LCM Dawn Patrol – 11.09.13 – Apple, China credit rises, JPM on Media, JPM on Banks… More!

Hello,

European markets expected to open up today again on ebbing concerns about an attack on Syria.
US equities finished higher again on Tuesday with the S&P 500 up for a sixth consecutive session on a continued pickup in global recovery sentiment on better-than-expected economic data out of China. Hopes for a diplomatic solution to the situation in Syria, were also cited as supportive. Most of the deeper cyclical pockets of the market outperformed with the industrials sector leading the way.
Asian stocks rose as President Barack Obama pulled the U.S. from the brink of a military strike against Syria. Energy producers led declines.

Today we’ll monitor jobs data in the UK and the MBA mortgage applications in the US.

Futures (SX5E) : 2852.00y 53.00 Support at 2849 then 2835. Resistances at 2860 then 2893

APPLE

It’s a nice upgrade, it’s faster and more powerful… It won’t trigger upgrades from the iPhone 5 owners and it won’t make people switch. The 5c version is just a colourful phone, not a cheap one.
Positive for ARM and Imagination, incrementally negative for STMicro and in line for Dialog Semi. AAPL shares sank as much as 3.3% before closing 2.3% lower. Credit Suisse cut its rating to UW, GS remain Buy but disappointed by 5c pricing.
Though the new color schemes are flashy — you can get the phone in silver, gold, or a darker “space gray” — the biggest changes are internal, with a new A7 chip that’s been reengineered for 64-bit architecture. http://bit.ly/14Kuaaz

NEWS

Obama Delaying Syria Strike Decision Avoids Fight in Congress
Swedes Face Forced Deleveraging as Debt Loads Swell to Record

BMW to Fix Supply-Chain Delays by Month’s End, Executives Say
UniCredit to Review Options for Its Credit Unit by October
Barclays faces $10bn damages claim from Saudi businessman
Barclays CEO Says 700 Jobs to Be Cut in Wholesale Unit
Orange Sees German Mobile Merger Approval Triggering Shakeup
Vodafone’s German Cable Deal in Balance Amid Hedge-Fund Catch 22
Bollore Rules Out Candidacy as Vivendi CEO Search Continues

Intel Angles for Wearable Market With Low-Power Quark Chips (2)
Texas Instruments Narrows Quarterly Sales, Profit Forecasts
Dell Said to Have Enough Votes to Approve $24.9 Billion Deal

CURRENT STUFF

“China’s broadest measure of new credit almost doubled in August from the previous month in a sign leaders are committed to meeting economic goals even at the cost of adding financial risks.” (Bloomberg)

Barack Obama has asked Congress to delay a vote authorising a strike on Syria while the US and its allies pursue a diplomatic initiative with Russia at the UN to force Damascus to give up its chemical weapons. He gave no indication of how long he would wait for a diplomatic solution to be worked out, with negotiations possibly being drawn out for weeks if not months, besides the difficulties of securing and removing Syria’s chemical weapons. (Financial Times)

Verizon is on course to sell $49bn of bonds on Wednesday, the largest corporate debt sale in history, as the US telecoms group raises funds for its $130bn acquisition of the 45 per cent of Verizon Wireless it does not already own. As 11 banks marketed the securities on Tuesday, order books swelled from $30bn to close to $100bn, people familiar with the transaction said. The sale is expected to be nearly three times as large as Apple’s $17bn issue in April, the previous record. (Financial Times)

Europe’s plan for an expansive financial transaction tax hit a wall after an unusually blunt paper from the EU Council legal service concluded it exceeds national jurisdiction, “infringes” on EU treaties and “is discriminatory” to non-participating states. (Financial Times)

UPS&DOWNS

JPM Top 5 Picks in Media sector (all OW with new increased PTs) are: PUB (AFL), WPP (AFL), Reed Elsevier, RMV, JCDecaux. The downgrade BSkyB and Vivendi to N from OW. We upgrade UBM and Informa to OW from N. We update our PTs for 30 stocks.

JPM on European Banks (Kian Abouhossein) : Shifting from core to total capital – introducing Bank ‘Enterprise Valuation’: Value in Southern Europe
In this 200+ page report, we look at the optimal capital structure for 25 banks accounting for c.80% of European Bank market value, by comparing total Basel capital required for i) the EU bail-in requirement, ii) Basel 3 revised leverage ratio consultation, and iii) Basel 3 Core Equity Tier I, i.e. moving away from just B3 core T1. We also implement a new valuation methodology in order to use the new total capital structure of Eurobanks adjusting for leverage as is the case in an industrial company (i.e. EV for banks). Based on our analysis, we add UCG, Caixabank and Deutsche Bank to our top picks in Euro-area banks. We retain UBS, Société Générale, Danske Bank and Nordea. We remove HSBC due to EM risk.

