LCM Dawn Patrol – 26.09.13 – BArclays Asset Alocation, Citi’s chart on the debt ceiling, lots of other stuff you may need to know…

Bonjour,

European stocks are set to dip on Thursday, losing ground for the fourth time in five sessions as a budget impasse in Washington and a looming battle over the U.S. debt ceiling rattle investors.
US equities were weaker in fairly uneventful trading on Wednesday. This marked the first five-day losing streak for the S&P since late last December. The path of least resistance remained skewed to the downside despite a lack of notable directional drivers. While there were no new developments surrounding monetary policy, recent worries about the Fed’s communication credibility continued to be cited as an overhang. Another pickup in concerns about sluggish consumer spending trends weighed on retail. Financials outperformed with some help from a modest bounce in the banking group. Materials was the only other sector to finish in positive territory, underpinned by a rally in the precious metals group.
Asian stocks fell for a third day with industrial and health care companies retreating, trimming the biggest monthly advance on the regional benchmark index since January 2012.

USTs 10y yields practically unchanged from NYs close and are at 2.6353% in Tokyo this morning vs.2.6643% this time yesterday.

We’ll see if we get a 6th down session in a row as sentiment remains uneasy. The debt ceiling is the new bump in the road (after Ireland, Greece, Spain, Italy, end of QE2, end of QE3, and all the terrible things set to happen). It seems that the market doesn’t like it when there is nothing left to fear.

Today we’ll get the French consumer confidence index the UK GDP, the EZ M3, US GDP and initial claims.

NEWS

NOKIA may consider an alliance in mobile networks with ALCATEL (Reuters)

Italy FinMin: thinks Italy can avoid a VAT increase; can raise funds from other areas; confident the govt will avoid a collapse
Spain PM Rajoy: No further austerity needed to meet 2013 deficit goal; Weaker EUR will help exports
Ireland: theIMF approves next Irish bailout tranche (€770M)
EU Mulls EU50b Fund to Aid Non-Euro Banks in Backstop Plan
U.K. Prosecutors Said to Plan More Libor Charges in October
Barroso Sees ‘Strong, Credible’ Euro as Region Exits Recession
Merkel Party Floats Higher Taxes on Rich in Coalition Ally Bid
U.K. Consumer Confidence Rises as Job Security Strengthens

Airbus Wins $15b of Plane Deals as Asia Drives Demand
Barclays Wealth Said to Exit More Than 100 Nations on Cost Cuts
Colruyt’s ‘Prudent’ Profit Forecast of ~EU369m Trails Estimates
Credit Suisse Said to Weigh Job Cuts at European Equities Arm
Deutsche Bank Said to Propose Bond Platform With Competitors
Doughty Hanson Completes Sale of 20.9% of HellermannTyton
JPMorgan Said to See Possible $11b Settlement in Mortgages Accord
Mapfre Says Bankia Group Selling 12% Stake
Rheinmetall in Oil & Gas JV With Ferrostaal, Handelsblatt Says
Royal Mail Said to Be Valued at as Much as $6.9b in IPO
Santander Sees EU3B Pretax Spain Profit ‘Swing’ 2012-2016
• Second Danone Unit Starts Probe Into Chinese Bribery Claims
Vinci may consider selling Vinci Park worth €1.5 to 2bn (les Echos)
Faurecia is being probed by German cartel authorities for price fixing.

CURRENT STUFF

Alibaba abandons $60bn Hong Kong listing: Alibaba has abandoned plans for a $60bn-plus listing in Hong Kong and is pursuing a US share sale after the city’s exchange refused to allow the company to hand-pick most of its board members. The shift to the US would set up the latest fight between Nasdaq and NYSE Euronext. (Financial Times) (WSJ)

US could run out of funds by October 17: “The US government could start to run short of funds to meet its obligations by October 17, Jack Lew, the Treasury secretary said, unless Congress votes to lift the debt ceiling before then.” (Financial Times)

BlackBerry shares fall on doubts over Fairfax offer: The stock dropped about 6 per cent to just above $8, well below the proposed $9-a-share cash offer from the consortium as analysts piled sceptisim on the deal. (Financial Times)

Companies rush to sell long-term debt: At least 10 benchmark deals led by BHP, with a $5bn offering, AIG and Walmart priced on Wednesday, boosting September’s tally toward $140bn in debt sales, eclipsing the record $136.6bn mark set in November 2012, according to Dealogic. (Financial Times)

