October 29th, 2012 Weekly Markets n Perspectives For important disclosures, refer to the Disclosure Section, located at the end of this report.
Weekly FocusThe US earnings season has been disappointing so In Europe, the composite euro area PMI fell to itsfar. The current earning season’s theme continues: lowest level since June 2009.companies beating on the bottom‐line butdisappointing on the top‐line. Moreover, there were some headlines of Greece obtaining a two year extension. The dealTech results have been fairly modest in Q3. Apple’s reached with the troika would include aQ4 FY12 earnings didn’t helped US tech stocks. EUR13.5bn austerity package together with aTechnology stocks continued to underperform the range of structural labor reforms. Greece wouldbroader index since their last September peak. be granted a two year extension to meet fiscal targets. Let’s wait and see…With one week of campaigning left in the US, therewas some talk of an imminent downgrade of the US At the Bundestag, Draghi reiterated his stancesovereign rating by Fitch (AAA with negative that the OMT will not lead to disguised financingoutlook). of governments. He also said that the programme will not compromise the ECBs independence andThe Fed reaffirmed its asset purchases plan to buy nor lead to inflation.$40bn of MBS per month to support the recovery.The Committee highlighted a slightly more upbeat In Japan, the government unveiled a JPY750bntone with regards to household spending but also stimulus package. Finally, Spain will have tonoted that growth in business fixed investments meet €20.3bn of redemptions between Mondayhas slowed. and Wednesday this week.
Euro area: Downturn in Business surveys point to a private sector lending weak euro economy • The euro‐zone composite PMI fell from 46.1 to• Commercial bank loans to the private sector fell 45.8 in October, its lowest level in over 3 years; in September ‐0.8% y/y, following ‐0.6% y/y in The index seems to point to quarterly falls in the previous month (see chart); euro‐zone GDP (see chart);• While lending to households barely expanded, • The manufacturing index fell, but the services that to firms was ‐1.4% in September; index increased;• The liquidity that the ECB has provided is still not • The German Ifo measure of business reaching the economy; confidence fell from 101.4 to 100.0 in October.• The ECB probably needs to do more to stimulate It seems to suggest that the German economy the economy.14% is slowing down. Lending to the Private Sector (% y/y)12% Composite PMI and Euro‐zone GDP 1.2%10% 60 8% 50 ‐0.2% 6% ‐0.2% 45.8 4% 40 Composite output PMI 2% ‐1.6% 30 0% Euro‐zone GDP ‐0.8% (% q/q, right scale)‐2% 20 ‐3.0% 1992 1997 2002 2007 2012 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: European Central Bank Source: Markit and Eurostat
Do not trust your neighbour… UK exits recession territory• The Bank for International Settlements • A rebound was expected on the grounds of announced banking statistics for Q2 2012; some temporary factors (e.g. Olympics);• Banks in the core euro‐zone economies reduced Nevertheless, even excluding those factors, GDP their exposures to the peripheral economies; in Q3 appears to have shown a robust underlying• Consensus forecasts for GDP in the peripheral expansion; economies are likely to continue to fall. This may • Services output was the main driver (+1.3% q/q lead to lower exposures in the near future; non annualized);• The peripheral banks’ reliance on the ECB could • The MPC meets in early November. Should we remain high. expect less QE ? Core euro area banks exposure to the 1.3% UK real GDP (q/q change)1800 peripheral economies (€bn) 1.0%1600 0.8%14001200 0.3%1000 800 ‐0.2% 600 ‐0.3% ‐0.4% ‐0.4% 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 ‐0.7% 2010 2011 2012 2013Source: Banks for International Settlements Source: Markit and Eurostat
German lawmakers respond favorably to ECB bond‐buying plan• The ECB President started his speech by referring o The independence of the ECB will be that the Euro Zone economy will remain week in compromised – Draghi denied it again. the near‐term. Next year, a very gradual recovery is Countries will have to comply with the expected (ECB forecasts GDP growth of 0.30%). requested conditionality as a prerequisite Unemployment will remain at high levels (ECB for the ECB to activate its OMT program. forecasts 11.3%); But, isn´t the ECB exposed to countries• Due to a week economic backdrop, the ECB with debt overhang problems? decided to lower interest rates, which in normal o Euro area taxpayers will be exposed to times should have been passed evenly to firms and risks – Draghi also denied it. But, isn´t the households across the Euro Zone; ECB exposed to potential losses on the• Other attempts were made by the ECB to push bonds that the bank decides to economic growth in the region (e.g. the Long‐Term purchase? Refinancing Operations). More recently, the ECB o OMT will lead to inflation: Draghi said announced the Outright Monetary Transactions that bond purchases will be fully programme; sterilized, in order to maintain price• Draghi underlined there were some concerns stability in the euro area. about the programme: • The reaction was apparently positive with the o Purchases will lead to disguised financing of CDU’s budget spokesman saying "(Draghis) Government – Draghi has denied it. The ECB answers were very convincing, and we can should only buy bonds on secondary markets; therefore give the message to German citizens that fears of inflation that have been expressed here are unfounded".
