LCM Dawn Patrol – 18.10.13 – Week End, China GDP, GS on L’Oreal, JPM on Alstom, More…

Bonjour,

US equities were mostly higher on Thursday with the major indexes finishing around their best levels for the session. While the focus started to shift to the economic consequences of the extended fiscal stalemate, there seemed to be an accompanying pickup in speculation that the Fed will likely have to further delay the start of its tapering process. This dynamic seemed to be particularly supportive for gold. There were some mixed takeaways from the economic calendar, though neither another round of distorted jobless claims data nor an upside surprise in the Philly Fed seemed to have much of an impact on recovery expectations. The earnings calendar continued to move to the frontburner with another flurry of Q3 results. However, takeaways were fairly mixed, as was the price action. Telecom, utilities and materials were the best performers, while tech was the only sector to finish in negative territory.
Accelerating economic growth in China coupled with a fresh all-time high for the S&P 500 brightened sentiment across the Asia-Pacific region.
European stocks are seen rising on Friday, gaining ground for the seventh straight session.

Today, there isn’t much in terms of economic data except this Chinese GDP of 7.8% which could prove a relief for all these European consumer names.

WEEKEND

RESTO. Le Lulli au Grand Hôtel du Palais-Royal. 4, rue de Valois, Ier. (http://www.grandhoteldupalaisroyal.com/fr/restaurant-bar/restaurant)
EXPO: EUROPUNK. Meet again with you old friends and remember the Sex Pistols .
EXPO: If you feel more Bourgeois: Le Parcours Saint Germain http://www.parcoursaintgermain.com/
DISCO. Le Blue. A new night club https://www.facebook.com/leblueclub
KIDDOS: I’m taking mine (well it’s complicated) to the Parc Asterix… Any tip?

NEWS

• China Economic Growth Rebounds to 7.8%
• Italy’s Letta Says Trade Pact Between U.S., EU to Be Priority
• Merkel Wins Over Social Democrats for Power-Sharing Talks

Yara 3Q Net Income Misses Est., Fertilizer Deliveries Up 17%
Ziggo 3Q Sales, Ebitda in Line; Reiterates Full Year Forecast
OMV 3Q Production 275k Boe/D From 309k Y/Y, Hurt by Shut-Ins
• Barclays, Citigroup FX Traders’ Messages Said to Be Scrutinized
• Barclays Executives Knew of Libor Lowballing, Guardian Claims
• Siemens CEO Kaeser Unravels Loescher Structure with Sales Revamp
• DBS Said to Advance in Bidding for SocGen’s Asian Private Bank
• L’Oreal in Talks to Buy Shiseido Brands for 230m Euros
• KPN Foundation Will Take Dutch VEB’s Letter Into Consideration
• Cap Gemini in Exclusive Talks to Buy Areva’s Euriware Unit
• Polymetal ‘Most Likely’ Won’t Pay Special Dividend This Yr: RIA

Lenovo is actively considering a bid for BlackBerry
Advanced Micro Devices
sees 4Q sequential rev. growth 5%, plus or minus 3%; implies $1.49b-$1.58b,est. $1.52b. 3Q adj. EPS 4c, est. 2c. 3Q rev. $1.46b, est. $1.42b, gross margin 36%, est. 36.1%. AMD shrs down 5.1% post-market; shrs had gained 70% YTD.
Google 3Q rev. ex-TAC $11.92b vs est.
$11.64b. 3Q cost per click down 8%, est. down 5% y/y. 3Q paid clicks 26%, est. up 21% y/y

CURRENT STUFF

China’s economy expanded 7.8 per cent in the third quarter from the same period a year earlier, marking an acceleration from the second quarter when it grew by 7.5 per cent. The rebound in the world’s second-largest economy was largely the result of government efforts to shore up growth with looser monetary policy and a “mini-stimulus” of investment in infrastructure such as rail and subway systems. (Financial Times)

Fed could taper as early as December: “The US government shutdown sabotaged a crucial month of data and dealt a blow to the world’s largest economy, but the Federal Reserve could still begin reducing its asset purchases as early as December. Analysts have slashed their growth forecasts for the fourth quarter to 2 per cent or below, with many expecting a hit of about 0.5 percentage points from the prolonged shutdown. But many said the economy would bounce back quickly with federal employees back at work.” (Financial Times)

Payroll Friday is now payroll Tuesday. The US Department of Labor said it would release the next monthly employment report on Tuesday, a delay of more than two weeks after one of the most-watched economic measures became a casualty of the US government shutdown. Other important reports, such as the consumer price index and the producer price index, will also be delayed. They will be released on October 30 and October 29, respectively. (Financial Times) (FT Alphaville)

