LCM Dawn Patrol – 27.09.13 – MS strategy on Europe, JPM likes Zodiac, Week End and more!!

Bonjour,

European stocks are seen opening slightly higher on Friday, although investors expected ongoing U.S. budget and debt negotiations to keep indexes in a tight trading range.
US markets finished higher yesterday, snapping five-day losing streaks. There were no major drivers behind the price action. The fiscal drama in Washington continued to get a lot of attention. Despite expectations for a volatile next few days however, the consensus still seems to be that Congress would manage to find a way to pass a stopgap funding measure before the focus shifted to bigger battle over the debt ceiling. Retail stocks rebounded, helping to drive the outperformance in the consumer discretionary space. Financials lagged as the banks gave back some of Wednesday’s bounce.
Asian stocks are set for a positive end to the week as data from China, Japan and the US boosted confidence in the region.

Watch today: GDP, CPI and Consumer confidence in Europe, US Personal Income & Spending, PCE and Michigan.

WEEK END


FILMO
(VOD): TRANCE (Danny Boyle with Vincent Cassel, James McAvoy and Rosario Dawson that I love…). Rating: 6/10, but entertaining.
RESTO: LE PARISIEN. 337 rue Saint-Martin, 3e. Haven’t been there yet, but on my list for next week. This week end, I’m trying Mary Céleste.
DISCO : PIXIES (Sunday or Monday, l’Olympia). I’m old enough to know them, but didn’t know they reunited…
SPORT. LA GENTLEMAN DU COEUR. Longchamp tomorrow. http://bit.ly/16NCxmw Get into your Lycra and come ride with us. (I’m still looking for a partner).
MUSIC: HALF MOON RUN – FULL CIRCLE. I really like this band… Yes it’s got some CSNY influence..

Please enjoy your Week End.

NEWS

Japanese consumer price inflation increased 0.9 per cent year on year in August, its biggest annual rise since November 2008.
Germany, U.K. Reject Plan for EU50b Non-Euro Bank Aid Fund
German Inflation Probably Stayed at Three-Month Low in Sept.
Greece’s Piraeus Bank Prepares to Float Geniki in 6 Months: FT
U.K. GfK Consumer Confidence Rises to Highest in Six Years
ECB’s Coeure Says More Liquidity – LTRO Not Urgent Necessity. Bbg

Accenture traded down 4% post mkt – EPS inline, rev beats but weak guidance : sees FY14 EPS $4.42-$4.54 vs est. $4.51. (Watch CAP).
Nike: Q1 EPS 86v beats 78c exp.; Q1 revs $6.97B small beat vs. $6.95B exp. (Nike +3% ah.)
Orange, Iliad Weigh Sharing French Mobile Networks: Echos
Nokia Said to Weigh Linkup With Alcatel to Boost Mobile Networks
Alitalia’s Rising Loss Risks Deterring Air France Stake Increase
CaixaBank to Sell 51% of Servihabitat to TPG
Oracle CFO Catz Says Cloud Computing Will Lift Operating Margins
Accenture Forecasts Earnings That May Fall Short of Estimates
Intesa, UniCredit May Need Additional EU5b Provisions: Barclays
J.C. Penney Co. shares fell 5.5% to $9.85 on heavy volume after a report that the ailing retailer will be launching a secondary offering of 84 million shares

CURRENT STUFF

US money market funds in French surge: French banks accounted for over half of all eurozone bank lending done by the 10 biggest US money market funds at the end of last month. (Financial Times)

Detailed negotiations over Iran’s nuclear programme will start in Geneva next month, it was announced on Thursday, following a meeting in New York that included one of the few encounters between senior US and Iranian officials since the 1979 Islamic revolution. (Financial Times)

Irish house prices rise at fastest pace since property crash: The value of Dublin homes surged 10.5 per cent in the year to the end of August, Ireland’s statistics office said on Thursday. However, when Dublin sales are excluded, national prices fell by 2.6 per cent in the 12 months to the end of August. (Financial Times)

Maersk calls bottom of trade cycle: The world’s biggest container shipping line by market share said it believed the downturn in trade had bottomed out and predicted demand for global containers would grow by 4-6 per cent in 2014 and 2015, up from recent forecasts of 2-3 per cent for this year. (Financial Times)

Greece’s Piraeus Bank prepares to float unit Geniki within the next six months, repositioning the unit it bought less than a year ago from France’s Société Générale as a bad debt workout specialist. (Financial Times)

STRATEGY

MS (Carr) European Strategy: Playing the Self-Help theme
Year Ahead Outlook

Market to remain focused on self-help stories. Investor focus on self-help ideas in European equities has risen in recent months, and we think three factors in particular will keep interest trained on self-help and restructuring stories. Firstly, we expect the recovery in European growth to be relatively anaemic, making non-cyclical earnings drivers an important differentiating factor. Second, median valuations in the market have risen significantly already. Third, there has recently been an uptick in newsflow related to M&A and corporate activity in general.
Stocks: Alcatel-Lucent, BHP-Billiton, LSE, Metro, SCA, Tullow Oil, UBS and Vivendi.

I agree with MS strategy and Tristan Abet, our strategist reiterated during our conference on Tuesday: BUY defensive domestic European names.

