EUROPEAN MORNING NEWS

Wednesday, 06 February 2013

U.S.
Nasdaq +1.3%, SPX +1.04%, Dow +0.71%, Russell +0.99% and SOX +1.57% - BEST SECTORS: Solar +2.4%, HMO +2.4%, Broker +1.9%, Retail +1.8%, Semi +1.57% - WORST SECTORS: Coal -2.08%, Miners 0.43%, Rest 0.30%, REIT 0.20%, Education 0.07% SPX took out highs of Friday around 2:30pm and hit 1,515 (wiping all of Mondays losses) Dow was also above 14k from 2:30 to 3:30.and almost felt market may take another leg up but we failed to hold the days highs, with Dow closing below 14k but still, SPX regained 1,500 with ease TRAN index had another all-time high close as well, so a couple of good signs. Volumes better but not great, as we ended 6% above 20day ave VWAP was a floor on SPX all day, so good to see that longs actively were buying as we drifted last hour of trading, 10y failed to hold psychological 2% level. Despite that, felt BETA was well bid ..CSUSBETA +1.35%, Cyclical index (CYC) +1.3%..... VIX fell -6.5% and back below 14. Early catalyst for yesterday's move was clearly better PMI services from Europe (and the collapse of periphery yields) - Also IMF said "Spain is making major progress on reforming the banking sector - IBEX ended up 2.2% and Italy's MIB up 1.05% (helped) be aware that uro tested 1.36, but failed to hold it. Other things to note Move in Apple (AAPL +3.51%) also another big reason for yesterdays move No major headlines (they did roll out a new generation IPad) felt the catalyst was more ARM Holdings (ARMH +4.1%) better earnings As far as other techs, focus were HWares as Dell (DELL +1.13%) confirmed agreement to go private at $13.65 a share in cash and equity, total deal worth $24.4b (to be acquired by Michael Dell & Silver Lake). .HPQ was up +6.5% after hourson BBerg that Quartz saying HPQ board may be mulling a "break up" (nothing confirmed) Retail a strong day XRT another all-time high - reasons were: a) REV +18.1% and K 0.70% rallied on earnings a) BBBY +2%, M +2.9% and TGT +2.6% all were upgraded at Citi and c) WAG +3.3% reported strong Jan SSS (+3.7% v est +1.9%)....Today CVS, Kraft (KRFT) and R Lauren (RL) are due to report. Also JC Penny (JCP) rallied; was down -3.5% pre-open and ended up +2.4%, big reversal - move after co said purported notice of default was invalid. Restaurants were pressed after YUM! Brands (YUM) fell -2.9% after weak guidance - said Jan China unit est comp sales fell 37%. Steels a good day after AK Steel (AKS +1.5%) was upgraded at CRT Capital - today ArcelorMittal (MT) reports, so a big gauge for group. Have to point out that Petrobras (PBR -7.9%) got hammered after terrible 4Q results. Ebitda of R$11.7b was -18% below cons. Also for first time in years, co proposed lower divvy for ordinary shareholders (PBR, PETR3) vs prefs (PBR/A). Big reason why Brazil ended down 22bps. Solars a good day - Some talks of prospects for solar REITs pushed the group higher - renewable play AEIS +4.95% also had good #s (rev $113m v est $111.4m) Credit Card a good day as Mastercard (MA +1.3%) led after BBerg headlines that co boosted quarterly divvy to 60c vs 30c (BBerg est was for 30c) - also annc'd buyback - today Visa (V) reports. Insurers market performed despite Hartford (HIG -1.3%) fell after EPS. Today Prudential (PRU) and Allstate (ALL) are due to report Coals weaker behind Arch Coal (ACI -12.8%) weak earnings - reported EPS loss of -$0.42 (v est $-0.15) and revs $968m (v est $1.01b) Homes lagged a bit going into Mortgage Apps today - also saw a few downgrades around the street - TOL and KBH were cut by BarCap and BZH was downgraded at CRT Capital Media was helped by VMED +17.8% after FT reported that Liberty Global (LBTYA) was preparing to bid for VMED. Chinese internets smoked - Baidu (BIDU) fell -10.1% as EPS beat on a one-time gain - Oper margin decreased from 52.7% in 3Q12 to 45.6% in 4Q12, below our forecast at 49.8%. Also was downgraded by few houses AFTER-HOURS Walt Disney (DIS +2.8%) - reports Q1 EPS $0.79 ex-items vs street $0.76; Reports Q1: Revenue $11.34B vs street $11.21B LBTYA/VMED - Liberty Global to acquire Virgin Media for ~$47.87 mix of cash ($17.50) and shares (0.2583 A shares and 0.1928 C shares); Conference call announced for 6-Feb at 8:30 EDT SLW/VALE - Silver Wheaton acquires gold streams from vale's Salobo and Sudbury mines for $1.90B, plus 10M Silver Wheaton warrants with a strike price of $65 and a term of 10 years. Harley-Davidson HOG) - increases quarterly dividend by 35.5% to $0.21 from $0.155 Hewlett-Packard (HPQ +2.6%) - board studying possible break-up of company (Quartz) 3M (MMM) - increases quarterly dividend by 7.6% to $0.635 from $0.59; authorizes repurchase of up to $7.5B of its common stock Aflac (AFL -1.5%) - reports Q4 EPS $1.48 ex-items vs street $1.47; FY Guidance (Dec 2013): Reaffirms EPS $6.86-7.06 CME Group (CME -3.7%) - reports Q4 EPS $0.63 ex-items vs street $0.63; Reports Q4: Revenue $660.9M vs street $659.9M Micron (MU -1.5%) - launched $440 mln offering of convertible senior notes

