FINCOR Weekly Market Perspectives (21 JAN 2013)

Weekly Markets

Perspectives

For important disclosures, refer to the Disclosure Section, located at the end of this report.

n

Jan

ua

ry2

1th

,2

01

3

Equity markets rose last week. In the US, the Dow

Jones Industrial Average reached on Friday a five-

year high, after House Republicans announced that

they intend to pass a three-month increase (until April

15th) in the debt ceiling this week. Japanese indices

were again the highlight, on headlines that the Bank

of Japan is preparing to announce additional

measures at its meeting this week (on Tuesday).

The US earnings season has so far been decent,

which also helped risk sentiment. Nonetheless, only

67 S&P 500 companies have so far reported results.

Apple shares traded below the $500 mark over the

week (down c. 30% from its peak reached in mid-

September 2012), after reports that the company’s Q1

2013 component orders have been cut due to lower

than expected demand for the iPhone 5.

In Europe, Spain (2015, 2018 and 2041 bonds) and

Portugal (T-bills)’s auctions were successfull.

Portuguese 10-year government bond yields fell for a

Weekly Summarythird week in a row, supported by news that

Portugal could soon return to the market. The

Portuguese PM expects the country to start issuing

debt gradually in 2013. However, there are still

downside risks as the Portuguese Central Bank

downgrade of its GDP forecast for 2013 seems to

remind.

China Q4 2012 GDP growth came in slightly above

consensus. On a full year basis, the economy rose

by 7.8%.

This week, investors will probably remain focused

on the US and European earnings season. In

Portugal, Galp (today) and Sonae (Wednesday) will

release trading statements.

In the euro area, several surveys will be released

this week. On the political front, this week’s main

event will probably be today’s eurogroup

meeting.

-3

-2

-1

0

1

2

3

4

5

6

07 08 09 10 11 12 13

US Consumer Prices

All items (%, y/y)

Excluding Energy

and Food (%, y/y)

US: Retail sales shrugged off “fiscal cliff”

related concerns at the end of 2012

• December’s retail sales value increased by 0.5%

m/m, well above the consensus forecast at 0.2%;

• Excluding gasoline, motor vehicles and building

materials, core sales rose by a solid 0.6% m/m,

after a 0.5% increase in November;

• Retail sales accelerated at the end of 2012.

Consumers don´t seemed to be overly concerned

with the “fiscal cliff” negotiations.

US: Inflation remained muted at the

end of 2012

• Inflation remained below the Fed’s 2% target in

December. The Fed can continue to focus on

reducing the still high unemployment rate;

• The annual rate of headline CPI inflation fell to

1.7%, from 1.8%. The rate of core CPI inflation

remained unchanged at 1.9%;

• Producer prices fell by 0.2% m/m in December.

The annual rate of PPI inflation dropped to

1.3%, from 1.5% in November.

Source: US Commerce Department Source: Bureau of Labor Statistics

US: Industrial Production rises 0.3%

m/m in December 2012

• Industrial production gained 0.3% m/m in

December. The monthly variation was held back

by a 4.8% m/m drop in utilities output due to

unseasonably warm whether;

• Business equipment production increased by

1.3% m/m. Consumer goods production saw a

0.1% m/m fall in December, while construction

supplies rose by 1.0% m/m, suggesting that the

housing recovery is probably continuing.

US: The manufacturing sector is still

struggling

• The Empire State manufacturing index

remained in negative territory in January, after

falling to -7.8 from -7.3;

• The US Philly Fed manufacturing index dropped

to -5.8 in January, from +4.6 in December;

• The new orders index (-4.3 from +4.9), the

employment index (-5.2 from -0.2), and the

shipments index (+0.4 from +14.7) fell over the

month.

Source: Federal Reserve Source: Philadelphia Federal Reserve, US Federal Reserve

-50

-40

-30

-20

-10

0

10

20

30

40

50

2001 2003 2005 2007 2009 2011 2013

US Regional PMIs

Empire State manufacturing US Philly Fed

40

50

60

70

80

90

100

110

120

00 01 02 03 04 05 06 07 08 09 10 11 12 13

University of Michigan Consumer Confidence

US: Consumer confidence falls to a one-

year low

• The University of Michigan’s measure of

consumer confidence fell to 71.3 in January, from

72.9 in the previous month;

• The “fiscal cliff” deal approved in early January

and the following rise in equity prices didn’t

boost sentiment, probably reflecting the expiry of

the payroll tax cut;

• The survey’s current conditions index (normally

driven by labor market conditions) fell from 87.0

to 84.8.

