LCM Dawn Patrol – 28.05.13 – HF performance, BoJ minutes, Earnings Season Monitor, MS likes BHP.

Bonjour,

European stocks are seen rising for a second session on Tuesday, with activity picking up as investors in Britain and the United States return after a long weekend. European bourses closed higher in thin trade on Monday, recovering after recent weakness, with the EuroSTOXX 50 index of euro zone blue chips adding 1.1 percent. Moderate equity market optimism continued overnight, with Japan’s Nikkei bouncing by 2.5% (opened down fyi) on strange rumor of “Price Keeping Operation”. Miyao said BoJ has taken all necessary easing steps for now & will make policy adjustments as needed. In Europe, ECB Executive Board member Joerg Asmussen on Monday also pledged to stick to the kind of expansive policy that has been a key driver of equity market gains over recent months.

Today, we’ll monitor US consumer confidence, housing data and Dallas+Richmond Fed Man. Activity. Noting as well Schaeuble speaks about euro’s future in Paris, Bank of France’s Noyer talks about the economy,ECB’s Asmussen talks about banking in Berlin. Netherlands, Denmark, Belgium and Italy sell bonds.

NEWS

GDF Suez buys 9% stake in Nabucco gas pipeline project from OMV

Peugeot Renault France is considering the creation of a national operator to manage infrastructure for recharging electric cars, Les Echos

Swatch Richemont China agreed to cut import tariffs on Swiss watches by 60 percent in 10 years as the two nations seek to expand trade. BBG

Origin Says Comfortable With FY Market EPS Estimates of 48.5c

Raiffeisen 1Q Net EU157m Vs Est. EU146m; CT1 10.6%

Akzo Nobel to Close Several Paint Plants in Europe, Dagblad Says

DJ Swiss April Watch Exports Gain 5.7% in Nominal Terms

CURRENT STUFF

China targeting 7% growth, says Li: Chinese Premier Li Keqiang told German business leaders his country faces “huge challenges” as it pursues an average annual growth rate of 7% this decade. The country’s leadership appears increasingly willing to tolerate lower growth. At a press conference in March, Li referred to a target of 7.5% average growth through 2020; however state-media transcripts that day said Li gave a 7% figure. (Bloomberg)

European lenders draw down on central bank reserves: ‘Cash hoards’ stashed at central banks by the 12 biggest European lenders have fallen 19% from their peak. (Wall Street Journal)

BoJ minutes reveal tensions over ‘contradictions’. (Financial Times)

Hedge-Fund performance:
As the latest HSBC hedge fund performance report confirms, the best YTD returns are, as expected, those for Japan-focused funds at least until the already fading Abenomics euphoria reverts them back to the mean.http://fr.scribd.com/doc/143957302/HSBC-HF-Performance-May-24

STRATEGY

GS (Schumacher) European Economics Daily: German elections unlikely to change Euro crisis response.
Given Germany’s pivotal role in the management of the Euro area crisis, the outcome of the election will also determine whether there will be any significant change to the overall policy response.

MS (Carr & Co) Earnings Season Monitor
Looking at the results for 1Q with 483 companies representing 53% of European market cap.
Earnings season has been very weak…
Looking at pre-exceptionals earnings, 32% of companies have beaten estimates, while 38% of companies have missed expectations, meaning a net 6% of companies have missed expectations. However, excluding Financials, an even weaker result, with a net 8% of companies missing earningsestimates by 1%. After a couple of earnings seasons in Europe that have been broadly in-line, this marks a renewed period of disappointment. In aggregate, earnings have missed estimates by 3.2% on a weighted basis. Earnings are on track to fall 5.2% YoY, or 9.2% excluding Financials.

UPS&DOWNS

BHP Billiton Plc (MS, Sanderse) Potash a key investment decision: a sensitivity model
With volatile and declining real commodity prices we prefer BHP Billiton’s low cost, diversification and above-average balance sheet strength despite its premium valuation. However, the key test will be the investment decisions on Potash and Shale gas. We provide an interactive model for the former.

BAYER RAISED TO BUY VS HOLD AT JEFFERIES
BUZZI RAISED TO BUY AT UBS
COMMERZBANK RAISED TO SECTOR PERFORM VS UNDERPERFORM AT RBC
CROPENERGIES RAISED TO BUY VS HOLD AT DZ
DSM RAISED TO BUY VS NEUTRAL AT BOFAML
EDP RAISED TO HOLD VS SELL AT SOCGEN
GLAXOSMITHKLINE RAISED TO BUY VS HOLD AT DEUTSCHE BANK
HANNOVER RE RAISED TO BUY VS HOLD AT DZ
INTELSAT RATED NEW OVERWEIGHT AT JPMORGAN, PT $30
KOC CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
LLOYDS CUT TO NEUTRAL VS BUY AT CITI
LOGITECH RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
NOVO NORDISK RAISED TO HOLD VS SELL AT DEUTSCHE BANK
RBS CUT TO SELL VS NEUTRAL AT CITI
SABANCI RATED NEW OVERWEIGHT AT JPMORGAN, PT TL14.75
SYGNITY RAISED TO BUY VS HOLD AT ING
TAMINCO RATED NEW NEUTRAL AT JPMORGAN, PT $17
TDC CUT TO SELL VS HOLD AT BERENBERG

OVERNIGHT MARKETS

Asian markets
Nikkei 225 up +165.77 (+1.17%) at 14,308
Topix up +19.46 (+1.69%) at 1,174
Hang Seng up +31.81 (+0.14%) at 22,718

European markets
Eurofirst 300 up +3.77 (+0.31%) at 1,230
FTSE100 down -42.45 (-0.63%) at 6,654
CAC 40 up +38.37 (+0.97%) at 3,995
Dax up +77.98 (+0.94%) at 8,383

Currencies
€/$ 1.29 (1.29)
$/¥ 101.77 (100.93)
£/$ 1.51 (1.51)

Commodities ($)
Brent Crude (ICE) up +0.01 at 102.63
Light Crude (Nymex) down -0.60 at 93.55
100 Oz Gold (Comex) unchanged 0.00 at 1,387
Copper (Comex) up +0.01 at 3.30

10-year government bond yields (%)
US 2.05%
UK 1.92%
Germany 1.46%

CDS (closing levels)
Markit iTraxx SovX Western Europe +3.8bps at 82.99bp
Markit iTraxx Europe +6.29bps at 98.23bp
Markit iTraxx Xover +15.2bps at 401.44bp
Markit CDX IG +2.44bps at 75.73bp

Sources: FT, Bloomberg, Markit

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