LCM Dawn Patrol – Alcoa: bad. JPM and MS bullish on STATOIL. JPM on capgoods. GS d/grades ARM, Week End. No surfing….

Bonjour,

US equities finished narrowly mixed in another round of directionless trading on Thursday. Spillover effects from the continued weakness out of Asia and the better sentiment surrounding the Eurozone periphery were fairly limited. There was also little reaction to a slightly more dovish ECB.

A better initial claims report was largely unable to help with the market waiting for the official December employment report out today. The difficult holiday season was in focus following the flurry of updates out of the retail sector. Healthcare was the standout again today, while financials also extended their recent outperformance. Telecom remained the worst performer.
Asian markets were mixed in early trade today but largely muted as markets await the upcoming US non-farm payrolls. Chinese trade surplus was lower than expected as import data missed expectations, however this had little impact on the market.

Today, U.K., France, Spain, Netherlands, Sweden report industrial production, with Spanish output seen rising at fastest yearly rate in almost 3 years, according to economists. Italy, U.K. sell bills. U.S. releases non-farm payrolls.

I reiterate here the 10 stocks I currently have in portfolio:
Atos, EADS, EasyJet, BG Group, VolksWagen, SAP, BNP, Roche, A3Media, Generali.

NFP

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WEEK END

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KINO. Saw the Wolf of Wall Street… VERY disappointed.
FOOD. For the best GALETTE DES ROIS: Le Moulin de la Vierge.
RESTO. BALLS. Great name for meat balls. Haven’t tried it yet…
DISCO. The Top 50 Albums of 2013 by Pitchfork

NEWS

• S&P may announce rating actions on Portugal, Germany, in line with its 2014 calendar
• Covered Bond Shock Forces Denmark to Examine ‘Plan B’ for Banks
• Portugal Sells 3.25 Billion Euros of Notes Amid Debt Rally

Alcoa down 4% After market on heavy vol as it reported lower Q4 sales/EPS.
Swatch 2013 Gross Rev. CHF8.82b, Est. CHF8.86b; Has Strong Start
Orange Targets 2-3 Million 4G Clients at End 2014: La Tribune
Itau Says Bank Still in Talks With Corpbanca Over Asset Merger
MercedesBenz Expects Record Sales in Japan in 2014: Ueno
Rolls-Royce Considering Production of a 4×4: Sky News
• Spanish Supermarket Chain DIA to Exit Beijing: Beijing News
Bankia Lures Foreigners With $1.4 Billion First Debt Sale
NXP CEO Considering Acquisitions of as Much as $1.5 Billion
Montagu Said to Hold Exclusive Talks on $823m Units
• Marchionne Says Fiat Will Rehire All Its Workers: Repubblica
Cineworld Close to Merger W/ Poland’s Cinema City: Sky
Metro May Be Broken Up, CEO Replaced in Dispute: Platow
Infosys Raises Sales Forecast as European IT Demand Revives

 

CURRENT STUFF

Too early to declare crisis over, says Draghi: The European Central Bank on Thursday strengthened its commitment to ultra-low interest rates as its president Mario Draghi said it was too early to declare the eurozone debt crisis over. Although rate-setters on the governing council opted to keep rates on hold at 0.25 per cent, the ECB president said policy makers “remain determined to maintain the high degree of monetary accommodation and take further decisive action if required”. (Financial Times)

China became the world’s biggest trader in goods for the first time last year, overtaking the US for all of 2013 and finishing the year with record trade figures in December. The total value of China’s imports and exports in 2013 was $4.16tn, a 7.6 per cent increase from a year earlier on a renminbi-adjusted basis, according to figures released by the Chinese government on Friday. (Financial Times) Notable though that total trade missed the growth target of 8 per cent. (FastFT)

Alcoa World Alumina has admitted links to what US authorities called a “corrupt international underworld” and agreed to a $384m settlement over charges concerning bribery in Bahrain. The company, a joint venture controlled by US aluminium group Alcoa , is pleading guilty to the charge that it paid millions of dollars in bribes through a middle man in London to Bahraini officials, including members of the secretive Gulf state’s royal family — The agreement was revealed on the same day that Alcoa released disappointing earnings for the fourth quarter of 2013, with a non-cash goodwill write-off of $1.72bn for acquisitions it made in 1998 and 2000. (Financial Times)

NY probes banks over early warning tips to select fund managers of changes to stock recommendations, by filling out surveys for clients that hinted of their intentions. NY AG Eric Schneiderman said on Thursday that banks had become a target of his wide-ranging investigation into what he called “insider trading 2.0”, after earlier agreeing a settlement with BlackRock under which it agreed to cease all analyst surveys. (Financial Times)