Durable goods orders increase 9.9% Countdown to the US m/m in September Presidential election • However, excluding commercial aircraft and defence orders, the report was a • One week of campaigning is left in the US disappointement; Presidencial election; • Non‐defence capital goods orders (ex. aircraft) • In October, Romney gained in some polls. were unchanged in September. August’s gain Nevertheless, the Intrade betting markets still was revised down from 1.1% to 0.2% m/m. put the odds of an Obama victory at close to Shipments decreased by ‐0.3% m/m. The decline 60%. He appears to be ahead of Romney in many in August was revised from ‐0.7% m/m to ‐1.2% of the key swing states, which will decide the m/m; outcome of the electoral college vote; • Business investment seems to have stalled • However, the chances of the victor having a probably due to the uncertainty surrounding the compliant Congress seem to be fading fast. election and the fiscal cliff. 100 Chances of Presidential Candidate US Non‐Defence Capital Goods Shipments Victory (%)20% (Ex. Aircraft) Y/Y Change 8015% Oba ma 64.010% 60 5% 0% 40 37.5 ‐2.1%‐5%‐10% 20 Romne y‐15%‐20% 0‐25% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Jan‐11 Mai‐11 Set‐11 Jan‐12 Mai‐12 Set‐12 Source: US Commerce Department Source: Intrade
Last week’s FOMC two‐days meeting delivered no surprises• From the accompanying statement, we can • However, the next meeting in December could conclude that: be more interesting. Fed officials could decide to o The economy is still expanding at a compensate for the expiry of the Operation moderate growth rate; Twist at the end of the year; o The unemployment rate is at a high level; • Moreover, if Congress can´t reach agreement to o Inflation rate is expected to remain stable prevent a contraction in fiscal policy (aka Fiscal in the long‐term. Medium‐term inflation Cliff), the Fed could decide that it need to loosen rate should run at or below the 2% target; monetary policy even more. o The housing sector is giving signs of improvement.• The Fed will continue purchasing mortgage‐ US Mortgage Interest rates backed securities at a pace of $40bn per month. 4.2% 30 yr Fixed rate Operation Twist will continue until the end of 4.0% 2012. The federal funds rate should be kept at a low level until mid 2015; 3.8%• The labor market will be followed closely. If the 3.6% outlook doesn’t improve substantially, fed officials could undertake additional purchases of 3.4% 3.37% assets or other policy tools that they find 3.2% convenient; Jan‐12 Mar‐12 Mai‐12 Jul‐12 Set‐12 Source: Freddie Mac Commitment Rates
GDP QoQ (Annualized)US Q3 GDP expanded by 2% 6% 4% 2.0%• The US economy grew 2% (annualized) in Q3, up from 2% 0% 1.3% in the previous quarter; -2%• Business investment declined by 1.3% (the first -4% -6% quarterly decline since the last recession); -8%• Consumption growth picked‐up to 2.0% from 1.5% in -10% 2005 2006 2007 2008 2009 2010 2011 2012 Q2 2012; Contributions to GDP Growth• Federal spending surged by 9.6%, which gave an Q2 12 Q3 12 important boost to GDP growth in the quarter. 1.42% 1.06% Government spending (mainly national defence) 0.71% contributed as much as 0.7% to overall GDP growth. 0.09%0.07% 0.23% How should we explain this huge increase in Federal -0.14% -0.18% spending? Personal Gross private Net exports Government Consumption domestic expenditures• Residential investment increased by 14.4%, reflecting Contribution to Government investment the improvement in the housing market; Spending growth• Net exports subtracted 0.2% from GDP growth, with Q2 12 Q3 12 exports falling by 1.6%; 0.64%• GDP growth came in a little higher than expected by the market… but largely because of the big jump in 0.08% Federal spending. The economy is still not growing rapidly enough to create sufficient jobs. -0.01% -0.01% -0.12% -0.01% National Defence Nondefence State and Local Source: U.S. Department of Commerce
China: PMI rebounds… Argentina vs. holdout • China’s October HSBC/Markit flash PMI rose to 49.1, up from 47.9 in September. It seems to creditors • Last Friday, the U.S. Court of Appeals for the suggest that manufacturing growth is Second District decided on the long awaited accelerating; Pari‐Passu case against Argentina. The wording• The new orders index increased to 49.7 in of the Court of Appeals ruling seems critical to October from 47.3 in September. The new export the Republic of Argentina’s stance regarding orders index rose to 47.3 in October from 44.9 in debt restructuring; September; • It appears Argentinas holdout creditors must• External demand outlook remains uncertain. be paid at the same time as creditors who Domestically, the government has been stepping accepted bonds in the 2005 and 2010 debt up its fiscal support. restructuring deals; HSBC Manufacturing PMI • The dispute stems from Argentinas $100 billion60 sovereign default in 2001. In 2005 and 201055 investors tendered about 93% of the debt in a swap offer paying about 33 cents on the dollar;50 49.1 • However, some $4.5bn of defaulted bonds are thought to be in the hands of the holdouts45 which continue to pursue the Argentine government in international courts seeking40 2009 2010 2011 2012 repayment;Source: Bloomberg • Argentine bond prices tumbled on the news.
