Weekly Markets Perspectives For important disclosures, refer to the Disclosure Section, located at the end of this report. n November 12 th , 2012
May 17, 2015
Weekly Markets
Perspectives
For important disclosures, refer to the Disclosure Section, located at the end of this report.
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Barack Obama won Tuesday’s US elections and
investors’ focus shifted to the fiscal cliff, capital
gains and dividends taxes (that are expected to be
hiked), and to the debt ceiling. Both Fitch and
Moody’s were quick to warn of the negative
implications to the US rating if an agreement to
stabilise the fiscal outlook was not reached soon.
The US election seems to have been the excuse for
the market to start a correction. Last week, the
S&P500 has had the worst 2-day performance in
2012. Apple’s slide continue to weigh on the index.
Last week was positive for gold, maybe reflecting
the search for safe haven assets. German and US
bonds also had a good run.
The Greek parliament passed the austerity bill
which includes cuts to pensions, public sector
salaries, tax hikes and increases in the retirement
age, amid a second day of protests outside the
Weekly FocusParliament. The Eurogroup / Ecofin meetings will
be held this week. There’s been some news
suggesting that Euro-zone finance ministers may
delay a decision on approving the next tranche
payment for Greece.
At Draghi’s post ECB meeting press conference,
he said that the ECB stands ready to buy
peripheral governments’ bonds. Additionally, the
ECB might be willing to play a role in helping
Greece.
China’s 18th Communist Party Congress has
started. The local government intends to double
per capita GDP by 2020 and accelerate financial
reforms (including Yuan convertibility and
interest rate liberalisation).
US Economic data is likely to be noisy due to
Hurricane Sandy’s related distortions.
-3%
-2%
-1%
0%
1%
2%
3%
-6%
-4%
-2%
0%
2%
4%
6%
2000 2002 2004 2006 2008 2010 2012
Employment & Households' Real Incomes
(% y/y)
Households' Real Incomes (LHS)
Employment
ECB acknowledges weaker
growth outlook
Source: Eurostat
• The ECB left the refi rate unchanged at 0.75%.
The monetary policy is seen as very
accommodative already. No strong hint at a refi
rate cut in December;
• Draghi mentioned that the surveys seem to
suggest that activity would weaken again
towards the end of the year;
• President Draghi said that the ECB stands ready
to buy peripheral governments’ bonds;
• He insisted that Spain would have to apply for
ESM aid and accept the associated conditions,
in order to receive support from the OMT;
• Mr Draghi confirmed that the ECB would give
the profits made on its Greek bond holdings to
Euro-zone governments. However, he ruled out
a write off or a restructuration;
• No indication were given regarding other types
of unconventional policy support that could
come in the future.
Euro-zone: unemployment
rises to 11.6%• The euro-zone unemployment rate rose to a new
record high of 11.6% in September. Back in
February, the consensus forecast for 2013 was
just 10.7%;
• The employment indices of the PMI business
surveys point to further falls in employment;
• With households’ real disposable incomes falling,
Euro-zone consumer spending should remain
weak.
4.5%
3%
4%
5%
6%
7%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Poland National Bank Reference Rate
-30%
-20%
-10%
0%
10%
20%
30
35
40
45
50
55
60
65
2005 2007 2009 2011 2013
German Industrial Production
& Manufacturing PMI
Manufacturing PMI (Adv. 2 months, LHS)
Industrial Production (% y/y, RHS)
German industrial production
slumps in September
Source: Deutsche Bundesbank and Markit
• German industrial production fell 1.8% m/m in
September. Excluding construction, the drop
was even bigger (2.3% m/m);
• Thanks to the rise in July, industrial production
should have risen in Q3, suggesting that GDP
probably expanded in that quarter;
• Industrial survey indicators are still pointing to
further falls in production;
• Is Germany’s growth engine slowing down?
Poland: NBP cut 25bp and
lowered its GDP forecast• The National Bank of Poland cut rates 25bp to
4.50%. Another cut was signaled for December;
• The accompanying Monetary Policy Committee
Statement was dovish, suggesting that this cut
could be the start of a monetary easing cycle;
• The NBP cut its GDP growth outlook to 1.5%
(from 2.1%) for 2013 and to 2.3% for 2014
(from 3.0%). Inflation is seen at 2.5% in 2013
and falling further to 1.6% in 2014.
Source: National Bank of Poland
-8%
-6%
-4%
-2%
0%
2%
4%
2011 2012 2013 2014 2015 2016
Greek GDP Forecasts (% y/y)
MoU (Mar 2012)
Budget (Nov 2012)
Greece: Parliament approves
new austerity package, but…• The Government passed the latest package of
austerity measures and structural reforms
demanded by the Troika;
• In an interview with Reuters, Olli Rehn
acknowledged that Greek debt was
unsustainable. He considered that a
combination of factors related to the length of
maturities and the level of interest rates of
official loans could be used to reduce the debt
burden of Greece.
Source: IMF and Greek Ministry of Finance
… Greece’s public debt is still
unsustainable• Due to the changes to the growth and fiscal
assumptions underpinning the rescue package,
Greece will probably need more money;
• In March this year, it was agreed that Greece would
receive a second economic adjustment program.
The total amount of official support for the years
2010-2014 was anticipated to be €237.5bn;
• The medium term objective of the second program
was to get Greece’s debt to GDP ratio down to
120% by 2020. Greece’s public debt will be well
above that level;
• Greece will probably get a two year extension on
the deficit objectives;
• Since 2009, Greece has improved its primary
position by around 8.7pp of GDP. However, the
austerity seen thus far has been associated with a
decline in real GDP of around 15%. It seems, that
Greece will only be able to remain in the Euro area
with substantial official debt restructuring.
Country 2010 2011 2012 2013 2012 2013
Germany 82.5% 80.5% 81.7% 80.8% 82.2% 80.7%
Ireland 92.2% 106.4% 117.6% 122.5% 116.1% 120.2%
Greece 148.3% 170.6% 176.7% 188.4% 160.6% 168.0%
Spain 61.5% 69.3% 86.1% 92.7% 80.9% 87.0%
France 82.3% 86.0% 90.0% 92.7% 90.5% 92.5%
Italy 119.2% 120.7% 126.5% 127.6% 123.5% 121.8%
Netherlands 63.1% 65.5% 68.8% 69.3% 70.1% 73.0%
Portugal 93.5% 108.1% 119.1% 123.5% 113.9% 117.1%
Euro Area 85.6% 88.1% 92.9% 94.5% 91.8% 92.6%
Autumn 12 Forecast Spring 12 Forecast
General Government Gross Debt (as % of GDP)
European Commission Autumn Forecast 2012 (I)
Source: European Commission Source: European Commission
• Economic outlook for the region continues to be
grim;
• Italy's economy is expected to shrink by 0.5% in
2013 due to weak domestic demand, a steeper
contraction than the 0.2% decline expected by
the government. The Commission forecast the
deficit will narrow to 2.9% of GDP in 2012 and
2.1% in 2013, above the government's most
recent forecasts of 2.6% for 2012 and 1.8% for
2013;
• The Commission said it expects Greece's
economy to shrink 4.2% in 2013 and expand
0.6% the following year;
• The Commission projects Greece's public debt
increasing to 176.7% in 2012. The debt ratio
should peak at 188.9% GDP in 2014. The
government sees debt peaking at 191.6% in
2014;
• Greece’s labour market is expected to bottom
out in 2013. The unemployment rate, currently
at 25.1%, is expected to fall to around 22% in
2014;
• Key downside risks are a deterioration of the
Sovereign Crisis in Europe, the Fiscal Cliff in the
US and an economic slowdown in the
developing economies.
Country 2010 2011 2012 2013 2012 2013
Germany 3.7% 3.0% 0.8% 0.8% 0.7% 1.7%
Ireland -0.4% 1.4% 0.4% 1.1% 0.5% 1.9%
Greece -3.5% -7.1% -6.0% -4.2% -4.7% 0.0%
Spain -0.1% 0.4% -1.4% -1.4% -1.8% -0.3%
France 1.5% 1.7% 0.2% 0.4% 0.5% 1.3%
Italy 1.8% 0.4% -2.3% -0.5% -1.4% 0.4%
Netherlands 1.7% 1.0% -0.3% 0.3% -0.9% 0.7%
Portugal 1.4% -1.7% -3.0% -1.0% -3.3% 0.3%
Euro Area 1.9% 1.4% -0.4% 0.1% -0.3% 1.0%
Real GDP
Autumn 12 Forecast Spring 12 Forecast
European Commission Autumn Forecast 2012 (II)
Source: European Commission
Country 2011 2012 2013
Germany 5.9% 5.5% 5.6%
Ireland 14.4% 14.8% 14.7%
Greece 17.7% 23.6% 24.0%
Spain 21.7% 25.1% 26.6%
France 9.6% 10.2% 10.7%
Italy 8.4% 10.6% 11.5%
Netherlands 4.4% 5.4% 6.1%
Portugal 12.9% 15.5% 16.4%
Euro Area 10.1% 11.3% 11.8%
Autumn 12 Forecast
Unemployment Rate
• France is expected to grow just 0.4% next year,
half the 0.8% level on which the government's
2013 budget is based on;
• France's budget deficit is expected to fall to 3.5%
of GDP next year, above the EU target of 3%.