Spain’s Bankia returns to capital markets launching its first senior unsecured bond since it was bailed out by Madrid in 2012. It’s tapping investors for a five-year senior unsecured bond, a mainstay of most banks’ funding. The bank is raising €1bn with a coupon of 3.5 per cent, after the issue was 3.5-times subscribed. (Financial Times)

To read:
Goldman versus Morgan Stanley (Financial Times)

UPS&DOWNS

Statoil (MS, Rashed)‘Green shoots’ of capital discipline?
A focused message on capital discipline with a credible route to a dividend covered by FCF could start the shares on a path to our bull case of NKr 187. We see potential for Statoil shares to perform strongly into its 7th February capital markets update.

Statoil (JPM, Sharma) Upgrade to Overweight – expect FCF profile to strengthen as capex discipline improves
We upgrade Statoil to Overweight from Neutral following 16% sector underperformance in calendar 2013 – the most extreme since its listing in 2001. Yet Statoil’s equity story continues to improve whilst its valuation remains undemanding, in our view. We expect Statoil’s medium term FCF profile to improve helped by a likely cut in Statoil’s medium term capex guidance. We also flag the marked improvement in Statoil’s exploration performance, progress on portfolio high grading, build-up of a quality unconventional portfolio funded by divestments, the decline in gas supply contract renegotiation risk and a once annual high yield dividend event.

European Capital Goods (JPM,  Willi) Views and Expectations for Q4 results and Q4 Survey
Following the disappointing Q3 results, expectations have been reduced and recent macro data has been more upbeat. However with FX still a headwind, sector EPS momentum likely remains moderately negative into/through results. Therefore, from a tactical perspective for the results season, our focus is on avoiding misses. We are comfortable holding Siemens, Metso, GKN and IMI during results while we see higher risks at Legrand, Sandvik and Atlas Copco. While ABB has already cautioned on 2014 revenues, it could lag given weak book to bill, also against Siemens. While we don’t expect negative surprises from Rexel or Philips from Q4 results, recent strong performance may limit near term upside.

Analyst Actions

ARM HOLDINGS REMOVED FROM CONVICTION BUY LIST AT GOLDMAN
CARLSBERG CUT TO SELL VS NEUTRAL AT GOLDMAN
DEUTZ RAISED TO BUY FROM HOLD AT BERENBERG
EASYJET CUT TO HOLD VS BUY AT LIBERUM
FIRST QUANTUM RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
FRESNILLO CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
GLENCORE XSTRATA RAISED TO OVERWEIGHT VS EQUALWEIGHT: BARCLAYS…
HOCHSCHILD MINING UPPED TO EQUALWEIGHT VS UNDERWEIGHT: BARCLAYS…
MORGAN ADVANCED MATERIALS RATED NEW BUY AT BERENBERG
POLYUS GOLD CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
RED ELECTRICA RAISED TO EQUALWEIGHT AT MORGAN STANLEY
RYANAIR CUT TO HOLD VS BUY AT LIBERUM
SIEMENS CUT TO HOLD FROM BUY AT BERENBERG

OVERNIGHT MARKETS

Asian markets
Nikkei 225 down -19.89 (-0.13%) at 15,860
Topix down -0.25 (-0.02%) at 1,297
Hang Seng up +114.92 (+0.50%) at 22,902

US markets
S&P 500 up +0.64 (+0.03%) at 1,838
DJIA down -17.98 (-0.11%) at 16,445
Nasdaq unchanged 0.00 (0.00%) at 4,156

European markets
Eurofirst 300 down -5.80 (-0.44%) at 1,315
FTSE100 down -30.44 (-0.45%) at 6,691
CAC 40 down -35.82 (-0.84%) at 4,225
Dax down -76.23 (-0.80%) at 9,422

Currencies
€/$ 1.36 (1.36)
$/¥ 104.91 (104.82)
£/$ 1.65 (1.65)
€/£ 0.8259 (0.8255)

Commodities ($)
Brent Crude (ICE) up +0.37 at 106.76
Light Crude (Nymex) up +0.81 at 92.47
100 Oz Gold (Comex) at 1,229
Copper (Comex) at 3.35

10-year government bond yields (%)
US 2.97%
UK 2.98%
Germany 1.91%

CDS (closing levels)
Markit iTraxx SovX Western Europe -1.07bps at 52.53bp
Markit iTraxx Europe +0.48bps at 71.14bp
Markit iTraxx Xover +0.3bps at 284.18bp
Markit CDX IG -0.01bps at 65bp

Sources: FT, Bloomberg, Markit

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