Portugal: Q3 2012Earnings Update as of October 26th, 2012Portucel (PTI PL): Results show resilience Jerónimo Martins (JMT PL): Poland is key• 9M 2012 sales were €1,109.5m. Net earnings • Net income of €120m in Q3 2012, + 7% y/y, increased 11.2% y/y, reflecting a better slightly below Reuters consensus of €123m; geographical mix, FX tailwinds and market share • Biedronka’s net profit increased 17% y/y. Q3 LFL gains in the European paper market; sales were 5.5% (a slowdown from Q2 2012);• The company continues to be an interesting stock • Pingo Doce´s promotional activities in the quarter in the Portuguese market. Key risks are a have had a negative effective on JM’s margins; decrease in the pulp and paper prices, a rise on • The Company should distribute an amount of the EURUSD exchange rate, a deterioration of the €0.239 per share from free reserves, payable in European economy and regulation changes on 2012; the Portuguese Biomass energy sector. • We continue to like the company’s exposure to the Polish market. Key risks are a deterioration onBPI (BPI PL): Solid… given macro challenges the macro outlook for the Portuguese and Polish• BPI posted a €32m net profit in Q3 2012; economies, increased competitive intensity in• Domestic performance: NII and fee income were Poland and the devaluation of the Zloty. solid, more than offsetting the cost of the CoCos; Net lending was down 5% y/y. Customer deposits Media Capital announced results for Q3 2012. increased 2% y/y. LTD ratio at 105%, if we include EBITDA increased by 45% y/y. EBITDA margin the retail bonds. Credit at risk increased from reached 17.9% in the first nine months of the year, 3.5% to 3.9%; representing a 1.6pp improvement, as a result of a• The bank plans to repay €100m of CoCos. decrease in operating costs.
S&P 500 Earnings Update: Q3 2012 as of October 26th, 2012• So far, 273 companies have reported Q3 results; • According to Bloomberg, 72% of reported• Widespread sales misses although we must take companies have beaten their earnings estimates, into account FX headwinds; while 41% of them have exceeded their revenue• Poor Q3 earnings season. Y/Y EPS growth should forecasts. be flat or even slighthly negative, given a dificult macro environment;S&P500 Q3 Earnings Summary as of October 26th, 2012 Number of companies Earnings Suprises Average Q3 Revenues Surprises Average Q3 Reported Total % of Cos Positive Negative In‐line Surprise Positive Negative In‐line SurpriseOil & Gas 16 41 39.0% 56.3% 43.8% 0.0% 2.8% 31.3% 68.8% 0.0% 3.0%Basic Materials 19 26 73.1% 42.1% 52.6% 5.3% ‐3.5% 31.6% 68.4% 0.0% ‐1.9%Industrials 47 75 62.7% 74.5% 21.3% 4.3% 3.4% 27.7% 72.3% 0.0% ‐0.9%Consumer Goods 32 57 56.1% 75.0% 25.0% 0.0% 3.6% 28.1% 71.9% 0.0% ‐1.3%Health Care 29 46 63.0% 82.8% 17.2% 0.0% 3.8% 31.0% 69.0% 0.0% ‐0.9%Consumer Services 30 74 40.5% 73.3% 20.0% 6.7% 1.9% 40.0% 60.0% 0.0% ‐0.4%Telecommunications 4 8 50.0% 50.0% 50.0% 15.2% 0.0% 25.0% 75.0% 0.0% ‐0.2%Utilities 6 32 18.8% 33.3% 66.7% 0.0% ‐1.8% 0.0% 100.0% 0.0% ‐10.1%Financials 57 85 67.1% 86.0% 14.0% 0.0% 11.4% 64.9% 35.1% 0.0% 2.9%Technology 33 54 61.1% 63.6% 36.4% 0.0% ‐0.8% 57.6% 42.4% 0.0% ‐0.9%S&P 500 273 498 54.8% 71.8% 26.4% 1.8% 4.2% 40.7% 59.3% 0.0% ‐0.3%Comparative Data (full earnings season)Q2 2012 71.5% 27.5% 1.0% 4.0% 41.4% 58.4% 0.2% 0.4%Source: Bloomberg
Last week’s market highlights• Apple (AAPL) reported Q4 FY12 revenues of $35.97bn, Apple: share price evolution (USD) above consensus of $35.80bn. EPS of $8.67 was below 700 consensus of $8.75. Apple guided to Q1 FY13 revenues of 600 about $52 billion and EPS of about $11.75. This 500 compares to consensus of $54.98 billion and $15.41;• Apple announced the iPad mini (the starting price point 400 Jan-12 Apr-12 Jul-12 Oct-12 of $329 was higher than expected), the fourth generation iPad, and refreshed the MacBook Pro, Mac Microsoft: Share Price evolution (% Daily Change) mini, and iMac lineups. Is Apple moving towards a more 1.2% rapid refresh cycle? 0.2%• Microsoft (MSFT) held the Windows 8 event in NYC last -0.1% -0.5% Thursday. October 26th Windows 8 became generally -2.3% available to the public. Initial reviews around consumer 22-Oct 23-Oct 24-Oct 25-Oct 26-Oct adoption will be important to help assess potential European car market uptake, especially for Windows‐based tablets. But, at 160 140 what pace will enterprises migrate to Windows 8? 120• As widely speculated in the press, Peugeot (UG FP) 100 80 announced that the French state will provide €7bn of 60 financial guarantees to Banque PSA. The news are 40 Jan-12 Apr-12 Jul-12 Oct-12 positive near‐term. But, in the long‐term, is this deal Peugeot Volkswagen Pref. Daimler going to limit the company’s strategic options? Source: Bloomberg
What we are watching this week: CALENDAR ‐ Event Date (GMT) Hour Survey Prior• October inflation data for the Italy sells €8bn in 6M TB 10‐29‐2012 10:00 Not Available Not Ava ila ble Bundesbanks Weidmann speaks in Frankfurt 10‐29‐2012 Not Ava ilable Not Available Not Ava ila ble eurozone is due Wednesday; Germany sells €3bn in 12M TB Personal Income (Sep), US 10‐29‐2012 10‐29‐2012 10:30 12:30 Not Available 0.4% Not Ava ila ble 0.1%• Provisional Q3 GDP for Spain Personal Spending (Sep), US France sells €6.8bn in 3, 6 and 12M TB 10‐29‐2012 10‐29‐2012 12:30 13:50 0.6% Not Available 0.5% Not Ava ila ble Job‐To‐Applicant Ratio, Japan 10‐29‐2012 23:30 0.83 0.83 should be announced tommorow; GDP Constant SA YoY (Q3), Spain 10‐30‐2012 08:00 ‐1.7% ‐1.30%• Many monetary policy meetings Japan BOJ monetary policy meeting India RBI monetary policy decision 10‐30‐2012 10‐30‐2012 Not Ava ilable Not Ava ilable Not Available Not Available Not Ava ila ble Not Ava ila ble Hungary monetary policy decision 10‐30‐2012 Not Ava ilable Not Available Not Ava ila ble will be held across the world this Unemployment Change (000s) (Oct), Germany Unemployment Rate (s.a), Germany 10‐30‐2012 10‐30‐2012 08:55 08:55 10K 6.9% 9K 6.8% week. An interest rate cut is Consumer Confidence, Euro Zone Indust. Confidence, Euro Zone 10‐30‐2012 10‐30‐2012 10:00 10:00 ‐25.6 ‐17.0 ‐25.6 ‐16.1 expected in Hungary; Services Confidence, Euro Zone Italy sells €7bn in 5 and 10Y GB 10‐30‐2012 10‐30‐2012 10:00 10:00 ‐13.0 Not Available ‐12.0 Not Ava ila ble Conf. Board consumer confidence (Oct), US 10‐30‐2012 14:00 72.0 70.3• In the UK, October PMI is due ECBs Constâncio in a policy panel 10‐31‐2012 Not Ava ilable Not Available Not Ava ila ble Thursday; ECB bank lending survey (Q3) France sells 7, 10 and 23Y GB 10‐31‐2012 10‐31‐2012 Not Ava ilable 09:50 Not Available Not Available Not Ava ila ble Not Ava ila ble Euro area flash HICP (Oct), Euro Zone 10‐31‐2012 10:00 2.5% 2.7%• In the US, this week’s ISM Norway Norges Bank monetary policy meeting 10‐31‐2012 Not Ava ilable Not Available Not Ava ila ble Spain Confederación