France's 2012 deficit is seen around 4.5% of GDP;
• Spain’s economy is expected to shrink by 1.4%
this year and next. The Spanish government
expects the economy to contract by 0.5% in
2013;
• The Commission said Spain's economy would
return to growth of 0.8% in 2014;
• The Commission predicted Spain's deficit this
year would be 8% of GDP, compared with a
European Union agreed target of 6.3%. The
deficit should fall to 6.0% in 2013, and rise to
6.4% in 2014. Spain's government expects to
cut the deficit to 4.5% next year;
• The Portuguese economy is expected to slump
by 3% this year and a further 1% in 2013. The
commission expects the economy to return to
growth in 2014 (0.8%). Domestic demand is
expected to fall 7.1% in 2012 and 2.5% next
year;
• Unemployment rates should remain at high
levels in the Euro-zone, reflecting the low-
growth environment. Unemployment rates
under-25 are even a greater concern.
2.9%
0.1%
1.4%
0.7%0.8%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Total High Income Tax
Cuts
Other Bush &
AMT
Payroll Tax Cut &
Unemployment
Benefits
Spending Cuts
The Fiscal Cliff (% impact on Real GDP)
US Presidential Election: and the winner is…• Barack Obama won Tuesday’s US elections. He
won the Electoral College by a significant
margin and also won the popular vote;
• With almost all the ballots in Florida counted,
Barack Obama seems to have been the winner
in that state. That will bring his total electoral
votes to 332 compared to 206 for Republican
challenger Mitt Romney;
• The status quo will be maintained in Congress.
The Republicans still have a majority in the
House of Representatives and the Democrats
retain control of the Senate. This provides little
clarity on the path to agreement on avoiding
the fiscal cliff;
• Investors focus shifted to the fiscal cliff, capital
gains taxes and to the debt ceiling;
• Consensus seems to expect a compromise to
avert most of the fiscal cliff to be reached in
late December. Congress reconvenes on
November 12th. The following week is the
Thanksgiving break;
• The uncertainty generated by the cliff already
hit business spending. This could be an incentive
for a deal to be struck sooner rather than later;
• The CBO released new estimates showing that
going off the fiscal cliff would reduce the budget
deficit by more than $500bn over the first nine
months of next year. It would lower real GDP by
a cumulative 2.9% in calendar year 2013;
• President Barack Obama said on Friday he was
prepared to compromise with Republicans, but
insisted a tax increase for the rich must be part
of any agreement.
Source: CBO
US trade deficit narrows in
September
Source: US Dept. of Commerce
• September’s trade deficit was $41.5bn.
August’s deficit was revised down to $43.8bn
from the previous estimate of $44.4bn;
• Nominal exports increased 3.1% m/m (3.1%
m/m in real terms too). However, the weak
global economic backdrop is expected to
continue to curtail exports;
• Imports rose 1.6% m/m, reflecting the release
of the iPhone 5 (which is made in China);
• The narrowing in the trade deficit in September
could justify a upward revision to third-quarter
real GDP.US Trade Balance
Total Excl. Petrol
$bn % m/m $bn % m/m $bn $bn
July 183.2 -1.1% 225.7 -0.6% -42.5 -21.4
August 181.4 -1.0% 225.2 -0.2% -43.8 -20.3
September 187.0 3.1% 228.5 1.5% -41.5 -19.9
Trade BalanceImportsExports
50
60
70
80
90
100
110
120
50
60
70
80
90
100
110
120
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
University of Michigan Consumer Confidence
Headline Index
Average (1978-2010)
Source: U. of Michigan Survey Research Center
• The University of Michigan’s measure of
consumer confidence increased in November
to 84.9, from 82.6 in the previous month;
• The recent drop in gasoline prices and the
improvement in both housing and labor market
conditions are probably supporting consumer
moods;
• Will fiscal cliff negotiations begin to have a
greater impact?
US Consumer confidence at a
five-year high
-25%
-15%
-5%
5%
15%
2010 2011 2012
Taiwan Export Orders to HK & China (y/y)
0%
5%
10%
15%
20%
25%
2008 2009 2010 2011 2012
China Industrial Production (y/y)
China’s economy seems to be
recovering…
Source: National Bureau of Statistics of China
• Industrial production rose 9.6% y/y in October,
compared to 9.2% y/y in September;
• Electricity production was up 6.4% y/y. This was
the strongest monthly growth since April;
• Seasonally-adjusted retail sales gained 1.4%
m/m, after 2.1% in September;
• October macro data seems to suggest that the
economy recovery is gaining traction;
• The housing market has stabilized in recent
months.
