LCM Dawn Patrol – More big waves, lots of research and a focus on EU media (JPM, MS)

Bonjour,

The S&P 500 and Russell 2000 ended little changed, the Dow was weaker and the Nasdaq posted modest gains in what seemed to be another round of fairly uneventful trading on Wednesday. Macro influences were largely subdued,partly a function of the waiting game ahead of the release the December employment report on Friday, a dynamic that seemed to overshadow the better-than-expected ADP private payrolls data.
Healthcare, materials, financials and tech all finished in positive territory. Telecom, energy and consumer staples were among the higher-profile laggards. Treasuries were weaker on the day with the front end underperforming.
Asian markets are largely flat this morning. Chinese inflation data showed weaker than expected consumer inflation, while producer price inflation was in line. Retailers were in focus in the Australian market after Australian November retail sales were stronger than expected and suggested that consumers are shifting spend away from department stores.

Today, we’ll look at what the ECB has got to say as deflation fears loom in Europe. We also have the EC consumer confidence index, the German IP, France and Spain to sell bonds. In the US, it’s going to be the intial jobless claims that may attract some attention before Friday’s NFPs.

More big waves in Europe…
ECE6F70A-1FEB-478E-8BD2-16B25A0FD66B

http://fr.magicseaweed.com/news/more-from-the-might-of-the-hercules-storm/5962/

NEWS

• Swedish Prime Minister Drops Stimulus Predicting Stronger Growth
• Draghi Faces Mission Conflict Balancing Growth With Bank Review
• France Should Impose Tax on Smartphones, Film Report Says: FT
• Portugal Said to Name Banks for First Bond Sale in Eight Months

• China 2013 Vehicle Sales Rise to 21.98m Units, Association Says
BMW’s Rolls-Royce Division Says 2013 Sales Exceeded 3,600 Cars
Rolls-Royce Said to Explore Offer for Waertsilae’s Marine Unit
Novartis Said to Be in Talks With Merck on $5b Unit Swap
RBS Open to Takeover Bids for Citizens Before IPO: Van Saun
Bristol, AstraZeneca Win FDA Approval for New Diabetes Drug
Raiffeisen to Redeem State Aid With $3b Sale of Shares
RSA Shares Rally to One-Month High Amid Takeover Speculation
Arkema Cuts FY 2013 Ebitda Forecast to Around EU900m vs EU920m
Danone Says Its Brand Was Hurt by Fonterra Botulism Scare
Monte Paschi Sells 5.7% Stake in Sorin for EU2.05/Shr
Havas’s Yannick Bollore Replaces David Jones as Chief Executive
• Mechel Leads Decline Amid Commodities Selloff: Russia Overnight

Samsung Plans Galaxy S5 by April With Possible Eye-Scan Security

CURRENT STUFF

Wall Street’s Biggest Bear In 2013 Just Published Her 2014 Outlook, And It’s Wild
Read more: http://www.businessinsider.com/gina-martin-adams-2014-market-outlook-2014-1 – ixzz2pseFJq8R

Chinese inflation slowed in December, as the government’s campaign to rein in lavish spending by officials made an unexpectedly big impact on the wider economy… The consumer price index fell to 2.5 per cent from 3.0 per cent in November. It was a seven-month low, bucking the usual pattern of higher year-end inflation. Food prices, the primary cause of the slowdown, rose 4.1 per cent year-on-year in December, down from 5.9 per cent in November. Stripped of food prices, inflation edged up to 1.7 per cent year-on-year from 1.6 per cent in November. (Financial Times)

Apple, Samsung CEOs agree to mediation, on or before Feb 19 in U.S. patent fight: “Apple CEO Tim Cook and Samsung CEO Oh-Hyun Kwon will attend the session with in-house lawyers only, according to a Wednesday court filing. Their legal teams had met on January 6 to “discuss settlement opportunities,” the filing read.” (Reuters)

“Dish is officially pulling its bid for LightSquared, the telecommunications firm in bankruptcy that has wireless spectrum Dish has been coveting, according to people familiar with the matter. The reversal, after Dish last year put in a bid for $2.2 billion, marks the latest twist in the high-profile case, in which LightSquared has hit a number of speed bumps in its effort to emerge from bankruptcy.” (WSJ)

UPS&DOWNS

SAP AG (MS, Wood) Positive into 4Q and business transition
Checks broadly positive, should benefit transition: Our channel checks have been broadly positive on 4Q and we see the risk to the upside rather than the downside to our and street forecasts. We believe a solid end to 2013 sets SAP up well for its Feb 4 investor meeting where it will outline its shift to more subscription revenues. We see 4Q and this event as potential positive catalysts and we remain OW ahead of results.