US: Bank loans are still expanding

Source: Bloomberg Source: Federal Reserve Board of Governors

• Bank loans registered a solid increase over the

closing weeks of 2012;

• Most types of loans expanded, including

residential mortgages, consumer credit and

business loans;

• The growth rate of US bank loans has slowed

but it remains in positive territory, which

contrast to what is seen both in the euro-zone

and in the UK.

US January Beige Book was released last

week

• The Federal Reserve’s January Beige Book

includes information collected on or before

January 4th, 2013;

• The Beige Book prepared for the January FOMC

meeting pointed to subdued but positive

economic growth across the 12 Federal Reserve

districts;

• Concerns regarding the fiscal policy continued to

be mentioned in the commentary;

• Reports on manufacturing were less positive,

with only half of the districts reporting expansion,

and three reporting contraction;

• Both residential real estate activity and selling

prices improved in all twelve districts;

• Consumer spending was reported as higher in all

twelve districts, and benefitted from holiday sales

that were mentioned as being “modestly higher”

than in 2011.

Brazil: Copom keeps Selic

unchanged at 7.25%

Source: IBGE

• The central bank Monetary Policy Committee

left the policy rate unchanged at 7.25% in an

unanimous decision;

• The post-meeting statement signaled again that

the policy rate is expected to remain unchanged

for a period of time;

• The Copom considers that “the balance of risks

for inflation” has “deteriorated in the short-

term”, and that the recovery of domestic

activity “has been less intense than expected”;

• Market attention will likely shift to the minutes

(to be released January 24th).

2

3

4

5

6

7

8

2006 2007 2008 2009 2010 2011 2012 2013

Brazil Consumer Price Index (%, y/y)

-15

-10

-5

0

5

10

15

2000 2002 2004 2006 2008 2010 2012

EU Trade Balance (€bn)

6

7

8

9

10

11

12

13

2000 2002 2004 2006 2008 2010 2012

China GDP (%, y/y)

China: December activity growth

momentum remained solid• Real GDP rose 7.9% y/y in Q4 2012, slightly above

consensus (7.8%), supported by a good autumn

grain harvest and a rebound in property market.

the 2012 full-year GDP increased 7.8% y/y,

following 9.3% y/y in 2011;

• Real retail sales increased 13.5% y/y in December,

following 13.6% in November;

• Industrial Production rose 10.3% y/y in

December, slightly above consensus (10.2% y/y),

following 10.1% y/y in the previous month;

• Fixed asset investment increased 19.9% y/y (vs.

+20.7% y/y in November).

Source: China National Bureau of Statistics

• In November 2012, the seasonally-adjusted

euro-zone trade surplus widened from €7.4bn

to a record high of €11bn;

• Exports rose 0.8% m/m, the first monthly rise

since August 2012, while imports dropped

1.5% m/m;

• These figures suggest that net trade may have

had a decisive contribution to GDP in Q4 2012.

Source: Eurostat

Euro-zone: Trade surplus reaches

record high in November 2012

-23

-18

-13

-8

-3

2

7

12

60

70

80

90

100

110

120

1998 2000 2002 2004 2006 2008 2010 2012

Euro-zone Industrial Production and EC Industrial

Sentiment

EC Survey Industrial Sentiment (LHS)

Industrial Production (% y/y, RHS)

Euro-zone: Industrial production

disappoints in November 2012• Industrial Production fell -0.3% m/m, weaker than

the +0.2% rise expected by the consensus,

following two large monthly falls in both

September (-2.3% m/m) and October (-1.0%

m/m). Germany and France recorded small

monthly gains;

• By country, Italian and Spanish production

registered sharp monthly falls. In the euro-zone

as a whole, production was down 3.7% on an

annual basis.

Moody’s remains cautious on

Portuguese Banks. NPL ratio at 11.38%

in Spain

Source: Eurostat, European Commission

• The rating agency considers the on-going

economic recession as the key driver of asset

quality deterioration. Moody’s sees the loan-

loss capacity of most of the Portuguese rated

banks as insufficient in an adverse scenario;

• Spanish banks NPL ratio increased to 11.38% in

November. NPLs rose by €2bn (+1% m/m) to

€192bn. Private deposits fell by -4.5% y/y. Loans

to the private resident sector declined by 5.7%.

Source: Spanish Central Bank

-8

-6

-4

-2

0

2

4

6

8

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Portuguese Central Bank's Coincident

Indicators

Activity Coincident Indicator - Monthly

Private Consumption Coincident Indicator - Monthly

Banco de Portugal releases December

2012 coincident indicators

• In December 2012, both the monthly coincident

indicator for the y/y evolution of economic

activity and the monthly coincident for the y/y

evolution of private consumption increased

relatively to the previous month;

• in the Q4 2012, sales of light commercial vehicles

fell 52.5% y/y (-55.5% in Q3). Sales of heavy

commercial vehicles increased 14.2% (-10.0% in

Q3). Cement sales of national firms to the

domestic market declined -29.1% y/y (-31.5% in

Q3).

