Good morning,

Markets are called to open flat this morning. This is what's happening today:

  • The yen slumped for a fifth day, the longest losing streak since November, as minutes from Bank of Japan’s February meeting fueled speculation for increased monetary easing;
  • Asian shares retreated from a 19-month high;
  • Air France, Lottomatica, MunichRe and Intesa Sanpaolo to report results today;

Stocks rallied worldwide this week amid optimism global policy makers will sustain or boost their stimulus efforts as economic data from the world’s biggest economy improved. Asian equities reached a 19-month peak, European shares traded at a 4 1/2-year high and the S&P 500 Index rose to the highest since October 2007, driving valuation of stocks in the MSCI All-Country World Index to the priciest since May 2010.

The yen dropped against almost all of its 16 major peers as Shan Bank of Japan’s deputy governor nominee Kikuo Iwata fanned speculation that the central bank will boost cash infusions in coming months after saying decisive monetary easing is needed.

Barclays remain underweight on Intesa Sanpaolo which is currently trading at E1.25. Barclays has a price target for ISP of E1.10/share. The following is the reasoning for the lack of enthusiasm in this stock 'While concerns on the domestic macro and asset quality headwinds remain, we see revenue sustainability as a key issue as we look forward to 2013. With cost efficiency already best in class and provisions likely to remain high, we focus on income as the main driver of any improvement in near term RoTE and therefore the best indicator for a re/de-rating of the shares. However, 2012 revenue has been supported by unusually high gains in trading and insurance which look unsustainable. With muted growth in net interest income and fees we forecast a 3% fall in revenues in 2013. Consensus is more optimistic on revenue growth but we believe that this does not fully factor in the non recurring nature of a significant proportion of 2012 revenue. With an underlying RoTE as low as 3% and lack of visibility on “new normal” RoE in the medium term, the current premium valuation to peers does not look justified to us. We remain Underweight.'

Deutsche Bank have a hold recommendation on Air France with a price target of E9/share. Air France is currently trading at E8.21/share. The following are comments by Deutsche Bank on Air France, 'Air France-KLM has the highest operational and financial gearing of the major European airlines. With increasing competition (from easyJet at its hubs and from Gulf carriers to destinations in the Middle East/Asia) and an uncertain global economic outlook, Air France-KLM will need to substantially cut its cost base (especially personnel costs). We see more and more signs that restructuring efforts at AF-KLM are intensifying. At the same time, the yield situation remains satisfying, despite challenging competition and economic uncertainties. The level of indebtedness remains challenging. Furthermore, the macroeconomic outlook for its major home market France has worsened lately. An investment in AF-KLM combines good chances with high risks. Given that balanced risk-return profile, we rate the stock a Hold.'

For more information on Air France or Intesa Sanpaolo, or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli