LCM Dawn Patrol – 03.09.2013 – LCM Cross Assets Strategy, Nokia, Vodafone, MS and BofA positive on ALU, TuesGear…

Bonjour,

European stocks are seen broadly steady on Tuesday, consolidating the previous session’s rally and with Nokia in focus after Microsoft said it will buy the Finnish company’s mobile phone business and patents for €5.44bn. Asian stocks climbed the most in a month and the yen weakened on positive manufacturing data. The MSCI Asia Pacific rose 1.4%, with the Nikkei rising 2.65% and the Topix up 2.5%.

Today: UK: Markit construction PMI. EU producer price index. US: Markit manufacturing PMI, ISM manufacturing index, construction spending for July.

NEWS

China Non-Manufacturing Services PMI for August came in at 53.9 from 54.1 in July.

Japan’s money base grew 42% in August by JPY177.0tn in further good news for Abe’s asset reflation programme (growth was 38% in July.)

Vodafone confirms sale of VZW to Verizon for USD130bn

Thyssen said after the close it was in “very advanced discussions”  with “leading bidder” and was seeking a prompt inking of the sale of Steel Americas.

Nokia announced it is to sell its handset business to Microsoft for EUR5.44bn ( 3.79 billion euros for the devices unit and 1.65 billion euros for patents license for 10 years). Watch STM as it is one of Nokia’s main supplier. Nokia could trade 40%+ up today…

TUESGEAR

Moves automatically records any walking, cycling, and running you do. You can view the distance, duration, steps, and calories burned for each activity. The app is always on, so there’s no need to start and stop it. Just keep your phone in your pocket or your bag. THIS IS MUCH EASIER than FitBit, Jawbone up or anything like that. Just have your phone with you….
http://www.moves-app.com/

CURRENT STUFF

Microsoft is to buy Nokia’s mobile phone business and patents for €5.44bn ($7.2bn) in an all-cash deal that will reshape the telecoms industry on two continents and comprise a big bet that Microsoft can challenge Apple and Samsung. The deal includes €3.79bn for the devices unit and €1.65bnfor patents. Nokia CEO Stephen Elop will step aside to return to Microsoft. Nokia will become a telecoms equipment company, ending a 30-year roller coaster ride with phones. (Financial Times)(Bloomberg)

Vodafone shareholders set for $84bn payout: It would be one of the biggest ever payouts from a corporate asset sale. Verizon Communications agreed on Monday to pay Vodafone $130bn in cash and stock for its 45 per cent stake in their joint venture Verizon Wireless, the largest US mobile operator, in what will be the third biggest deal ever. (Financial Times)

Banks face new bail-in-able debt requirements: Mark Carney “said the move was a necessary component in the “ambitious” desire of the Group of 20 nations to stop the most important banks from being “too big to fail”.” The plan would not be developed until 2015 at the earliest, he said. It’s expected the big international banks will have higher requirements. (Financial Times)

Li says he’s confident China will meet economic goals: “Recent data show employment and prices are stable and market expectations have “apparently” improved, Li said in a speech today at the China-ASEAN Expo in Nanning, China, that was broadcast on state television. The economy has “maintained stable development” since the first half and “confidence is increasing,” Li said.” Bloomberg

UPS&DOWNS

MS remain buyer of low cost airlines (stay OW on RYA and EZJ), reiterate OW on Alcatel. ALU added as well to BofA’s Europe 1 List, replacing STM
JPM upgrade TalkTalk to OW, Iliad cut to Hold at Socgen, Barcap keep OWrating on HSBC and downgrade STAN to EW, Delhaize raised to Buy at UBS, SES cut to Sell at DBK while Eutelsat raised to Hold vs Sell, Centrica upgraded to Buy at DB. Swatch rated at Outperform at CS while G4S cut to Neutral.
Bernstein rate Shire Outperform, Mkt perform on Merck and Novi

STRATEGY

LCM Cross Asset Strategy Report #10 : EM: The Ineluctable Destiny
The current economic slowdown in the EM world is endogenous.

– 2001 was the first endogenous economic recession in the US. It was the consequence of a super economic cycle driven by capital accumulation in the IT sector. The high level of economic growth in EM countries over the past decade, generated by a strong capital accumulation, should lead to the same consequence: an endogenous recession.
– The Great Crisis and the resulting policy reaction prevented the underlying economic forces to normalise in the EM world. The weak cyclical recovery in emerging countries comes from this ineluctable destiny. Time has come to pay for the excess of the over-investment cycle. The below potential growth is about to last for a while and will be investment-driven.
– EM currencies’ reaction is not significant from an historical perspective and, if it is really a crisis, the hard part is yet to come.
– These (unfortunate) events for the EM world occur in a context of improving growth prospects for the developed world. The “decoupling thesis” is back again, 6 years after, but at the advantage of the developed world.
– The re-pricing of risk has started on the currency and bond markets but seems very shy on the equity markets.

 

Trade recommendation Summary– We Buy European Utilities against EM Utilities
– We buy FTSEMIB Short OMX Sweden
– We published our first Derivatives research report last week: “The Finger and The Moon”. We point out here our most important ideas: Buy Impl Vol on CAC40, HSI, Sell Impl Vol on NKY, FTSEMIB, Sell a Strangle on USDJPY Dec13Short EURGBP with a target at 0.8

OVERNIGHT MARKETS: UP

Asian markets
Nikkei 225 up +359.65 (+2.65%) at 13,933
Topix up +27.89 (+2.50%) at 1,146
Hang Seng up +234.97 (+1.06%) at 22,410

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 up +22.00 (+1.84%) at 1,217
FTSE100 up +93.26 (+1.45%) at 6,506
CAC 40 up +72.23 (+1.84%) at 4,006
Dax up +140.72 (+1.74%) at 8,244

Currencies
€/$ 1.32 (1.32)
$/¥ 99.45 (99.29)
£/$ 1.56 (1.55)

Commodities ($)
Brent Crude (ICE) down -0.13 at 114.20
Light Crude (Nymex) down -1.03 at 106.62
100 Oz Gold (Comex) down -2.80 at 1,393
Copper (Comex) up +0.06 at 3.28

10-year government bond yields (%)
US 2.82%
UK 2.88%
Germany 1.91%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.05bps at 89.94bp
Markit iTraxx Europe -3.6bps at 103.53bp
Markit iTraxx Xover -15.31bps at 418.73bp

Sources: FT, Bloomberg, Markit

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