Good morning,

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

  • The yen weakened after the Bank of Japan expanded asset purchases to support economic growth. The BOJ expanded its asset-purchase fund to Y40t from Y30 t;
  • S&P downgraded Spain for the second time this year. Spain’s sovereign credit rating was cut to BBB+ from A by S&P on concern the nation will have to provide further fiscal support to the banking sector as the economy contracts;
  • Samsung Electronics Co. gained 2.9%. Asia’s largest consumer-electronics maker posted first-quarter profit that beat analysts’ estimates amid surging sales of Galaxy smartphones;
  • Japan Tobacco Inc. slid 1% in Tokyo. Asia’s biggest listed cigarette maker by market value forecast this year’s annual profit will fall 1%, missing analysts’ estimates;
  • Inc., the world’s largest Internet retailer, rose after it beat analysts’ first- quarter revenue and earnings estimates on buoyant demand for Kindle devices and e-commerce services for outside vendors. The shares surged 15% in extended trading after the report yesterday;
  • 10-year Italian debt is yielding 5.642%, 10-year Spanish debt is yielding 5.833%, 10-year Portuguese debt is yielding 10.934%;
  • Brent is trading at $119.48/barrel.


Spain's sovereign credit rating was cut for the second time this year by Standard & Poor's on concern that the country will have to provide further fiscal support to banks as the economy contracts. S&P lowered the long-term grade to BBB+ from A, with a negative outlook. Prime Minister Mariano Rajoy is struggling to convince investors he can control public finances amid soaring unemployment and a contracting economy. Banks threaten to disrupt the premier’s efforts as bad loans reach the highest levels in almost two decades.

“Spain’s budget trajectory will likely deteriorate against a background of economic contraction,” S&P wrote in the statement yesterday. “At the same time, we see an increasing likelihood that Spain’s government will need to provide further fiscal support to the banking sector. As a consequence, we believe there are heightened risks that Spain’s net general govern debt could rise further.”

This is the second downgrade of Spain by S&P this year. The firm cut Spain along with France and other European nations on Jan. 13. Since then, the yield on Spain’s 10-year bonds have risen to 5.83% from 5.22%, while borrowing costs for France are little changed at 2.98%. Spain’s yields are up from about 4.13% in January 2009, when S&P stripped it of its top AAA rating.

“We could also consider a downgrade if political support for the current reform agenda were to wane,” the S&P statement said. “Moreover, we could lower the ratings if we see that Spain’s external position worsens or its competitiveness does not continue to approach that of its trading partners, a key factor for Spain to return to sustainable economic and employment growth.”

Spanish banks probably need E50b of additional capital, Morgan Stanley analysts estimate. The figure may rise to as much as E160b in a worst-case scenario. The banks could try to raise the capital themselves or get it from either the Spanish government or the European Financial Stability Facility.

Governments committed more than $430b in fresh money to the International Monetary Fund to help it protect the world economy against deepening debt turmoil in Europe. The near-doubling of the fund’s firepower was announced after Group of 20 finance ministers and central bankers met April 20 in Washington.


The Bank of Japan expanded its asset-purchases program by Y10t after the world’s third-largest economy showed signs of slowing and lawmakers pressed for more aggressive steps. The BOJ’s fund, its main policy tool since the benchmark interest rate was cut to near zero, is now Y40t.

The central bank also extended the maximum maturity of government bonds purchases in the program to three years, from two years. A separate credit facility providing funds to banks was pared by Y5t.

Amazon Inc., the world’s largest Internet retailer, rose after it beat analysts’ first- quarter revenue and earnings estimates on buoyant demand for Kindle devices and e-commerce services for outside vendors.The shares surged 15% in extended trading after the report yesterday. Net income was $130 million, or 28 cents a share, compared with $201 million, or 44 cents, a year earlier. Sales rose 34% to $13.2 billion. Analysts on average estimated earnings of 7 cents on sales of $12.9 billion, according to data compiled by Bloomberg.

Chief Executive Officer Jeff Bezos is looking to add customers by pouring money into new versions of the Kindle and warehouses that are equipped to send out products faster. In the quarter when it was introduced last November, the Kindle Fire tablet rocketed to No. 2 in the market behind Apple Inc.’s iPad, according to IDC, and it remains the best-selling item on Amazon’s website, the company said.


Samsung Electronics Co., Asia’s largest consumer-electronics maker, reported a better-than- estimated first-quarter profit after surging sales of Galaxy smartphones helped mask slumping earnings at the chip business. Net income jumped 81% from a year earlier to 5.05 trillion won ($4.4 billion), the Suwon, South Korea-based company said in a statement today, beating the 4.24 trillion-won average of 29 analyst estimates compiled by Bloomberg.

Shares of Samsung, the world’s biggest maker of TVs and chips, rose to a record in Seoul as profit at the mobile-phone business almost tripled in the quarter, with new models such as the Galaxy Note taking on Apple Inc.’s iPhone and iPad. Samsung, which overtook Nokia Oyj as the world’s biggest handset maker in the first quarter, said its momentum in the $219 billion smartphone market will continue with “remarkable” demand in emerging markets.

Stock to watch: Las Vegas Sands (Price $56.97, $68)

Given the strong YTD share price performance, we believe the key risks to LVS shares at current levels are valuation, which has generally been less of a concern for gaming investors, and expectations, which continue to be too low, in our view. At present, on our fresh estimates, we believe LVS shares remain reasonably priced, if not inexpensive, on nearly every metric. As such, while visible positive catalysts are less abundant than they were earlier this year, we believe reasonable valuation, upside to estimates on continued Macau market strength and LVS share capture, and an ever improving FCF story have become the key tenets to the LVS thesis. We continue to believe that one or all of the following are likely to be positive drivers for the stock in 2012: 1) potentially shareholder friendly uses of capital, given the strong free cash flow generation, rapidly declining leverage, and limited current development pipeline, 2) a decision concerning the conversion of Four Seasons apartment units into hotel rooms, thereby adding an incremental 300 rooms to the property, 3) further discussion concerning gaming expansion in Asia, and Spain to a lesser extent, and 4) potential non-core asset monetization activity. We rate the shares Buy.

For further information on Las Vegas Sands or other stocks we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli