LCM (light and late) Dawn Patrol – 31.07-2013 – Earnings… GS takes Havas and IFX off its conviction list…

Bonjour,

Markets to open flat as we wait for the Fed’s announcements. BNP numbers look OK, Ingenico is strong. US equities finished little changed on Tuesday. There did not seem to be any notable directional influences on the market today, a dynamic that fit with the waiting game ahead of tomorrow’s FOMC announcement and Friday’s release of the July employment report. However, there were a number of different headlines and themes in focus, including a rebound in China and Japan, some renewed hope for corporate tax reform, the continued debate about the momentum behind the housing recovery and a sharp selloff in the fertilizer stocks.

Today, we’ll watch employment numbers, CPI and in the US MBA mortgage apps and the ADP emloyment.

SX5E futures: 2761.00y 22.00. Support at 2751 then 2725. resistance still at 2764 then 2788. Another Doji candle yesterday….uptrend is right on the support today…something has to give…

NEWS

Earnings

AB InBev Profit Growth Tops Expectations on Higher-Priced Beers. (+2%)
Bayer 2Q Adj. Ebitda Beats, Says Forecast Increasingly Ambitious (+1%)
BNP Paribas – Q2 net/revs/op profit/CAPITAL beat,€218m gain from fortis +1%
EADS – H1 sales in line,net light.ebit beat,confirms 2013 guidance +2%
Eutelsat FY in line, but lower forecasts (ML and JPM lower PT) -2%
Ingenico shows some very strong results with increased guidance and better margins (+5%)
Peugeot – H1 op loss beat,signs of recovery in H1 +3%
Schneider 2Q Rev. Beats, 1H Net Misses; Reaffirms 2013 Targets
Solvay – Q2 rebitda beat,sales miss,low quality beat -3%
Suez Env’t – H1 revs in line,ebitda beat,raises fy ebitda forecast +3%
Vinci 1H Rev. Beats Est.; Ebitda Seen Higher in 2H vs 1H
Vallourec – Q2 sales/ebitda in light,net in line,reiterates fy forecast -1%
Vontobel – H1 net better,says 2014 targets now in reach +2%
VW – Q2 ebit/pbt beat,confirms 2013 operating profit guidance +3%

CURRENT STUFF

Global fertiliser shake-up after cartel falls apart: “One of the two big cartels controlling the potash market has fallen apart after a leading Russian producer of the vital ingredient in fertiliser announced its withdrawal from the group, sending sector share prices tumbling. In a move likened to a break-up of Opec, the oil producers’ club that controls output, Uralkali pulled out of the Belarus Potash Corporation export cartel after it accused its Belarusian partner of violating an agreement and selling outside the partnership.” (Financial Times)

The WSJ said that in a speech today in in Chattanooga, Tenn., President Obama will offer Republicans a deal under which he would support an overhaul of the corporate tax system in exchange for a guarantee that a resulting one-off windfall from would be used to fund various job creation proposals.

UPS&DOWNS

Saint-Gobain (JPM,  Biddulph) Reviewing the eventual upside potential, as earnings momentum edges into positive territory.
Saint-Gobain H1 results left us with greater conviction that earnings momentum will turn positive over the next 6-12 months. Comments on the state of key European markets and the outlook were subtly more positive, while the industrials divisions appear stable at a higher level than we anticipated. While at this stage we are only upgrading our EBITA estimates by 2% for 2013-15, we still see 8% upside on a very modest ‘14 bull-case. Longer-term, in the event of a reversal of LFL and margin declines, we see growth potential of c.54% vs. ‘14 EBITA (c.36% on EBITDA), with scope with further organic growth, should markets recover to the levels that the Group expected when it targeted €5.5bn EBITA by ‘15 back in 2010. The stock trades on 5.4x EV/EBITDA, at a slight discount to historic average. We would be comfortable with a 10% premium at this stage, implying a July-14 price target of €38 (12% potential upside).

Havas (GS, Yang): Off the Conviction List following outperformance; remains Buy
We remove Havas from the Conviction Buy List post recent share price outperformance as we now see lower valuation upside and its P/E discount to PUB has narrowed to c.10%. We retain a Buy rating with an unchanged 12-month price target of €6.1.

Infineon (GS, Schafer): Off Conviction List given incremental expenses; remains Buy
Removing IFX from Conviction Buy List following today’s results that highlighted incremental expenses. Remain Buy as our investment thesis of mean reversion is intact, given IFX is a major beneficiary of an inflexion point in the semis cycle.

AEGON CUT TO NEUTRAL VS BUY AT GOLDMAN SACHS
ALCATEL-LUCENT RAISED TO BUY VS NEUTRAL AT NOMURA
AVIVA PLC CUT TO NEUTRAL VS BUY AT GOLDMAN SACHS
BPOST RATED NEW BUY AT NOMURA; PT EU17
BPOST RATED NEW EQUALWEIGHT AT MORGAN STANLEY; PT EU14.7
BPOST RATED NEW OVERWEIGHT AT JPMORGAN; PT EU17.3
CEGEDIM CUT TO SELL VS HOLD AT SOCGEN
GBL PT RAISED TO EU63 FROM EU62 AT ING
GKN PLC RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
ICL CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
INFINEON REMOVED FROM GS CONVICTION BUY LIST
JCDECAUX RAISED TO BUY VS NEUTRAL AT BOFAML
K+S CUT TO NEUTRAL VS BUY AT CITI
K+S CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
KGHM RAISED TO HOLD VS SELL AT SOCGEN
NEXT CUT TO HOLD VS BUY AT DEUTSCHE BANK
PANALPINA RAISED TO HOLD VS SELL AT DEUTSCHE BANK
STHREE PLC CUT TO SECTOR PERFORM VS OUTPERFORM AT RBC
TELECITY CUT TO NEUTRAL VS BUY AT UBS
THYSSENKRUPP CUT TO SELL VS BUY AT UBS
URALKALI CUT TO NEUTRAL VS BUY AT CITI
URALKALI CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
URALKALI CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
VISTULA GROUP RAISED TO BUY VS HOLD AT ING

OVERNIGHT MARKETS: MIXED

Asian markets
Nikkei 225 down -58.70 (-0.42%) at 13,811
Topix down -2.28 (-0.20%) at 1,146
Hang Seng up +60.74 (+0.28%) at 22,015

US markets
S&P 500 up +0.63 (+0.04%) at 1,686
DJIA down -1.38 (-0.01%) at 15,521
Nasdaq up +17.33 (+0.48%) at 3,616

European markets
Eurofirst 300 up +0.14 (+0.01%) at 1,206
FTSE100 up +10.70 (+0.16%) at 6,571
CAC 40 up +17.70 (+0.45%) at 3,987
Dax up +11.99 (+0.15%) at 8,271

Currencies
€/$ 1.33 (1.33)
$/¥ 98.13 (98.03)
£/$ 1.52 (1.52)

Commodities ($)
Brent Crude (ICE) down -0.08 at 106.83
Light Crude (Nymex) up +0.24 at 103.32
100 Oz Gold (Comex) up +7.40 at 1,331
Copper (Comex) unchanged 0.00 at 3.04

10-year government bond yields (%)
US 2.60%
UK 2.32%
Germany 1.68%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.32bps at 91.92bp
Markit iTraxx Europe -3.39bps at 99.92bp
Markit iTraxx Xover -12.79bps at 401.68bp
Markit CDX IG +1.12bps at 86.56bp

Sources: FT, Bloomberg, Markit

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