Source: Ministry of Economic Affairs Taiwan
… as showed by Taiwan’s
exports to China• Taiwan’s merchandise exports fell in October
1.9% y/y. However, the sequential trend still
seems to show an improvement;
• Exports to China /Hong Kong, which had been
on a weakening trend, seems to have stabilized.
In October, exports fell 2.9% m/m, but that
followed a strong jump at 11.2% m/m in
September;
• Interestingly, exports to Europe rose 1.7% m/m
in October, after 2.9% m/m in September.
Portugal: Last week’s results (I)REN (RENE PL): Q3 Results and 2012 Investor Day
• 9M EBITDA was €389.1m, +11.1% y/y and
broadly in-line with Reuters consensus
(€389.5m). 9M 2012 Net income stood at
€98.4m, +2.9% y/y, 3% below consensus,
reflecting higher financial expenses;
• The new strategy is focused on deleverage (Net
debt/EBITDA 4.9x in 2011) and
internationalization;
• REN has confirmed its dividend policy, i.e. to
maintain or slightly increase the nominal
dividend per share year on year. REN is fully
funded until 2013. Considering financing and
refinancing initiatives currently under way, the
company expects to be fully financed until 2015.
EDP (EDP PL): Q3 2012 Results
• Q3 2012 EBITDA stood at €857m, down 2%
over-the-year ago period and 3% above
consensus (€831.5m);
• Q3 2012 Net profit reached €213m, -1% y/y
(reflecting a higher tax rate) but 10% above
consensus (€193.6m);
• Regulatory reviews are almost completed in
Portugal and Spain (pending Parliamentary
approval). Investors could remain focused on
further news regarding EDP’s deleveraging and
Portugal’s de-risking;
EDP - 9M Results
9M 2012 9M 2012 9M 2011 y/y
(€mn) Reported Consensus Reported Change
EBITDA 2,742 2,717 2,775 -1.2%
LT Contracted Generation 609 623 -2.2%
Liberalised Activities in Iberia 280 279 0.4%
Regulated Networks Iberia 809 800 1.1%
Wind Power 675 548 23.2%
Brazil 397 554 -28.3%
Other -28 -29 -3.4%
Net Income 795 775 824 -3.5%
Source: Company data, Reuters
Capex (2012-2016) Up to €1.7bn
RAB CAGR 2011-2016 between 2% and 5%
EBITDA CAGR 2011-2016 between 3% and 5%
Net income CAGR 2011-2016 5%
Gearing Net debt/EBITDA lower than 4.5x in 2016
Source: Company data
REN Strategic Plan guidelines for 2016
Portugal: Last week’s results (II)EDP Renovaveis (EDPR PL) – 9M 2012 Results: a
solid beat
• 9M Revenues reached €936m, up 22% y/y;
• 9M EBITDA grew 23% y/y to €675m, a 1% beat
vs. Reuters consensus (€668m). Net income
rose 48% y/y to €93m, 9% above consensus,
whilst in the quarter alone net losses stood at
€7.4m;
• EDP Renovaveis added 255MW y/y in 9M and it
has 395MW under construction;
• The first minority sale to CTG is still expected to
occur in Q4 2012.
Portugal Telecom (PTC PL): Q3 Trading Update
• Domestic trends remain sluggish, but
international showed a EBITDA acceleration;
• Domestic revenues reached €682m, down 6.7%
y/y. Residential revenues increased 4.1% y/y,
reflecting a higher ARPU and an increase in the
number of clients, a good performance
considering the country’s current recession.
Personal mobile revenues were down 11.2%
y/y. The ARPU and the number of clients
continue to be squeezed by the economic
backdrop. Enterprise revenues fell 8.2% y/y and
Wholesale revenues decreased 12% y/y;
• Domestic EBITDA was €301m, very modestly
below consensus (€303m);
• Portugal Pay-TV adds at +37k. PSTN line
additions at +11k. Broadband additions at +29k.
In a sluggish environment, Portugal Telecom
have been able to increase its number of
customers;
EDP Renovaveis - 9M 2012 Results Breakdown
9M 2012 9M 2012 9M 2011 y/y
(€mn) Reported Consensus Reported Change
EBITDA 675 668 548 23%
Spain 257 213 21%
Portugal 92 88 6%
Europe 439 358 23%
Rest of Europe 101 61 67%
US 314 278 13%
Brazil 28 18 60%
Net Profit 93 85 63 48%
Source: Company data, Reuters
Portugal: Last week’s results (III)Zon (ZON PL): resilient given macro challenges
• Net income increased 6.3%y/y;
• International Revenues have been growing
quite rapidly (24,7%q/q), although they only
represent 4% of the company’s total revenues;
• EBITDA increased 0.9% q/q, reflecting higher
EBITDA margins in the international area and in
the domestic Pay TV division;
• Zon reached 193k Iris subscribers, reflecting on-
going innovation including the recent launch of
“Timewarp” 7 day catch up TV;
• The company reduced its net debt by €9.9m
during Q3 2012.
Zon - Quarterly Results
(€mn) Q3 2012 Q2 2012 Q3 2011 q/q y/y
Operating Revenues 215.3 214.5 213.6 0.4% 0.8%
Domestic 206.2 207.2 213.6 -0.5% -3.5%
International 9.1 7.3 24.7%
EBITDA 79.7 79.0 79.5 0.9% 0.3%
EBITDA Margin 37.0% 36.8% 37.2%
EBIT 27.5 26.6 23.6 3.4% 16.5%
Net Income 9.6 9.7 9.0 -1.0% 6.7%
Source: Company data
• Oi results will be only announced tomorrow on
November 13th;
• Portugal Telecom will present its Q3
consolidated earnings on November 30th.
(€ mn) Q3 2012 Q2 2012 Q3 2011 q/q y/y
Portugal 681.9 678.0 731.0 0.6% -6.7%
Residential 178.6 178.5 171.0 0.1% 4.4%
Personal 177.6 170.3 199.9 4.3% -11.2%
Enterprise 218.4 226.3 238.0 -3.5% -8.2%
Wholesale, other and eliminations 107.3 102.9 122.1 4.3% -12.1%
EBITDA 301.0 307.3 329.9 -2.1% -8.8%
EBITDA Margin 44.14% 45.32% 45.13%
Residential
Fixed Retail Accesses (000') 3791.0 3714.0 3460.0 2.1% 9.6%
Arpu (€) 31.8 31.7 30.9 0.3% 2.9%
Mobile
Clients (000') 5806.0 5797.0 5873.0 0.2% -1.1%
Arpu from Customers (€) 8.3 8.0 9.2 3.8% -9.8%
Portugal Telecom - Trading Update - Summary
Source: Company data
Source: Bloomberg
• 317 companies have reported Q3 results;
• The European earnings season continues to be
on the negative side, but showing some
improvements compared to last quarter;
• According to Bloomberg, 71.3% of reported
companies have beaten their earnings estimates,
while 52.2% of them have exceeded their
revenue forecasts;
• Insurance and Oil & Gas have announced good
numbers so far this season, while Food &
Beverages and Media have disappointed.
DJ Europe 600 Earnings Update: Q3 2012 as of November 9th,
2012
Dow Jones Europe 600 Q3 Earnings Summary as of November 9th, 2012
Average Q3 Average Q3
Reported Total % of Co's Positive In-line Negative Surprise Positive In-line Negative Surprise
Oil & Gas 19 23 82.6% 52.9% 0.0% 47.1% 9.5% 44.4% 0.0% 55.6% -2.6%
Basic Materials 32 35 91.4% 53.8% 0.0% 46.2% -3.4% 46.9% 0.0% 53.1% -0.3%
Industrials 66 75 88.0% 58.8% 0.0% 41.2% 0.5% 51.6% 0.0% 48.4% 0.5%
Consumer Goods 44 49 89.8% 46.2% 0.0% 53.8% 5.1% 65.1% 0.0% 34.9% 2.6%
Health Care 26 29 89.7% 52.2% 4.3% 43.5% 2.4% 38.5% 0.0% 61.5% -0.4%
Consumer Services 26 34 76.5% 60.0% 0.0% 40.0% 24.6% 52.0% 4.0% 44.0% -0.8%
Telecommunications 15 17 88.2% 76.9% 0.0% 23.1% 11.0% 33.3% 0.0% 66.7% -0.6%
Utilities 13 17 76.5% 28.6% 0.0% 71.4% -8.9% 63.6% 0.0% 36.4% 0.9%
Financials 60 92 65.2% 48.9% 4.3% 46.8% 4.0% 53.2% 0.0% 46.8% -5.2%
Technology 16 20 80.0% 46.2% 0.0% 53.8% -17.3% 68.8% 0.0% 31.3% 1.0%
DJ Europe 600 317 391 81.1% 71.3% 1.1% 27.6% 5.0% 52.2% 0.3% 47.5% -0.7%
Earnings Suprises Revenues SurprisesNumber of companies
Source: Bloomberg
• 451 companies have reported Q3 results as the
Earnings Season comes near to its end;
• Widespread sales misses have been
disappointing;
• Q4 2012 guidance has been cautious, mainly at
the revenues level. Q4 earnings expectations are
falling;
• Management comment on the recent earnings
conference calls reinforced the negative impact
policy uncertainty has been having on the real
economy;
• According to Bloomberg, 71.3% of reported
companies have beaten their earnings estimates,
while 40% of them have exceeded their revenue
forecasts.