UPS&DOWNS

Fiat Industrial (MS, Lempke) Reborn in the USA – Moving EW as Stock Hits PT
On Sept. 30th FIAT Industrial and CNH will merge into ‘CNH Industrial’ to list on NYSE; we are yet to see how big the free float will be in Italy. With the stock reaching our PT, we downgrade to EW, reflect a little on the past and what the future may hold.

Zodiac Aerospace (JPM, Perry, CFA) Fortune favours the bold; initiate coverage with Overweight rating and PT of €147
We initiate on Zodiac Aerospace with a Dec-2014 price target of €147 (27% potential return). Despite the strong rally in the shares since 2009 we see further upside, driven by healthy EPS growth and modest multiple expansion. From 2005-2012 Zodiac executed a bold strategy, acquiring multiple companies producing aircraft interiors (cabins, seats, galleys) for cUS$2bn. It is now a global leader in interiors, in addition to its strong niche positions in aircraft safety equipment and other aircraft systems. These positions should drive a sales CAGR of c8-9% through to 2017, the strongest medium-term sales growth in the sector.

ADECCO RAISED TO BUY VS NEUTRAL AT GOLDMAN
AFRICAN MINERALS RAISED TO BUY VS NEUTRAL AT BOFAML
ALLIANCE OIL COMPANY CUT TO UNDERPERFORM VS BUY AT BOFAML
AMLIN CUT TO SELL VS HOLD AT BERENBERG
APR ENERGY CUT TO NEUTRAL VS BUY AT GOLDMAN
AXA RAISED TO BUY VS HOLD AT BERENBERG
BUNZL RAISED TO NEUTRAL VS SELL AT GOLDMAN
ELECTROCOMPONENTS RAISED TO BUY VS NEUTRAL AT GOLDMAN
ELECTROLUX CUT TO NEUTRAL VS BUY AT NOMURA
FIAT INDUSTRIAL CUT TO EQUALWEIGHT AT MORGAN STANLEY
H&M RAISED TO HOLD VS SELL AT CANTOR
H&M RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
HAVAS RAISED TO OVERWEIGHT VS NEUTRAL AT HSBC
HEIDELBERGCEMENT CUT TO NEUTRAL VS OVERWEIGHT AT HSBC
HELVETIA CUT TO HOLD VS BUY AT BERENBERG
HENNES & MAURITZ RAISED TO BUY VS HOLD AT SOCGEN
HOLCIM CUT TO NEUTRAL VS OVERWEIGHT AT HSBC
LADBROKES CUT TO SELL VS NEUTRAL AT CITI
MAROC TELECOM RATED NEW UNDERWEIGHT AT ABSA CAPITAL/BARCLAYS
MICHAEL PAGE RAISED TO BUY VS NEUTRAL AT GOLDMAN
MTN RAISED TO OVERWEIGHT AT ABSA CAPITAL/BARCLAYS
PRADA RATED NEW BUY AT UBS, PT HK$85
PREMIER FARNELL RAISED TO BUY VS NEUTRAL AT GOLDMAN
PSI RAISED TO BUY VS HOLD AT BERENBERG
REGUS RAISED TO BUY VS NEUTRAL AT GOLDMAN
ROBERT WALTERS RAISED TO BUY VS NEUTRAL AT GOLDMAN
TENARIS CUT TO NEUTRAL VS BUY AT BOFAML
TRAVIS PERKINS RAISED TO BUY VS NEUTRAL AT GOLDMAN
ULKER CUT TO NEUTRAL VS BUY AT CITI
WPP RAISED TO OVERWEIGHT VS NEUTRAL AT HSBC
ZODIAC AEROSPACE RATED NEW OVERWEIGHT AT JPMORGAN; PT EU147

OVERNIGHT MARKETS

Asian markets
Nikkei 225 down -24.89 (-0.17%) at 14,774
Topix up +0.48 (+0.04%) at 1,221
Hang Seng up +34.44 (+0.15%) at 23,159

US markets
S&P 500 up +5.90 (+0.35%) at 1,699
DJIA up +55.04 (+0.36%) at 15,328
Nasdaq up +26.33 (+0.70%) at 3,787

European markets
Eurofirst 300 up +0.60 (+0.05%) at 1,258
FTSE100 up +14.06 (+0.21%) at 6,566
CAC 40 down -8.63 (-0.21%) at 4,187
Dax down -1.53 (-0.02%) at 8,664

Currencies
€/$ 1.35 (1.35)
$/¥ 98.81 (98.97)
£/$ 1.60 (1.60)

Commodities ($)
Brent Crude (ICE) down -0.13 at 109.08
Light Crude (Nymex) down -0.30 at 102.73
100 Oz Gold (Comex) up +0.70 at 1,324
Copper (Comex) down -0.01 at 3.30

10-year government bond yields (%)
US 2.66%
UK 2.79%
Germany 1.83%

CDS (closing levels)
Markit iTraxx SovX Western Europe +0.33bps at 86.99bp
Markit iTraxx Europe +1.61bps at 99.5bp
Markit iTraxx Xover +5.65bps at 394.79bp

Sources: FT, Bloomberg, Markit

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