LCM Dawn Patrol – 13.09.13 – Week End, LCM Strategy note, JPM US strategy note, JPM on reinsurers, GS on Carlsberg, Oriflame and Beiersdorf. Lots more…

Hola!

European stocks are seen opening flat after two weeks of solid gains before the FOMC meeting next week.
US equities finished lower in quiet trading on Thursday. The S&P 500 snapped a seven-day winning streak. As was the case on Wednesday, there were no meaningful directional drivers in play. While there seemed to be some good news surrounding the traction in the labor market recovery, a larger-than-expected decline in initial claims was exaggerated by state-level computer upgrades. Some unwinding of the recovery trade that boosted stocks earlier in the week weighed on the deeper cyclical pockets of the market. Most of the defensive plays fared better, with telecom the only major sector to finish in positive territory.
Asian stocks fell, with the regional benchmark index on course to snap an 11-day rally, as the U.S. and Russia hold talks on Syria and investors await the outcome of a Federal Reserve meeting next week.

UST10y yields are at 2.93, +2bps in Asian trade today against 2.8834% this time yesterday and 2.91% at the NY close.

Today, we’ll watch the Ecofin meeting to discuss the banking Union and the SSM (informal meeting), we’ll try to assess how the LTRO payment is mase US August retail sales, US PPI and Univ. of Michigan confidence index.

WEEK END

(maybe I should post this on Thursdays…).

SPORT: Salon du Cycle 2013, porte de Versailles.
DISCO: Jack Johnson. If you’re a wanna be surfer or an old one… (Olympia).
DISCO: Festival Jazz de la Villette. With Gregory Porter, Kenny Garrett and lots more.
RESTO: Blueberry. Great pop Maki bar. 6 rue du sabot.

NEWS

Obama to Name Summers as Next Fed Chief, Nikkei Says
Blackstone’s Hilton Files for $1.25 Billion IPO in U.S.
Dell Holders Approve Founder’s $24.9 Billion Buyout Proposal
Twitter Sets Market Debut in Motion With SEC Filing for IPO
Vodafone’s $10.2 Billion Kabel Takeover Wins Shareholder Support
BMW CEO Sees Electric Car Sales in Germany, France in 2014

Fresenius Unit to Pay $4.1b for Rhoen-Klinikum Hospitals
Areva Wins EU200m in Contracts From German Utilities
Porsche’s China Growth to Quicken Next Year After Macan
BBVA Sold Portfolio of 1,000 Homes to Baupost, Expansion Says

Nokia Buying Alcatel Wireless Unit May Enhance Value: Liberum

CURRENT STUFF

A Group Of Economists Wrote An Open Letter In Favor Of Janet Yellen, And The List Of Names Is STACKED (http://read.bi/14Lclh1)

Elite Syrian unit scatters chemical arms stockpile: “A secretive Syrian military unit at the center of the Assad regime’s chemical weapons program has been moving stocks of poison gases and munitions to as many as 50 sites to make them harder for the U.S. to track, according to American and Middle Eastern officials.” (Wall Street Journal)

Pimco and Blackrock purchased more than a quarter of the debt sold in Verizon’s record $49bn offering — they “bought about $13 billion of the largest corporate-bond deal on record, said people familiar with the matter.” (Wall Street Journal)

Indonesia lifts interest rate for second time in two weeks: Bank Indonesia raised its main lending rate by 25 basis points to 7.25 per cent, the highest in more than four years, even though most economists had expected the central bank to keep rates on hold after increasing the cost of borrowing by 150 basis points since June. Inflation and a sliding rupiah were the targets. (Financial Times)

“U.S. stock exchanges agreed with regulators on Thursday to reforms including a “kill switch” to stop trading during emergencies, after a software glitch with Nasdaq’s stock quote processor last month led to a three-hour trading halt.” (Reuters) Mary Jo White, Securities and Exchange Commission chairman, has asked the heads of exchange groups including NYSE Euronext and Nasdaq OMX to provide assessments on the robustness and resilience of US market infrastructure. (Financial Times)

STRATEGY

LCM (Abet) European Equity Sectors – The Quant View
Tristan just launched a great new quant product based on momentum factors (price, earnings, volatility…).

Summary of the Quant View:
We recommend adopting a balanced portfolio, without any strong bias: it is not about low beta vs high beta or defensive vs cyclical. Do not chase after the recent run of cyclicals, it is only beta, not alpha.
Positive on Media, Indus G&S, Telcos, IT and negative on Food&Bev Personal, Oil&Gas and Chemicals.
– We propose 2 L/S: 1) Long Basic Resources Short Autos and 2) Long Utilities Short Healthcare

MS (Patel) European Equity Strategy: Examining the geographical exposure of European equity indices
As Europe’s economy improves, investor interest in ways to position for the European recovery theme is growing. In this report, we use our proprietary database of European companies’ revenue exposure to analyze the exposure of the following major European equity indices to different regions.

JPM (Lee) US Equity Strategy
Feedback from recent marketing in Asia: Bottom line: not a “wall of worry” but a mound of indifference. Overall, we found investors on balance less enthusiastic about US equities, particularly compared to owning Europe or Japan, but not sufficiently so as to signal a “contrarian” view. Rather, our takeaways are as follows: (i) investors are waiting for clarity on the noted issues in September, but because of that, we remain comfortable seeing positive risk/reward into that; (ii) a potential acceleration in EPS is not “discounted” by the market and if, indeed, EPS accelerates, this should lead to a re-rate of equities. We still favour owning Cyclicals into year-end, with a particular focus on Technology, Financials and also Healthcare. YE S&P target remains 1775.

UPS&DOWNS

Raising forecasts on reinsurers (JPM, Huttner, CFA) Capital management – the time is right. U/g Munich to OW with EUR1bn forecast buyback.
We upgrade Munich to OW (N) and add it to the AFL. Our revised Dec-14 SOTP-based PT is €161. We expect Munich to announce a €1bn buyback with its 3Q13 result. We believe the time is right as Munich a) has €4.2bn free funds plus its normal €1.3bn div; b) holds excess capital of we estimate €5bn vs. AA level & c) only sees 2-3% growth and so needs little funds for this. We note the forecast €1bn buyback coupled with 0.9x Dec13e P/NAV is strongly positive for value creation, as at current levels Munich would be buying shares back at a modest disc. to NAV. We also reiterate our OW rating on SCOR.

Oriflame (GS, Edwards) Off Conviction List following underperformance; remains Sell
We remove Oriflame from our Conviction List as a result of recent underperformance, but retain our Sell rating. The stock has fallen sharply since May as earnings disappointed and the multiple compressed. As such we see reduced downside potential.

Carlsberg (GS, Collett): Input cost tailwind and improving Europe; up to Neutral
Upgrading Carlsberg to Neutral (from Sell) due to more favourable input costs, improving European macroeconomic conditions and ongoing cost saving measures.

Beiersdorf (GS, Edwards): Upgrade to Neutral following share pullback & +ve growth catalyst
We upgrade our rating on Beiersdorf to Neutral from Sell following the recent pullback in the shares and ahead of potential positive catalysts for growth.

AFRICAN BARRICK CUT FROM CONVICTION SELL AT GOLDMAN, STIL…
APR ENERGY CUT TO SELL VS NEUTRAL AT UBS
ATRESMEDIA RAISED TO NEUTRAL VS REDUCE AT NOMURA
AUTOGRILL CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
BARCLAYS RATED NEW BUY AT JEFFERIES, PT 367P
BEIERSDORF RAISED TO NEUTRAL VS SELL AT GOLDMAN
CARLSBERG RAISED TO NEUTRAL VS SELL AT GOLDMAN
GEA GROUP CUT TO HOLD VS BUY AT BERENBERG
HARMONY GOLD CUT TO SELL VS NEUTRAL AT GOLDMAN
KPN RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
MOESK CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
MORRISON CUT TO SELL VS NEUTRAL AT CITI
MTN GROUP RAISED TO BUY VS NEUTRAL AT BOFAML
MUNICH RE RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
NORILSK NICKEL RAISED TO EQUALWEIGHT AT MORGAN STANLEY
ORIFLAME CUT FROM CONVICTION SELL AT GOLDMAN, STILL SELL
PENNON GROUP CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT S…
RTL RAISED TO BUY VS NEUTRAL AT NOMURA
SIBANYE GOLD RAISED TO BUY VS NEUTRAL AT GOLDMAN
SUEDZUCKER ADDED TO CONVICTION SELL LIST AT GOLDMAN
TELEFONICA CZECH CUT TO NEUTRAL VS BUY AT UBS
TELEFONICA DEUTSCHLAND RATED NEW OUTPERFORM AT CREDIT SU…
TURKCELL RAISED TO BUY VS NEUTRAL AT UBS

OVERNIGHT MARKETS:

Asian markets
Nikkei 225 down -104.38 (-0.73%) at 14,283
Topix down -5.25 (-0.44%) at 1,179
Hang Seng down -111.07 (-0.48%) at 22,843

US markets
S&P 500 down -5.71 (-0.34%) at 1,683
DJIA down -25.96 (-0.17%) at 15,301
Nasdaq down -9.04 (-0.24%) at 3,716

European markets
Eurofirst 300 down -0.30 (-0.02%) at 1,247
FTSE100 up +0.55 (+0.01%) at 6,589
CAC 40 down -12.48 (-0.30%) at 4,107
Dax down -1.73 (-0.02%) at 8,494

Currencies
€/$ 1.33 (1.33)
$/¥ 99.59 (99.54)
£/$ 1.58 (1.58)

Commodities ($)
Brent Crude (ICE) up +0.17 at 112.80
Light Crude (Nymex) up +0.95 at 108.60
100 Oz Gold (Comex) unchanged 0.00 at 1,330
Copper (Comex) unchanged 0.00 at 3.21

10-year government bond yields (%)
US 2.93%
UK 3.00%
Germany 2.00%

CDS (closing levels)
Markit iTraxx SovX Western Europe bps at 90.67bp
Markit iTraxx Europe +0.35bps at 97.33bp
Markit iTraxx Xover +2.52bps at 389.56bp

Sources: FT, Bloomberg, Markit

HAVE A GREAT WEEK END!

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