S&P 500 Earnings Update: Q3 2012 as of November 9th, 2012
S&P500 Q3 Earnings Summary as of November 9th, 2012
Average Q3 Average Q3
Reported Total % of Co's Positive In-Line Negative Surprise Positive In-Line Negative Surprise
Oil & Gas 40 41 97.6% 57.5% 0.0% 42.5% 2.2% 52.5% 0.0% 47.5% -0.2%
Basic Materials 25 26 96.2% 52.0% 4.0% 44.0% -2.5% 28.0% 0.0% 72.0% -1.7%
Industrials 69 75 92.0% 69.6% 2.9% 27.5% 3.1% 29.0% 0.0% 71.0% -1.0%
Consumer Goods 51 58 87.9% 80.4% 0.0% 19.6% 6.2% 29.4% 0.0% 70.6% 0.4%
Health Care 43 46 93.5% 86.0% 0.0% 14.0% 4.1% 34.9% 0.0% 65.1% -1.2%
Consumer Services 54 74 73.0% 69.8% 3.8% 26.4% 1.5% 35.8% 1.9% 62.3% -0.8%
Telecommunications 8 8 100.0% 50.0% 0.0% 50.0% 15.2% 50.0% 0.0% 50.0% -0.1%
Utilities 32 32 100.0% 62.5% 0.0% 37.5% 2.5% 9.4% 0.0% 90.6% -8.6%
Financials 85 85 100.0% 79.8% 0.0% 20.2% 7.5% 62.7% 0.0% 37.3% 4.2%
Technology 44 54 81.5% 68.2% 0.0% 31.8% -0.1% 52.3% 0.0% 47.7% -0.7%
S&P 500 451 499 90.4% 71.3% 1.1% 27.6% 3.7% 40.0% 0.2% 59.8% -0.3%
Comparative Data (full earnings Season)
Q2 2012 71.5% 1.0% 27.5% 4.0% 41.4% 0.2% 58.4% 0.4%
Number of companies Earnings Suprises Revenues Surprises
85
95
105
115
125
135
145
85
95
105
115
125
135
145
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
JP Morgan vs. S&P500 Financial Sector
S&P500 Financial Sector JP Morgan
Jan 2012= 100
0
5
10
15
20
25
30
Nov-11 Feb-12 May-12 Aug-12 Nov-12
Groupon share price ($)• Last Friday, Groupon (GRPN US) reported poor Q3 results,
with revenue below the low end of guidance. The
international segment weakness worsened in Q3. The
shares tumbled 30% to $2.76 for a market cap value of
$1.81bn. Last November, Groupon sold shares at $20 in an
initial public offering, valuing the company at about
$12.7bn. Investors seems to have serious doubts about
Groupon’s business model;
• JP Morgan (JPM US) filed its Q3 2012 10-Q in which it
discloses that the FED did not object to the bank’s
resubmitted capital plan. It contemplates up to $3bn in
share buybacks in Q1 2013. This is positive and well above
street expectations, and seems to suggest that JP Morgan
is recovering after its recent big trading losses;
• BCP (BCP PL) posted a Q3 2012 net loss of €252m. NII (-
54% y/y; -35% q/q) was the major disappointment. CT1
ratio is 10.3% according to EBA criteria. Last week, the
stock gained 1.4% but is down -17.9% since the beginning
of 2012. The restructuring is ongoing. However, the asset
quality deterioration and the bank’s ability to repay the
€3bn of state CoCos are significant uncertainties.
Last week’s market highlights
Source: Company data
Source: Bloomberg
Source: Bloomberg
What we are watching this week:• The minutes for the two-day
FOMC meeting concluded on
October 24th will be released
on Wednesday (Nov 14th). The
market will probably search
for some insight into what
officials intend to do when the
current Operation Twist
programme concludes at the
end of this year;
• The European Union finance
ministers meet in Brussels
starting Monday (Nov 12th);
• On November 14th, The CGTP
(General Confederation of
Portuguese Workers), one of
the main union confederation
in Portugal, is to stage a strike
against the government’s
austerity measures.
