LCM Dawn Patrol – 10.06.13 – WWDC, China IP, Markets, RTL initiated by 4 brokers, Strategy: JPM, GS… Goes well with a croissant.

Bonjour,

European stocks are seen edging lower at the open, easing off after Friday’s strong gains as Chinese data suggested that growth was losing momentum. On the other hand, the Nikkei soars 5% as I type… We have some data today, but the key event is the WWDC (and not the launch of the XBOX one).

Roland Garros is over and the weather is back to cloudy so we can focus on the markets again. Tapering is still the word I read the most and after last week’s roller coaster in equities and fixed income, it’s time to reassess what the future will bring. Strategist still favor Equities for now with the US and EU (and Japan?) as the preferred regions. EM are tempting in terms of valuation, but growth remains low and the end of QE won’t help.

This week, we’ll focus on the German court’s hearings regarding the legality of the OMT and in terms of data, we’ll have the EU and US IP, the EU CPI and the US retail sales.
Today, it’s the Japanese GDP (better than expected, the French and Italian IPs, and the Italian GDP.

I found a note in a JPM note that summarises the macro narrative:
1. Tail risks remain suppresses,
2. Growth is slowly improving,
2. Earnings like growth are not great but decent,
4. Central Banks remain accommodative (for now)
5. Valuations are reasonable.
6. Corporates are healthy (and aggressively purchasing stocks).

WWDC 2013 preview: Apple prepares to unveil the future of iOS, OS X, and more
http://www.theverge.com/2013/6/6/4402070/apple-wwdc-2013-preview

NEWS

Rupee hits record-low against US dollar
Aussie dollar down under 94 cents

Barron’s is positive on SAP following its acquisition of Hybris
Atos Will Use Samsung Technology as Part of New Partnership
Enel in €3bn hybrid bond launch
Severn Trent Water bid may be abandoned as U.K. ultimatum looms
Google said to be buying Waze for $1.1b for social maps
Sanofi gets FDA approval for Fluzone vaccine
EADS, Thales among possible bidders for Cinven space unit – Sole
SAP looks for acquisitions in China to pick up software talent
ELAN BOARD REJECTS ROYALTY PHARMA REVISED TENDER OFFER

On China
Nomura Sees Downside Risk to China’s 2013 GDP Forecast of 7.5%
Goldman Sachs Sees Downside Risk to China’s 2Q, 2013 GDP Ests.
China’s 2013 GDP Growth Est. Cut to 7.5% From 7.7% at UBS
RBS Lowers China’s 2013, 2014 GDP Growth Forecasts on May Data
China 2013 GDP Growth Estimate Cut to 7.4% From 7.9% at Barclays
China May Industrial Output Rises 9.2%; Est. 9.4%
China May Consumer Prices Rise 2.1% Y/y; Est. 2.5%

CURRENT STUFF

Japan revised up Q1 growth to annual 4.1%: “Japan has revised up its first quarter economic growth to 1 per cent, giving Prime Minister Shinzo Abe a boost as he seeks to strengthen his grip on power in next month’s upper house elections. Government data released on Monday showed that the economy expanded at an annualised rate of 4.1 per cent between January and March, lifted by strong household spending and a pick-up in private residential investment. That was much higher than the preliminary estimate of 3.5 per cent, which was already the fastest rate recorded by any Group of Seven economy.” (Financial Times)

Bank reforms spur BNP Paribas to merge US units: “BNP Paribas is planning a full-blown merger of its US operations as it attempts to offset the impact of threatened US regulatory reforms for foreign banks, according to people familiar with the project. The French bank, which is one of the world’s largest by assets, has drawn up detailed plans to combine BancWest, its US retail banking subsidiary, with its US corporate and investment banking operations in a move intended to improve its capital and funding efficiency in the country.” (Financial Times)

STRATEGY

JPM (Loeys) The J.P. Morgan View
Asset allocation –– Market volatility in response to talk of an early end to easy money will not last, even as it may not be completely over, but it gives ideas on where the vulnerability to the real end to easy money lies. For the medium term investors should focus their holdings on assets least affected by this fire drill. To be overweight equities to broad fixed income is the most obvious implication.
Economics –– Strong German data for April suggest to us that the Euro area recession is over. An average US jobs report keeps us finely balanced between Sep and Dec as start of tapering.
Fixed Income –– We advise bullish positions in G3 due to mean reversion.
Equities –– EM is still the universe with most headwinds from a growth and flow perspective.
Credit –– We turn neutral on EM external debt and prefer relative trades.
Currencies ––Stay long CHF and selectively short commodity currencies (AUD, NZD) and high-yielders (IDR).
Commodities –– We continue to underweight commodities in our global portfolio given no yield and falling EM growth projections.

