LCM Patrol – 02.09.13 – JPM View, MS on Lybian disruptions on oil, Vodafone, inside Janet Yellen’s brain

Hello,

Markets are expected to open higher on stronger China manufacturing data and on the delays regarding any intervention in Syria as President Obama finally decided to consult congress. This morning, Asia is up with the Ninkkei gaining 1.5% and the Hang Seng up 1.9% Crude oil prices down.

 

The main events for investors this week apart from Syria will be the ECB, BoE, BoJ and RBA meetings where no change is expected. In terms of data, we’ll monitor the US Payrolls, global PMI, global IPs and Q2 GDP numbers. In Europe, we’ll have the IFO, M3 and retail sales. Several Fed speakers will… speak and if you want to know what’s inside Janet Yellen’s brain, you can click here: http://reut.rs/17gYMjN

 

 

 

CURRENT STUFF

 

Vodafone
Verizon and Vodafone have agreed to a dealfor the UK company’s stake in their US joint venture, Verizon Wireless. Vodafone will announce the deal today after its board met on Sunday to approve the $130bn deal. Verizon’s board will meet on Monday morning for final approval. Barring any last-minute hitches, Verizon and Vodafone will lay out the terms of the deal in separate announcements later today. A centrepiece of the deal will be a substantial return of capital to Vodafone shareholders — and as the telecoms group is one of the most widely held stocks in the UK, it would help the British economic recovery in what has been labelled a “massive quantitative easing injection”. (Financial Times)

 

More expansionary Chinese manufacturing PMIs. The official PMI for August was 51, a 16-month high. HSBC Markit’s PMI was confirmed at 50.1, up from 47.7 the previous month. (Bloomberg)

 

India’s growth is at its slowest rate since 2009. GDP rose 4.4% in the June quarter from a year earlier, compared to 4.8% in the previous quarter and a consensus forecast of 4.7%. (Bloomberg)

 

STRATEGY

 

JPM (Loeys) The J.P. Morgan View
Monetary tightening has started early
Asset allocation –– Monetary conditions are tightening in the US, without a better  economy.  This  creates  downsides  to  both  equities  and  fixed  income, and thus the risk of asset deflation.
Economics –– India downgrade lowers EM growth forecast also, to 4.3% in 2013, keeping negative momentum of  -0.1% downgrade per month.
Fixed Income –– September tapering appears priced, but we keep a bearish outlook on USTs.
Equities –– Keep a long VIX as a hedge to lo ng equities.
Credit –– Stay UW CEMBI vs. EMBIG.
FX –– Stay UW EM FX, focused  on  TRY, MYR, ZAR, IDR  and  CLP but take profit on UW INR.
Commodities –– Stay OW energy.

 

UPS&DOWNS

 

Oil & Gas (MS, Rashed) Back from Libya – Thoughts on Latest Developments
Libya disruptions – Impact for Integrateds: Fresh disruptions to crude production in the west of Libya this week highlight the continued deterioration of the security situation. Libya’s Prime Minister Ali Zeidan was quoted in local press recently (Libya Herald, 29 August), indicating production from the country has fallen to just 250kboe/d, a far cry from the ~1.4mb/d achieved last year post the revolution. Following our recent visit to the country, we outline the latest developments on the ground and provide detail on which companies are most exposed. Whilst still early days, if these disruptions persist, it could have a meaningful impact on 3Q production for Eni, Repsol and OMV.

 

Afren PLC (AFRE.L): RBC cuts to sector perform from outperform; target to 170p from 180p

Bwin.Party Digital (BPTY.L): Morgan Stanley cuts to equal-weight from overweight

EVN AG (EVNV.VI): SocGen raises to buy from hold

ING (ING.AS): UBS adds to its Key Call list; rating buy

Inmarsat PLC (ISA.L): Morgan Stanley raises to overweight from equal-weight

KPN (KPN.AS): Jefferies raises target price to 2 euros from 1.93 euros; rating hold

Serco Group (SRP.L): Jefferies cuts target price to 675p from 750p; rating buy

Telefonica Deutschland (O2Dn.DE): Jefferies cuts target to 5.40 euros from 5.80 euros

Vodafone Plc (VOD.L): Jefferies raises target price to 216p from 179p; rating hold

Zurich Airport (FHZN.S): Morgan Stanley raises target to Sfr 550 from Sfr 470; overweight

 

OVERNIGHT MARKETS: UP

 

Asian markets
Nikkei 225 up +201.95 (+1.51%) at 13,591
Topix up +12.40 (+1.12%) at 1,118
Hang Seng up +410.35 (+1.89%) at 22,142

US markets
S&P 500 down -5.20 (-0.32%) at 1,633
DJIA down -30.64 (-0.21%) at 14,810
Nasdaq down -30.43 (-0.84%) at 3,590

European markets
Eurofirst 300 down -12.04 (-1.00%) at 1,195
FTSE100 down -70.12 (-1.08%) at 6,413
CAC 40 down -52.57 (-1.32%) at 3,934
Dax down -91.40 (-1.12%) at 8,103

Currencies
€/$ 1.32 (1.32)
$/¥ 98.60 (98.13)
£/$ 1.56 (1.55)

Commodities ($)
Brent Crude (ICE) down -1.12 at 112.89
Light Crude (Nymex) down -1.54 at 106.11
100 Oz Gold (Comex) down -5.00 at 1,391
Copper (Comex) up +0.07 at 3.30

10-year government bond yields (%)
US 2.79%
UK 2.85%
Germany 1.86%

CDS (closing levels)
Markit iTraxx SovX Western Europe +0.57bps at 89.99bp
Markit iTraxx Europe +2.1bps at 107.13bp
Markit iTraxx Xover +9.77bps at 434.04bp

Sources: FT, Bloomberg, Markit

 

 

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