CALENDAR - Event Country Date Hour (GMT) Survey Prior
BOJ Governor Shirakawa speech Japan 12-Nov Not Available Not Available Not Available
Japan real GDP (Q3 first prelim.) Japan 12-Nov Not Available Not Available Not Available
German Chancellor Merkel to meet
Portuguese PM Coelho in Lisbon Portugal 12-Nov Not Available Not Available Not Available
Eurogroup meeting Euro-zone 12-Nov Not Available Not Available Not Available
US Veterans Day (some markets closed) US 12-Nov Not Available Not Available Not Available
CPI inflation (Oct) (YoY) United Kingdom 13-Nov 09:30 2.4% 2.2%
ZEW Survey (Econ. Sentiment) Germany 13-Nov 10:00 -10.0 -11.5
FED's Yellen speech on central bank
communications US 13-Nov Not Available Not Available Not Available
CPI (YoY) Portugal 13-Nov 10:00 2.0% 2.9%
Chile monetary policy meeting Chile 13-Nov Not Available Not Available Not Available
Industrial Production sa (MoM) Euro-Zone 14-Nov 10:00 -2.0% 0.6%
WPI inflation (Oct) India 14-Nov Not Available Not Available Not Available
Real GDP (YoY) Portugal 14-Nov 10:00 -3.2% -3.3%Bank of England Inflation Report United Kingdom 14-Nov 10:30 Not Available Not Available
ECB's Asmussen speech Euro-zone 14-Nov Not Available Not Available Not Available
Unemployment Rate Portugal 14-Nov 11:00 Not Available 15.0%
Producer Price Index (MoM) US 14-Nov 13:30 0.2% 1.1%
PPI Ex Food & Energy (MoM) US 14-Nov 13:30 0.1% 0.0%
Advance Retail Sales US 14-Nov 13:30 -0.2% 1.1%
Retail Sales Less Autos US 14-Nov 13:30 0.2% 1.1%
FOMC minutes of October 24 meeting US 14-Nov 19:00 Not Available Not Available
Real GDP (Q3 first) (YoY) France 15-Nov 06:30 0.0% 0.3%
Real GDP nsa (Q3 flash) (YoY) Germany 15-Nov 07:00 0.4% 0.5%
Real GDP sa (Q3 final) (YoY) Spain 15-Nov 08:00 -1.6% -1.6%
Real GDP sa and wda (Q3 prelim) (YoY) Italy 15-Nov 09:00 -2.9% -2.6%
Retail Sales Ex Auto Fuel (Oct) (YoY) United Kingdom 15-Nov 09:30 2.1% 2.9%
CPI (YoY) Euro-Zone 15-Nov 10:00 2.5% Not Available
Real GDP sa (Q3 flash) (YoY) Euro-Zone 15-Nov 10:00 -0.6% -0.5%
Consumer Price Index (Oct) (MoM) US 15-Nov 13:30 0.1% 0.6%
CPI Ex Food & Energy (Oct) (MoM) US 15-Nov 13:30 0.1% 0.1%
Empire Manufacturing US 15-Nov 13:30 -7.20 -6.16
FED's Bernanke speech on housing and
mortgage markets US 15-Nov Not Available Not Available Not Available
Initial Jobless Claims US 15-Nov 13:30 373K 355K
Continuing Claims US 15-Nov 13:30 3150K 3127K
Philadelphia Fed. US 15-Nov 15:00 1.5 5.7
Industrial Production (Oct) US 16-Nov 14:15 0.2% 0.4%
Capacity Utilization (Oct) US 16-Nov 14:15 78.3% 78.3%
HK, Malaysia and Singapore real GDP (Q3) Asia 16-Nov Not Available Not Available Not Available
30
35
40
45
50
55
60
65
-45
-35
-25
-15
-5
5
15
25
35
45
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US Regional PMIs & National ISM Index
Empire State (LHS)
Philly Fed (LHS)
ISM (RHS)
Next Week Preview: Economics
Source: Bloomberg
• October’s US Retail Sales (Nov 14th) and
Industrial Production (Nov 16th) will be released
this week. Hurricane Sandy will probably have
affected the retail sales value and may have been
an additional drag on manufacturing in late
October;
• The Empire State and Philly Fed Indices will be
disclosed Thursday (Nov 15th). Both surveys cover
parts of the area affected by the hurricane;
• In Europe, September industrial production for
the eurozone is due on Wednesday (Nov 14th).
