European stocks are expected to fall at the open on Monday, taking their cue from a sell-off in major markets across the globe (Nikkei down 3.5%) as investors fretted about a curbing of U.S. monetary stimulus and mixed signals about the Chinese economy.
Hope you had a great week end. This week will be central banks focused again as we have meetings from the ECB and the BoE on Thursday with no change expected and the Fed Beige Book on Wednesday. In terms of economic data, we’ll check the NFP on Friday. Other key indicators will be today’s PMIs in the US, FR, IT, GE and the EC.
Looking for a Skateboard for a kid? (Well, I am…)
Siemens CEO Warns Against Rising German Power Prices, Bild Says
Sanofi to Take $285M Impairment Charge for Iniparib
Telefonica Considers Selling Irish O2 Unit to Reduce Debt: FT
Apple Said Be Pressing for Internet Radio Deals: NYT
Roche Offers Health Insurers Rebate on Avastin Drug, Welt Says
Total Didn’t Pay Bribes to Win Iran Contracts, CEO Says
Vodafone will increase capital spending on its UK network by more than 50 per cent, to £1bn. FT
Modelo, SAB Miller, Heineken: Mexico antitrust agency may rule on beer investigation BBG
Metso removed from MS’ Best Ideas list (IAG, IHG, Kabel Deutschland, Metro, RWE, SAP, Siemens, UBS) as it reached its 15% stop-loss.
Spain – PM Rajoy said jobs data due out this Tues will be “encouraging” and signal an economy on the mend.
ECB – the IMF called on the ECB to do more to spur credit creation throughout Europe – Reuters
China’s official May Manufacturing PMI edges higher. Fridays unsubstantiated rumour that the weekends official PMI would print below 50 prove incorrect as the official May manufacturing PMI rose modestly to 50.8 in May. However, The HSBC/Markit manufacturing PMI for China fell to a seven-month low in May, to 49.2 contrasted with April’s 50.4.
Outside investors could pull $3.5bn from SAC Capital by today’s deadline for requests to withdraw money. The estimate by executives was preliminary, but would follow $1.7bn already taken out in February (Wall Street Journal). SAC began the year with $6bn in outside money (Bloomberg).
Weakest equity flows since June 2012 (from GS Europe Flow Monitor). Despite the recent strength of the global equity market (both European and US equity markets have risen +5% quarter-to-date), European investors made the largest weekly net withdrawal from equity funds since June 2012. We estimate that European investors withdrew a net €3.5 bn from equities this week (seven days ended May 30, based on EPFR and EFAMA data). While some degree of weakness was visible in most equity products, Asia Pacific funds saw a particularly marked pick-up in redemptions.
US hedge funds threaten to flee Europe. A number of large US hedge funds have scrapped plans to enter Europe and have put existing operations under review in response to new, burdensome European regulation. Their retreat comes in response to the arrival of the Alternative Investment Fund Managers directive, which was drawn up by European lawmakers to rein in the hedge fund, private equity fund and real estate fund industries. (FT).
JPM (Loeys) The J.P. Morgan View
Trial runs for end of easy money
Asset allocation –– The best defense against any fear of an end to easy money is to be significantly OW equities to fixed income.
Economics –– Weak retail sales create downside risk on US Q2 growth. Brazil 2013 growth is lowered from 3% to 2.5%.
Fixed Income –– Third worst selloff in global government bonds in 20 years. But we don’t expect the selloff to go much further for now .
Equities –– A bearish bond environment hurts our OW Defensives, despite a still weak outlook for global industry. We cover the OW Defensive .
Credit –– We cut our OW in EM external in half.
Currencies –– Near term , expect further delevering of FX positions. We sell USD vs CHF, but buy it versus AUD and IDR.
Commodities –– Stay OW energy vs. base metals.
Alcatel-Lucent (MS, Meunier) Previewing New CEO’s Strategic Review
CEO Michel Combes will present a strategic review on June 19 in Paris, followed by investor meetings in London and New York. Investor expectations are low, but there is a genuine restructuring story and the share price is still close to all-time low.
European Civil Aerospace (JPM, Perry, CFA). A great week for the bull case on civil aerospace.
Last week saw three data points that reinforce our positive stance on the civil aerospace stocks. Our top picks are EADS, MTU and Rolls-Royce. Orders, orders, orders: In the first five months of 2013 we estimate Airbus and Boeing combined secured just over 1,000 firm aircraft orders. We expect both companies to secure significantly more orders in the coming few m onths, notably at the upcoming Pairs Air Show from June 17-2.
Autos (MS, Spina) China Feedback: Audi & VW lead in Healthy Market.
Feedback from the MS China Industrial Summit & fieldtrip is generally positive for EU autos: pricing and inventory seem stable and at healthy levels, while new car launches may accelerate growth in 2H. Audi & VW stand out, leading their segments and anticipating continued strength in May.
*GALP ENERGIA RAISED TO BUY VS NEUTRAL AT CITI
*MR PRICE RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*TELIASONERA RAISED TO HOLD VS SELL AT BERENBERG
*INGENICO CUT TO SELL VS HOLD AT BERENBERG
*EVS PT RAISED TO EU63 FROM EU50 AT ING
*DELHAIZE PT RAISED TO EU49.40 FROM EU39 AT ING
|07:00||JN||Vehicle Sales (YoY)||May||—||
|09:50||FR||PMI Manufacturing||May F||
|09:55||GE||PMI Manufacturing||May F||
|10:00||EC||PMI Manufacturing||May F||
|16:00||US||Construction Spending MoM||Apr||
|16:00||US||ISM Prices Paid||May||
|03-07 JUN||UK||Halifax House Prices sa (MoM)||May||
OVERNIGHT MARKETS: DOWN
Nikkei 225 down -391.63 (-2.84%) at 13,382
Topix down -24.18 (-2.13%) at 1,111
Hang Seng up +90.57 (+0.40%) at 22,482
S&P 500 down -23.67 (-1.43%) at 1,630
DJIA down -208.96 (-1.36%) at 15,115
Nasdaq down -35.39 (-1.01%) at 3,455
Eurofirst 300 down -11.24 (-0.9%) at 1,216
FTSE100 down -73.90 (-1.1%) at 6,583
CAC 40 down -47.72 (-1.19%) at 3,948
Dax down -51.36 (-0.61%) at 8,348
€/$ 1.30 (1.30)
$/¥ 100.64 (101.08)
£/$ 1.52 (1.52)
Brent Crude (ICE) down -0.07 at 100.32
Light Crude (Nymex) down -0.03 at 91.94
100 Oz Gold (Comex) up +1.70 at 1,394
Copper (Comex) up 0.02 at 3.31
10-year government bond yields (%)
CDS (closing levels)
Markit iTraxx SovX Western Europe at 85.95bp
Markit iTraxx Europe +2.8bps at 102.8bp
Markit iTraxx Xover +11.7bps at 421.24bp
Markit CDX IG +2.9bps at 79bp
Sources: FT, Bloomberg, Markit