and RBS capital levels are Credit Positive acc to Moody’s. Announcements indicate that Lloyds and RBS expect to make sufficient progress in restructuring their businesses and taking other action to address the Prudential Regulatory Authority’s concerns about them being undercapitalized.
RBS hires former FSA Director to oversee conduct acc to Telegraph
Ferragamo to Seek Control of Franchised Stores in China: Echos
Sixt 1Q Rev Drops; Reiterates 2013 Rev Stable, Ebit to Fall
Santander Sells Stake in Asset Management Unit, Expansion Says
Brussels probes Apple’s iPhone tactics (FT article)


Gold Bets Reach Five-Year Low With Prices Whipsawed. Hedge funds are the least bullish on gold in more than five years as speculation about the pace of money printing by central banks whipsawed prices, driving volatility to a 17-month high. (Bloomberg)

This Week’s Tape: Retail Earnings Dominates Light Week. Earnings results from big and notable companies will be sparse this week, so just like last week the primary fare will be a handful of retailers. (WSJ)

To Read:
This is for me: The Art of Staying Focused in a Distracting World (The Atlantic)

The Intelligent Investor: Tokyo’s Warning. (WSJ)




JPM (Loeys) The J.P. View
A Technical Correction

While largely technical, and thus noise, this week’s correction could also be seen as a trial run of the real end to QE. In that context, it may seem strange that search-for-yield assets barely moved this week. Spreads on US HY and EM external debt, both sovereign and corporate, are only 10bp or so wider, barely worth talking about. Liquid markets such as equities and EM currencies in comparison moved a lot more. At this point, we choose to interpret this week as not indicative of what would happen in the real end of QE, but more as telling of where the speculative positions currently are and where one can sell in a hurry. The biggest sell off this week was in the Nikkei. This confirms to us that equities are the more liquid asset and that the Japanese equityrally hasbeen led more by speculative than by real money. It is our understanding that few heavy holders of credit sold with many instead selling UST futures to hedge against an earlier end to QE, as that is where they could cast fast.
Asset allocation –– Unchanged as we see no change in fundamentals and see this week’s disturbance as temporary profit taking .
Economics –– No change in Fed view, either. QE tapering only from Dec 2013 on. Earlier tapering requires payrolls gains around +200K over next 4 meetings, vs our view of +165K.
Fixed Income –– Signs of moderation in JGB selling pressure .
Equities –– We view the Japanese equity correction as technical. Reverse long in S&P500 vs. MSCI EMU.
Credit –– EM $ corporate and US HY loans are the stand-out growth markets so far in 2013.
Currencies –– Arguments for broad-based USD rally are not convincing .
Commodities –– Stay UW commodities versus equities and credit .


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