Weekly Markets Perspectives

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

n

Octob

er29

th,2012

The US earnings season has been disappointing sofar. The current earning season’s theme continues:companies beating on the bottom‐line butdisappointing on the top‐line.

Tech results have been fairly modest in Q3. Apple’sQ4 FY12 earnings didn’t helped US tech stocks.Technology stocks continued to underperform thebroader index since their last September peak.

With one week of campaigning left in the US, therewas some talk of an imminent downgrade of the USsovereign rating by Fitch (AAA with negativeoutlook).

The Fed reaffirmed its asset purchases plan to buy$40bn of MBS per month to support the recovery.The Committee highlighted a slightly more upbeattone with regards to household spending but alsonoted that growth in business fixed investmentshas slowed.

Weekly FocusIn Europe, the composite euro area PMI fell to itslowest level since June 2009.

Moreover, there were some headlines of Greeceobtaining a two year extension. The dealreached with the troika would include aEUR13.5bn austerity package together with arange of structural labor reforms. Greece wouldbe granted a two year extension to meet fiscaltargets. Let’s wait and see…

At the Bundestag, Draghi reiterated his stancethat the OMT will not lead to disguised financingof governments. He also said that the programmewill not compromise the ECB's independence andnor lead to inflation.

In Japan, the government unveiled a JPY750bnstimulus package. Finally, Spain will have tomeet €20.3bn of redemptions between Mondayand Wednesday this week.

45.8

‐0.2%

‐3.0%

‐1.6%

‐0.2%

1.2%

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011 2012 2013

Composite PMI and Euro‐zone GDP

Euro‐zone GDP (% q/q, right scale)

Composite output PMI

‐0.8%

‐2%

0%

2%

4%

6%

8%

10%

12%

14%

1992 1997 2002 2007 2012

Lending to the Private Sector (% y/y)

Euro area: Downturn in private sector lending 

Business surveys point to a weak euro economy• The euro‐zone composite PMI fell from 46.1 to

45.8 in October, its lowest level in over 3 years;The index seems to point to quarterly falls ineuro‐zone GDP (see chart);

• The manufacturing index fell, but the servicesindex increased;

• The German Ifo measure of businessconfidence fell from 101.4 to 100.0 in October.It seems to suggest that the German economyis slowing down.

• Commercial bank loans to the private sector fellin September ‐0.8% y/y, following ‐0.6% y/y inthe previous month (see chart);

• While lending to households barely expanded,that to firms was ‐1.4% in September;

• The liquidity that the ECB has provided is still notreaching the economy;

• The ECB probably needs to do more to stimulatethe economy.

Source: European Central Bank Source: Markit and Eurostat

‐0.4%‐0.3%

‐0.4%

1.0%

‐0.7%

‐0.2%

0.3%

0.8%

1.3%

2010 2011 2012 2013

UK real GDP (q/q change)

600

800

1000

1200

1400

1600

1800

2008

 Q1

2008

 Q2

2008

 Q3

2008

 Q4

2009

 Q1

2009

 Q2

2009

 Q3

2009

 Q4

2010

 Q1

2010

 Q2

2010

 Q3

2010

 Q4

2011

 Q1

2011

 Q2

2011

 Q3

2011

 Q4

2012

 Q1

2012

 Q2

Core euro area banks' exposure to the peripheral economies  (€bn)

Do not trust your neighbour…• The Bank for International Settlements

announced banking statistics for Q2 2012;• Banks in the core euro‐zone economies reduced

their exposures to the peripheral economies;• Consensus forecasts for GDP in the peripheral

economies are likely to continue to fall. This maylead to lower exposures in the near future;

• The peripheral banks’ reliance on the ECB couldremain high.

Source: Banks for International Settlements Source: Markit and Eurostat

UK exits recession territory• A rebound was expected on the grounds of

some temporary factors (e.g. Olympics);Nevertheless, even excluding those factors, GDPin Q3 appears to have shown a robust underlyingexpansion;

• Services output was the main driver (+1.3% q/qnon annualized);

• The MPC meets in early November. Should weexpect less QE ?