Germany: Government lower 2013

growth forecast• Germany’s economy expanded by 0.9% (working-

day adjusted), 0.7% unadjusted, in

2012, according to a first estimate released by the

German Statistical Office;

• The fiscal balance of the general government

(+0.1% of GDP) went into positive territory for

the first time since 2007;

• The government lowered its 2013 growth forecast

to 0.4% (0.5% working-day adjusted), which now

matches the current Bundesbank outlook.

Source: Banco de PortugalSource: Destatis

Banco de Portugal sees lower growth in

2013

• The Portuguese Central Bank has lowered its

GDP forecast for 2013 from -1.6% to -1.9%,

reflecting a less favorable international

economic environment;

• The economy is expected to fall almost 2% in

2013, after receding by 3% in 2012, on the back

of the fiscal consolidation adopted with the 2013

budget which are expected to lead to a significant

drop in domestic demand.

Portugal: IMF completes the sixth

review

• The IMF completed the sixth review of the

Extended Fund Facility arrangement with

Portugal;

• The report considers that “the policy and

reform effort has been impressive”;

• Given a already high tax burden, the IMF

supports the government’s expenditure review;

• The report highlights the need to broaden the

tax base and to progress on structural reforms,

including labor and product market reforms;

• Finally, the IMF mentions the importance of

“continued external support and successful

crisis policies at the euro area level”;

• The IMF has already disbursed €22.2bn of the

total €27.5bn package approved on May 2011.

Banco de Portugal Projections: 2012-2014

Annual rate of change, %

2012 2013 2014 2012 2013

Gross Domestic Product -3.0 -1.9 1.3 -3.0 -1.6

Private Consumption -5.5 -3.6 0.1 -5.8 -3.6

Public Consumption -4.5 -2.4 1.5 -3.9 -2.4

Gross Fixed Capital Formation -14.4 -8.5 2.8 -14.9 -10.0

Domestic Demand -6.9 -4.0 0.8 -6.8 -4.5

Exports 4.1 2.0 4.8 6.3 5.0

Imports -6.9 -3.4 3.5 -4.7 -2.3

Current plus Capital Account (% of GDP) -0.1 3.1 4.4 -0.2 4.0

Trade Balance (% of GDP) 0.3 3.1 4.1 0.8 4.5

Harmonized Index of Consumer Prices 2.8 0.9 1.0 2.8 0.9

Source: Banco de Portugal; INE

Winter 2012 Autumn 2012

Greece: IMF completes program review

• The IMF has completed the first and second

reviews of the Extended Fund Facility

arrangement with Greece;

• The country remains focused on restoring

growth, competitiveness and debt sustainability.

However, the IMF considers that more should be

done;

• Large fiscal efforts have already been taken by the

government. Nevertheless, the report considers

that Greece still needs to increase tax collections,

fight tax evasions, and shrink the public sector;

• The IMF highlight the importance of further help

by the European partners to reduce debt below

110% of GDP;

• Finally, the report reaffirms the IMF’s preferred

creditor status.

The World Bank releases new

economic forecasts

• Last week, the World Bank released its Global

Economic Prospects (Assuring growth over the

medium term, January 2013);

• The report considers that the global economy

remains fragile, as high income countries

continue to suffer from slow growth;

• Prospects for the developing world remains

solid, albeit below the pre-crisis trend growth;

• The World Bank estimates global GDP increased

2.3% in 2012. Growth is forecast to remain

broadly unchanged at 2.4% in 2013, before

gradually strengthening to 3.1% in 2014 and

3.3% in 2015.

2011 2012e 2013f 2014f 2015f

World 2.7% 2.3% 2.4% 3.1% 3.3%

Euro-Zone 1.5% -0.4% -0.1% 0.9% 1.4%

US 1.8% 2.2% 1.9% 2.8% 3.0%

Japan -0.7% 1.9% 0.8% 1.2% 1.5%

China 9.3% 7.9% 8.4% 8.0% 7.9%

India 6.9% 5.1% 6.1% 6.8% 7.0%

Brazil 2.7% 0.9% 3.4% 4.1% 4.0%

Source: The World Bank, Global Economic Prospects, January 2013

Real GDP Growth (%)

• Banif (BANIF PL) rose 5.8% over the week. The bank’s GSM

approved the recapitalization plan, which includes €1.1bn of

State capital (€700mn through special special shares and €400

through CoCos). Moreover, the bank’s current shareholders

seem to have already pledged €100mn of the €450mn capital

increase that Banif will execute, while BES (BES PL) has

underwritten €50mn;

• BCP (BCP PL) gained 7.8%. The Bank has denied reports that it is

looking to sell its Polish unit Bank Millennium, where BCP has a

65% holding;

• Portugal Telecom (PTC PL) added 5.1%. The company announced

a definitive agreement for the sale of its minority equity stake

(28%) held in CTM (in Macau) for $411.6mn (subject to certain

adjustments). Moreover, Portugal Telecom launched its

quadruple play offer, including TV, Internet, fixed telephone, and

mobile telephone. The new service is available through FTTH.