This document contains extracts from various media and news sources, Credit Suisse makes no representation as to their accuracy or completeness and do not endorse the content thereof.

EUROPEAN MORNING NEWS

Wednesday, 06 February 2013

Economics
GMT 11:00 Germany Ind Orders Dec mmyy 12:00 US MBA Mtg Applins 01-Feb CS 1.0%/-0.7% N/A CONS 0.7%/-1.2% N/A PREV -1.8%/-1% -8.1%

Earnings & Events

EARNINGS ANNOUNCEMENTS FOR WEDNESDAY, FEBRUARY 06, 2013 ArcelorMittal FY Consensus: Sales: ZAR33153m EBIT: ZAR-275m Elisa Corp FY Consensus: Sales: 1562.2m EBIT: 304.4m GEA Group FY Consensus: Sales: 5769.8m EBIT: 510.3m GlaxoSmithKline FY Consensus: Sales: 26572.2m EBIT: 8037m Hargreaves H1 Consensus: Sales: 134.667m EBIT: 83.8m Lundbeck FY Consensus: Sales: DKr14726m EBIT: DKr1996m Lundin Petroleum FY Consensus: Sales: SKr1342m EBIT: SKr746m Mapfre SA FY Consensus: Sales: 20378.7m EBIT: 1679.75m Mobistar FY Consensus: Sales: 1627m EBIT: 273.9m Pohjola Bank FY Consensus: Sales: 980.5m NI: 504.25m Smurfit Kappa FY Consensus: Sales: 7297.111m EBIT: 640.143m Svenska HSB FY Consensus: Sales: SKr34798.792m NI: SKr13801.92m Syngenta FY Consensus: Sales: SFr14243m EBIT: SFr2516m Terna FY Consensus: Sales: 1773.5m EBIT: 933.4m Tieto FY Consensus: Sales: 1836m EBIT: 121.736m Turk Telekom FY Consensus: Sales: TRY12637m EBIT: TRY3481m Vestas FY Consensus: Sales: DKr6918m EBIT: DKr-154m Volvo FY Consensus: Sales: SKr304982m EBIT: SKr19419m Vontobel FY Consensus: Sales: SFr775m NI: SFr129.5m NI: ZAR-343m NI: 210.8m NI: 340.45m NI: 5458m NI: 67.05m NI: DKr1585m NI: SKr184.7m NI: 902.9m NI: 170.3m NI: 217.5m NI: SFr2046m NI: 438m NI: 95.082m NI: TRY2662m NI: DKr-148m NI: SKr12292m

