LCM Dawn Patrol – 20.09.13 – Adidas warns, MS likes the new Spain, GS on EM. Barclays on Tech, Week End!

Bonjour,

European markets to open flat today as they consolidate after a rally to five year highs a day earlier.

US markets finished slightly lower on Thursday, though the Nasdaq managed to buck the trend and post a modest gain. The lack of overall direction fit with some of the uncertainty in the market following the unexpected decision on the part of the Fed not taper. There seemed to be some debate about positioning in the wake of yesterday’s rally in both stocks and bonds, while the issue of Fed credibility also received attention. Though still not a big overhang on sentiment, the looming debt ceiling fight in Washington continued to be cited as a potential stumbling block for the September rally. The market failed to get any support from another lower-than-expected initial claims number, as the data remained distorted by state-level computer upgrades. The Philly Fed index was the standout on the economic calendar, but was unable to provide much of a tailwind. In addition, after a huge rally on Wednesday, homebuilder stocks were unable to take advantage of the better existing home sales data as the NAR highlighted the potential for some choppiness going forward. Financials lagged with the regional banks extending their recent underperformance.
Asian stocks rose, with the regional benchmark index on course for its biggest three-week advance in two years, as a weaker yen boosted Japanese shares.

Today, we’ll monitor the Eurozone confidence index, Adidas could impact the whole sector, and then some FOMC members speak, but it’ll be the Week End for us…

WEEK END

CONCERT: Roger Waters: The Wall Live. Stade de France. (Still alive?).
BAR: Dirty Dick. Ex hostess bar, new Hawaiian vibe… 10 rue Frochot 9e.
RESTO: Kinugawa. Nothing very original here, but maybe you haven’t been? 9 rue du Mont Thabor 1er.
EXPO: Georges Braque au Grand Palais.

NEWS

• Syria Government to Seek Cease-Fire at Geneva Talks: Guardian
• Germany 3Q Economic Growth Weaker Than 2Q: Finance Ministry
• Schaeuble Seen Keeping Finance Post Even in Coalition With SPD
• German Election. most polls point to a Grand Coalition between the CDU/CDU and the SPD

Adidas Cuts 2013 Profit Forecast as Euro Gains, Golf Weakens
Apple’s New IPhone Poised for Record Debut as Sales Begin
Bilfinger to Cut 1,250 Worldwide Employees in Next 2 Yrs
Continental Boosted to Investment Grade on Schaeffler Stake Sale
Deutsche Bank Wins Singapore Ruling Overturning $49m Client Award
Finmeccanica’s Sr Debt Rating Cut to Junk by Moody’s
New York Life in Talks to Buy Dexia Unit Managing $99b
RBS Seeks to Raise as Much as $1b From Direct Line Stake
Richemont Said to Hire Adviser to Sell Luxury Bag Maker Lancel
RWE to Cut Dividend in Face of Shrinking Power Generation Income
Sanofi Reaches Accord in Investor Suit Over Weight-Loss Drug
Sanofi Settles Lawsuit Over Obesity Drug for $40m
Telecom Italia Is Said to Consider Selling Mobile-Phone Towers

CURRENT STUFF

Buffett thinks Obama should tell Bernanke to stay as Chairman. “I don’t know Janet Yellen at all”. “I know Bernanke and my view is he is very, very good”. DJ

Fed’s decision has triggered a backlash among Republican lawmakers unhappy with the protracted easy-money policy, and raised pressure from the right on Janet Yellen, the frontrunner to take the helm of the central bank. (Financial Times)

China allows six foreign hedge funds to operate in China as part of a pilot program: NYT Dealbook cited people familiar with the matter saying that Shanghai regulators will allow six British and American hedge funds to operate in China. The funds will be limited to raising $50M each from Chinese institutions, and will be able to invest this globally. The funds will be operating under the Qualified Domestic Limited Partner Program, and will be subject to strict government oversight.

“The European Union and Singapore submitted for approval on Friday one of the world’s most comprehensive free trade agreements, which the EU sees as a stepping stone towards a wider deal with southeast Asia… Subject to approval in Singapore and by the 28 EU member states and the European Parliament, the agreement should enter into force in late 2014 or early 2015.” (Reuters)

STRATEGY

Morgan Stanley Theme Trades: Ways to Play the New Spain
Spain’s economic path is at a turning point – with GDP growth likely to have stabilised or even become (fractionally) positive in 3Q after eight outright contractions in a row. While risks remain, we expect above-consensus growth of close to 1% on average in 2014-15.
The New Spain’s export engine continues to strengthen, external and fiscal imbalances are being gradually corrected, and structural measures keep coming on many fronts. All this is likely to bring a more sustained pace of GDP expansion,characterised less by boom-bust dynamics than in the pre-crisis years. Thismakes us fundamentally more constructive on the New Spain’s ability to set itself apart from the rest of the eurozone periphery in the medium term.
In this piece, we highlight 10 stocks we believe will benefit from Spain’s recovery. Each of these stocks have significant exposure to the Spanish economy.
> Abertis, Bankinter, BBVA, CaixaBank, DIA, Gas Nat, Mapfre, Mediaset Esp, Ryanair, Santandr

GS on EM : Bailed Out By The Fed, For Now’
“FOMC outcome surpassed our dovish expectation: Last week we argued that, despite our cautious strategic EM stance, a likely dovish surprise by the Fed could support EM assets temporarily. However, yesterday’s outcome clearly surpassed our expectations. The sharp moves in EM assets that we have seen in the last 24 hours testify to the impact of a dovish Fed surprise. The big tactical question now is how much further these moves can extend. Much is already priced, but EM equities and credits could rally further in places
The moves we have already seen in response to the FOMC surprise are quite large compared with the moves our analysis would predict in the short term. This is especially true of EM local rates and currencies. But our analysis suggeststhat some of these moves could extend over the next month, particularly in EM equities and EM credit.
We may need to wait a bit longer for long USD/EM Last week we said that an opportunity to be long the USD against EM currencies was likely to open up post-FOMC. We still think so but are inclined to wait a little longer.”

UPS&DOWNS

Barcap European Technology: Feedback from our payments conference
We held our 2nd European payment forum on Tuesday – it was very well attended with total attendees up 15% over last year at almost 200. The key takeaways are as follows: i) Move from product to business models – at last year’s conference it was all about new ways of making (like P2P, Wallets, etc) and accepting (mPos, in-store mobility) payments, while the 2013 conference panellists were far more focused on the change ofbusiness models and the role that data plays; ii) Data is becoming the differentiator – at most panels or keynotes there was discussion about how to monetise the data, which is generated during the payment process. These models are still in a very early stage but it is clear that payments are expandingoutside the traditional domain. In addition, payment and commerce platformswill become increasingly integrated; iii) Convergence between brick-and-mortar and e-commerce to create multi or omni channel marketing – historically merchants ran separate channels for on-and-offline and this is rapidly becoming outdated. Payment vendors will mimic this trend and the recent investments from Optimal Payments, Monitise and Wirecard are clear manifestations of this.

ARCELORMITTAL CUT TO SECTOR PERFORM VS OUTPERFORM AT RBC
ARYZTA CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
CREDIT: TELEFONICA HYBRIDS RATED NEW OVERWEIGHT AT BOFAML
DEUTSCHE BOERSE RAISED TO BUY VS NEUTRAL AT BOFAML
ERICSSON CUT TO HOLD VS BUY AT DNB
ETIHAD ETISALAT CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
GDF SUEZ RATED NEW BUY AT KEPLER CHEUVREUX; PT EU21
GKN RAISED TO BUY VS HOLD AT SOCGEN
ICAP CUT TO NEUTRAL VS BUY AT BOFAML
IMA RATED NEW BUY AT KEPLER CHEUVREUX; PT EU24
PORTUGAL TELECOM RAISED TO OUTPERFORM AT BERNSTEIN
PURECIRCLE RATED NEW OUTPERFORM AT MACQUARIE
RAUBEX RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY
SAINSBURY RAISED TO NEUTRAL VS SELL AT CITI AHEAD OF 2Q
SONOVA CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
TATE & LYLE CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE

OVERNIGHT MARKETS:

Asian markets
Nikkei 225 down -31.15 (-0.21%) at 14,735
Topix up +0.14 (+0.01%) at 1,216
Hang Seng up +385.06 (+1.67%) at 23,503

US markets
S&P 500 down -3.18 (-0.18%) at 1,722
DJIA down -40.39 (-0.26%) at 15,637
Nasdaq up +5.74 (+0.15%) at 3,789

European markets
Eurofirst 300 up +7.52 (+0.60%) at 1,266
FTSE100 up +66.57 (+1.01%) at 6,625
CAC 40 up +35.64 (+0.85%) at 4,206
Dax up +58.12 (+0.67%) at 8,694

Currencies
€/$ 1.35 (1.35)
$/¥ 99.24 (99.43)
£/$ 1.60 (1.60)

Commodities ($)
Brent Crude (ICE) down -0.07 at 108.69
Light Crude (Nymex) down -0.29 at 106.10
100 Oz Gold (Comex) unchanged 0.00 at 1,369
Copper (Comex) unchanged 0.00 at 3.35

10-year government bond yields (%)
US 2.74%
UK 2.94%
Germany 1.93%

CDS (closing levels)
Markit iTraxx SovX Western Europe -2.22bps at 88.61bp
Markit iTraxx Europe -1.1bps at 92.93bp
Markit iTraxx Xover -2.09bps at 374.38bp

Sources: FT, Bloomberg, Markit

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