German lawmakers respond favorably to ECB bond‐buying plan• The ECB President started his speech by referring

that the Euro Zone economy will remain week inthe near‐term. Next year, a very gradual recovery isexpected (ECB forecasts GDP growth of 0.30%).Unemployment will remain at high levels (ECBforecasts 11.3%);

• Due to a week economic backdrop, the ECBdecided to lower interest rates, which in normaltimes should have been passed evenly to firms andhouseholds across the Euro Zone;

• Other attempts were made by the ECB to pusheconomic growth in the region (e.g. the Long‐TermRefinancing Operations). More recently, the ECBannounced the Outright Monetary Transactionsprogramme;

• Draghi underlined there were some concernsabout the programme:

o Purchases will lead to disguised financing ofGovernment – Draghi has denied it. The ECBshould only buy bonds on secondary markets;

o The independence of the ECB will becompromised – Draghi denied it again.Countries will have to comply with therequested conditionality as a prerequisitefor the ECB to activate its OMT program.But, isn´t the ECB exposed to countrieswith debt overhang problems?

o Euro area taxpayers will be exposed torisks – Draghi also denied it. But, isn´t theECB exposed to potential losses on thebonds that the bank decides topurchase?

o OMT will lead to inflation: Draghi saidthat bond purchases will be fullysterilized, in order to maintain pricestability in the euro area.

• The reaction was apparently positive with theCDU’s budget spokesman saying "(Draghi's)answers were very convincing, and we cantherefore give the message to German citizensthat fears of inflation that have beenexpressed here are unfounded".

‐2.1%

‐25%

‐20%

‐15%

‐10%

‐5%

0%

5%

10%

15%

20%

2005 2006 2007 2008 2009 2010 2011 2012 2013

US Non‐Defence Capital Goods Shipments (Ex. Aircraft) Y/Y Change

Durable goods orders increase 9.9% m/m in September• However, excluding commercial aircraft and

defence orders, the report was adisappointement;

• Non‐defence capital goods orders (ex. aircraft)were unchanged in September. August’s gainwas revised down from 1.1% to 0.2% m/m.Shipments decreased by ‐0.3% m/m. The declinein August was revised from ‐0.7% m/m to ‐1.2%m/m;

• Business investment seems to have stalledprobably due to the uncertainty surrounding theelection and the fiscal cliff.

Source: US Commerce Department

Countdown to the US Presidential election• One week of campaigning is left in the US

Presidencial election;• In October, Romney gained in some polls.

Nevertheless, the Intrade betting markets stillput the odds of an Obama victory at close to60%. He appears to be ahead of Romney in manyof the key swing states, which will decide theoutcome of the electoral college vote;

• However, the chances of the victor having acompliant Congress seem to be fading fast.

Source: Intrade

64.0

37.5

0

20

40

60

80

100

Jan‐11 Mai‐11 Set‐11 Jan‐12 Mai‐12 Set‐12

Chances of Presidential Candidate Victory (%)

Obama

Romney

3.37%

3.2%

3.4%

3.6%

3.8%

4.0%

4.2%

Jan‐12 Mar‐12 Mai‐12 Jul‐12 Set‐12

US Mortgage Interest rates 30 yr Fixed rate

Last week’s FOMC two‐days meeting delivered no surprises• From the accompanying statement, we can

conclude that:o The economy is still expanding at a

moderate growth rate;o The unemployment rate is at a high level;o Inflation rate is expected to remain stable

in the long‐term. Medium‐term inflationrate should run at or below the 2% target;

o The housing sector is giving signs ofimprovement.

• The Fed will continue purchasing mortgage‐backed securities at a pace of $40bn per month.Operation Twist will continue until the end of2012. The federal funds rate should be kept at alow level until mid 2015;

• The labor market will be followed closely. If theoutlook doesn’t improve substantially, fedofficials could undertake additional purchases ofassets or other policy tools that they findconvenient;

• However, the next meeting in December couldbe more interesting. Fed officials could decide tocompensate for the expiry of the OperationTwist at the end of the year;

• Moreover, if Congress can´t reach agreement toprevent a contraction in fiscal policy (aka FiscalCliff), the Fed could decide that it need to loosenmonetary policy even more.

Source: Freddie Mac Commitment Rates

-0.01% -0.01%-0.12%

0.64%

0.08%

-0.01%

National Defence Nondefence State and Local

Contribution to Government Spending growth

Q2 12 Q3 12

1.06%

0.09% 0.23%

-0.14%

1.42%

0.07%

-0.18%

0.71%

PersonalConsumption

Gross privatedomestic

investment

Net exports Governmentexpenditures

Contributions to GDP GrowthQ2 12 Q3 12

2.0%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2005 2006 2007 2008 2009 2010 2011 2012

GDP QoQ (Annualized)US Q3 GDP expanded by 2%• The US economy grew 2% (annualized) in Q3, up from

1.3% in the previous quarter;• Business investment declined by 1.3% (the first

quarterly decline since the last recession);• Consumption growth picked‐up to 2.0% from 1.5% in

Q2 2012;• Federal spending surged by 9.6%, which gave an

important boost to GDP growth in the quarter.Government spending (mainly national defence)contributed as much as 0.7% to overall GDP growth.How should we explain this huge increase in Federalspending?