This offer could have an important uptake to the company, given

that ZON (ZON PL) and Sonaecom (SNC) are still in the middle of

a merger process;

• Galp (GALP PL) fell -2.4%. After suffering successive delays, the

hydrocraking complex installed at the Sines refinery began the

commercial production stage.

PSI20 Weekly Review

Source: Bloomberg

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Jan-12 Abr-12 Jul-12 Out-12 Jan-13

BCP and BES CDS EUR SR 5Y (bps)

BES BCP

• Portugal has successfully raised €2.5bn through a T-bill

action, last week;

• The Portuguese PM expects the country to start issuing

debt gradually in 2013. According to the local press,

Portugal wants to return to the capital market by the end of

February, in order to take advantage of improving market

sentiment, before the next programme review is due.

Portugal will probably focus on a five-year syndicated bond;

• The IMF’s chief acknoweledged that Portugal has made

progress in reducing its deficit. However, she considered

that more fiscal consolidation is needed;

• Portuguese 10-year government bond yield fell for a third

week in a row, supported by news that Portugal could soon

return to the market and speculation of potential ECB’s

OMT buying of Portuguese bonds. Although recognizing

the current positive market sentiment, the economic

adjustment process is still a long one. The 2013 budget

should keep the economy in recession. The high level of

corporate debt as a percentage of GDP remains an

important concern;

• Portuguese Banks 5Y SR CDS rose over last week, but are

still well below the 2012 year-end levels.

Portuguese Sovereign and Corporate Debt Weekly Review

Source: Bloomberg

0

5

10

15

20

25

2011 2012 2013

Portuguese Government Bond Yields (%)

2-year 5-year 10-year

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

Out-12 Nov-12 Dez-12 Jan-13 Fev-13

Portugal Telecom and EDP Selected

Corporate Bond Yields (%)

Portugal Telecom 5 7/8

04/17/18

EDP 5 3/4 09/21/17

5

6

7

8

9

10

11

12

13

Jan-12 Mar-12 Mai-12 Jul-12 Set-12 Nov-12 Jan-13

Bank of America Share Price ($)

• SAP (SAP GY) preannounced Q4 2012 results on January 15th

with licenses of €1.94bn (8% y/y excl. FX), below consensus

estimates of €1.97bn. SSRS revenues of €4.27bn (+10% y/y

excl. FX) also came lower that expected (€4.32bn). Operating

margins of 38.8% are below consensus estimates of 39.4%.

SAP will release its 2013 outlook on January 23th. The shares

fell -5.3% over the week;

• Intel (INTC US) reported Q4 2012 revenue of $13.5bn (flat

q/q), in line with consensus. EPS of $0.48 was above

consensus of $0.45 due to higher margins. The company

guided Q1 2013 revenue to a range of $12.2-$13.2bn (down

2%-9% q/q and with a $12.7bn mid-point), below consensus

of $12.9bn;

• Bank of America (BAC US) reported Q4 2012 of $0.03,

including several previously announced charges. Net interest

income was better than expected. Basel 3 capital continued to

improve. BAC’s Tier 1 common ratio now stands at 9.25%;

• ASML (ASML NA) rose 5.3% over the week. The company

announced that sales, which fell 16% to €4.73bn in 2012, will

probably be little changed in 2013, pointing to an expected

week H1. Consensus 2013 sales estimates were €5.2bn.

Last week’s European and US equity market highlights

Source: Bloomberg

-0.4

-3.9

0.5

-1.5

-0.1

14-Jan 15-Jan 16-Jan 17-Jan 18-Jan

SAP Stock Price Daily Changes (%)

17

19

21

23

25

27

29

Jan-12 Mar-12 Mai-12 Jul-12 Set-12 Nov-12 Jan-13

Intel Stock Price ($)

What we are watching this week:• In the US, Existing Home Sales (Tuesday) and New

Home Sales (Friday) reports are due. In the industrial

sector, January’s preliminary Markit Manufacturing

PMI (Thursday) will be released. This week will

probably further suggest the diverging fortunes in the

housing and industrial sectors;

• In the UK, Q4 2012 GDP data is expected to be

announced (Friday). The unwinding of the Olympics

effect will probably take its toll on quarterly growth;

• In the euro-zone, the focus for the week will probably

be the release of Flash PMIs for the euro area, France

and Germany (Thursday);

• On the euro-zone political front, this week’s main

event will probably be today’s eurogroup meeting.

