LCM Dawn Patrol – 22.01.14 – GS commos outlook, MS & JPM on telcos, MS on Renault, JPM on MuRe and Allianz… More……

Bonjour,

 

US equities finished mostly higher in fairly uneventful trading on Tuesday. The Dow was the only major index to end in the red. There continued to be some focus on the dampened market momentum in early 2014, along with the lack of direction from macro headlines. In terms of the latter dynamic, there were no surprises from a WSJ report highlighting the likelihood of another $10B tapering announcement at next week’s FOMC meeting.
Earnings, sell-side ratings changes, shareholder activism and M&A drove the more notable price action yesterday. In line with the dampened macro influences, the deeper cyclical plays put in a mixed performance. The defensive leaning utilities sector was the best performing sector, while telecom lagged. Treasuries were mixed with the belly underperforming.

 

Today: U.K. unemployment rate falls in November, a survey shows; BOE publishes minutes of last rate decision; WEF meeting in Davos starts; Riksbank Deputy Governor Per Jansson speaks

 

In Europe, ABB warn on profits, BHP iron ore prod missed, ASML beat on 4Q revs but disappoint on 1Q sales forecasts, Mohamed El-Erian resigns as CEO of Pimco and StanChart denied right issues rmrs.

Otherwise, UBS switch from Atos into CapGemini, MS upgrade Telecoms to Attractive and move OW on ISP.

 

NEWS

 

 

IMF Raises Global Growth Outlook as Advanced Nations Improve
France to Announce Paris-CDG Express Link, Le Figaro Reports
• Worst of Europe Debt Crisis Ended in Poll With 57% Optimistic
• Investors Assail Income Gap as 68% in Poll Say Govt Needed
• Portugal’s GDP May Grow More Than 1% This Year: Lima
• Finland to Probe Govt Losses From Tax Evasion: Urpilainen

BHP Billiton 2Q Iron Ore Output Misses Est.; 2014 View Kept
ABB 4Q Ebitda Hit by ~$260m in Charges in Power Systems Division
Merck KGaA CEO Says Pharmaceutical Unit Is Integral to Strategy
Raiffeisen Starts 2.9b-Euro Share Sale to Bolster Capital
BHP Quarterly Iron Ore Production Narrowly Misses Forecast
• Discovery Seeks Sports Rights After Buying Control of Eurosport
Sanofi Agrees to Collaborate With Melbourne Uni on Vaccines
Deutsche Bank Should Cut Leverage While Paying Less: Serra
Bitcoin No Bargain for Investors With 47% Bearish in Global Poll

ASML sees 1Q sales ~EU1.4b vs est
EU1.71b, 1Q gross margin ~42% vs est 42.5%.

• Reports 4Q sales EU1.85b vs est. EU1.82b

• Reiterates 1H forecast of sales ~EU3b (ex-EUV)

After Hours
Trading Higher:
+15.4% SMCI (Super Micro Computer) — earnings
+8.7% NUAN (Nuance Communications) — guidance
+1.8% CA (CA Technologies) — earnings
Trading Lower:
-9.5% AMD (Advanced Micro) — earnings
-5.3% KERX (Keryx Biopharmaceuticals) — $90M stock offering
-4.4% IBKR (Interactive Brokers) — earnings
-3.7% NKTR (Nektar Therapeutics) — 8.5M share offering
-3.5% XLNX (Xilinx) — earnings
-2.8% IBM (IBM) — earnings
-0.2% TXN (Texas Instruments) — earnings

 

CURRENT STUFF

 

Mohamed El-Erian, one of the world’s best known institutional investors, resigned as chief executive of Pimco on Tuesday as part of a broader reshuffle at the world’s largest bond house. (Financial Times)

 

The European Commission is pushing to include strict constraints on investors’ ability to take legal action against governments as part of a new trans-Atlantic trade deal, according to leaked documents. (Financial Times)

 

 

Italian Bad Loans Hit Record High – Up 23% YoY

Italian Bad Loans (source: ZeroHedge)

Italian Bad Loans (source: ZeroHedge)

 

 

STRATEGY

 

 

GS (Lelong) Mining Commodities outlook for 2014 and beyond.
Nickel, Zinc and Palladium are our top picks for 2014
(shortened)

On a 12-month view, we believe the mining commodities with the most upside are nickel (+13%), zinc (+3%) and palladium (+14%).
Conversely, we believe the commodities with the greatest downside over the next 12 months are iron ore (-21%) and copper (-15%).