• Residential investment increased by 14.4%, reflectingthe improvement in the housing market;

• Net exports subtracted 0.2% from GDP growth, withexports falling by 1.6%;

• GDP growth came in a little higher than expected bythe market… but largely because of the big jump inFederal spending. The economy is still not growingrapidly enough to create sufficient jobs.

Source: U.S. Department of Commerce

49.1

40

45

50

55

60

2009 2010 2011 2012

HSBC Manufacturing PMI

China: PMI rebounds…• China’s October HSBC/Markit flash PMI rose to

49.1, up from 47.9 in September. It seems tosuggest that manufacturing growth isaccelerating;

• The new orders index increased to 49.7 inOctober from 47.3 in September. The new exportorders index rose to 47.3 in October from 44.9 inSeptember;

• External demand outlook remains uncertain.Domestically, the government has been steppingup its fiscal support.

Source: Bloomberg

Argentina vs. holdout creditors• Last Friday, the U.S. Court of Appeals for the

Second District decided on the long awaitedPari‐Passu case against Argentina. The wordingof the Court of Appeals ruling seems critical tothe Republic of Argentina’s stance regardingdebt restructuring;

• It appears Argentina's holdout creditors mustbe paid at the same time as creditors whoaccepted bonds in the 2005 and 2010 debtrestructuring deals;

• The dispute stems from Argentina's $100 billionsovereign default in 2001. In 2005 and 2010investors tendered about 93% of the debt in aswap offer paying about 33 cents on the dollar;

• However, some $4.5bn of defaulted bonds arethought to be in the hands of the holdoutswhich continue to pursue the Argentinegovernment in international courts seekingrepayment;

• Argentine bond prices tumbled on the news.

Portugal: Q3 2012Earnings Update as of October 26th, 2012Portucel (PTI PL): Results show resilience• 9M 2012 sales were €1,109.5m. Net earnings

increased 11.2% y/y, reflecting a bettergeographical mix, FX tailwinds and market sharegains in the European paper market;

• The company continues to be an interesting stockin the Portuguese market. Key risks are adecrease in the pulp and paper prices, a rise onthe EURUSD exchange rate, a deterioration of theEuropean economy and regulation changes onthe Portuguese Biomass energy sector.

BPI (BPI PL): Solid… given macro challenges• BPI posted a €32m net profit in Q3 2012;• Domestic performance: NII and fee income were

solid, more than offsetting the cost of the CoCos;Net lending was down 5% y/y. Customer depositsincreased 2% y/y. LTD ratio at 105%, if we includethe retail bonds. Credit at risk increased from3.5% to 3.9%;

• The bank plans to repay €100m of CoCos.

Jerónimo Martins (JMT PL): Poland is key• Net income of €120m in Q3 2012, + 7% y/y,

slightly below Reuters consensus of €123m;• Biedronka’s net profit increased 17% y/y. Q3 LFL

sales were 5.5% (a slowdown from Q2 2012);• Pingo Doce´s promotional activities in the quarter

have had a negative effective on JM’s margins;• The Company should distribute an amount of

€0.239 per share from free reserves, payable in2012;

• We continue to like the company’s exposure tothe Polish market. Key risks are a deterioration onthe macro outlook for the Portuguese and Polisheconomies, increased competitive intensity inPoland and the devaluation of the Zloty.

Media Capital announced results for Q3 2012.EBITDA increased by 45% y/y. EBITDA marginreached 17.9% in the first nine months of the year,representing a 1.6pp improvement, as a result of adecrease in operating costs.

Source: Bloomberg

• So far, 273 companies have reported Q3 results;• Widespread sales misses although we must take

into account FX headwinds;• Poor Q3 earnings season. Y/Y EPS growth should

be flat or even slighthly negative, given a dificultmacro environment;

S&P 500 Earnings Update: Q3 2012 as of October 26th, 2012• According to Bloomberg, 72% of reported

companies have beaten their earnings estimates,while 41% of them have exceeded their revenueforecasts.