Debt Ceiling:
From Citi

STRATEGY

Barclays Asset Allocation
Theme – Equities
Key forecasts
– Continued modest economic growth, super loose monetary policy and reasonably attractive valuations should support global equity markets into year-end.
– We expect non-US equities to outperform US equities. EM stocks are 40% cheaper than US ones on P/B. In Europe, positive earnings surprises and a closing profitability gap with the US should mean that stocks outperform the US.
– Japanese equities may not yet fully reflect recent policy changes.
– In the US, we remain optimistic on small and mid cap stocks, as well as large caps with high exposure to global growth. We expect volatility to stay elevated.
Key recommendations:– We overweight equities relative to low risk fixed income assets and recommend buying US and European call spreads.
– EM outperformance could come through equity market and currency appreciation. We prefer European quality dividend aristocrats and quality low-beta portfolios with index call overwriting. We favour Financials, Autos, as well as Oil &Gas.
– Overweight Japanese stocks relative to the US. Opportunities might have improved for retail trade, real estate, land transportation, and information and communications stocks.
– Overweight Technology and Industrial stocks to get exposure to global growth. Long-dated SX5E options cheap to SPX. Sell elevated HSI skew. Buy VIX OTM calls.

UPS&DOWNS

AGGREKO RATED NEW UNDERWEIGHT AT MORGAN STANLEY, PT 1,300P
AMBEV RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
APR ENERGY RATED NEW OVERWEIGHT AT MORGAN STANLEY, PT 1,400P
ATLAS COPCO RAISED TO OUTPERFORM VS NEUTRAL AT EXANE
BEIERSDORF CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
BOLIDEN CUT TO HOLD VS BUY AT DEUTSCHE BANK
CAPE CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
CENTRICA CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
CIMSA CUT TO NEUTRAL VS OVERWEIGHT AT HSBC
FERREXPO RAISED TO NEUTRAL AT MACQUARIE
FRESENIUS MEDICAL CARE RATED NEW HOLD AT BANKHAUS LAMPE
GECINA RAISED TO NEUTRAL VS SELL AT GOLDMAN
ICAP CUT TO SELL VS REDUCE AT NUMIS
JENOPTIK CUT TO HOLD VS BUY AT BERENBERG
KAZAKHMYS CUT TO SELL VS HOLD AT DEUTSCHE BANK
KERYX PHARMA RATED NEW BUY AT H.C. WAINWRIGHT, PT $15 (EARLIER)
LAMPRELL RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
MELIA HOTELS INTL RAISED TO OUTPERFORM AT RAYMOND JAMES
METSO CUT TO NEUTRAL VS OUTPERFORM AT EXANE
PIAGGIO CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
RAIFFEISEN BANK CUT TO SELL VS NEUTRAL AT CITI
RETROSCREEN VIROLOGY CUT TO HOLD VS ADD AT NUMIS
SANDVIK CUT TO NEUTRAL VS OUTPERFORM AT EXANE
SAUDI CEMENT CUT TO NEUTRAL VS OVERWEIGHT AT HSBC
TEMENOS RATED NEW UNDERPERFORM AT CREDIT SUISSE, PT SF17.5

OVERNIGHT MARKETS

Asian markets
Nikkei 225 up +62.45 (+0.43%) at 14,683
Topix down -4.68 (-0.39%) at 1,206
Hang Seng down -97.53 (-0.42%) at 23,112

US markets
S&P 500 down -4.65 (-0.27%) at 1,693
DJIA down -61.33 (-0.40%) at 15,273
Nasdaq down -7.16 (-0.19%) at 3,761

European markets
Eurofirst 300 down -1.25 (-0.10%) at 1,257
FTSE100 down -19.93 (-0.30%) at 6,552
CAC 40 down -0.26 (-0.01%) at 4,195
Dax up +1.03 (+0.01%) at 8,666

Currencies
€/$ 1.35 (1.35)
$/¥ 98.84 (98.39)
£/$ 1.61 (1.61)

Commodities ($)
Brent Crude (ICE) down -0.06 at 108.26
Light Crude (Nymex) down -0.32 at 102.34
100 Oz Gold (Comex) unchanged 0.00 at 1,336
Copper (Comex) unchanged 0.00 at 3.28

10-year government bond yields (%)
US 2.64%
UK 2.79%
Germany 1.82%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.4bps at 86.66bp
Markit iTraxx Europe +0.35bps at 97.89bp
Markit iTraxx Xover +0.88bps at 389.14bp

Sources: FT, Bloomberg, Markit

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