Media & Internet (MS, Wellington) The home of outperformance
Axel Springer: UW to EW, PT €36 to €47.50
Mediaset Espana: EW to UW, PT €8.50 to €7.90

Media outperformed by 20% points in 2013…and by 24% points ex Vivendi. This was the product not just of a rerating of cyclicals in advance of an anticipated European ad upturn in 2014 but of an across-the-board re-rating of a structurally improved, corporately active, cash returning, and shareholder friendly sector.

Pan-European Media & Internet (JPM,  Lo Franco) Media: serial outperformer – ready to do it again for a 5th year in a row
Our Investment Approach in 2014: We expect EU Media to outperform the market for a 5th year in a row in ’14, driven by: i) a gradual recovery of the advertising market from trough ’13 levels; ii) the digital revolution is accelerating and it requires more content, more data analysis as hardware/networks are commoditised. In this presentation, we provide our top large cap picks, top SMID cap picks and least preferred stocks. We also give a summary of several other stocks in focus.

Greek Banks (JPM, Formanko) A lot of heavy lifting completed, recovery in progress, re-instating Alpha, Piraeus with OW and NBG UW.
Alpha rating: OW, PT€0.84; (€0.64), 31% upside; Piraeus: OW, PT€2.00 (€1.51), 32% upside; NBG: UW, PT€3.92 (€4.10), constructive after €50bn restructuring. Expect the top 3 banks’ earnings at €3.8bn in 17E, c.30% above €2.9bn pre-crisis (07A): Piraeus €1.3bn/€0.5/+165%, Alpha €1.2/€0.8bn/+52%, NBG €1.3bn/€1.5/-18%. The market is likely to underestimate profitability potential from a highly concentrated sector benefitting from funding normalization, rapid cost reduction and long-term tax benefits, after 25% GDP contraction, 20% GDP equivalent bank recap. ‘Blue sky’ PT upside is >50% for Alpha & Piraeus in the longer-term (Table 11).

AXEL SPRINGER RAISED TO EQUALWEIGHT AT MORGAN STANLEY

CRH PLC RAISED TO BUY VS NEUTRAL AT UBS

CSR CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANLEY

DECEUNINCK PT RAISED TO EU1.85 FROM EU1.35 AT ING

ECONOCOM CUT TO HOLD FROM BUY AT ING

Erste Cut to Sell at J&T After Rally Leaves Shares ‘Overvalued’

FRESENIUS MEDICAL CARE RAISED TO NEUTRAL AT JPMORGAN

FRESENIUS SE RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN

HERMES RAISED TO BUY VS NEUTRAL AT BOFAML

HUGO BOSS CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML

KERING CUT TO UNDERPERFORM VS BUY AT BOFAML

LADBROKES CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS

LINDT & SPRUENGLI
CUT TO HOLD VS BUY AT BERENBERG

LUNDIN PETROLEUM
CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE

MEDIASET ESPANA CUT TO UNDERWEIGHT AT MORGAN STANLEY

MEGAFON CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE

MTS CUT TO UNDERPERFORM VS OUTPERFORM AT CREDIT SUISSE

NEXANS RATED NEW EQUALWEIGHT AT BARCLAYS; PT EU38

ORANGE CUT TO UNDERPERFORM AT CREDIT SUISSE, PT EU8.50

PRADA CUT TO NEUTRAL VS BUY AT BOFAML

RTL CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN

STMICROELECTRONICS CUT TO SELL AT DEUTSCHE BANK
UNILEVER CUT TO HOLD VS BUY AT BERENBERG

VIMPELCOM CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE

WILLIAM HILL
CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS

OVERNIGHT MARKETS

Asian markets
Nikkei 225 down -229.36 (-1.42%) at 15,892
Topix down -12.67 (-0.97%) at 1,294
Hang Seng down -16.42 (-0.07%) at 22,980

US markets
S&P 500 down -0.39 (-0.02%) at 1,837
DJIA down -68.20 (-0.41%) at 16,463
Nasdaq up +12.43 (+0.30%) at 4,166

European markets
Eurofirst 300 up +1.45 (+0.11%) at 1,321
FTSE100 down -33.67 (-0.50%) at 6,722
CAC 40 down -1.72 (-0.04%) at 4,261
Dax down -8.36 (-0.09%) at 9,498

Currencies
€/$ 1.36 (1.36)
$/¥ 104.78 (104.83)
£/$ 1.64 (1.64)
€/£ 0.8255 (0.8252)

Commodities ($)
Brent Crude (ICE) up +0.35 at 107.50
Light Crude (Nymex) up +0.35 at 92.68
100 Oz Gold (Comex) at 1,225
Copper (Comex) at 3.39

10-year government bond yields (%)
US 2.99%
UK 2.99%
Germany 1.91%

CDS (closing levels)
Markit iTraxx SovX Western Europe -1.23bps at 53.6bp
Markit iTraxx Europe +2.04bps at 70.66bp
Markit iTraxx Xover +8.88bps at 283.88bp
Markit CDX IG +0.98bps at 65.01bp

Sources: FT, Bloomberg, Markit

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