LCM Dawn Patrol – 15.11.13 – JPM ups target on S&P 500, Week End and other important things.

Howdy,

US equities finished mostly higher on Thursday, with the S&P and Dow again closing at record highs. Markets erased early losses after Fed Chair nominee Janet Yellen told the Senate in her confirmation hearing that current monetary policy would remain under her leadership. A round of mostly weak economic data was another key area of focus this morning after jobless claims, Q3 productivity and international trade all missed expectations. Cautious corporate guidance from WMT +0.3% and CSCO (11%) also received attention. Utilities and financials led the market higher, while tech was the only major sector to trade lower. Treasuries closed slightly higher, along with the dollar. Crude oil was little changed while gold rallied amid Yellen’s testimony.
Asian bourses continued their ascent on the prospect of extended monetary stimulus in the US.
European markets are set to open higher today as liquidity may still flow for a while.

Today, we’ll check on inflation data in Europe with the final CPI at 11:00 as it was Draghi’s last excuse to lower rates, not the Euro… We then get the US empire manufacturing index at 14:30 and IP data at 15:15.

WEEK END


PHOTO
. Raymon Depardon at le Grand Palais. www.grandpalais.fr/fr/Accueil/p-93-Accueil.htm

FILMO: Inside Llewyn Davis. I haven’t seen it yet, but I know it’s worth going.

SONO: Arcade Fire, Reflektor. http://open.spotify.com/album/5MG3r1vGsf19TU4Xjll229

RESTO: Lefooding.com Palamres 2014: http://www.lefooding.com/palmares/

Enjoy this week end!

NEWS

BOE’s Miles Says Rates Not Best Tool for Housing Risks
SNB’s Danthine Says Franc Cap Remains ‘Essential’ Policy Tool
Croatia Plans 2014 Without IMF Aid, Finance Minister Says
Stournaras Rejects Any Further Greek Fiscal Tightening
Moscovici: EU Agreement on Bank Resolution Likely Near Year End

Vivendi Promises 2014 Split to End Phone Unit’s Weight on Profit
Maersk Line Appoints J. Russell Bruner as New CEO
GfK 3Q Cash Flow From Op Activities EU92.8m Vs EU48.1m
Geox Sees 2013 Rev. Falling 6.5-7% Y/y; Est. Down 6%
Telecom Italia Cut to Junk by S&P Month After Moody’s Downgrade
Aviva Trying to Sell GBP1b Asbestos Liabilities, Sky Reports
H&M October LFL sales +1%, inline with expectations
Monte Paschi 9m Net loss of EU518m, 3 Theoretical windows for capital raise.
Safran Overnight investor sold 19.5m shares @ 46.30
WPP Daily Mail – WPP may acquire Interpublic (stk up 3% yest)
Vedanta 1H14 EBITDA beat, net debt small miss on investment spending

CURRENT STUFF

“China’s benchmark money-market rate jumped the most in almost five months as the central bank drained cash from the financial system for a second week.” (Bloomberg)

Disappointing growth figures in the eurozone and Japan driven by weak export numbers have dashed hopes that a global economic recovery would gather pace in the second half of the year. Growth in the eurozone faltered in the third quarter, expanding 0.1 per cent following growth of 0.3 per cent in the second quarter. In Japan, the rate of growth roughly halved to an annualised rate of 1.9 per cent. (Financial Times)

Warren Buffett’s Berkshire Hathaway has taken a $3.7bn stake in ExxonMobil, handing a vote of confidence from one of the world’s most famous investors to a company that has underperformed relative to its smaller peers in the US oil industry. The purchase, disclosed in a regulatory filing late on Thursday, was funded in part by the sale of $500m of Berkshire’s shares in Exxon’s rival, ConocoPhillips. (Financial Times)

Moody’s has cut the credit ratings of big US banks including Goldman Sachs, Morgan Stanley and JPMorgan Chase, after deciding that the federal government is less likely to bail the financial institutions out if they get into future difficulties. They had the ratings on their long-term senior unsecured debt lowered one notch to Baa1, Baa2 and A3, respectively. (Financial Times)

“Activist investor Carl Icahn disclosed Thursday that he owned about 3.88 million shares of technology giant Apple at the end of September, a regulatory filing showed.Icahn’s stake in the company at the end of the third quarter was worth about $1.85 billion.” (Reuters)

STRATEGY

JPM (Lee) US Equity Strategy.
Raising 2013 YE Target to 1825.

The S&P 500 has now closed above our previous 2013 YE target of 1775, and given that our constructive view on equities remains in place, we are now raising our YE target to 1825, implying a 15.2x P/E on our 2014E EPS of $120. In our view, the case for continuing to maintain a positive stance on equities remains in place given: (i) improving economic momentum to support upward EPS revisions (pent-up demand in US housing, autos, construction, capex and a recovery in the Euro-area); (ii) attractive relative value (particularly vs. corporate bonds), (iii) supportive monetary policy and (iv) sentiment that is not excessively bullish We continue to believe that the U.S. is in a secular bull market and that remaining constructive on equities is warranted.

UPS&DOWNS

Technology (MS, Meunier) Internet of Things Q3 Spotting
Post the publication of our global insight report "The Internet of Things is now", we attended the Internet of Things World Forum and we remain bullish on the theme. Our key takeaways follow. Most hardware companies present (ARM, Gemalto, Ericsson) recognize that hardware costs are too high but Moore’s law drives prices down, and we have argued there is a significant potential for integration of the key semiconductor building blocks (sensors, micro controllers and connectivity) as we have seen before in the smartphone industry.

Technicolor SA (Humpfrey) Cheaper Play on Patents? Initiate at EW
Technicolor is a play on patent value for video encoding and decoding (where it makes money though licensing activity), and on consolidation in the set-top box industry. After a recent financial restructuring, more fundamental improvement is needed to drive further upside, in our view.

AHOLD CUT TO NEUTRAL VS BUY AT NATIXIS
AKER RAISED TO BUY VS HOLD AT DNB
BIZIM TOPTAN CUT TO HOLD VS BUY AT DEUTSCHE BANK
Brembo Cut to Neutral at Exane; PT Raised 18% to EU20.5
BREMBO CUT TO NEUTRAL VS OUTPERFORM AT EXANE
CAMPOFRIO FOOD GROUP RAISED TO NEUTRAL VS UNDERPERFORM…
DEUTZ CUT TO SELL VS NEUTRAL AT UBS
ERICSSON RAISED TO BUY VS HOLD AT SANTANDER
JACQUET METAL SERVICE CUT TO HOLD VS BUY AT SOCGEN
K+S RAISED TO BUY VS HOLD AT BANKHAUS LAMPE
MIGROS CUT TO HOLD VS BUY AT DEUTSCHE BANK
MUNICH RE CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
ODFJELL CUT TO HOLD VS BUY AT DNB
PIRELLI CUT AT BOFAML; EXPECTATIONS EXECUTION NOW THE RISK
QUESTERRE ENERGY CUT TO NEUTRAL VS BUY AT SWEDBANK FIRST
SODEXO CUT TO NEUTRAL VS BUY AT UBS
SOLAR A/S CUT TO HOLD VS BUY AT NORDEA
SPIRAX-SARCO CUT TO HOLD VS ADD AT NUMIS
TULLETT PREBON CUT TO MARKET PERFORM VS OUTPERFORM AT KBW

Have a great week end.

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