Daily Alpha

10:08:50
May 26th
I am not expecting a great deal of activity first thing this morning as investors wake themselves up after the long weekend. A lower opening was expected in the Western European space and as the US futures turn negative I fully expect us to follow suit and continue to erode. I don't anticipate a collapse by any means but a slight consolidation is definitely on the cards. Futures volumes are quiet at 65% and cash at 90% of recent activity. There's no sector at 5am NY time that's in the black and Small Caps (SCXP) underperforms Large Caps (LCXP) by 40 Bps.. risk aversion? What's slightly weighing is Korea fires two short range missiles off its eastern coast a day after a nuclear test and similar missiles launches. The price of crude is showing signs of weakness -$2 @ 59.67 as of 5am so look for the energy sector to underperform. Big stories early on is DANONE rights issue, REC news out yesterday, RIOs agrees to 33% steel price cut. Danone rights is slightly troubling as if someone like Danone needs to raise capital then who doesn't. The rest moves seems to be related to a catch up with yesterday....

Macro stories...

Germany's BaFin President Jochen Sanio said debts of the country's banks willblow up like a grenade unless the lenders participate in the government's plan to help them prepare for the credit crunch's next stage (Telegraph) Jochen Sanio, said the danger is a series of "brutal" downgrades of mortgage securities by the rating agencies, which would eat into the capital reserves of the banks and cause broader stress across the credit system. According to the BaFin, the markets will "kill" banks that try to go it alone without state protection, warning that banks have 200B of bad debts on their books. BaFin's president added that "we are pretty sure that within a month or two our banks will feel the full force of the sharpest recession ever on their credit portfolios." An internal memo by the regulator's office suggested that likely write-offs may reach 816B, which is twice the entire reserves of the country's financial institutions. The figure included problematic assets and Hypo Real Estate topped the secret list with 268B in credit risk, followed by HSH Nordbank at 105B and Commerzbank at 101B.
Earnings of Italian banks may fall more than 40 percent this year because of bad loans to businesses and consumers and the impact of the economic slowdown, Il Sole 24 Ore said, citing a report by research institute Prometeia.

Lowest Libor Hides `Exceptionally Wide' Spreads by Banks Hoarding Deposits-BloombergThe difference between the highest and lowest interest rates banks say they pay for three-month dollar-denominated loans is near the widest this year, according to data compiled by the British Bankers’ Association. The spread signals that lenders still lack confidence in each other, even though measures ranging from the so-called Libor-OIS spread to corporate bond sales show credit markets have recovered from the freeze caused by the Sept. 15 collapse of Lehman
According to a report from China's State Information Center (SIC), monthly retail sales figures overstate China's domestic consumption. SIC believes that the retail sales data excludes consumer spending on services and housing, which has fallen more sharply than spending in other areas. In Q1, China reported inflation-adjusted retail sales growth of 15.9%, but officials said that the data includes government and corporate spending and thus overstates actual growth.

OPEC is expected to meet on Wed-Thur of this week in Vienna. Saudi Oil Min Naimi said that OPEC is "not expected to change level of production"; OPEC will not raise output until world oil inventories are at a "normal position", targets 52-54 days of demand. Here's some speculated commentary expected: - World oil inventories still high.- Sees demand recovery from Q3.- Reiterates that $75-$80/bbl is a fair price to sustain investment.- Note: On 23/5, Naimi said that he would recommend staying the course during upcoming OPEC meeting- Over the weekend, Libya's top oil official there is a 50% chance a production cut will be decided upon

Earnings:
YPSOMED Sales 272.6 (289.8); EBIT 30.4 (34.4), Net 26.2 (29)
..to raise Chf 100mm in share sale..sees single digit growth in 09/10

FLUGHAFEN WEIN Sales 121.4 (117.6); EBIT 25.1 (23.8), Net 17.5 (16.3)
..sees '09-'13 capex around 937mm..sees passengers '09 to fall 9%

D/S NORDEN EBITDA 15 (21); EBIT 22 (26); Net 73 (70)

Micro/single stock stories...