Google shares hit record on smartphone shift: Google’s latest figures hinted at a continued decline in its overall pricing power as more advertising moved to mobile… The price decline was more than balanced out by a 26 per cent jump in the number of paid clicks recorded in the quarter, as smartphones and tablets boosted the number of times people looked at Google adverts. (Financial Times)

UPS&DOWNS

JPM on Alstom (ALO FP, N – €25.18, PT €30.00) What is priced in? Play relative catch up but long term remains challenged
After ~25% under-performance over the past 6 mths we increasingly get questions on what is priced in and in-light of negative FCF expected for H1, whether Alstom needs to raise equity now. We conclude that the market is already pricing in some risk of a near term capital increase which we don’t expect. On a fundamental basis, we remain cautious, unchanged from our long standing view. Call option spreads represent an attractive way to position for a potentialcatch up performance.

GS on L’Oreal (OREP.PA) Buy: Following underperformance, reiterate Buy, add to Conviction List
We add L’Oreal to the Conviction List and reiterate our Buy rating following recent underperformance. On our estimates, use of cash (whether M&A or buyback of Nestle stake) yields FY16E EPS of €7.80, representing 24% upside to Reuters consensus.

ALIOR BANK CUT TO UNDERWEIGHT VS OVERWEIGHT AT JPMORGAN
BUILDING & CONSTRUCTION CUT TO CAUTIOUS AT MORGAN STANLEY
COMPUTACENTER CUT TO NEUTRAL VS BUY AT UBS
DUERR RAISED TO BUY VS HOLD AT BERENBERG
KBC GROUPE RATED NEW NEUTRAL AT UBS, PT EU41.7
LAGARDERE RAISED TO BUY VS REDUCE AT KEPLER CHEUVREUX
MTU AERO ENGINES CUT TO HOLD VS BUY AT DEUTSCHE BANK
PADDY POWER RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
PEARSON RAISED TO HOLD VS REDUCE AT KEPLER CHEUVREUX
POLYMETAL INTERNATIONAL RAISED TO NEUTRAL AT BOFAML
REXEL RAISED TO BUY VS HOLD AT BERENBERG
ROSENBAUER RAISED TO BUY VS HOLD AT BERENBERG
ROTORK RAISED TO HOLD VS SELL AT BERENBERG
SEGRO RESUMED OVERWEIGHT AT MORGAN STANLEY, PT 345P
SKF REINSTATED AT UNDERWEIGHT AT BARCLAYS; PT SEK145
SULZER RAISED TO BUY VS HOLD AT BERENBERG
SWISSLOG CUT TO HOLD VS BUY AT BERENBERG
TELECITY RAISED TO BUY VS NEUTRAL AT UBS
TOTAL CUT TO NEUTRAL VS BUY AT UBS
UBI RAISED TO NEUTRAL VS UNDERPERFORM AT BOFAML
UNITED UTILITIES RAISED TO NEUTRAL AT CREDIT SUISSE
VOSSLOH RAISED TO HOLD VS SELL AT BERENBERG
WILLIAM HILL CUT TO UNDERWEIGHT VS OVERWEIGHT AT JPMORGAN

OVERNIGHT MARKETS

Asian markets
Nikkei 225 down -42.06 (-0.29%) at 14,544
Topix down -2.77 (-0.23%) at 1,203
Hang Seng up +148.58 (+0.64%) at 23,243

US markets
S&P 500 up +11.61 (+0.67%) at 1,733
DJIA down -2.18 (-0.01%) at 15,372
Nasdaq up +23.72 (+0.62%) at 3,863

European markets
Eurofirst 300 up +2.43 (+0.19%) at 1,268
FTSE100 up +4.57 (+0.07%) at 6,576
CAC 40 down -4.08 (-0.10%) at 4,240
Dax down -34.02 (-0.38%) at 8,812

Currencies
€/$ 1.37 (1.37)
$/¥ 98.03 (97.89)
£/$ 1.61 (1.62)

Commodities ($)
Brent Crude (ICE) up +0.17 at 109.28
Light Crude (Nymex) up +0.12 at 100.79
100 Oz Gold (Comex) down -6.40 at 1,316
Copper (Comex) unchanged 0.00 at 3.28

10-year government bond yields (%)
US 2.60%
UK 2.78%
Germany 1.87%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.25bps at 72.54bp
Markit iTraxx Europe +0.37bps at 87.96bp
Markit iTraxx Xover -0.76bps at 353.99bp

Sources: FT, Bloomberg, Markit

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