Recent news suggest that there is the possibility of

the discussion or even some announcement

ragarding Cyprus, Ireland and Portugal. Moreover, the

euro-zone finance ministers are likely to appoint the

Dutch Finance Minister Jeroen Dijsselbloem as the

new head of the eurogroup, replacing the

Luxembourg Prime Minister Jean-Claude Juncker.

Event Date Hour (GMT) Survey Prior

Machine Tool Orders (y/y), Japan 21-Jan 06:00 -27.5%

Producer Prices (y/y), Germany 21-Jan 07:00 1.7% 1.4%

Trade Balance (Mln Euros), Spain 21-Jan -1492.4M

BOJ Target Rate, Japan 22-Jan 0.1%

Current Account (euros), Portugal 22-Jan -268.8M

House Price Index (y/y), Spain 22-Jan -9.3%

ZEW Survey (Current Situation), Germany 22-Jan 10:00 6.2 5.7

ZEW Survey (Econ. Sentiment), Germany 22-Jan 10:00 12.0 6.9

ZEW Survey (Econ. Sentiment), Euro-Zone 22-Jan 10:00 7.6

Richmond Fed Manufact. Index, US 22-Jan 15:00 5.0

Existing Home Sales, US 22-Jan 15:00 5.10M 5.04M

Cabinet Office Monthly Economic Report for January, Japan 23-Jan

Bank of Japan Monthly Economic Report for January 23-Jan 05:00

Production Outlook Indicator, France 23-Jan 07:45 -36.0 -38.0

Business Confidence Indicator, France 23-Jan 07:45 90.0 89.0

Bank of England Minutes 23-Jan 09:30

Current Account (mn euro), Italy 23-Jan 10:00 -245M

Euro Area Third Quarter Government Debt 23-Jan 10:00

House Price Index MoM, US 23-Jan 14:00 0.5% 0.5%

Euro-Zone Consumer Confidence 23-Jan 15:00 -26.0 -26.5

IMF Releases World Economic Outlook Update 23-Jan 15:00

Bank of Canada Rate 23-Jan 15:00 1.0% 1.0%

GDP (YoY), South Korea 23-Jan 23:00 1.9% 1.5%

HSBC Flash Manufacturing PMI, China 24-Jan 01:45 51.5

Unemployment Rate (Survey), Spain 24-Jan 08:00 26.0% 25.0%

PMI Manufacturing, France 24-Jan 08:00 44.9 44.6

PMI Services, France 24-Jan 08:00 45.5 45.2

PMI Manufacturing, Germany 24-Jan 08:30 46.8 46.0

PMI Services, Germany 24-Jan 08:30 52.0 52.0

Euro-Zone Current Account nsa 24-Jan 09:00 7.2B

ECB Euro-Zone Current Account SA 24-Jan 09:00 3.9B

PMI Manufacturing, Euro-Zone 24-Jan 09:00 46.6 46.1

PMI Services, Euro-Zone 24-Jan 09:00 48.0 47.8

PMI Composite, Euro-Zone 24-Jan 09:00 47.5 47.2

Retail Sales (y/y), Italy 24-Jan 09:00 -3.8%

Initial Jobless Claims, US 24-Jan 13:30 360K 335K

Conference Board Revisions of Leading Indicators, US 24-Jan 15:00

Leading Indicators, US 24-Jan 15:00 0.3% -0.2%

Markit US PMI Preliminary 24-Jan 53.0

Natl CPI YoY, Japan 24-Jan 23:30 -0.2% -0.2%

Producer Prices (y/y), Spain 25-Jan 08:00 2.8%

IFO - Business Climate, Germany 25-Jan 09:00 103.0 102.4

IFO - Current Assessment, Germany 25-Jan 09:00 107.3 107.1

IFO - Expectations, Germany 25-Jan 09:00 98.5 97.9

GDP (y/y), UK 25-Jan 09:30 0.2% 0.0%

New Home Sales, US 25-Jan 15:00 385K 377K

Source: Bloomberg, Fincor

0.40

0.10

0.60

-0.30-0.20

-0.40

0.90

Q1 2012 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012

UK GDP Growth (q/q, %)

