LCM Dawn Patrol – 13.06.13 – Japan down 6%, MS lowers China and assess the impact, JPM ups Adidas to OW, lowers Santander to UW… More…



European shares to open down again today as US dropped and Japan tanks. Nikkei down 6% to over 2-month low on a rising yen. The current theme is still the same and there isn’t really anything new. Markets suffer on the tapering fears, there is no important data, Bernanke won’t speak before next week and Japan is collapsing (except the JGBs). The terrible events in Greece and Turkey add to the lack of confidence in Europe.


Today, we’ll watch US retail sales at 14:30 and initial jobless claims. We’ll also watch lines at train stations and airports as employees of the SNCF and Airports go on strike and add to the ambient mood and makes this country a joke. I’ll ride my bike…



The Bank of Korea left its key benchmark interest rate at 2.5 per cent, as anticipated.
Apple looking at bigger iPhone screens, multiple colours – (Reuters)
Luxury names should trade lower after Prada down 2.4% to lowest level since May 14 after it reported 1Q net income of 138.2m euros vs est. 141m euros.
Safeway’s shares jumped by a third late Wednesday after the supermarket operator announced it was selling off its Canadian operations for more than $5 billion and using some of the proceeds to help pay down its debt.
Nordea to sell Polish operations to PKO for €700m
Rio selling 29% of its 80% stake in Coal & Allied
KPN Chief Financial Officer Eric Hageman says co. is currently not in talks with Telefonica
EDF may take a stake of up to 40% in Rio Tinto’s aluminum factory southeast France – Les Echos
Air Liquide: to acquire Voltaix, an electronics materials company. no amount disclosed. co has 185 employees (BBG)
France Telecom board to meet after CEO charged in Tapie affair
Rhoen Klinikum shareholders abolish 90% approval threshold. Fresenius will no doubt be mentioned as possible re-bidder.
Clearwire urges shareholders to accept Dish offer
Cisco sees new product raising core router revenue to $10 bln




World Bank sees world economy expanding 2.2% this yr vs 2.4% forecast issued in Jan., according to reportreleased today.  Sees euro region GDP shrinking 0.6% vs previous forecast for 0.1% contraction; U.S. economy seen expanding 2% vs 1.9% forecast in Jan. Developing countries collectively forecast to expand 5.1% this yr vs previous 5.5% est. China 2013 growth forecast cut to 7.7% vs 8.4%
For 2014, bank sees world economy expanding by 3% vs 3.1% forecast issued in Jan. Sees 2014 growth 2.8% for U.S., 1.4% for Japan, 0.9% for EU, 8% for China


Yen’s rise through Y95 hits Japanese shares hard: “Japanese stocks fell sharply after the yen rose to its strongest level against the US dollar since the first week of April. The Nikkei 225 sank 5.6 per cent in morning trading, while the Japanese currency broke through Y95 per dollar for the first time in two months. Fast Retailing, the largest weighted stock on the Japanese index, dropped 6.9 per cent, while Softbank lost 8.7 per cent. The broader Topix index fell 4.2 per cent”


Europeans leave Europe…




MS (Yule) China GDP Downgrade: Global Equity Impact
Morgan Stanley economists have lowered their China GDP growth forecasts to 7.6% for both 2013 and 2014. They have identified 41 companies globally that they rate Equal-weight or Underweight that have high China exposure and may be vulnerable to a lower growth outlook. They have asked MS analysts to assess whether this outlook has been factored into current share prices.




MS removes Kabel Deutschland on restrictions. Current list of MS Best Ideas:

OW : IAG, IHG, Metro, RWE, SAP AG, Siemens, UBS


▲adidas Group (JPM,  Battistini) A year of catalysts — Upgrading to Overweight
With this note, we upgrade our adidas recommendation to Overweight and raise our price target to €95, representing a further 18% potential upside to current levels. As brand momentum keeps on building ahead of the World Cup next year, comps start to ease, margins continue to improve and potential for enhanced cash return is tangible, we believe adidas currently offers a compelling investment proposition, at a valuation that, in the context of its growth prospects, remains attractive.


▼Santander (JPM,  Becerril) Capital issues must be tackled – Downgrade to UW
Santander’s capital ratios under Basel III remain too low, in our view, targeting just 8% CT1 in FY13, as doubts remain about its Spanish book. Meanwhile, the sector is moving towards 10%. We have analyzed the different options SAN has to solve this, from selling assets to lowering RWAs or raising equity. Given the bank’s capital position, downturn in LatAm and the fact that our profit estimates are 24% below consensus, we downgrade our rating to UW from Neutral as we lower our TP to €4.34 from €5.80.


BG Group (GS, della Vigna) Buy: 1H start-ups have de-risked 2014 growth; reiterate CL-Buy
BG’s production growth in 2014 mainly depends on the 1H13 start-ups, which have now all been delivered. The start-up of the third FPSO in Brazil on June 6 was the fourth key start-up on schedule since the beginning of 2013.


Safran (MS, Vig) A Chance to Impress
Safran’s capital markets day gives management an opportunity to instill confidence that positive YTD after-market trends can continue. This coupled with on-track program development & potential guidance increases could see further out-performance. Stay OW and PT to €46.




Asian markets
Nikkei 225 down -579.30 (-4.36%) at 12,710
Topix down -40.11 (-3.66%) at 1,056
Hang Seng down -572.49 (-2.68%) at 20,782

US markets
S&P 500 down -13.61 (-0.84%) at 1,613
DJIA down -126.79 (-0.84%) at 14,995
Nasdaq down -36.52 (-1.06%) at 3,400

European markets
Eurofirst 300 down -4.78 (-0.41%) at 1,175
FTSE100 down -40.63 (-0.64%) at 6,299
CAC 40 down -16.86 (-0.44%) at 3,794
Dax down -79.19 (-0.96%) at 8,143

€/$ 1.34 (1.33)
$/¥ 94.77 (96.00)
£/$ 1.57 (1.57)

Commodities ($)
Brent Crude (ICE) down -0.38 at 103.11
Light Crude (Nymex) down -0.50 at 95.38
100 Oz Gold (Comex) down -0.90 at 1,391
Copper (Comex) unchanged 0.00 at 3.23

10-year government bond yields (%)
US 2.20%
UK 2.18%
Germany 1.60%

CDS (closing levels)
Markit iTraxx SovX Western Europe +0.33bps at 89.55bp
Markit iTraxx Europe +1.31bps at 112.21bp
Markit iTraxx Xover +7.95bps at 471.03bp
Markit CDX IG +1.9bps at 87.36bp

Sources: FT, Bloomberg, Markit



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