General de Trabajos general strike 10‐31‐2013 Not Ava ilable Not Available Not Ava ila ble manufaturing (Thursday) and US ADP employment survey (Oct), US Eurogroup (potential teleconference on Greece) 10‐31‐2012 10‐31‐2012 12:15 Not Ava ilable 137.5K Not Available 162.0K Not Ava ila ble Employment report (Friday) for Unemployment Rate, Euro Zone Germany sells €2bn in 30Y GB 10‐31‐2012 10‐31‐2012 10:00 10:30 11.5% Not Available 11.4% Not Ava ila ble October could be key to the stock Chicago Purchasing Manager, US Manufacturing PMI (Oct), China 10‐31‐2012 11‐01‐2012 13:45 01:00 51.4 50.3 49.7 49.8 market and to the Presidential Czech monetary policy decision Manufacturing PMI (Oct), Ireland 11‐01‐2012 11‐01‐2012 Not Ava ilable Not Ava ilable Not Available Not Available Not Ava ila ble Not Ava ila ble Manufacturing PMI (Oct), UK 11‐01‐2012 Not Ava ilable Not Available Not Ava ila ble Election; Initial Jobless Claims, US 11‐01‐2012 12:30 370K 369K Continuing Claims, US 11‐01‐2012 12:30 3252K 3254K• The official China manufacturing ISM Manufacturing, US 11‐01‐2012 14:00 51.0 51.5 Bank of Japan minutes (of Oct 4‐5 monetary policy meeting) 11‐02‐2012 Not Ava ilable Not Available Not Ava ila ble PMI is due on Thursday. It is Romania monetary policy meeting Change in Nonfarm, Payrolls US 11‐02‐2012 11‐02‐2012 Not Ava ilable 12:30 Not Available 120K Not Ava ila ble 114K expected to tick up above the 50 Unemployment Rate, US Avg Hourly Earning YoY All Emp, US 11‐02‐2012 11‐02‐2012 12:30 12:30 7.9% 1.8% 7.8% 1.8% threshold. Avg Weekly Hours All Employees, US Factory Orders, US 11‐02‐2012 11‐02‐2012 12:30 14:00 34.5 4.5% 34.5 ‐5.2% Greek austerity measures to be submitted to parliament 11‐03‐2012 Not Ava ilable Not Available Not Ava ila ble G20 Fin. ministers and C. Bank governors meet in Mexico City 11‐03‐2012 Not Ava ilable Not Available Not Ava ila ble
Next Week Preview: Economics 70 ISM Manufacturing Index 50• The US ISM Manufacturing Index for the month 60 30 of October will be released Thursday (Nov. 1st) at 10 50 15.00 GMT. The regional manufacturing indices ‐10 40 have been mixed. The headline indices improved ‐30 but the new orders and employment indices 30 2005 2006 2007 2008 2009 2010 2011 2012 2013 ‐50 remained weaker. A weak global economic ISM Manufacturing Index (left s cale) Empire State Index Philly Fed Index backdrop and the slump in domestic business 300 investment are important headwinds for US 250 US: Change in Employment manufacturers; 200• The October’s Employment Report will be 150 100 announced Friday (Nov. 2nd) at 13:00 GMT, just 50 four days before the election. Modest 0 employment growth and a steady unemployment Ja n‐12 Fev‐12 Ma r‐ 12 Abr‐12 Non‐Farm Pa yrolls Mai‐12 Jun‐12 Jul‐12 ADP Ago‐12 Set‐12 rate should be expected; Spain: Real GDP (q/q change)• Provisional Q3 GDP data for Spain is due Tuesday. 0.4% 0.2% 0.3% 0.2% 0.2% 0.1% 0.1% Last week, the Bank of Spain said that the 0.0% economy should have contracted by 0.4% in Q3, ‐0.2% ‐0.1% 0.0% the same as in Q2 2012. On an annual basis, the ‐0.4% ‐0.3% ‐0.4% contraction should have been 1.7% in Q3, ‐0.6% ‐0.5% ‐0.8% compared with a 1.3% drop in Q2 2012. Mar‐ 10 Set‐10 Mar‐ 11 Set‐11 Mar‐ 12 Set‐12 Mar‐ 13 Source: Bloomberg