S&P500 Q3 Earnings Summary as of October 26th, 2012Average Q3 Average Q3

Reported Total % of Co's Positive Negative In‐line Surprise Positive Negative In‐line Surprise

Oil & Gas 16 41 39.0% 56.3% 43.8% 0.0% 2.8% 31.3% 68.8% 0.0% 3.0%Basic Materials 19 26 73.1% 42.1% 52.6% 5.3% ‐3.5% 31.6% 68.4% 0.0% ‐1.9%Industrials 47 75 62.7% 74.5% 21.3% 4.3% 3.4% 27.7% 72.3% 0.0% ‐0.9%Consumer Goods 32 57 56.1% 75.0% 25.0% 0.0% 3.6% 28.1% 71.9% 0.0% ‐1.3%Health Care 29 46 63.0% 82.8% 17.2% 0.0% 3.8% 31.0% 69.0% 0.0% ‐0.9%Consumer Services 30 74 40.5% 73.3% 20.0% 6.7% 1.9% 40.0% 60.0% 0.0% ‐0.4%Telecommunications 4 8 50.0% 50.0% 50.0% 15.2% 0.0% 25.0% 75.0% 0.0% ‐0.2%Utilities 6 32 18.8% 33.3% 66.7% 0.0% ‐1.8% 0.0% 100.0% 0.0% ‐10.1%Financials 57 85 67.1% 86.0% 14.0% 0.0% 11.4% 64.9% 35.1% 0.0% 2.9%Technology 33 54 61.1% 63.6% 36.4% 0.0% ‐0.8% 57.6% 42.4% 0.0% ‐0.9%S&P 500 273 498 54.8% 71.8% 26.4% 1.8% 4.2% 40.7% 59.3% 0.0% ‐0.3%

Comparative Data (full earnings season)Q2 2012 71.5% 27.5% 1.0% 4.0% 41.4% 58.4% 0.2% 0.4%

Number of companies Earnings Suprises Revenues Surprises

-2.3%

0.2%

-0.5%-0.1%

1.2%

22-Oct 23-Oct 24-Oct 25-Oct 26-Oct

Microsoft: Share Price evolution (% Daily Change)

400

500

600

700

Jan-12 Apr-12 Jul-12 Oct-12

Apple: share price evolution (USD)

40 60 80

100 120 140 160

Jan-12 Apr-12 Jul-12 Oct-12

European car market

Peugeot Volkswagen Pref. Daimler

• Apple (AAPL) reported Q4 FY12 revenues of $35.97bn,above consensus of $35.80bn. EPS of $8.67 was belowconsensus of $8.75. Apple guided to Q1 FY13 revenues ofabout $52 billion and EPS of about $11.75. Thiscompares to consensus of $54.98 billion and $15.41;

• Apple announced the iPad mini (the starting price pointof $329 was higher than expected), the fourthgeneration iPad, and refreshed the MacBook Pro, Macmini, and iMac lineups. Is Apple moving towards a morerapid refresh cycle?

• Microsoft (MSFT) held the Windows 8 event in NYC lastThursday. October 26th Windows 8 became generallyavailable to the public. Initial reviews around consumeradoption will be important to help assess potentialuptake, especially for Windows‐based tablets. But, atwhat pace will enterprises migrate to Windows 8?

• As widely speculated in the press, Peugeot (UG FP)announced that the French state will provide €7bn offinancial guarantees to Banque PSA. The news arepositive near‐term. But, in the long‐term, is this dealgoing to limit the company’s strategic options?

Last week’s market highlights

Source: Bloomberg

What we are watching this week:• October inflation data for the

eurozone is due Wednesday;• Provisional Q3 GDP for Spain

should be announced tommorow;• Many monetary policy meetings

will be held across the world thisweek. An interest rate cut isexpected in Hungary;

• In the UK, October PMI is dueThursday;

• In the US, this week’s ISMmanufaturing (Thursday) andEmployment report (Friday) forOctober could be key to the stockmarket and to the PresidentialElection;

• The official China manufacturingPMI is due on Thursday. It isexpected to tick up above the 50threshold.

CALENDAR ‐ Event Date (GMT) Hour Survey Prior

Italy sells €8bn in 6M TB 10‐29‐2012 10:00 Not Available Not Available

Bundesbank's Weidmann speaks in Frankfurt 10‐29‐2012 Not Available Not Available Not Available

Germany sells €3bn in 12M TB 10‐29‐2012 10:30 Not Available Not Available

Personal Income (Sep), US 10‐29‐2012 12:30 0.4% 0.1%Personal Spending (Sep), US 10‐29‐2012 12:30 0.6% 0.5%France sells €6.8bn in 3, 6 and 12M TB 10‐29‐2012 13:50 Not Available Not Available