Next Week Preview: Economics

• US Existing Home Sales for December will be released on

Tuesday (15:00 GMT). Existing Home Sales broke above the five

million mark in the previous month and are expected to rise

further in December. The positive evolution on Pending Homes

sales also points to a continuing rise in Existing Home Sales;

• Several surveys will be release this week in the euro area. The

Zew index is expected to be announced on Tuesday. Flash PMIs

for the euro-zone, France and Germany are due Thursday. The

German Ifo Business Confidence Survey will be released on

Thursday. Notwithstanding the rise of the euro, a pickup in

business sentiment is expected, reflecting improving market

conditions;

• The Flash Markit US Manufacturing PMI is due Thursday (13:58

GMT). In December, the index rose to a seven-month high of

54.0. Given the more modest evolution in the ISM survey, the

January figure will probably show a drop back in the index;

• The first estimate of the UK Q4 2012 GDP is to be published on

Friday. A rebound in construction output is expected to be an

important help to offset (at least partially) the unwinding of the

Olympics efect.Source: Bloomberg

75

85

95

105

115

125

135

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

US Existing Home Sales and Pending Home Sales

Existing Home Sales (000s, LHS)

Pending Homes Sales Index (adv. 1 m, RHS)

Next Week Preview: Eurogroup/ ECOFIN Meetings and Government Debt

Issuance Calendar

Eurogroup/ECOFIN meeting

scheduled for January 21st-22nd• Today, EMU finance ministers will discuss the

current economic environment in the euro area,

review current assessments by the Troika

(including the sixth review of the Portuguese

programme), discuss the roadmap for the

implemention of bank recapitalization by the ESM

and the potential successor of Jean-Claude

Juncker;

• Tomorrow, the EU27 finance minister will focus

on (a) the Commission’s annual growth outlook,

(b) the economic policy coordination in Europe,

(c) the Commission’s action plan on the

prevention of tax evasion, and (d) legislative

issues regarding the financial transaction tax;

• According to some press, the eurogroup could

approve changes to the conditions on the EFSF

loans to Portugal in line with the changes made

to the loans to Greece.

• Quarterly data on government debt for EMU

countries will be released on January 21st.

Spain to auction T-Bills on January

22nd

Next week's Selected Bonds and T-Bills Supply

Issue Country Date Amount Hour (GMT)

BTF Apr 2013 France 21-Jan € 4-4.4bn

BTF Jun 2013 France 21-Jan € 1.2-1.6bn

BTF Jan 2014 France 21-Jan € 1.2-1.6bn

Gilt 4% 7 Mar 2022 UK 22-Jan GBP 1.75bn 10:30

Letras Apr 2013 Spain 22-Jan

Letras Jul 2013 Spain 22-Jan

T-Bills Apr 2013 US 22-Jan USD 32bn

T-Bill Jul 2013 US 22-Jan USD 28bn

T-Bills Mar 2013 Japan 23-Jan JPY 2.5tn

T-Bills Feb 2013 US 23-Jan

JGB 20 Dec 2032 Japan 24-Jan JPY 1.2tn 03:00

TIPS 0.125% 15 Jan 2023 (new) US 24-Jan USD 15bn

T-Bills Apr 2013 Japan 24-Jan JPY 5.7tn

T-Bills Feb 2013 UK 25-Jan GBP 0.5bn

T-Bills Apr 2013 UK 25-Jan GBP 0.5bn

T-Bills Jul 2013 UK 25-Jan GBP 1.5bn

Next week's Selected Bonds and T-Bills redemptions

Issues Country Date Amount Hour (GMT)

T-Bills Ireland 21-Jan € 0.5bn

Bubills (12m) Germany 23-Jan € 3.0bn

BTF France 24-Jan € 6.5bn

Source: Treasuries; Fincor

Next Week Preview: US Earnings SeasonApple will probably be the

highlight of the week • Of the 67 S&P companies that reported Q4

2012 results, about 75% beat on EPS,

according to Bloomberg. About 78% of the

companies beat on sales, with an average

surprise of 5%;

• Microsoft (MSFT US) will release earnings on

Thursday. Earnings are expected to reflect

weakness in PC demand. Weak market

sentiment reflects holiday season on Windows

8, Surface RT and PC sales. Focus should be on

expectations regarding the launch of Office

2013;

• McDonalds (MCD US) will release Q4 results

on Wednesday. Better US trends are expected

to be offset by a weaker performance in Asia;

• 3M (MMM US) reports earnings on Thursday.

Few surprises are expected given that the

company gave a 2013 guidance call in mid-

December.