ADECCO CUT TO ’OUTPERFORM’ AT RBC CAPITAL
ALCATEL RAISED TO HOLD VS SELL AT BERENBERG
ALSTOM CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
ATOS CUT TO SELL VS HOLD AT BERENBERG
BSKYB CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
CAIXABANK RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
CAP GEMINI CUT TO HOLD VS BUY AT BERENBERG
COVIDIEN RAISED TO BUY VS NEUTRAL AT GOLDMAN
CREDIT: LLOYDS RAISED TO OVERWEIGHT AT BARCLAYS
ERICSSON RAISED TO BUY VS SELL AT BERENBERG
ESPRIT KEPT UNDERWEIGHT AT BARCLAYS
GEBERIT RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
HSBC CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
INFORMA RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
INTESA RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
K+S CUT TO ’UNDERPERFORM’ AT BMO CAPITAL MARKETS
KAGISO MEDIA CUT TO NEUTRAL VS BUY AT UBS
NOKIA RAISED TO BUY VS NEUTRAL AT BOFAML
NOKIA RAISED TO BUY VS SELL AT BERENBERG
NORILSK NICKEL RAISED TO BUY VS NEUTRAL AT BOFAML
PARIS ORLEANS RATED NEW NEUTRAL AT CREDIT SUISSE; PT EU19.9
RAIFFEISEN CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
SANTANDER RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
UBM RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
UNICREDIT RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
VIVENDI RESUMED AT NEUTRAL AT JPMORGAN
WHITBREAD CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
YARA CUT TO UNDERPERFORM VS OUTPERFORM AT BERNSTEIN

ECONOMIC DATA

Date Event Survey Actual Prior Revised Relevance Ticker
08:45 FR Current Account Balance Jul -1.4B 39.3939 FRCAEURO Index
01:50 JN Domestic CGPI YoY Aug 2.40% 2.40% 2.20% 2.30% 88.6364 JNWSDYOY Index
07:30 FR Non-Farm Payrolls QoQ 2Q F -0.20% -0.20% -0.20% 48.4848 FRPRTOTQ Index
08:00 GE CPI EU Harmonized MoM Aug F 0.00% 0.00% 60.7143 GRCP2HMM Index
08:00 GE CPI EU Harmonized YoY Aug F 1.60% 1.60% 64.2857 GRCP2HYY Index
08:00 GE CPI YoY Aug F 1.50% 1.50% 71.4286 GRCP20YY Index
08:00 GE CPI MoM Aug F 0.00% 0.00% 73.2143 GRCP20MM Index
10:30 UK Claimant Count Rate Aug 4.30% 4.30% 77.907 UKUER Index
10:30 UK ILO Unemployment Rate 3Mths Jul 7.80% 7.80% 86.0465 UKUEILOR Index
10:30 UK Jobless Claims Change Aug -21.0K -29.2K 96.5116 UKUEMOM Index
13:00 US MBA Mortgage Applications Sep-06 1.30% 93.75 MBAVCHNG Index
16:00 US Wholesale Inventories MoM Jul 0.30% -0.20% 77.6786 MWINCHNG Index

OVERNIGHT MARKETS: decent

Asian markets
Nikkei 225 up +97.42 (+0.68%) at 14,521
Topix up +1.78 (+0.15%) at 1,192
Hang Seng down -28.90 (-0.13%) at 22,948

US markets
S&P 500 up +12.28 (+0.73%) at 1,684
DJIA up +127.94 (+0.85%) at 15,191
Nasdaq up +22.84 (+0.62%) at 3,729

European markets
Eurofirst 300 up +15.53 (+1.26%) at 1,244
FTSE100 up +53.25 (+0.82%) at 6,584
CAC 40 up +76.31 (+1.89%) at 4,117
Dax up +170.22 (+2.06%) at 8,447

Currencies
€/$ 1.33 (1.33)
$/¥ 100.52 (100.39)
£/$ 1.57 (1.57)

Commodities ($)
Brent Crude (ICE) up +0.18 at 111.43
Light Crude (Nymex) down -0.37 at 107.02
100 Oz Gold (Comex) down -7.40 at 1,357
Copper (Comex) up +0.02 at 3.28

10-year government bond yields (%)
US 2.97%
UK 3.07%
Germany 2.03%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.72bps at 90.49bp
Markit iTraxx Europe -2.24bps at 98.5bp
Markit iTraxx Xover -9.55bps at 391.85bp

Sources: FT, Bloomberg, Markit

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