FINANCIALS:
ERSTE:BCR failed stress test & required to increase equity (WirtschaftsBlatt)
JULIUS BAER: agreed to buy Italy’s Alpha SIM with ~€400m AuM
DEXIA: plans to reduce activities in Japan-La Tribune
SANTANDER: sells Venezuelan biz for $1.05B
D.BANK: Holds AGM at 10am local time
GENERALI and CREDIT AGRICOLE may amend a shareholders’ agreement for their combined 11% in INTESA SANPAOLO to a "lighter" version
HSBC plans to float PT Bank Ekonomi Raharja shares on the Indonesian stock exchange after the bank completes the purchase of the remaining shares in the lender (South China Morning Post)
JPM: Stands to reap $29 Bil windfall thanks to accoutning rule transforming bad loans it pruchased from WaMu into income

TMT:
GEMALTO: Completed acquisition of 03SIS
STM: reported Q1 negative free cashflow -$103m vs +$244m in Q1 2009
VODAFONE: lost a UK tax avoidance case, costing up to £2.2B- WSJ Friday
WPP: proposing a £60m bonsus payout for Martin Sorrel-Times
NEXANS: sales may fall 5-10% in 2009; cautious comments -Les Echos
ATOS ORIGIN: won contracts for Olympic Games ($300m for 2014, $500M for 2016) UNITIED INTERNET: To acquire Freenet's DSL biz for Eu 123mm
D.TEL: To extend savings program beyond 2010
ENIRO: Rights terms announced
NOKIA: Ovi apps store now live. http://www.ovi.com/services. CONSUMER/RETAIL:
DANONE: seeks to raise €3B in a rights issue; conf call 8am UK
M&S: Sir Stuart Rose to leave earlier than previously said-Times
ARCANDOR/METRO: FTD reports they are to shelve combination talks
SAINSBURY: Considers expansion in Russia (Kommersant)
UNILEVER is launching an advertising offensive to promote its brands against own label products of super markets (Het Financieele Dagblad) PHARMA/CHEMS:
LONZA: received a contract from an undisclosed major drug co.; no terms given
YARA: -7% on talk urea futures pricing in $225-$230 ton (spot $240-$250)
..Ureua Futures (BIFUPBYU Index)
ENERGY/MINERS/UTILITIES:
RIO: +3% in Oz, agreed to cut iron ore prices by 33%, heard spec was 35%
Q-CELLS & TIMMINCO: Reach new supply agreement for solar grade silicon
GAZPROM: Deputy CEO says '09 figs will be similar to '07
GAZPROM: North Stream gas pipeline to be finished by middle of 2010
EDF: Will join AREVA, TOTAL, GDF partnership to win contract to build civilnuclear energy plants in the Unitied Arab Emirates

AUTOS/TRANSPORT:
PORSCHE: negotiating bridging loans with 'variety of banks'-Telegraph
PORSCHE: $24 Bil options profit in peril as VW fights merger-Bloomberg
FIAT: may propose a merger instead of a takeover with GM's Opel to win backing
NEPTUNE ORIENT LINES: April volumes -22% (March -22%) and rates -20%

INDUSTRIALS:
ALSTOM: yday rumour of a capital increase; spec to purchase Areva's T&D unit
SIEMENS: To cut more than 1,000 jobs in software & metals
SIEMNES: Austrian unit of SIE to cut 630 of 1,700, related to automation unit
ABB: Could cut 20% of 2,500 staff in France in 2 sites involved in automation-L'Expansion

MISC:
HEIDELBERGCEMENT: rejected report that it plans sale Hanson UK unit for £1B
BRITISH AIRWAYS/IBERIA: could conclude planned tie-up within months
LAND SEC: CEO has 6m to come up with radical biz plan or face dismissal-Times

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