Job‐To‐Applicant Ratio, Japan 10‐29‐2012 23:30 0.83 0.83

GDP Constant SA YoY (Q3), Spain 10‐30‐2012 08:00 ‐1.7% ‐1.30%Japan BOJ monetary policy meeting 10‐30‐2012 Not Available Not Available Not Available

India RBI monetary policy decision 10‐30‐2012 Not Available Not Available Not Available

Hungary monetary policy decision 10‐30‐2012 Not Available Not Available Not Available

Unemployment Change (000's) (Oct), Germany 10‐30‐2012 08:55 10K 9KUnemployment Rate (s.a), Germany 10‐30‐2012 08:55 6.9% 6.8%Consumer Confidence, Euro Zone 10‐30‐2012 10:00 ‐25.6 ‐25.6Indust. Confidence, Euro Zone 10‐30‐2012 10:00 ‐17.0 ‐16.1Services Confidence, Euro Zone 10‐30‐2012 10:00 ‐13.0 ‐12.0Italy sells €7bn in 5 and 10Y GB 10‐30‐2012 10:00 Not Available Not Available

Conf. Board consumer confidence (Oct), US 10‐30‐2012 14:00 72.0 70.3

ECB's Constâncio in a policy panel 10‐31‐2012 Not Available Not Available Not Available

ECB bank lending survey (Q3) 10‐31‐2012 Not Available Not Available Not Available

France sells 7, 10 and 23Y GB 10‐31‐2012 09:50 Not Available Not Available

Euro area flash HICP (Oct), Euro Zone 10‐31‐2012 10:00 2.5% 2.7%Norway Norges Bank monetary policy meeting 10‐31‐2012 Not Available Not Available Not Available

Spain Confederación General de Trabajo's general strike 10‐31‐2013 Not Available Not Available Not Available

US ADP employment survey (Oct), US 10‐31‐2012 12:15 137.5K 162.0KEurogroup (potential teleconference on Greece) 10‐31‐2012 Not Available Not Available Not Available

Unemployment Rate, Euro Zone 10‐31‐2012 10:00 11.5% 11.4%Germany sells €2bn in 30Y GB 10‐31‐2012 10:30 Not Available Not Available

Chicago Purchasing Manager, US 10‐31‐2012 13:45 51.4 49.7

Manufacturing PMI (Oct), China 11‐01‐2012 01:00 50.3 49.8Czech monetary policy decision 11‐01‐2012 Not Available Not Available Not Available

Manufacturing PMI (Oct), Ireland 11‐01‐2012 Not Available Not Available Not Available

Manufacturing PMI (Oct), UK 11‐01‐2012 Not Available Not Available Not Available

Initial Jobless Claims, US 11‐01‐2012 12:30 370K 369KContinuing Claims, US 11‐01‐2012 12:30 3252K 3254KISM Manufacturing, US 11‐01‐2012 14:00 51.0 51.5

Bank of Japan minutes (of Oct 4‐5 monetary policy meeting) 11‐02‐2012 Not Available Not Available Not Available

Romania monetary policy meeting 11‐02‐2012 Not Available Not Available Not Available

Change in Nonfarm, Payrolls US 11‐02‐2012 12:30 120K 114KUnemployment Rate, US 11‐02‐2012 12:30 7.9% 7.8%Avg Hourly Earning YoY All Emp, US 11‐02‐2012 12:30 1.8% 1.8%Avg Weekly Hours All Employees, US 11‐02‐2012 12:30 34.5 34.5Factory Orders, US 11‐02‐2012 14:00 4.5% ‐5.2%

Greek austerity measures to be submitted to parliament 11‐03‐2012 Not Available Not Available Not Available

G20 Fin. ministers and C. Bank governors meet in Mexico City 11‐03‐2012 Not Available Not Available Not Available

0.1%0.2%

‐0.1%

0.1%

0.3%0.2%

0.0%

‐0.5%

‐0.3%‐0.4%

‐0.8%

‐0.6%

‐0.4%

‐0.2%

0.0%

0.2%

0.4%

Mar‐10 Set‐10 Mar‐11 Set‐11 Mar‐12 Set‐12 Mar‐13

Spain: Real GDP  (q/q change)

‐50

‐30

‐10

10

30

50

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012 2013

ISM Manufacturing Index

ISM  Manufacturing Index (left scale)Empire State IndexPhilly Fed Index

Next Week Preview: Economics • The US ISM Manufacturing Index for the month

of October will be released Thursday (Nov. 1st) at15.00 GMT. The regional manufacturing indiceshave been mixed. The headline indices improvedbut the new orders and employment indicesremained weaker. A weak global economicbackdrop and the slump in domestic businessinvestment are important headwinds for USmanufacturers;

• The October’s Employment Report will beannounced Friday (Nov. 2nd) at 13:00 GMT, justfour days before the election. Modestemployment growth and a steady unemploymentrate should be expected;

• Provisional Q3 GDP data for Spain is due Tuesday.Last week, the Bank of Spain said that theeconomy should have contracted by 0.4% in Q3,the same as in Q2 2012. On an annual basis, thecontraction should have been 1.7% in Q3,compared with a 1.3% drop in Q2 2012.

