LCM Dawn Patrol – 04.07.13 – JPM on Global Banks, MS EM strat. GS ups Peugeot, MS negative on Danone… More…


Europe to open higher following the US and Asia. In the US, telcos and tech led, while financials underperformed. In Asia, China rebounded with real estate, while Japan suffered from the JPY. Commodities stronger too.

Today, we’ll watch the Spanish bond auction, the ECB meeting where we can expect some dovish comments by Mr Draghi. To those in the US: Happy 4th of July.





Nestle cuts the price of its baby formula in China FT

NTT DoCoMo weighs overseas acquisitions

RBS has drawn interest in its structured retail products and equity derivatives business from rivals – Bbg

Siemens negative background article reg. restructuring program ” Siemens 2014″- too short-term- losing too much power

Sprint Nextel-Softbank deal said to meet FCC approval

Telecom Italia board meets on proposed for mobile-assets merger with Hutchison Whampoa

Yahoo acquires Xobni for ~$70m


Peripheral bond yields jumped as investors grew nervous about the prospects of an early election in Portugal and another showdown between Greece and its creditors. In Portugal, Pedro Passos Coelho is struggling to hold his coalition together as political upheaval may undermine the country’s efforts to exit its €78bn aid programme on schedule. A eurozone official said it was possible European finance ministers may decide on Monday to delay Greece’s next aid instalment by three months, but added such a decision was unlikely. (Financial Times)(Reuters)

China is considering a dramatic relaxation of its capital controls over the next few years as part of an accelerated push to make its currency freely tradable, despite international advisers warning against hasty implementation of reform. (Financial Times)

Russian oil shipments to Europe have slumped to a 10-year low, forcing refineries across the continent to pay more for scarce supplies. (Financial Times)

Global fund managers are pulling money out of Chinese stocks in the largest outflow since 2008. (Wall Street Journal)


JPM – Global Investment Banks (Kian Abouhossein). Basel leverage ratio consultation: manageable, but capital at risk for Deutsche Bank and Barclays .
s discussed in our note (Global IBs – Can universal banking model survive the new wave of uncoordinated IB regulations? published 11th Apr 2013), the leverage ratio remains one of the key regulatory hurdles for mainly IB-geared banks. The Basel leverage consultation document published on June 26, 2013 would lead to 33% average increase in balance sheet. We warn that the rules are far from final, implementation long-dated, and we make material assumptions which lead us to conclude that overall the ratios are manageable for Global IBs. Stock specific: i) US IBs are best-in-class, ii) SG, BNPP are surprisingly positive, iii) Swiss need to deliver on deleveraging with CSG requiring CoCo issuance, iv) BARC is a concern from UK regulation, not Basel and might have to raise capital, v) DB needs to raise capital in our view.

MS Emerging Market Strategy
Brazil recommendation lifted to equalweight from underweight amid “exceptionally oversold technicals,”
Indonesia stocks cut to underweight from equalweight amid “still expensive” valuation, “still crowded” fund flows and vulnerability of sudden end to capital flows
In other MS changes, Czech stocks raised to overweight from equalweight; Poland cut to equalweight from overweight; Colombia reduced to underweight from equalweight


Peugeot (GS, Burgstaller) Buy: Greater degrees of freedom: Up to Buy and onto the Conviction List
We upgrade Peugeot to Buy and add it to the Conviction List on growing confidence that its cash burn can be controlled, an improving European operating environment, and an increasing likelihood that the family might be willing to cede control.

Danone (MS, Khoo) 3 Growth Drivers Reverse – Reiterate Underweight
The latest developments from China, following the announcement of an NDRC pricing probe, appear more -ve than our initial assessment. Pricing risk in China IMF, higher raw milk prices and weaker EU demand are 3 potential NT headwinds implying downside. Peak valuation unwarranted; UW DANO.

United Internet AG (Fox) Interactive Model: Exploring the Valuation Upside
Our interactive model allows investors to flex key drivers and SOTP multiples. Our new €26 PT implies Access and Applications are at 8.4x and 11.6x 2015e OpFCF, respectively. We raise our 2014 forecasts to reflect stronger B2B hosting growth, which we expect to be a focus of H1 results on August 14.

AB Inbev SA (ABI.BR): Berenberg cuts target price to 82 euros from 83 euros; rating buy
Aeroports De Paris (ADP.PA): RBC cuts to sector perform from outperform
Aeroports De Paris (ADP.PA): RBC raises target price to 73 euros from 65 euros
ASOS Plc (ASOS.L): Jefferies raises to buy from underperform; target to 6200p from 2199p
Aurelius AG (AR4G.DE): Berenberg raises target to 23 euros from 22.67 euros; rating buy
Carillion Plc (CLLN.L): RBC raises to outperform from sector perform
Carillion Plc (CLLN.L): RBC raises target price to 315p from 285p
Chr Hansen (CHRH.CO): SocGen cuts target price to Dkk 225 from Dkk 245; rating buy
Celesio AG (CLSGn.DE): Jefferies cuts to hold from buy
Celesio AG (CLSGn.DE): Jefferies cuts target price to 15.40 euros from 18.50 euros
Unilever NV (UNc.AS): SocGen raises to buy from hold
Unilever NV (UNc.AS): SocGen raises target price to 36 euros from 34 euros
Vicat SA (VCTP.PA): Berenberg starts with buy rating; price target of 57 euros


Asian markets
Nikkei 225 down -21.60 (-0.15%) at 14,034
Topix down -4.05 (-0.35%) at 1,170
Hang Seng up +353.88 (+1.76%) at 20,501

US markets
S&P 500 up +1.33 (+0.08%) at 1,615
DJIA up +56.14 (+0.38%) at 14,989
Nasdaq up +10.27 (+0.30%) at 3,444

European markets
Eurofirst 300 down -7.87 (-0.68%) at 1,151
FTSE100 down -74.07 (-1.17%) at 6,230
CAC 40 down -40.56 (-1.08%) at 3,702
Dax down -81.45 (-1.03%) at 7,829

€/$ 1.30 (1.30)
$/¥ 99.82 (99.87)
£/$ 1.53 (1.53)

Commodities ($)
Brent Crude (ICE) down -0.25 at 105.51
Light Crude (Nymex) up +0.01 at 101.25
100 Oz Gold (Comex) up +2.00 at 1,254
Copper (Comex) down -0.01 at 3.16

10-year government bond yields (%)
US 2.50%
UK 2.42%
Germany 1.66%

CDS (closing levels)
Markit iTraxx SovX Western Europe +3.93bps at 98.6bp
Markit iTraxx Europe +2.68bps at 116.55bp
Markit iTraxx Xover +9.96bps at 464.66bp
Markit CDX IG -0.51bps at 85.44bp

Sources: FT, Bloomberg, Markit


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