GS (Turner) European Flow Monitor
A bad week for bondflows, while equity outflows accelerate

The steady flow of capital into fixed income funds  that has lasted for more than a year came to an  abrupt halt this week. We estimate that European  investors withdrew a net -€7.3 bn from bond  funds this week (7 days ended June 6, based on  data from EPFR and EFAMA). This is the largest  weekly outflow since November 2011 and  compares to an average weekly inflow of +€4.6 bn  over the preceding 12 months.  Money market funds saw a net inflow of +€9.7 bn  this week.

GS (Timcenko) Global Markets Daily
Are Stocks Now A Buying opportunity?

After the recent sell-off, equities in the US and Germany appear moderately inexpensive, while equities in Japan appear sharply inexpensive.
The global industrial cycle continues to stabilize, as the GLI approaches the equity-friendly state of ‘Expansion’.
While we remain constructive about the US and continue to recommend a long position in large-cap banks as a top trade …
… we also recognize that some non-US equity indices may benefit from the mix of the recent price action and the better data, including Germany and Japan.
But monetary policy remains a risk, raising the bar for forthcoming central bank communications.

UPS&DOWNS

RTL Group SA (GS, Yang) Buy: Content, cash and carriage fees; initiate as Buy
We initiate on RTL as a Buy, with a 12M price target of €71. RTL is one of the world’s leading broadcasting and content companies. It has Q2 industry positioning, attractive valuation and among the best cash return potential in the sector.

RTL Group SA (MS, Rossi) Attractive cash return potential – Initiate at OW
We forecast RTL will return €3bn in cash dividends over the next 3 years, including a €1.4bn payment in 2013. We think strong execution and cost-control make RTL’s risk / reward one of the more attractive in the space and initiate coverage at OW, €70 PT.

Volkswagen (MS, Lembke) Ŝkoda – Yet Another Jewel in VW’s Portfolio
VW’s CMD at the Skoda facilities near Prague leaves us not only confident that the Czech brand is one of the group’s most promising assets, but also that VW can rely on a ‘deep bench’ of managers that could ultimately take over the helm of the company.

AMLIN CUT TO HOLD VS ADD AT NUMIS
BANCO SANTANDER CHILE RAISED TO NEUTRAL AT JPMORGAN
BBA AVIATION RATED NEW BUY AT GOLDMAN, PT 350P
BETFAIR RAISED TO BUY VS NEUTRAL AT CITI
CATLIN CUT TO REDUCE VS HOLD AT NUMIS
ELECTROCOMPONENTS CUT TO NEUTRAL AT CREDIT SUISSE
ELEKTA CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
EVRAZ RAISED TO BUY VS NEUTRAL AT UBS
FINDEL CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
FRESENIUS MEDICAL RAISED TO OVERWEIGHT AT BARCLAYS
LANCASHIRE RAISED TO ADD VS HOLD AT NUMIS
NESTE OIL RAISED TO BUY VS HOLD AT SOCGEN
NORDEA CUT TO NEUTRAL VS BUY AT GOLDMAN
NOVAE CUT TO REDUCE VS ADD AT NUMIS
PORSCHE RAISED TO NEUTRAL VS SELL AT CITI
PREMIER FARNELL CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
RTL GROUP RATED NEW BUY AT CITI, PT EU70
RTL GROUP RATED NEW NEUTRAL AT BOFAML, PT EU64
RTL RATED NEW BUY AT GOLDMAN, PT EU71
RTL RATED NEW OVERWEIGHT AT MORGAN STANLEY, PT EU70
SCOR RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
VOLKSWAGEN (PREF) RAISED TO BUY VS NEUTRAL AT CITI
ZURICH INSURANCE CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN

OVERNIGHT MARKETS

Asian markets
Nikkei 225 up +504.31 (+3.92%) at 13,382
Topix up +48.96 (+4.63%) at 1,106
Hang Seng up +95.99 (+0.44%) at 21,671

US markets
S&P 500 up +20.82 (+1.28%) at 1,643
DJIA up +207.50 (+1.38%) at 15,248
Nasdaq up +45.17 (+1.32%) at 3,469

European markets
Eurofirst 300 up +15.67 (+1.33%) at 1,194
FTSE100 up +75.88 (+1.20%) at 6,412
CAC 40 up +58.31 (+1.53%) at 3,873
Dax up +155.87 (+1.92%) at 8,255

Currencies
€/$ 1.32 (1.32)
$/¥ 98.05 (97.48)
£/$ 1.55 (1.56)

Commodities ($)
Brent Crude (ICE) unchanged 0.00 at 104.56
Light Crude (Nymex) up +0.04 at 96.07
100 Oz Gold (Comex) up +2.80 at 1,386
Copper (Comex) unchanged 0.00 at 3.27

10-year government bond yields (%)
US 2.16%
UK 2.07%
Germany 1.55

CDS (closing levels)
Markit iTraxx SovX Western Europe +1.41bps at 87.66bp
Markit iTraxx Europe -8.56bps at 104.28bp
Markit iTraxx Xover -34.63bps at 436.66bp
Markit CDX IG -3.01bps at 81.06bp

Sources: FT, Bloomberg, Markit

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s