Source: Bloomberg

0

50

100

150

200

250

300

Jan‐12 Fev‐12 Mar‐12 Abr‐12 Mai‐12 Jun‐12 Jul‐12 Ago‐12 Set‐12

US: Change in Employment

Non‐Farm Payrolls ADP

Next Week Preview: Portuguese Earnings SeasonGalp Energia (GALP PL) Q3 Results: A solid quarteris expected (October 29th, before market)

• A conference call with analysts and investors willtake place on the same day at 11:30 GMT;

• We forecast Q3 consolidated EBITDA and EBIT at€290m (+31% y/y) and €182m (+64% y/y).Financial expenses should be down over‐the‐yearago level, reflecting lower debt levels followingthe capital increase in Brazil. Net profit RCA isforecasted at €103m;

• Upstream: Net entitlement production rose 60%y/y to 19.5Kboepd in Q3 2012, boosted by thefirst FPSO at Lula/Cernambi and the productionfrom Angola (returning from maintenance). Oilprices were flat q/q and down ‐3.5% y/y to USD109.5. We forecast Q3 EBITDA RCA at €111m(+75% y/y) and Q3 EBIT RCA at €69m (more thanthree times the year‐ago level);

• Refining and Marketing: Galp’s indicator marginpoints to $3.9/bbl from the negative $0.4/bbl

over‐a‐year ago and the $2.2/bbl of Q2 2012;• However, the company will probably not capture

all the strength due to a negative time lag inpassing through higher prices to end consumers.Q3 EBITDA RCA should stand at €88m (+18% y/y)and Q3 EBIT RCA to reach €32m (+52% y/y);

• Gas & Power: gas sales were up 27% y/y astrading volumes increased 5‐fold. However, salesof electricity to the grid have been weak (‐0.9%y/y). Q3 EBITDA RCA is expected to reach €90m(+14% y/y) and Q3 EBIT RCA (+15% y/y);

• Q3 2012 is forecasted to have been a goodquarter to Galp. But, probably investors willremain focused on potential news from thecompany’s exploration activity, mainly fromBrazil.

Novabase and Semapa will report Tuesday.Corticeira Amorim, Impresa and Brisa will releaseQ3 earnings Wednesday. Inapa is expected to reportFriday.

Next Week Preview: European Earnings Season• Five of Europe’s integrated oil

giants will report this week,including Royal Dutch Sheel(Thursday), BP (Tuesday) andTotal (Wednesday);

• This will also be an importantweek for UK banks. On thecontinent, UBS (Tuesday),Deutsche bank (Tuesday) andBBVA (Wednesday) will alsoreport earnings;

• In the pharma sector,GlaxoSmithkline (Wednesday),Bayer (Tuesday) and NovoNordisk (Wednesday) shouldreport;

• The world’s largest brewer, ABInbev, releases result onWednesday;

• Tuesday will be the first day oftrading for Telefónica Germany.

Monday 29th ConsensusGalp Energia Q3 2012 ResultsAssa Abloy Q3 2012 Results Sales SEK 11.755bn (+8.4% y/y); adj EBIT SEK 1.921bn (+9.7% y/y);

PTP SEK1.727bn (+9.2%); net income SEK 1.329bn (‐19.2% y/y)Linde Q3 2012 Results Sales €3.88bn (+13%); adj EBITDA €898m; EBIT €520m; net profit

€293m; Fully dil. EPS €1.71Dia  9M 2012 ResultsTuesday 30th

Deutsche Bank Q3 2012 ResultsFerrovial 9M 2012 ResultsUBS Q3 2012 Results IB revenues CHF2.0bn; IB PTP CHF188m; WM gross margin 89bps;

group net profit CHF345m. Will cost reductions be announced?Bayer Q3 2012 Results Group sales €9.312bn; EBITDA pre‐tax €1.845bn; EPS pre‐tax €1.15Standard Chartered Trading UpdateEni 9M 2012 Results Sales €32.03bn (+22.6%); operating profit €4.33bn (‐3.7%); EBIT €4.45bn (‐1.1%);