Company Name Company Ticker Time Event Description

Tuesday, 22nd

January

EI du Pont de Nemours & Co DD US 11:00 Q4 2012 Earnings Release

Verizon Communications Inc VZ US 12:30 Q4 2012 Earnings Release

Johnson & Johnson JNJ US 12:45 Q4 2012 Earnings Release

Freeport-McMoRan Copper & Gold Inc FCX US 13:00 Q4 2012 Earnings Release

Texas Instruments Inc TXN US 20:30 Q4 2012 Earnings Release

CSX Corp CSX US 21:01 Q4 2012 Earnings Release

Advanced Micro Devices Inc AMD US 21:15 Q4 2012 Earnings Release

Google Inc GOOG US After Market Q4 2012 Earnings Release

International Business Machines Corp IBM US After Market Q4 2012 Earnings Release

Wednesday, 23rd

January

Abbott Laboratories ABT US Before Market Q4 2012 Earnings Release

Air Products & Chemicals Inc APD US Before Market Q1 2013 Earnings Release

Praxair Inc PX US Before Market Q4 2012 Earnings Release

United Technologies Corp UTX US Before Market Q4 2012 Earnings Release

General Dynamics Corp GD US Before Market Q4 2012 Earnings Release

McDonald's Corp MCD US Before Market Q4 2012 Earnings Release

WellPoint Inc WLP US 11:00 Q4 2012 Earnings Release

Motorola Solutions Inc MSI US 13:00 Q4 2012 Earnings Release

Apple Inc AAPL US 21:30 Q1 2013 Earnings Release

Amgen Inc AMGN US After Market Q4 2012 Earnings Release

SanDisk Corp SNDK US After Market Q4 2012 Earnings Release

Symantec Corp SYMC US After Market Q3 2013 Earnings Release

Thursday, 24th

January

Union Pacific Corp UNP US Before Market Q4 2012 Earnings Release

Raytheon Co RTN US 12:00 Q4 2012 Earnings Release

Xerox Corp XRX US 12:15 Q4 2012 Earnings Release

Bristol-Myers Squibb Co BMY US 12:30 Q4 2012 Earnings Release

AT&T Inc T US After Market Q4 2012 Earnings Release

Starbucks Corp SBUX US After Market Q1 2013 Earnings Release

Microsoft Corp MSFT US After Market Q2 2013 Earnings Release

3M Co MMM US Not Avaliable Q4 2012 Earnings Release

Friday, 25th

January

Honeywell International Inc HON US Before Market Q4 2012 Earnings Release

Procter & Gamble Co/The PG US Before Market Q2 2013 Earnings Release

Covidien PLC COV US Before Market Q1 2013 Earnings Release

Kimberly-Clark Corp KMB US Before Market Q4 2012 Earnings Release

Halliburton Co HAL US Not Avaliable Q4 2012 Earnings Release

Source: Bloomberg

Next Week Preview: European Earnings SeasonNovartis, Unilever and

Siemens report this week• Repsol (REP SM) will hold its

Exploration Day on Friday;

• Siemens (SIE GY) will disclose Q1

results on Wednesday. Order

momentum, management

commentary on business trends

and underlying margins are likely

to be the investors’ focus;

• Unilever (UNA NA) will report Q4

and FY2012 results on

Wednesday. Consensus compiled

by the company is looking for Q4

organic growth of 6.3% but with a

large range (5.3% - 7.8%).

Consensus expectations are for

40bp of Core EBIT margin

expansion to 13.8% in H2, which

would give +20bp or 13.7% for

FY12.

Company Name Company Ticker Time Event Description

Monday, 21st

January

Cie Financiere Richemont SA CFR VX 06:00 Q3 2013 Sales and Revenue Release - Trading Statement

Galp Energia SGPS SA GALP PL Before Market Q4 2012 Sales and Revenue Release - Trading Update

Pearson PLC PSON LN Q4 2012 Sales and Revenue Release - Trading Update

Tuesday, 22nd

January

Alstom SA ALO FP 07:00 Q3 2013 Sales and Revenue Release

SABMiller PLC SAB LN Q3 2013 Sales and Revenue Release - Trading Statement

Wednesday, 23rd

January

Novartis AG NOVN VX 06:00 Y 2012 Earnings Release

SAP AG SAP GR 06:00 Y 2012 Earnings Release

Siemens AG SIE GR 06:30 Q1 2013 Earnings Release

Sage Group PLC/The SGE LN 07:00 Q1 2013 Sales and Revenue Release - Interim Management Statement

Unilever PLC ULVR LN 07:00 Y 2012 Earnings Release

Land Securities Group PLC LAND LN 08:30 Q3 2013 Sales and Revenue Call - Interim Management Statement

BHP Billiton PLC BLT LN Q2 2013 Sales and Revenue Release - Production Report

Thursday, 24th

January

Lonza Group AG LONN VX 06:00 Y 2012 Earnings Release

Ziggo NV ZIGGO NA 06:30 Y 2012 Earnings Release

Banco de Sabadell SA SAB SM 07:30 Y 2012 Earnings Release

Svenska Cellulosa AB SCAB SS 11:00 Y 2012 Earnings Release

Nokia OYJ NOK1V FH 11:00 Y 2012 Earnings Release

JCDecaux SA DEC FP 16:40 Q4 2012 Sales and Revenue Release

easyJet PLC EZJ LN Q1 2013 Sales and Revenue Release - Interim Management Statement

Friday, 25th

January

Wartsila OYJ Abp WRT1V FH 06:30 Y 2012 Earnings Release

Anglo American PLC AAL LN 07:00 Q4 2012 Sales and Revenue Release - Production Report

Source: Bloomberg

Next Week Preview: Earnings season in Portugal and Idea of the

weekGalp and Sonae to release trading

statements• Galp (GALP PL) is expected to disclose Q4

Trading Statement on Monday. The company

will update on production volumes, crude

processed and gas sales volumes. It will also

report data on benchmark refining margins.

Production should reflect lower output from

Lula. Refining volumes is expected to be

penalized by the delay on the upgrade of the

Sines refinery;

• Sonae (SON PL) will report preliminary results

on Wednesday.

Idea of the week: Rio Tinto (RIO LN)

• The company announced last week that it will

take a total of c. US$14bn of write-downs across

its aluminium coal assets at its 2012 results.

Moreover, both the group’s CEO and the CEO of

the energy division will leave the company;

• The management changes could lead the

company to better a capital allocation in the

future. Its volume growth profile and cost

savings potential are still important attractions.

2,500

3,000

3,500

4,000

4,500

2011 2012 2013

Rio Tinto Share Price (GBp)

Source: Bloomberg

Source: Bloomberg

Charts we are watching

• Realized volatility in equity and fixed income markets is

at very low levels. Short-term implied volatility, which

tracks realized volatility, is stuck at low levels. However, it

is possible to identify a number of economic (e.g. will all

the efforts made by central bank be fruitless?) or political

(e.g. instability in the Middle East; will Spain ask for OMT

support?) risks. Nonethless, record lows in volatility

seems to be supported by the current environment of

low trading volumes and QE policies by central banks.

• Cyprus is a small economy in GDP terms. The country

needs external funding and it has applied for EU/IMF/ECB

programme in 2012. However, the Troika and the Cypriot

government have reached stalemate, with the latter

refusing to agree on the conditionality that comes with

the programme. Of the proposed bail-out of around

€17bn, c. €10bn will probably go to recapitalize the

banking sector. Today’s eurogroup meeting could bring

some news regarding the assessment of the banking

sector in Cyprus. However, with the presidential election

in February, getting a deal before then could be difficult.Source: Bloomberg

0

100

200

300

400

500

600

2010 2011 2012 2013

iPath S&P500 VIX Short-term Futures

0

5

10

15

20

25

30

35

40

45

50

2010 2011 2012 2013

Republic of Cyprus Government

Bond Yields (%)

Republic of Cyprus 3Jun2013

Republic of Cyprus 3Feb2020

Disclosure Section

This research report is based on information obtained from sources which we believe to be credible and reliable, but is

not guaranteed as to accuracy or completeness. All the information contained herein is based upon information

available to the public.

The recipient of this report must make its own independent assessment and decisions regarding any securities or

financial instruments mentioned herein.

This report is not, and should not be construed as an offer or a solicitation to buy or sell any securities or related

financial instruments. The investment discussed or recommended in this report may be unsuitable for investors

depending on their specific investment objectives and financial position.

The material in this research report is general information intended for recipients who understand the risks associated

with investment. It does not take account of whether an investment, course of action, or associated risks are suitable

for the recipient.

Investors should seek financial advice regarding the appropriateness of investing in any securities or investment

strategies discussed or recommended in this research report and should understand that the statements regarding

future prospects may not be realized. Investors may receive back less than initially invested. Past performance is not a

guarantee for future performance.

Fincor – Sociedade Corretora, S.A. accepts no liability of any type for any indirect or direct loss arising from the use of

this research report.

Recommendations and opinions expressed are our current opinions as of the date referred on this research report.

Current recommendations or opinions are subject to change as they depend on the evolution of the company or may

become outdated as a consequence of changes in the environment.

Fincor - Sociedade Corretora, S.A. provides services of reception, execution, and transmission of orders.

Fincor – Sociedade Corretora, S.A.

Rua Castilho, 44 4º Andar

1250-071 Lisboa

Portugal