 

 

 

UPS & DOWNS

 

Munich Re and Allianz (JPM, Huttner) Downgrade Munich to N due to falling reinsurance nat cat pricing, this lower pricing benefits Allianz OW
We reduce our Munich forecasts to reflect the -11% lower nat cat pricing at the January 2014 renewals and also our forecast of -5% rate cuts at the June-July14 US nat cat renewals. For this reason we reduce our 2014e and 2015e net profit forecasts by -6%, and reduce our Dec14e SoTP-based target price from €172 to €166.

Telecom Services (JPM, Dattani) Q4 13 Preview: Telecom stocks to watch
This report provides our Q4 previews and short-term trading calls. Overall, we anticipate a very mixed reporting season
Positive calls include: Ziggo (growth acceleration, M&A optionality), BT (encouraging KPIs) and SCOM (EBITDA beat).
Cautious calls: Tele2, Eutelsat, SES and Bouygues all with guidance risk.

Renault (MS, Lembke) Still Our Top Turnaround & EU Recovery Play, PT to €77
RNO offers investors a unique combination of: 1) exposure to EU car market recovery, 2) self-help initiatives, 3) upcoming catalysts and 4) attractive valuation as one of the cheapest global cyclicals, trading at FY15 PE of <6x. We raise our PT to €77 and stay OW – RNO remains our top pick in Autos.

Italian Banks (MS, Tondi) Benefits of liabilities repricing
Intesa Sanpaolo: EW to OW, PT €2.10 to €2.4
UBI: UW to EW, PT €4.80 to €6.30
Improving sovereign spreads and funding markets continue to benefit earnings and valuation of Italian banks, and we price in these effects. Some volatility is likely to remain in the BTP yield and stock prices, but we see value in the larger names given still deep NAV discounts. We move ISP to OW.

Telecommunications Services (MS, Prota) Structural Changes Trigger Sector Upgrade to Attractive
Industry View: In Line to Attractive
Swisscom: UW to OW, PT SFr 430 to SFr 525 | Positive RTI
Turning positive on structural changes around regulation, consolidation and network quality strategy. 2014 earnings might still decline but we see stabilisation from 2015, and potential synergies and multiple expansion result in attractive risk reward. Prefer Orange, Swisscom & Telenor.

Analyst Actions

APR ENERGY RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
ATOS CUT TO NEUTRAL VS BUY AT UBS
BANK OF IRELAND RESUMED NEUTRAL AT CREDIT SUISSE, PT EU0.27
Beni Stabili Discount Set to Narrow, Raised to Buy at SocGen
BENI STABILI RAISED TO BUY VS HOLD AT SOCGEN
CAP GEMINI RAISED TO BUY VS NEUTRAL AT UBS
DATATEC RATED NEW BUY AT UBS
DELEK GROUP CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
DRAKE & SCULL CUT TO NEUTRAL VS BUY AT BOFAML
ENEL RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
HELLENIC TELECOM RAISED TO BUY VS NEUTRAL AT GOLDMAN
HOCHSCHILD MINING REINSTATED NEUTRAL AT GOLDMAN, PT 140P
INTESA RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
INTESA RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STAN…
KELLER GROUP RATED NEW BUY AT BERENBERG; PT 1,400P
OMAX CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
Morgan Stanley Weighs Spreads/Funding Benefits on Italy Banks
MUNICH RE CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
PIONEER FOODS CUT TO SELL VS NEUTRAL AT UBS
POLYMETAL, NORDGOLD CUT TO UW AT MORGAN STANLEY
PROMETHEAN RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
Prudential Cut to Neutral at Mediobanca on Decelerating Growth
PRUDENTIAL CUT TO NEUTRAL VS OUTPERFORM AT MEDIOBANCA
RBS CUT TO SELL VS NEUTRAL AT UBS
SCOR CUT TO NEUTRAL VS OUTPERFORM AT EXANE
SWISS RE CUT TO NEUTRAL VS OUTPERFORM AT EXANE
SWISSCOM RAISED TO OVERWEIGHT VS UNDERWEIGHT AT MORGAN S…
TELECOM SERVICES RAISED TO ATTRACTIVE AT MORGAN STANLEY
TIGER BRANDS RAISED TO BUY VS NEUTRAL AT UBS
TURK EKONOMI BANKASI CUT FROM OUTPERFORM AT CREDIT SUISSE
TURK EKONOMI BANKASI CUT TO UNDERPERFORM AT CREDIT SUISSE
UBI RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT MORGAN STANLEY
UK STOCKS CUT TO SMALL UNDERWEIGHT AT UBS
UNILEVER RAISED TO SECTOR PERFORM AT RBC CAPITAL
VAKIFBANK RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUI…

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