Next Week Preview: Portuguese Earnings SeasonGalp Energia (GALP PL) Q3 Results: A solid quarter over‐a‐year ago and the $2.2/bbl of Q2 2012;is expected (October 29th, before market) • However, the company will probably not capture all the strength due to a negative time lag in• A conference call with analysts and investors will passing through higher prices to end consumers. take place on the same day at 11:30 GMT; Q3 EBITDA RCA should stand at €88m (+18% y/y)• We forecast Q3 consolidated EBITDA and EBIT at and Q3 EBIT RCA to reach €32m (+52% y/y); €290m (+31% y/y) and €182m (+64% y/y). • Gas & Power: gas sales were up 27% y/y as Financial expenses should be down over‐the‐year trading volumes increased 5‐fold. However, sales ago level, reflecting lower debt levels following of electricity to the grid have been weak (‐0.9% the capital increase in Brazil. Net profit RCA is y/y). Q3 EBITDA RCA is expected to reach €90m forecasted at €103m; (+14% y/y) and Q3 EBIT RCA (+15% y/y);• Upstream: Net entitlement production rose 60% • Q3 2012 is forecasted to have been a good y/y to 19.5Kboepd in Q3 2012, boosted by the quarter to Galp. But, probably investors will first FPSO at Lula/Cernambi and the production remain focused on potential news from the from Angola (returning from maintenance). Oil company’s exploration activity, mainly from prices were flat q/q and down ‐3.5% y/y to USD Brazil. 109.5. We forecast Q3 EBITDA RCA at €111m (+75% y/y) and Q3 EBIT RCA at €69m (more than Novabase and Semapa will report Tuesday. three times the year‐ago level); Corticeira Amorim, Impresa and Brisa will release• Refining and Marketing: Galp’s indicator margin Q3 earnings Wednesday. Inapa is expected to report points to $3.9/bbl from the negative $0.4/bbl Friday.
Next Week Preview: European Earnings Season th• Five of Europe’s integrated oil Monday 29 Galp Energia Assa Abloy Q3 2012 Results Consensus Q3 2012 Results Sales SEK 11.755bn (+8.4% y/y); adj EBIT SEK 1.921bn (+9.7% y/y); giants will report this week, Linde PTP SEK1.727bn (+9.2%); net income SEK 1.329bn (‐19.2% y/y) Q3 2012 Results Sales €3.88bn (+13%); adj EBITDA €898m; EBIT €520m; net profit €293m; Fully dil. EPS €1.71 including Royal Dutch Sheel Dia Tuesday 30 th 9M 2012 Results (Thursday), BP (Tuesday) and Deutsche Bank Ferrovial Q3 2012 Results 9M 2012 Results UBS Q3 2012 Results IB revenues CHF2.0bn; IB PTP CHF188m; WM gross margin 89bps; Total (Wednesday); Bayer group net profit CHF345m. Will cost reductions be announced? Q3 2012 Results Group sales €9.312bn; EBITDA pre‐tax €1.845bn; EPS pre‐tax €1.15• This will also be an important Standard Chartered Eni Trading Update 9M 2012 Results Sales €32.03bn (+22.6%); operating profit €4.33bn (‐3.7%); EBIT €4.45bn (‐1.1%); EBITDA €7.3bn (+2.19%); adj net income €1.562bn (‐12.9%) week for UK banks. On the BP MAN Q3 2012 Results Adj net income $4.069bn (‐26.8%); adj EPS $0.217 (‐26.5%) Q3 2012 Results Order intake €3.71bn (‐9.4%);net sales €3.748bn (‐7.1%); op profit €199m (‐38%); EBIT €184m; net income €95.3m continent, UBS (Tuesday), Swedish Match Q3 2012 Results Sales (ex tobacco tax) SEK 3.213bn (+6.7% y/y); operating profit SEK 1.075bn (+9.3%); Net profit SEK 755m (+10.3%) Deutsche bank (Tuesday) and Imperial Tobacco Metro FY 2012 Results Sales GBP 7.937bn (+1.2%); PTP GBP 2.512bn (+16.6%); adj EPS 199.3p (+6%) Q3 2012 Results Sales €15.922bn; adj EBIT €438m; EBIT €423m; net income €162m; EPS €0.50 Fiat 9M 2012 Results Trading profit €910m;Net income €250m (+123%); net debt €6.5bn BBVA (Wednesday) will also Wednesday 31 Antena 3 th 9M 2012 Results