EBITDA €7.3bn (+2.19%); adj net income €1.562bn (‐12.9%)BP Q3 2012 Results Adj net income $4.069bn (‐26.8%); adj EPS $0.217 (‐26.5%)MAN Q3 2012 Results Order intake €3.71bn (‐9.4%);net sales €3.748bn (‐7.1%); op profit €199m (‐38%);

EBIT €184m; net income €95.3mSwedish Match Q3 2012 Results Sales (ex tobacco tax) SEK 3.213bn (+6.7% y/y); operating profit SEK 1.075bn

(+9.3%); Net profit SEK 755m (+10.3%)Imperial Tobacco FY 2012  Results Sales GBP 7.937bn (+1.2%); PTP GBP 2.512bn (+16.6%); adj EPS 199.3p (+6%)Metro Q3 2012 Results Sales €15.922bn; adj EBIT €438m; EBIT €423m; net income €162m; EPS €0.50Fiat 9M 2012 Results Trading profit €910m;Net income €250m (+123%); net debt €6.5bnWednesday 31th

Antena 3 9M 2012 ResultsNovo Nordisk Q3 2012 Results Sales DKK19.921bn (+20.5% y/y); EBIT DKK7.227bn (+28.8%); PTP DKK6.824bn

(+25.1%); net profit DKK5.277bn (+25.6%)Abertis 9M 2012 ResultsAnheuser‐Busch InBev Q3 2012 Results Revs $10.3bn; EBITDA $4.02bn; EBIT $3.3bn; net income $2.04bn; norm. EPS $1.22ArcelorMittal Q3 2012 Results EBITDA $1.3bn (‐45.8% y/y)Grifols 9M 2012 ResultsClariant Q3 2012 Results Sales CHF1.927bn (+3.3%); net income CHF53.6mAir France‐KLM Q3 2012 Results Revs €7.08bn; EBIT €454m; net income €14.4m; EPS €0.05Deutsche Lufthansa 9M 2012 Results Sales €22.792bn; EBITDAR €2.128bn; EBIT €479m; net profit €190mBarclays Trading update PTP GBP1.651bn (‐31.9% y/y)Total Q3 2012 Results Net income €3.05bn (+8.9%); EBIT €6.128bn (+6%)GDF Suez Q3 2012 Results Revs €20bn (+1.42%)Prosegur Q3 2012 ResultsGlaxoSmithKline Q3 2012 Results Sales GBP6.668bn (‐6.1%); PTP GBP1.909bn (‐1.7%); adj EPS 28.4p (‐0.5%)BBVA 9M 2012 Results Will credit quality in Spain continue to worsen?Ebro Foods 9M 2012 ResultsFiat Industrial Q3 2012 Results Trading profit €500m (+3.3%): CNH €375m, Iveco €100m; net profit €245m (+20%)Thursday 1st

BG Group Q3 2012 Results Adj net income $1.165bn (+14.4%); adj EPS $0.329 (+9.4%)TDC Q3 2012 Results Revs DKK6.49bn (+0.5%); gross profit DKK4.74bn (‐0.9%); EBITDA DKK2.654bn

(‐5.9%); net income DKK726mBritish Sky Broadcasting Q1 2013 Results Sales GBP1.712bn (+3.3%); adj EPS 13p (+12%)Legal & General Trading updateRoyal Dutch Shell Q3 2012 Results Adj net income $6.35bn; adj EPS $1BT Group Q2 2013 Results Revs GBP4.55bn (+1.4bn); adj EPS 5.8p (+1.7%)Lloyds Banking Group Trading update PTP GBP540.7m vs. Loss GBP607m last yearFriday 2nd

Alcatel‐Lucent/France Q3 2012 Results Sales €3.576 (‐7%); adj operating income €3m (vs. €173m in Q3 2011)Royal Bank of Scotland Trading update PTP GBP660m vs. Loss GBP101m y/y

Next Week Preview: US Earnings Season and Company Events• Weekly highlights will probably be Pfizer

(Tuesday), Ford (Tuesday), General Motors(Wednesday), Exxon (Thursday) andChevron (Friday);

• Weakness in Europe is expected toinfluence Ford and General Motors’results. Guidance will be key;

• FX headwinds could be an issue to Pfizer(from both a top‐line and bottom‐lineperspective). Investors will watch closelyfor updates on capital deployment and thepotential for further cost reductions;

• Exxon Q3 2012 results are expected tobenefit from higher E&P earnings. Investorattention should be directed at XOM’srational behind recent moves and theM&A strategy going forward. Alsoimportant, will probably be XOM’s plansfor cash returns to shareholders and theoutlook for share repurchases.