Thursday (Nov 15th) will see the release of
October inflation numbers for the eurozone as
well as advance Q3 2012 GDP numbers for the
euro area and its biggest economies (Germany,
France, Italy);
• In the UK, the Bank of England releases its
quarterly inflation report on Wednesday (Nov
14th). October inflation data is due on Tuesday
(Nov 13th). Wednesday (Nov 14th) will also see
the release of data from the labour market. Source: Bloomberg
Eurogroup / Ecofin finance
ministers’ meetings Preview• Eurogroup / Ecofin finance ministers’ meeting will
be held on November 12/13th;
• Euro-zone finance ministers are unlikely to take a
final decision to release the next tranche of loans
to Greece. The debt sustainability report
prepared by the Troika will probably only be
available by the end of the month;
• Greece needs the money to redeem debt
maturing on November 16th. European officials
have already said that there’ll not be a default;
• According to recent news, the Banking Union will
not be discussed;
• Cyprus intended to agree its aid programme with
the Troika in time for this meeting. But, with
international lenders resuming talks with Cyprus
only on November 9th, probably the meeting
scheduled for December 3rd looks to be the
likely timetable target.
Next Week Preview: Eurogroup meeting and Earnings season
Q3 Earnings season goes on…
• In Europe, we’ll highlight ENEL, Vivendi, Intesa
SanPaolo, Unicredit, E.ON, Vodafone and BES
(Tuesday, Nov 13th); Tecnicas Reunidas,
Infineon, Sainsbury, SSE, RWE and Sonae
(Wednesday, Nov 14th); Zurich Insurance and
National Grid (Thursday, Nov 15th), and Henkel
(Friday, Nov 16th);
• SAP will hold its biannual Customer Event on
November 13-15th. Heineken will hold its
Investor Day on November 13-14th. Danone
wil hold an investor seminar on November 14-
16th. Royal Dutch Shell will hold its
Management day on November 15th;
• In the US, we’ll highlight Home Depot and
Cisco Systems (Tuesday, Nov 13th); and Dell,
Wal-Mart and Applied Materials (Thursday,
Nov 15th).
50
100
150
200
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
BES, BPI and BCP share prices
BES BPI BCP
Jan 2012= 100
0.573
0.35
0.40
0.45
0.50
0.55
0.60
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Sonae (SON PL) share price (€)
Charts we are watching (I)• Sonae (SON PL) is one of the best performers in the
PSI20 Portuguese stock market index, since the
beginning of 2012. Since its June’s lows, the stock’s
gained more than 55%. The ongoing sovereign de-
risking has provided support to the stock price. Sonae
will disclose its Q3 2012 numbers on November 14th
(after market close). Sonaecom (SNC PL) and Sonae
Sierra have already reported their numbers. For that
reason, the main focus should be on the retail
business. Given the tough macro context, will Sonae’s
core business continue to show resilience?
• BPI (BPI PL) has been the best stock in the Portuguese
banking sector this year. BES (BES PL) share price is
down 3% year-to-date. The bank is expected to report
Q3 2012 results on November 13th (after market
close). BES has been able to meet regulatory capital
requirements without having to resort to public funds.
NII, margins both on domestic and international
activities, and the bank’s asset quality will be closely
followed by investors.
Source: Bloomberg
Source: Bloomberg
10
15
20
25
30
35
40
May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12
Facebook share price ($)
$19.21
Source: Bloomberg
100
110
120
130
140
150
160
170
100
105
110
115
120
125
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Apple share price vs. S&P500 and S&P 500
technology sector
S&P Tecnology Sector SPX Apple
Jan 2012= 100 Jan 2012= 100
Charts we are watching (II)• The iPhone 5, the new generation iPad and the
iPad Mini seem to suggest a strong product cycle
for Apple (AAPL US). However, the stock is down
more than 20% since its September’s high. This has
clearly weigh on the S&P500 and on the
technology sector. Short-term, the company’s
aggressive product launch will probably lower its
EPS (higher costs). Nevertheless, demand upside
should drive earnings growth in the future. But, is
the market afraid that, given Android and Windows
competition, margins will disappoint?
• Facebook (FB US) share price fell 3.9% last Friday to
$19.21. The stock is down more than 49% from its
$38 IPO price. Facebook delivered 43% y/y ad
revenue growth in Q3 2012. Revenues and
adjusted EBITDA reached $1,26bn and $701m,
respectively Meanwhile, the lock-up expiration
table could weigh on the stock. Approximately
777 million shares will be eligible for sale in the
public market from November 14th.Source: Bloomberg
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