LCM Dawn Patrol – 08.01.13 – Welcome back… big waves… Asset allocation, sectors and stock selection, news, analyst actions, and more!

Bonjour,

Hope you enjoyed this little break (I sure did). Remember to stay in shape…

US equities finished higher on Tuesday, snapping a three-day losing streak. There was no specific driver behind the bounce, though the move did fit with the upbeat sentiment surrounding stocks that failed to translate into gains over the first three trading days of 2014. In terms of the more positive dynamics at work today, the continued rally in Eurozone peripheral sovereign debt received some attention. This helped drive outsized gains in Eurozone equities following the more sluggish tone in Asia.
Ahead of the unofficial start of Q4 earnings season this week, there was a continued pickup in activity on the corporate calendar. Takeaways remained fairly company-specific in nature, though the hospital stocks extended their recent rally. This helped the healthcare sector put in the best performance of the day, while tech was another bright spot. Despite the continued improvement in the US recovery outlook and the lack of anything new out of the latest batch of Fedspeak, Treasury yields continued to move lower.
Asian stocks are positive in morning trade with no significant news flow directing trade. The Australian market opened reasonably strongly seemingly on little news and quickly gave back these gains. The yen weakened versus the USD overnight which has helped Japanese stocks reverse losses of the past two days. Strong earnings from Japanese convenience store operators were also in focus. South Korea underperformed the wider market as Samsung’s weaker than expected guidance spooked the market about the impact the won could have on the upcoming reporting season.

Today, we’ll check European retail sales (11:00) for Nov, ADP employment changes (14:15) and Sainsbury trading update.

NOT RELATED

Follow the CES show 2014 here: http://www.engadget.com/tag/CES+2014/
And see Belharra’s monster here: http://vimeo.com/82628802

NEWS

AstraZeneca, Teva, Roche Consider Buying Celltrion Stake: Maeil
Sacyr-led Group Seeks $400m to Continue Panama Canal Work
Codere Creditors Extend Loan Deadline Amid Restructuring Talks
Airbus Says U.S. Budget Uncertainty Limits M&A: Reuters
• Superlift Places 10.7m Kion Shares
EFG’s CHF200m Profit Target Is ‘Ambitious,’ CEO Tells FuW
KPN CEO Blok Says He’s Confident Financial Results Will Improve
RSA Insurance to Get Review on Financial, Regulatory Reporting
Lloyds Asked by Govt to Draw Up Plan for GBP19b Stake Sale: Sky
Mota Wins Europe, Africa, Latin America Contracts Worth EU780m
• Albert Frere Sells EU3.9m of Groupe Bruxelles Lambert Stock
BASF’s Wintershall Signs JV W/ Neuquen to Tap Argentine Shale
Popular Buys Dexia Stake in Popular’s Private Bank for EU49m
• KBC Repays Second Aid Installment Ahead of Schedule

Sodexo total 1Q organic sales up 2.7%, est. up 2.3% (median of 10).
• 1Q rev. EU4.856b, est. EU4.871b (median of 8).
• Confirms FY forecast: organic rev. growth 2.5% to 3%, oper. profit up 11%, oper. margin 5.6%
• FX had nearly 5% negative effect
• North America 1Q organic sales up 5.1%, est. up 4% (median of 9)
• Continental Europe 1Q organic sales up 0.5%, est. unchanged (median of 9)
• U.K. & Ireland 1Q organic sales up 0.4%, est. up 1.1% (median of 9)
• Rest of World 1Q organic sales down 0.2%, est. up 4.4% (median of 9)
• Benefits and Rewards Services 1Q organic sales up 12%
• Related preview here

• Call 8:30am CET +44 (0)145 254 1003, pw 26 76 61 26

CURRENT STUFF

Eurozone periphery’s borrowing costs tumble: Borrowing costs for the eurozone’s crisis-hit countries tumbled on Tuesday after a surge in investor demand for Irish government bonds allowed Dublin to easily raise almost half its funding target for this year. Yields on government debt, which move inversely with prices, fell sharply in Spain, Portugal and Greece as well as Ireland after investors placed €14bn of orders in an offer of 10-year Irish bonds. (Financial Times)

JPMorgan to pay $1.7bn to settle Madoff case: JPMorgan Chase bankers had concerns about Bernard Madoff for more than a decade but failed to inform US authorities, according to a damning assessment of the bank’s serial inaction by the US attorney for Manhattan. (Financial Times)

“Shares in Nintendo jumped as much as 7.5 percent to a two and a half-year high on Wednesday after China temporarily lifted a 14-year-old ban on selling video game consoles. The move could pave the way for Nintendo, Sony Corp and Microsoft Corp to enter the world’s third-largest video game market in terms of revenue.” (Reuters)

STRATEGY

LCM Allocation.

