LCM Dawn Patrol – 30.01.14 – Roche, SandP earnings update, HSBC PMIs, the Fed, MS likes Eurotunnel, JPM trims Airbus wings. MORE…

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Bonjour,

US equities declined Wednesday in choppy trading as markets focused on renewed emerging market jitters and the Fed. Equities opened sharply lower as emerging market concerns returned to the fore, despite the fact there did not seem to be any notable new signs of macro deterioration. Trading volumes were relatively light as investors waited for the Fed’s statement, which ultimately matched consensus expectations with a $10B taper. December’s weak jobs growth and recent market volatility did not receive any mention in the statement. While remaining on the defensive, stocks did not seem to know how to react, gyrating through to the close in directionless trading. Risk aversion appeared to be the theme of the day as gold prices jumped more than 1%, the yen rallied sharply and the yield on the US Treasury 10-year declined ~7 bp to ~2.69%.
Asian markets are all negative in morning trade as the risk-off trade continues. The Federal Reserves decision to taper more toped headlines, while weaker HSBC manufacturing data was also of focus. Japanese markets were pushed further by a the yen strengthening versus the US overnight. South Korea is closed for Seol-nal Holiday

Dollar rises against 14 of 16 major counterparts after the Fed cut monthly bond buying by $10b, offsetting efforts in South Africa and Turkey to bolster their currencies through interest-rate increases.

Today: Euro-zone consumer confidence, German unemployment figures are due. Spain publishes 4Q GDP growth. German, Belgian inflation numbers for January are due. Italy sells bonds. BSkyB, Shell, Diageo, Santander, Roche report earnings.

 

 

MOVIE

12 Years a Slave

12 Years a Slave

Not bad, but not the great movie I was expecting. Go and see Dallas Buyers Club (more tomorrow).

NEWS

*CHINA JAN. HSBC MANUFACTURING PMI AT 49.5; EST. 49.6
• National Bank of Greece Said to Explore Sale of Buyout Firm NBGI
• Greek Bank Deposits Post First Annual Increase in Four Years

Peugeot to Reduce 208 Assembly at Poissy, Les Echos Says
Thales Alenia Space Wants to Cut 7% of French Jobs: Les Echos

Givaudan 2013 Ebitda Beats Estimates, Confirms Forecast
TeliaSonera 4Q Sales SK 26.5 Bln; Analyst Est. Sk26.2 Bln
Roche FY Core EPS Chf14.27; Analyst Estimate Chf14.8
Dassault Systemes Offers $12.50 Cash A Share for Accelrys
Lenovo to Buy Google’s Motorola Mobility for $2.91 Billion
AT&T Said to Still Be Interested in Vodafone Takeover Bid
Ericsson CEO Hans Vestberg Said to Tell Board He Plans to Stay
Telefonica Deutschland Says Rene Schuster Leaves as CEO
Qiagen 4Q Adj. EPS Beats Est.; Adj. Net Sales Miss
Ansaldo 2013 Rev., New Orders In Line With Target
• Marco Tronchetti Provera Says No Offers Made to Pirelli Board
• We’re pushing Nintendo, but so far Iwata’s plans fail to impress as he refuses to licence its character franchise.

Roche FY Core EPS CHF14.27; Misses CHF14.8 Est.
FY sales CHF46.8b, in line with ests.
• FY net CHF11.4b vs est. CHF9.66b
• FY core op. profit CHF17.9b vs CHF17.2b
• Says 15 drugs in late stage development
• FY pharma sales CHF36.3m vs CHF35.2m
• FY Diagnostics sales CHF10.5b vs CHF10.3b
• Sees sales growing low-mid single digit
• Proposes 2013 div. CHF7.8 vs est. CFH8.1; says expects to further increase div.

After Hours

Facebook: Q4 EPS $0.31 ex-items vs  $0.27 exp, 4Q revenue $2.59B vs $2.35Bln exp, 4A mobile ad revenue about 53% of total revenue – Shares are up 6.3% in after market
Qualcomm: 1Q Adj. $1.26 vs $1.18 est, 1Q revenue $6.62Bln, vs $6.68Bln est, sees 2Q Adj. EPS $1.15-$1.25 vs $1.26 est, sees FY Adj. EPS $5-$5.20, saw $4.95-$5.15, vs $5.06 est – Shares are up 2.4% in after market

Trading Higher:
+11.9% FB (Facebook) — earnings
+10.6% FLEX (Flextronics) — earnings
+5.0% GERN (Geron) — despite filing equity offering of indeterminate amount
+2.6% QCOM (Qualcomm) — earnings
+2.6% GOOG (Google) — sells Motorola Mobility for $2.91B
Trading Lower:
-7.0% INVN (Invensense) — earnings
-5.7% TSCO (Tractor Supply) — earnings
-4.7% ELY (Callaway Golf) — earnings
-4.6% CTXS (Citrix Systems) — earnings
-3.7% CDNS (Cadence Design) — earnings

.

CURRENT STUFF

The Fed (JPM) – the statement Wed afternoon wound up being remarkably consistent w/the one from Dec and the Fed continued w/its $10B taper pace and didn’t acknowledge any of the disappointing eco numbers or recent market volatility (the jobs language was tweaked mildly lower but the broader economic language was mildly brighter).  If there was one big “surprise” it was the fact that no one dissented (many thought Fisher and Plosser, who started voting at this meeting for the first time, would dissent – the fact they didn’t was maybe mildly “dovish” although note that Kocherlakota, a known dove, also didn’t dissent).