U.S.EARNINGS ANNOUNCEMENTS FOR WEDNESDAY, FEBRUARY 06, 2013 Pre mkt: Cummins, Marathon Oil, Polo Ralph Lauren, Time Warner, Inc Post mkt: Akamai Tech, Allstate, Equifax, Prudential Financial, Tesoro Petroleum EUROPEAN AGMs/INVESTOR DAYS FOR WEDNESDAY, FEBRUARY 06, 2013 None EX DIVIDEND DAYS FOR WEDNESDAY, FEBRUARY 06, 2013 Stagecoach Group (2.6p), Unilever PLC (20.39p) OTHER EVENTS FOR WEDNESDAY, FEBRUARY 06, 2013 Atkins WS (IMS), Douglas Holding / Sappi (Q1 results), EasyJet (January Traffic Statistics), Eurasian Natural Resources Corporation Plc (Q4 Production Results), Vodacom Group (Trading Update) EUROPEAN EARNING ANNOUNCEMENTS FOR THURSDAY, FEBRUARY 07, 2013 - FRIDAY, FEBRUARY 08, 2013 THURSDAY Voestalpine Q3; Nyrstar NV FY; Umicore FY; Danske Bank Q4/FY; Metso Q4; Outotec FY & Analyst Mtg; Sanoma FY & Analyst Mtg; Air France-KLM Jan Traffic figs; Alcatel-Lucent Q4/FY; Eutelsat Communication H1 - 2012/2013; Lagardere Q4 Sales; Sanofi FY; Air Berlin Jan Traffic figs; Daimler Q4/FY; Heidelberger Druck Q3; Telecom Italia Prelims; DnB NOR Q4; Statoil Q4 & Analyst Mtg; Assa Abloy Q4; Skanska Q4/FY; Credit Suisse Group Q4; Swisscom FY & Analyst Mtg; Compass Group Trading Update & AGM; Smith & Nephew Q4 Prelims; TUI Travel Q1 & AGM; Vodafone Group Plc Q3 Trading Update FRIDAY Eiffage Q4 Rev - 2012; Deutsche Lufthansa AG Traffic Figs; MAN FY; Buzzi Unicem Prelims; BCP Q4;Securitas Q4; SSAB Q4; Aquarius Platinum Limited Interims - 2012/2013

Early Research
BANK OF IRELAND U/P, TP 0.11; Cut to Underperform vs Neutral Following strong outperformance (+37% 3M vs. SX7P), we downgrade Bank of Ireland to UP (from N) with an increased TP of 0.11 (from 0.10). Trading on at 0.8x 14E TNAV for a 4.4% adjusted RoTE in 15E, on CS capital adjusted basis (adjusting for 2.4bn B3 capital shortfall) the bank trades at a higher 1.0x 14E capital adjusted TNAV (vs. sector at 0.9x) for a 15E capital adjusted return of 2.8%. We acknowledge the bank is in a strong position to benefit from potential macro improvements, but think it is more than discounted. Discounting sharp recovery in NIM Current market valuation implies an 8.4% RoTE which discounts (i) a normalisation of impairments charges to 65bps (from 170bps in 12E / vs. CSe 75bps in 15E); and (ii) a sharp recovery in NIM to c.175bps (vs. CSe 155bps in 15E). Having reflected liability margin improvement, we believe that, barring base rate increases, NIM will remain subdued as we see limited asset margin expansion. Asset quality to remain a drag With unemployment set to remain above 14%, we expect the Irish mortgage market to remain challenging (CSe 13E NPL ratio of 11.1%, up by 1.4ppt yoy). Despite expecting a significant improvement in impairment charges with a LLP ratio of 171bps in 12E down to 75ps by 15E, even by then we still expect provisions at 73% of PPOP.

This document contains extracts from various media and news sources, Credit Suisse makes no representation as to their accuracy or completeness and do not endorse the content thereof.