UPS&DOWNS

I’ll tell keep you updated on these 10 names. Should you want more details, call me…
Stock selection: 10 names for the next 3 months: ATOS, EADS, EASYJET, BG GROUP, VOLKSWAGEN, SAP, BNP ROCHE, ATRESMEDIA (bloody expensive), GENERALI

European Banks (JPM, Abouhossein) Outlook 1H 2014: OW IBs vs. credit geared banks as 50% implied CoE gap narrows: Buy UBS, DB, BARC
In Sep-13, we increased exposure to Southern European credit geared banks over IB gearing and added UCG and Caixabank to our Top Picks portfolio. We see 10% upside for the Eurobanks in 2014 and review our portfolio of top picks for H1 2014. We see material valuation and performance gaps between European IBs and Credit geared banks, with European IBs trading at average implied CoE of 13.0% vs. 8.6% for Italian and Spanish banks in 2015E. Hence for H1 we seek to be heavily exposed to IB geared stocks where we see materially better value and add Barclays to our Top Picks alongside UBS, DBK. Our new portfolio of Top Picks is IB heavy: UBS, DBK, Barclays, SG, UCG, Caixabank and Danske.

The European Internet Investment guide – Vol. 3.0 (JPM, Dubourg) More structural online growth to go and mobile benefits leaders. OW on Gameloft, MONY, Perform and RMV.
We publish our third European Internet investment guide focusing on 1) changing consumer behaviour with online/mobile, 2) the impact on our European Internet stocks. Top picks are GFT (OW) & MONY (OW, u/g from N to OW). We also stay OW RMV, u/g Perform (from N to OW), stay Neutral SCH & SPR and d/g CTS (OW to N) & Xing (N to UW).

Energy Sector Downgraded at Citi; Eni, Petrochina Least Favored

Socgen on Banks
Societe Generale initiates coverage on global investment banks with neutral rating; sees i-banks underperforming commercial banks given continued regulatory, rev. headwinds. SocGen more bearish on credit, rev. growth vs market, especially for GS, DB. Sees weakness in FICC trading “beyond short-term,” with liquidity rolling into equities. Favors equity trading rev., wealth/asset management; MS, UBS havemost attractive business models
DB new sell, PT $31.50 implies 35% downside
GS new sell, PT $138 implies 23% downside
CS new hold, PT $27 implies 14% downside
MS new hold, PT $33 implies 3.8% upside
UBS new buy, PT $20 implies 3.1% upside

AIR LIQUIDE RAISED TO NEUTRAL VS UNDERPERFORM AT BOFAML
ANGLO AMERICAN CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
ARKEMA CUT TO NEUTRAL VS BUY AT BOFAML
ASCENCIO PT RAISED TO EU54.80 FROM EU52 AT ING
AVEVA RAISED TO BUY VS NEUTRAL AT UBS
BASF CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
BODYCOTE CUT TO HOLD VS ADD AT NUMIS
CTS EVENTIM CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
DEBENHAMS CUT TO UNDERWEIGHT VS OVERWEIGHT AT JPMORGAN
DNB CUT TO UNDERPERFORM VS NEUTRAL AT MACQUARIE
ENERGY SECTOR CUT TO UNDERWEIGHT AT CITI
ESSILOR RAISED TO BUY VS NEUTRAL AT BOFAML
FREENET CUT TO NEUTRAL VS BUY AT UBS
HYDRO RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
LINDE RAISED TO NEUTRAL VS UNDERPERFORM AT BOFAML
MONEYSUPERMARKET RAISED TO OVERWEIGHT VS NEUTRAL AT JPM…
PERFORM RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
RIGHTMOVE CUT TO NEUTRAL VS BUY AT UBS
SALZGITTER CUT TO UNDERPERFORM VS BUY AT BOFAML
SAP RAISED TO BUY VS NEUTRAL AT UBS
SCOR CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
TELE2 RAISED TO BUY VS HOLD AT BERENBERG
WILLIAM DEMANT CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
XING CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN

OVERNIGHT MARKETS

Asian markets
Nikkei 225 up +234.05 (+1.48%) at 16,048
Topix up +17.95 (+1.40%) at 1,301
Hang Seng up +173.51 (+0.76%) at 22,886

US markets
S&P 500 up +11.11 (+0.61%) at 1,838
DJIA up +105.84 (+0.64%) at 16,531
Nasdaq up +39.50 (+0.96%) at 4,153

European markets
Eurofirst 300 up +10.50 (+0.80%) at 1,320
FTSE100 up +24.72 (+0.37%) at 6,755
CAC 40 up +35.14 (+0.83%) at 4,263
Dax up +78.20 (+0.83%) at 9,506

Currencies
€/$ 1.36 (1.36)
$/¥ 104.94 (104.60)
£/$ 1.64 (1.64)
€/£ 0.8303 (0.8299)

Commodities ($)
Brent Crude (ICE) up +0.09 at 107.44
Light Crude (Nymex) up +0.30 at 93.97
100 Oz Gold (Comex) down -1.90 at 1,228
Copper (Comex) at 3.41

10-year government bond yields (%)
US 2.95%
UK 2.95%
Germany 1.89%

CDS (closing levels)
Markit iTraxx SovX Western Europe -2.85bps at 54.83bp
Markit iTraxx Europe -0.43bps at 68.62bp
Markit iTraxx Xover -3.76bps at 275bp
Markit CDX IG +1.13bps at 64.03bp

Sources: FT, Bloomberg, Markit

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s