Federal Reserve stuck with $10bn taper and reduced its monthly asset purchases to $65bn on Wednesday as it shrugged off emerging market turmoil at chairman Ben Bernanke’s final meeting. (Financial Times)

EM FX woes continued: The rally that followed the dramatic midnight rate hikes by Turkey’s central bank fizzled out as analysts said monetary policy had not been tightened as much as initially thought. South Africa’s central bank also shocked markets by raising rates – but the rand continued to plunge after policy makers presented it as a one-off move that would not change its overall stance on inflation. “It is possible that investors fear that the emerging markets central banks have fired their last shot, and will be unable to follow through with more tightening,” wrote Steve Englander, strategist at Citibank. (Financial Times) (FT Alphaville)

China factory output slows in January: Improving factory activity in other parts of Asia has yet to boost production in China, according to a manufacturing survey released on Thursday. The unofficial purchasing managers’ index, compiled by HSBC and Markit, showed a weak start to the year in Chinese manufacturing. The gauge dropped from 50.5 in December to 49.5 in January, a slight downward revision from the 49.6 reported in the “flash” PMI last week. (Financial Times)

HSBC Manufacturing PMI

HSBC Manufacturing PMI

STRATEGY

S&P 500 Results update (GS) So far, 178 companies have reported 4Q results (49% of total cap). 47% of companies reporting have beaten earnings estimates (in-line with the historical average) and 11% have missed estimates (vs. average of 15%). The average EPS surprise has been 7.5%, above the 4.7% historical average.
42% of companies reporting have beaten revenue estimates (above the historical average of 35%) and 12% have missed estimates (vs. average of 20%). The average revenue surprise has been 2.1%, above the 0.9% historical average.
Excluding Financials, 49% of companies beat earnings estimates and 10% missed. 43% of companies beat sales estimates and 13% missed.
Historical averages listed above are calculated on the last 40 quarters of earnings results.

GS (Wilson) Global Economics Weekly
What Happens in EM (mostly) stays in EM

Extracts: EM demand would have to slow a lot to have a large impact through trade channels and lower commodity prices and bond yields would provide some offset. Transmission through banking system or financial market contagion poses a higher risk, but DM banking exposures to key EM markets are not too alarming. So we think spillovers are more likely to be short-lived.
We also think a patch of softer US data is central to the market response. EM worries may have acted as a ‘coordinating mechanism’ for investors already feeling overly exposed to cyclical assets during a softer patch for US and global data. But, ultimately, if we are right that the US domestic recovery will hold firm, that is likely to dominate the market outlook. In our  view, that issue is likely to be determined in the DM, not the EM, world.

GS on EM Assets

GS on EM Assets

UPS&DOWNS

Eurotunnel (MS, Rowbotham) More to go for – Overweight
OW, PT €8.50 to €9.20
The shares are up c.15% over the past couple of months but we think there is more to go. European confidence indicators continue to edge up and Eurotunnel is, in particular, a strong play on the buoyant UK economy. Overweight.

Airbus Group (JPM, Perry, CFA) We were too optimistic on EPS but still see significant upside for the shares.
We are cutting our 2014-2016E AIR defined EPS by 4-5% pa (explained below). This is the 5th ‘trim’ to our EPS since October 15, 2013, with the cumulative cut to our 2013-2016E EPS now 2%/15%/12%/17%. There have been many reasons: weaker FX; the early end to the share buyback; higher than expected A350 losses, and the cuts with this note. We have not been the only sell-siders to cut estimates, yet AIR’s share price is up 10% since October 15, on multiple expansion. This is thoroughly justified in our view due to much better than expected new aircraft orders (Q4 2013), AIR giving concrete guidance on A350 losses for the first time (Dec 2013), and confirmation of an aggressive cost reduction plan in defence & space (Dec 2013). Due to our EPS cuts we also cut our multiples-based Dec-14 PT by 4% to €65. However, we see three good reasons to remain OW the shares

AngloGold Ashanti Limited (JPM, Cooke) Gold Year 2014: Regulatory crunch year for SA miners. Upgrade ANG to OW, downgrade HAR and KOZAL to N
Harmony Gold Mining Co Ltd (JPM, Cooke) Gold Year 2014: Regulatory crunch year for SA miners. Upgrade ANG to OW, downgrade HAR and KOZAL to N
Koza Gold (JPM Cooke) Gold Year 2014: Regulatory crunch year for SA miners. Upgrade ANG to OW, downgrade HAR and KOZAL to N

ANGLOGOLD ASHANTI RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
CGG RAISED TO NEUTRAL VS REDUCE AT NOMURA
COLOPLAST RAISED TO HOLD AT JEFFERIES
DUFRY RATED NEW BUY AT JEFFERIES; PT CHF165
HARMONY GOLD CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
KOZA GOLD CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
LEONTEQ RATED NEW NEUTRAL AT UBS, PT SFR120
PEGASUS CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
PETROLEUM GEO-SERVICES CUT TO REDUCE VS BUY AT NOMURA
PREMIER FOODS RAISED TO HOLD VS SELL AT SOCGEN
PREMIER OIL CUT TO NEUTRAL VS BUY AT GOLDMAN
PUMA CUT TO SELL VS NEUTRAL AT UBS
SBM OFFSHORE RAISED TO NEUTRAL VS REDUCE AT NOMURA
ZUMTOBEL RAISED TO BUY VS NEUTRAL AT UBS

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