LCM Dawn Patrol – 11.06.13 – Apple, MS European clients are soooo bullish, BoJ disappoints, JPM likes SAP.

Bonjour,

European shares are expected to fall today, following losses in Asia, with China growth concerns, BoJ announcements and a hearing in a German court about the legality of the ECB’s bond-buying scheme hurting sentiment. The Constitutional Court will hear on June 11-12 whether Germany, Europe’s largest economy, can legally participate in bailout schemes. A ruling, however, is not expected until after Germany holds national elections in September.

Today, we’ll listen to Kuroda (BoJ governor) at 8:30. We’ll look at the German constitutional ruling on the OMT (yaaaawn), the UK IP at 10:30 and the US NFIB at 13:30.

To all GS clients, I would recommend to read Jan Hatzius’ piece “US views: no rush for the exit“. It gives a clear (somewhat bearish) picture of the current state of the US (and the world) and argues that tapering too soon (ie September) could be a mistake and that he expects the Fed to start reducing the QE pace in December.

APPLE

I love the new Mac Pro and the new OSX has been named after a surf spot I’ll never surf…. Mavericks.
the WWDC in 10 minutes: http://www.theverge.com/2013/6/10/4417634/apple-wwdc-2013-keynote-highlight-reel

NEWS

The BOJ disappointed investors this morning after BOJ announced they weren’t going to be expanding J-REIT or ETF purchases nor would they undertake any additional measures to curb bond market volatility by extending fund liquidity operation’s out to two years.

Texas Instruments Mid Q update: Prior guidance unchanged trade -1.7% after hours

Air France. and others airlines serving France will cut flights as a three-day strike by French air traffic controllers begins today. (This is not news, this is business as usual)

RWE Said to Struggle to Find Buyers for Dea Oil, Gas Unit

Anglo American Says Aquila Coal Mine to Halt Production

Remy FY Current Op. Profit Misses Ests.

SBM’s FPSO Facility Paraty Continues to Ramp Up Production

France’s Wendel selling remaining 14.4m Legrand shares

Nestle’s Nespresso to face new Copycat capsule from Mondelez

U.K. RICS house-price index reaches 3-yr high on buyer revival

Spain’s Bankia should be prepared for sale, Linde says

Aznar says only People’s Party can ensure stability in Spain

Biotest prices new preferred shares at EU52

CURRENT STUFF

World has 10 years of shale oil, reports US: “Global shale resources are vast enough to cover more than a decade of oil consumption, according to the first-ever US assessment of reserves from Russia to Argentina. The US Department of Energy estimated “technically recoverable” shale oil resources of 345bn barrels in 42 countries it surveyed, or 10 per cent of global crude supplies. The department had previously only provided an estimate for US shale reserves, which it on Monday increased from 32bn barrels to 58bn.” (Financial Times)

Apple takes fight to rivals with its redesign: “Apple unveiled what its chief executive Tim Cook called the most radical redesign of its iOS software since the introduction of the iPhone six years ago, as the company looks to prove it has not lost the advantage in innovation to rivals. The new iOS7 has a minimalist new look and improvements that will make it easier for users to share documents and organise their photos. Apple’s design chief, Sir Jonathan Ive, said the changes would define “an important new direction” for the original smartphone.” (Financial Times)
My 2 cents. I think regular iPhone users will be somewhat happy that Apple brings on a new UI and some new features. It may not be enough to increase retention or to get more people to switch from the Android/Windows world to (or back to) Apple. It will be a nicer phone to have, but not a must have, so will be disappointing for the stock. For Apple core lovers, the Mac Heads, there is some very good news, Apple is focusing again on the Mac Pro and announced a killer desktop with an unusual design and a lot of power.

STRATEGY

MS Global Investment Seminar 2013
Most Positive on European equities since 2006.

I just post the chart as it’s self explanatory. Obviously most of the investors surveyed are Europeans.

UPS&DOWNS

SAP (JPM, Pollard). Big Data and SaaS Trends are Mainly Positive for SAP.
The key drivers for SAP are HANA, Cloud and Mobile. J.P. Morgan’s US software analyst, John DiFucci, has published two large industry reports on SaaS and Big Data, and we write this note in partnership with those reports. Industry trends in SaaS and Big Data are broadly favourable to SAP, although SaaS is both opportunity and threat.

Samsung Electronics(MS, Kim) Cutting Through the ‘Mumbo Jumbo’
In this report, we cut through the Galaxy S4 sell-side bubble ‘mumbo jumbo’ and provide a mid-quarter update. We also tweak our estimates to reflect less incremental penetration gain for high-end smartphones in 2H13.

European Airlines (GS, Edelman) Flag prospects and valuations less compelling: IAG & LHAG to Sell
Low cost carrier airlines are positioned more competitively vs. flag carriers in Europe. Ryanair is a CL-Buy but we believe IAG and Lufthansa’s valuations already discount the likely improvement in returns driven by an improving macro (both to Sell).

Compass Group (GS, Edelman): Resilient growth profile but less attractive valuation, down to Neutral
While we see Compass’ strong organic growth, low revenue volatility, low capital intensity, and strong balance sheet as attractive, we now see more upside potential elsewhere in our sector coverage and downgrade our rating to Neutral from Buy.

BANKIA RAISED TO NEUTRAL VS SELL AT UBS
BETSSON RAISED TO BUY VS HOLD AT SEB
BHP Billiton Cut to ’Sell’ at S&P Capital IQ
COMPASS CUT TO NEUTRAL VS BUY AT GOLDMAN
ELAN PT UPPED TO EU9.3 VS EU9.1 AT CREDIT SUISSE, STAYS NEUTRAL
ENEL CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
GERRY WEBER RAISED TO BUY VS HOLD AT BERENBERG
HANNOVER RE RAISED TO NEUTRAL VS UNDERPERFORM AT BOFAML
HISCOX CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
ICAP CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
IMPALA PLATINUM HOLDINGS CUT TO NEUTRAL VS BUY AT NOMURA
INFINEON RAISED TO BUY VS NEUTRAL AT CITI
RENEWABLE ENERGY CUT TO NEUTRAL VS BUY AT CITI
Samsung Electronics Price, EPS Targets Cut at Morgan Stanley

OVERNIGHT MARKETS

Asian markets
Nikkei 225 down -124.28 (-0.92%) at 13,390
Topix down -5.81 (-0.52%) at 1,106
Hang Seng down -191.40 (-0.89%) at 21,424

US markets
S&P 500 down -0.57 (-0.03%) at 1,643
DJIA down -9.53 (-0.06%) at 15,239
Nasdaq up +4.55 (+0.13%) at 3,474

European markets
Eurofirst 300 down -0.99 (-0.08%) at 1,193
FTSE100 down -11.54 (-0.18%) at 6,400
CAC 40 down -8.23 (-0.21%) at 3,864
Dax up +53.01 (+0.64%) at 8,308

Currencies
€/$ 1.33 (1.33)
$/¥ 98.74 (98.76)
£/$ 1.56 (1.56)

Commodities ($)
Brent Crude (ICE) down -0.21 at 103.74
Light Crude (Nymex) up +0.06 at 95.83
100 Oz Gold (Comex) down -2.30 at 1,384
Copper (Comex) unchanged 0.00 at 3.24

10-year government bond yields (%)
US 2.22%
UK 2.15%
Germany 1.61%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.32bps at 87.34bp
Markit iTraxx Europe +3.04bps at 107.32bp
Markit iTraxx Xover +14.88bps at 451.54bp
Markit CDX IG +2.88bps at 83.94bp

Sources: FT, Bloomberg, Markit

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