LCM Dawn Patrol – 05.07.13 – GS on the ECB meeting, JPM downgrades Heineken, MS cautious on SAP. Week End.

Bonjour,

Markets top open mixed today ahead of the very important payrolls data and after yesterday’s rally. Asia continued in the wake of Europe following Draghi’s dovish comments with Japan up 1.9% and the MSCI Asia up 0.8%. While US markets were closed the UST 10y reaches 2.53%. The WTI Oil at 101.24.

Today, we’ll focus on the US Non Farm Payrolls (165k expected). A strong number (>200k) would trigger confirmation of a September tapering (at least in investors minds). We’ll also have a look at the German factory orders for May.

WEEK END

RESTO: EDGAR, 31 rue d’Alexandrie, 75002. http://www.lefooding.com/node.php?articleid=9009

FILMO: World War Z. I’m a cinephile.
DISCO: Full Circle. Half Moon Run. youtube http://youtube.com/w/?v=azV0Y7v6wsg
SPORT: LE TOUR… http://www.letour.fr/le-tour/2013/fr/etape-7.html

NEWS

Fiat’s Altavilla doesn’t see recovery in 2013 Europe car sales

Diageo gained control of United Spirits Ltd. After completing the final stage of a transaction to acquire a stake in the Indian maker of Bagpiper whiskey. BBG

Unilever bid fails to gain 75% control of Hindustan Unilever BBG

Samsung Electronics share price -4% today in Seoul after 2Q OP disappoints

Valeo Says China Sales Will be Doubled Every Four Years

TNT Sells 14.3% Equity Interests in Apriso to Dassault

Novartis says Lucentis approved in EU as first effective anti-VEGF treatment for myopic choroidal neovascularization.

CURRENT STUFF

ECB Meeting
(GS) Bottom line: At today’s ECB press conference, President Draghi introduced more explicit “forward guidance” on ECB policy rates, reflected in the Governing Council’s statement that key ECB interest rates will remain “at present or lower levels for an extended period of time”. During the press conference, Mr. Draghi stressed the “downward bias” in policy rates implied by this form of forward guidance, helping to steer short-term market rates back towards the levels seen prior to the Federal Reserve’s recent change in language towards the pace and timing of its ‘tapering’ of asset purchases.

Samsung Q2 profits disappoint, despite record: In a preliminary estimate ahead of more detailed figures to be released later this month, Samsung said it expected to report operating profit for the period of Won9.3-9.7tn ($8.2-8.5bn), compared with Won8.8tn in the first quarter. Analysts polled by Bloomberg before the release produced a consensus forecast of Won10tn. Some analysts wondered whether the results meant the company’s smartphone growth was peaking. (Financial Times)(Reuters)

Morsi supporters plan rally today: “Islamist supporters of Egypt’s ousted president, Mohamed Mursi, will rally on Friday to express their outrage at his overthrow by the army and to reject a planned interim government backed by their liberal opponents.” (Reuters

Portugal’s government avoids collapse: Prime minister Pedro Passos Coelho said he had received assurances yesterday of continued backing from the junior partner in his centre-right coalition, despite the resignation of its leader, Paulo Portas, as foreign minister. The two parties had “found a formula to maintain government stability”, he said after hours of talks with Portas. Yields on the country’s 10-year sovereign yields fell back to 7.19% from a high of 7.9% on Wednesday. (Wall Street Journal)(Financial Times)

Greece’s finance minister expressed optimism that talks with troika auditors will be concluded in time for next week’s meeting of eurozone finance ministers that will decide whether to unlock further aid to the country. “We are heading for a political agreement on Monday,” Yannis Stournaras said after a three-hour meeting with troika officials and prime minister Antonis Samaras. (Wall Street Journal)

China suspends industry-specific data from official manufacturing PMIs: “We now have 3,000 samples in the survey, and from a technical point of view, time is very limited — there are many industries, you know,” Cai Jin, vice president of the China Federation of Logistics & Purchasing, which compiles the data with the National Bureau of Statistics, told reporters yesterday in Beijing. (Bloomberg)

China’s monetary policy isn’t relaxed or tight and liquidity in the financial system is sufficient, Zhu Guangyao, vice finance minister, says at a briefing in Beijing today. China’s financial markets are healthy and stable, Zhu says in response to a question about financial market strain. Central bank of any country, as lender of last resort, has the duty and responsibility to maintain financial market stability, Zhu says. M2 growth is still higher than the PBOC’s annual target so overall liquidity is not tight, he said. It was necessary for the central bank to give a warning said Zhu. BBG

UPS&DOWNS

Heineken (JPM, Gibbs) Volumes and margins still under pressure in W. Europe; a relative UW in the sector
Investors are likely braced for a weak H113 given recent relative underperformance (we have flat reported net profit). Volumes and profit growth should improve in H213 but the “margin of safety” is now minimal, in our view, and consensus estimates are still too high. Heineken has strong positions in key EMs, notably Mexico and Nigeria (now recovering), but competitive pressures are increasing. We see no absolute downside to our new PT of €49 but see Heineken shares as unattractive in the near term vs peers and downgrade to UW.

SAP AG (MS, Wood) 2Q13 weakness in the price?
2Q likely to be weak, but increasingly discounted: Our 2Q channel checks have been mixed and we think recent sector results point to a licence outcome closer to our forecast than consensus. However, conversations with investors and the share price weakness suggest this is largely priced in – indeed, we see limited downside to our bear case here. We also feel the bears are overly focused on the slowing core licence growth and ignore the strong contribution from HANA, Mobile and especially cloud subscriptions, in which SAP has explicitly invested to drive growth. We may lack catalysts in the short term, but we see the potential for licences to accelerate in 4Q13 and 2014 and so believe the risk/reward is well skewed to the upside. We remain OW.

AFRICAN BARRICK GOLD RAISED TO BUY VS REDUCE AT NOMURA
ALSTOM CUT TO HOLD VS BUY AT DEUTSCHE BANK
HEINEKEN CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
HSBC CUTS EMERGING-MARKET STOCKS TO UNDERWEIGHT VS OVERWEIGHT
HSBC SAYS EMERGING-MARKETS TO UNDERPERFORM FOR NEXT FEW QTRS
JCDECAUX CUT FROM CONVICTION SELL LIST AT GOLDMAN, STILL SELL
Johnson Matthey Raised to Equalweight at Morgan Stanley
KION RATED NEW NEUTRAL AT UBS, PT EU25
LAMPRELL CUT TO NEUTRAL VS BUY AT BOFAML
MEGGITT CUT TO HOLD VS BUY AT DEUTSCHE BANK
MOSS BROS RAISED TO BUY VS HOLD AT CANTOR
PGE CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
POLYMETAL INTL RAISED TO BUY VS NEUTRAL AT NOMURA
RANDGOLD RESOURCES RAISED TO NEUTRAL VS REDUCE AT NOMURA
SEADRILL RAISED TO BUY VS NEUTRAL AT BOFAML
VICTREX RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT MORGAN STANLEY
WHITBREAD CUT TO NEUTRAL VS BUY AT UBS
WINKWORTH RATED NEW BUY AT LIBERUM, PT 160P
WOOD GROUP RAISED TO BUY VS NEUTRAL AT BOFAML

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