report earnings; Novo Nordisk Q3 2012 Results Sales DKK19.921bn (+20.5% y/y); EBIT DKK7.227bn (+28.8%); PTP DKK6.824bn (+25.1%); net profit DKK5.277bn (+25.6%) Abertis 9M 2012 Results• In the pharma sector, Anheuser‐Busch InBev ArcelorMittal Q3 2012 Results Revs $10.3bn; EBITDA $4.02bn; EBIT $3.3bn; net income $2.04bn; norm. EPS $1.22 Q3 2012 Results EBITDA $1.3bn (‐45.8% y/y) Grifols 9M 2012 Results GlaxoSmithkline (Wednesday), Clariant Air France‐KLM Q3 2012 Results Sales CHF1.927bn (+3.3%); net income CHF53.6m Q3 2012 Results Revs €7.08bn; EBIT €454m; net income €14.4m; EPS €0.05 Bayer (Tuesday) and Novo Deutsche Lufthansa Barclays 9M 2012 Results Sales €22.792bn; EBITDAR €2.128bn; EBIT €479m; net profit €190m Trading update PTP GBP1.651bn (‐31.9% y/y) Total Q3 2012 Results Net income €3.05bn (+8.9%); EBIT €6.128bn (+6%) Nordisk (Wednesday) should GDF Suez Prosegur Q3 2012 Results Revs €20bn (+1.42%) Q3 2012 Results report; GlaxoSmithKline BBVA Ebro Foods Q3 2012 Results Sales GBP6.668bn (‐6.1%); PTP GBP1.909bn (‐1.7%); adj EPS 28.4p (‐0.5%) 9M 2012 Results Will credit quality in Spain continue to worsen? 9M 2012 Results• The world’s largest brewer, AB Fiat Industrial Thursday 1 st Q3 2012 Results Trading profit €500m (+3.3%): CNH €375m, Iveco €100m; net profit €245m (+20%) BG Group Q3 2012 Results Adj net income $1.165bn (+14.4%); adj EPS $0.329 (+9.4%) Inbev, releases result on TDC Q3 2012 Results Revs DKK6.49bn (+0.5%); gross profit DKK4.74bn (‐0.9%); EBITDA DKK2.654bn (‐5.9%); net income DKK726m Wednesday; British Sky Broadcasting Legal & General Q1 2013 Results Sales GBP1.712bn (+3.3%); adj EPS 13p (+12%) Trading update Royal Dutch Shell Q3 2012 Results Adj net income $6.35bn; adj EPS $1• Tuesday will be the first day of BT Group Lloyds Banking Group Q2 2013 Results Revs GBP4.55bn (+1.4bn); adj EPS 5.8p (+1.7%) Trading update PTP GBP540.7m vs. Loss GBP607m last year trading for Telefónica Germany. nd Friday 2 Alcatel‐Lucent/France Q3 2012 Results Sales €3.576 (‐7%); adj operating income €3m (vs. €173m in Q3 2011) Royal Bank of Scotland Trading update PTP GBP660m vs. Loss GBP101m y/y
Next Week Preview: US Earnings Season and Company Events th Monday 29 Consensus (First Call)• Weekly highlights will probably be Pfizer Anadarko Petroleum (APC) Masco (MAS) Earnings release Earnings release $0.75 $0.12 (Tuesday), Ford (Tuesday), General Motors Tuesday 30 Mattel (MAT) th Investor Day (Wednesday), Exxon (Thursday) and Microsoft (MSFT) Pfizer (PFE) Microsoft BUILD Developer Conference Earnings release $0.53 Automatic Data Processing (ADP) Earnings release $0.63 Chevron (Friday); Avon Products (AVP) Earnings release $0.23 Cincinnati Bell (CBB) Earnings release $0.05• Weakness in Europe is expected to Western Union (WU) Union Pacific (UNP) Earnings release $0.45 Investor Day influence Ford and General Motors’ Office Depot (ODP) Johnson Controls (JCI) Earnings release $0.01 Earnings release $0.75 results. Guidance will be key; Ford Motor (F) JDS Uniphase (JDSU) Earnings release $0.29 Earnings release $0.12 Hasbro (HAS) Non‐deal Roadshow• FX headwinds could be an issue to Pfizer Valero Energy (VLO) MetroPCS Communications (PCS) Earnings release $1.79 Earnings release $0.27 (from both a top‐line and bottom‐line United States Steel (X) Wednesday 31 th Earnings release $0.00 perspective). Investors will watch closely Clorox (CLX) McGraw‐Hill (MHP) Earnings release Earnings release $0.96 $1.31 American Tower (AMT) Earnings release $0.41 for updates on capital deployment and the Time Warner Cable (TWC) Earnings release $1.42 Mastercard (MA) Earnings release $5.90 potential for further cost reductions; Southern (SO) Ralph Lauren (RL) Earnings release Earnings release $1.13 $2.14• Exxon Q3 2012 results are expected to Allstate (ALL) General Motors (GM) Earnings release Earnings release $1.13 $0.60 benefit from higher E&P earnings. Investor Visa (V) Murphy Oil (MUR) Earnings release Earnings release $1.50 $1.21 MetLife (MET) Earnings release $1.28 attention should be directed at XOM’s Exelon (EXC) st Earnings release $0.72 Thursday 1 rational behind recent moves and the Apache (APA) Exxon Mobil (XOM) Earnings release $2.22 Earnings release $1.96 M&A strategy going forward. Also Watson Pharmaceuticals (WPI) Kellogg (K) Earnings release $1.29 Earnings release $0.81 important, will probably be XOM’s plans Estée Lauder (EL) Newmont Mining (NEM) Earnings release $0.77 Earnings release $0.91 American International Group (AIG) Earnings release $0.87 for cash returns to shareholders and the Fluor (FLR) UPS (UPS) Earnings release $0.97 Non‐deal Roadshow outlook for share repurchases. Starbucks (SBUX) nd Friday 2 Earnings release $0.45 UPS (UPS) Non‐deal Roadshow Chevron (CVX) Earnings release $2.85
Charts we are watching (I) USD/Chinese Renminbi exchange rate• The Republican presidential candidate Mitt 6.40 Romney promised to declare China a currency Price of 1 USD in CNY 6.35 manipulator on his first day in office. Nevertheless, China’s renminbi has had a nice 6.30 run over the last three month. Recent economic data seems to point to an economic 6.25 6.2494 stabilization. FX traders have probably the same opinion… 6.20 Jan‐12 Abr‐12 Jul‐12 Out‐12 Source: Bloomberg • The Hong Kong Monetary Authority intervened USD / Hong Kong Dollar exchange rate 7.7700 in the currency market for a second time in less than a week on Tuesday, in an attempt to 7.7650 Price of 1 USD in HKD halt appreciation on the local currency. Better 7.7600 news on China’s growth probably explained the 7.7550 pressure from hot money flows. The liquidity 7.7503 boost is also reaching the local property 7.7500 market. Prices have surged past 1997 highs, 7.7450 according to an index provided by Centaline 7.7400 Property Agency. Jan‐12 Abr‐12 Jul‐12 Out‐12 Source: Bloomberg
Charts we are watching (II) S&P 500 vs. S&P 500 Info Tech Index• Huge underperformance from technology 125 100= Dec. 31th, 2011 S&P 500 Info Tech stocks since their peak on September. The 120 Index softness in global growth and investment 115 spending has clearly weighted on parts of big‐ 113 110 112 cap tech. The US tech sector has strong balance sheets, solid dividend growth and 105 share repurchases. But, should we expect a 100 S&P 500 pick‐up in corporate IT investment in 2013? 95 Jan‐12 Abr‐12 Jul‐12 Out‐12 Source: Bloomberg Gold Spot Price (USD per try ounce)• The Fed has announced QE3. On balance, 1800 further QE is expected to be good for gold. 1750 Gold price tends to rise when the real Fed fund 1711.15 1700 rate and TIPS yields are low. However, gold 1650 recorded its third straight weekly loss. That was the first time this happened since March. 1600 Are speculative positions on gold extended? 1550 1500 Jan‐12 Abr‐12 Jul‐12 Out‐12 Source: Bloomberg
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