Monday 29th Consensus (First Call)Anadarko Petroleum (APC) Earnings release $0.75Masco (MAS) Earnings release $0.12Tuesday 30th

Mattel (MAT) Investor DayMicrosoft (MSFT) Microsoft BUILD Developer ConferencePfizer (PFE) Earnings release $0.53Automatic Data Processing (ADP) Earnings release $0.63Avon Products (AVP) Earnings release $0.23Cincinnati Bell (CBB) Earnings release $0.05Western Union (WU) Earnings release $0.45Union Pacific (UNP) Investor DayOffice Depot (ODP) Earnings release $0.01Johnson Controls (JCI) Earnings release $0.75Ford Motor (F) Earnings release $0.29JDS Uniphase (JDSU) Earnings release $0.12Hasbro (HAS) Non‐deal RoadshowValero Energy (VLO) Earnings release $1.79MetroPCS Communications (PCS) Earnings release $0.27United States Steel (X) Earnings release $0.00Wednesday 31th

Clorox (CLX) Earnings release $0.96McGraw‐Hill (MHP) Earnings release $1.31American Tower (AMT) Earnings release $0.41Time Warner Cable (TWC) Earnings release $1.42Mastercard (MA) Earnings release $5.90Southern (SO) Earnings release $1.13Ralph Lauren (RL) Earnings release $2.14Allstate (ALL) Earnings release $1.13General Motors (GM) Earnings release $0.60Visa (V) Earnings release $1.50Murphy Oil (MUR) Earnings release $1.21MetLife (MET) Earnings release $1.28Exelon (EXC) Earnings release $0.72Thursday 1st

Apache (APA) Earnings release $2.22Exxon Mobil (XOM) Earnings release $1.96Watson Pharmaceuticals (WPI) Earnings release $1.29Kellogg (K) Earnings release $0.81Estée Lauder (EL) Earnings release $0.77Newmont Mining (NEM) Earnings release $0.91American International Group (AIG) Earnings release $0.87Fluor (FLR) Earnings release $0.97UPS (UPS) Non‐deal RoadshowStarbucks (SBUX) Earnings release $0.45Friday 2nd

UPS (UPS) Non‐deal RoadshowChevron (CVX) Earnings release $2.85

7.7503

7.7400

7.7450

7.7500

7.7550

7.7600

7.7650

7.7700

Jan‐12 Abr‐12 Jul‐12 Out‐12

Price

 of 1

 USD

 in HKD

USD / Hong Kong Dollar exchange rate

6.2494

6.20

6.25

6.30

6.35

6.40

Jan‐12 Abr‐12 Jul‐12 Out‐12

Price

 of 1

 USD

 in CNY

USD/Chinese Renminbi exchange rate

Charts we are watching (I)

• The Republican presidential candidate MittRomney promised to declare China a currencymanipulator on his first day in office.Nevertheless, China’s renminbi has had a nicerun over the last three month. Recenteconomic data seems to point to an economicstabilization. FX traders have probably thesame opinion…

• The Hong Kong Monetary Authority intervenedin the currency market for a second time inless than a week on Tuesday, in an attempt tohalt appreciation on the local currency. Betternews on China’s growth probably explained thepressure from hot money flows. The liquidityboost is also reaching the local propertymarket. Prices have surged past 1997 highs,according to an index provided by CentalineProperty Agency.

Source: Bloomberg

Source: Bloomberg

1711.15

1500

1550

1600

1650

1700

1750

1800

Jan‐12 Abr‐12 Jul‐12 Out‐12

Gold Spot Price (USD per try ounce)

113

112

95

100

105

110

115

120

125

Jan‐12 Abr‐12 Jul‐12 Out‐12

S&P 500 vs. S&P 500 Info Tech Index100= Dec. 31th, 2011

S&P 500

S&P 500 Info TechIndex

Charts we are watching (II)

• Huge underperformance from technologystocks since their peak on September. Thesoftness in global growth and investmentspending has clearly weighted on parts of big‐cap tech. The US tech sector has strongbalance sheets, solid dividend growth andshare repurchases. But, should we expect apick‐up in corporate IT investment in 2013?

• The Fed has announced QE3. On balance,further QE is expected to be good for gold.Gold price tends to rise when the real Fed fundrate and TIPS yields are low. However, goldrecorded its third straight weekly loss. Thatwas the first time this happened since March.Are speculative positions on gold extended?

Source: Bloomberg

Source: Bloomberg

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