EUROPEAN MORNING NEWS

Wednesday, 06 February 2013

Capital position under pressure Whilst optically well capitalised (14.9% last reported CT1 ratio), we estimate a group B3 fully loaded CET1 ratio of 6.5% at YE12E (vs. c.9.0% sector average), including 1.9bn of government pref. shares which will need to be replaced by equity. With the next PCAR in Sept. 13, we see increasing regulators scrutiny on the banks capital. KPN NEUTRAL, TP 3.5; Cut to Neutral vs Outperform; TP cut to 3.5 vs 6.5 We downgrade KPN to Neutral (from Outperform) and reduce our t/p to 3.50 (from 6.50) reflecting KPNs change in strategy on International Mobile market share. In January we maintained our Outperform rating on the view that top line trends at KPN could improve and that a capital increase wasnt necessary. Top line trends are indeed improving, with KPN Neths returning to line growth in Q4 12, Dutch mobile service revenue falling -6.9% vs. -10% Q3 and e-plus underlying service revenue (ex MTR) broadly stable. But just as the top line turns, KPN has announced a much more aggressive commercial strategy to pursue market share growth in Germany and Belgium at the expense of profitability, a strategy that has failed to create value elsewhere. This new strategy takes another 360m from our 2013E EBITDA forecast. Even including a positive 200m working capital swing and lower cash tax, our 2013E FCF forecast falls 14% to 836m. This leaves a 2013E adjusted equity FCF yield of 9% assuming a 4bn capital increase and 10.5% if scaled back to 2bnstill not cheap vs. the sector (11%). The EGM in 6 weeks is now a poll on the new plan as well as the capital raising, with AMX holding the casting vote. A no-vote could lead to a more share-price-friendly strategy near term. But speaking to our AMX analyst, the go-for-growth strategy is right out of the Carlos Slim playbook. Whether a more aggressive strategy in Germany elicits a new approach from Telefonica remains a possibility. As ever with KPN, optionality abounds. But a capital increase and new growth strategy reduce the base case value considerably, at least until KPN shows profitable growth in International. 9.0% adjusted 2013E equity FCF yield (inc 4bn rights issue). RWE U/P, TP 28.00; TP cut to 28.0 vs 29.5 Mainly as a result of using a higher future tax rate (35% vs. 32%), we cut our EPS by 8% in 2013 (3.59) and 9% on average after 2014. 201215E EPS CAGR goes to -2% vs. +1% previously. Our TP is adjusted to 28 from 29.5 (-5%). We still base our earnings on our mid-Dec 2012 power price scenario pointing to flat real prices. Recent weakness in power prices, while partly a one-off, provides evidence that downside risk is significant. Yet marking to market our valuation would take 20% off our TP and up to 40% off our EPS. We argue that RWE has a 5bn+ funding gap and should suspend or strongly cut its dividend post-2013 with a view to maintaining its credit rating (BBB+). Lack of progress on disposals (still 5.2bn to go out of 7bn) is an issue but full implementation could result in up to 12% EPS dilution. Catalysts: RWE re-iterated its 2013E guidance in November 2012 as E.ON suspended its. RWE will release its FY 2012 earnings on 5th March and updated earnings guidance will be a key catalyst for the stock. The stock is trading on optically attractive PE and EV/EBITDA prior to incorporating the potential full impact of dilution. However, post-dilution multiples, in particular dividend yield of 4.8% (sector: 6.4%), remains unattractive despite the recent decline in the stock price. Our TP remains based upon a blend of methods including DCF and market multiples.

Early Headlines
Nasdaq +1.3%, SPX +1.04%, Dow +0.71%, Russell +0.99% and SOX +1.57%, Sector Performance, Solar +2.4%, HMO +2.4%, Broker +1.9%, Retail +1.8%, Semi +1.57%, Coal -2.08%, Miners -0.43%, Rest -0.30%, REIT -0.20%, Education -0.07%, SPX took out highs of Friday around 2:30pm and hit 1,515 (wiping all of yesterdays loss) - Dow was also above 14k from 2:30 to 3:30.and almost felt market may take another leg up - but we failed to hold the days highs, with Dow closing below 14k - but still, SPX regained 1,500 with ease - TRAN index had another all-time high close as well, so a couple of good signs. Volumes better but not great, as we ended 6% above 20day ave - VWAP was a floor on SPX all day, so good to see that longs actively were buying - as we drifted last 1/2 hour of trading, 10y failed to hold psychological 2% level. Despite that, felt BETA was well bid today..CSUSBETA +1.35%, Cyclical index (CYC) +1.3%..... VIX fell -6.5% and back below 14. (US Salestrading) China Market Colour, CHINA: SHCOMP: 2432 (-5bps) SZCOMP: 9927 (-20bps), China little changed as volumes shrink ahead of Chinese New Year. Brokers and insurers both outperforming. Initial reports are that brokers asset management arms booked very strong results in January. Insurers stronger on reports Ping An has extended its window to issue debt instead of equity. Very little immediate reaction to China's income equality policy, more of a long term positive for broader markets. Property & construction giving back gains from yesterday afternoons rally. (Asia Salestrading) Japan, A Japanese finance official said the Bank of Japans policy tools are sufficient for now as a central bank board member said a new level of action is needed to counter deflation. The BOJ, for the time being, should stick to policy measures it has taken so far, Vice Finance Minister Shunichi Yamaguchi said in an interview yesterday in Tokyo. Board member Takehiro Sato said in a speech today that reaching a 2 percent inflation goal will be difficult without new initiatives. (BN) The EURO, European leaders should protect the euro against irrational swings of the financial market by setting a medium-term target for the exchange rate, Franois Hollande, the President of France, said at the European Parliament Feb. 5. The eurozone must, through its heads of state and government, decide on a medium-term exchange rate, the Socialist president told a news conference, two days before the start of the EU Summit on Feb. 7-8. (BN)

This document contains extracts from various media and news sources, Credit Suisse makes no representation as to their accuracy or completeness and do not endorse the content thereof.

EUROPEAN MORNING NEWS

Wednesday, 06 February 2013

Irland, European Central Bank officials may consider as soon as today which concessions they are prepared to grant Ireland to lower the cost of the nations bank bailout, according to two people with knowledge of the matter. (BN) Platinum futures rose to a 17-week high on mounting concern that global demand may outpace supplies. Palladium jumped to the highest since September 2011, and gold declined. The platinum industry is in crisis, Anglo American Plc Chief Executive Officer Cynthia Carroll said today in Cape Town, South Africa. Her company controls Johannesburg-based Anglo American Platinum, the worlds biggest producer, which yesterday reported a 2012 loss as production of refined metal dropped. (BN) Rio Tinto, the cost of building Rio Tinto Groups Oyu Tolgoi copper and gold mine rose 16 percent to $6.6 billion, according to a company statement responding to criticism of the project in Mongolias parliament last week. The estimate compares with the initial 2010 costing of $5.7 billion, according to a statement on the website of Oyu Tolgoi LLC, the mines operator that is owned 66 percent by Rio unit Turquoise Hill Resources Ltd. and 34 percent by Mongolias government. (BN) Rio Tinto Group halted prefeasibility studies for work associated with its TIO4 titanium project in Canada and Madagascar because of weaker market conditions and as the miner cuts costs, the company said in an e-mailed statement. (BN) ArcelorMittal, Q4 EBITDA $1.32bn (cons $1.25bn), Q4 Sales $19.3bn (cons $19.2bn), expects reported EBITDA to be higher in 2013 (BN) ThyssenKrupp, too many administrative departments made co. far too complex, Die Welt reports, citing a memo to employees by CEO Heinrich Hiesinger. Co.s structure is not affordable, doesnt work well in many places. Revamp includes combination of human resources, health & safety, ThyssenKrupp Akademie and executives management into one group (BN) Total SA entered exclusive talks to sell the TIGF natural gas network in southwestern France to Snam SpA, Electricite de France SA and the Government of Singapore Investment Corp. for 2.4 billion euros ($3.26 billion). The selected group will support TIGF in its further development, while meeting commitments made to TIGFs employees and partners, Paris-based Total said in a statement yesterday. The unit, which has 5,000 kilometers (3,100 miles) of pipelines and more than a fifth of the countrys storage capacity, drew seven initial bids, Total Chairman and Chief Executive Officer Christophe de Margerie said in November. (BN) Skanska foresees a stable U.K. market this year and good growth in 2014, Dagens Industri reports, citing Mike Putnam, who heads the companys U.K. unit. (BN) Royal Bank of Scotland Group Plc is set to pay 400 million to 500 million pounds ($783 million) in fines for manipulating interest rates, the secondlargest penalty imposed in a global regulatory probe, two people with knowledge of the matter said. (BN) Virgin Media shareholders to receive $17.50 in cash, 0.2582 Liberty Global Series A shares and 0.1928 Liberty Global Series C shares for each Virgin Media share they own. (BN) Swatch May Be Ousted From SMI Over Accounting Rules, FuW Reports (BN) Syngenta, 2012 EBITDA 3.15bn (cons 3.19bn), Rev $14.2bn (cons $14.25bn), DIVI CHF 9.50 (BDVD fcts CHF 8.60), expects to generate significant FCF, while continuing to invest in realization of crop.based pipelines in 2013 (BN)

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This document contains extracts from various media and news sources, Credit Suisse makes no representation as to their accuracy or completeness and do not endorse the content thereof.