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									                                                                                                                                      April 11th 2011
A Federal Shutdown on spending was avoided on Friday with two hours to spare as the Rep and Dem.
Agreed spending cuts. Focus now will move to the start of US earnings. Alcoa kicks off Monday with other
                                                                                                                    This Week’s Market Events
major names such as JPM and BAC reporting on Wednesday and Friday respectively. Sectors we expect
to perform during Q1 earnings are the oil majors such as Chevron and Exxon helped by the current strong
oil price with industrials (ITW & GE) the other sector we expect to perform well. The US banks will also
perform in our view as loan losses and increased loan demand boost earnings. The other theme for the                 Corporate              Economics
week ahead is interest rates with the ECB to move again in June/July and the Fed to remain on hold for
the remainder of the year, even with some concerns over inflation in the US. Inflation will continue to be in        Alcoa Q1            FR Industrial Prod
focus in economic releases as the US, China and the UK release inflation numbers during the week. We                 SAS AGM
believe yield curves will continue to steepen on this inflation theme and we are calling for yields to move         Chevron IMS
higher at the longer end of the curve. On markets, we are calling them higher as expectations of a posi-
tive Q1 earnings season lend support, as does the increased level of M&A activity in recent weeks.
                                   Trading Recommendations
Syngenta - Buy                            Previous Close CHF304                               Target CHF340
Since July 2010, the forward price of crops has more than doubled, with growing momentum at the start
of 2011. Currently forward prices for wheat, corn and cotton are at a 50% premium to this time last year.            Corporate              Economics
Good prices last year and strong forward prices this year have encouraged farmers to not only plant more
crops but also apply more agrochemicals to those crops to improve yields and maximise profit. Swiss-                 AIB FY2010               GE CPI
based Syngenta is the number one global player in the crop protection industry, commanding an over                                       UK Trade Balance
20% share of a $40bn market. The company also has 11% of the seeds market. With a truly global foot-                                          UK CPI
print and strong portfolio of agrochemicals, it is the best placed company to take advantage of the in-                                   GE ZEW Survey
                                                                                                                                          EC ZEW Survey
creasing agro-chemical demand through the FY11 growing season. This, in conjunction with a recently
                                                                                                                                         US Trade Balance
announced restructuring and the opportunity to expand into China (already has 6.5% of a highly frag-
mented market) is set to drive earnings growth.

Ryanair - Buy                            Previous Close €3.37                                 Target €4.00
After the initial “shock” of the MENA disruption impact on oil prices, the market has differentiated between
airlines with a low cost base and well-hedged fuel requirements and those more exposed to increasing                       WEDNESDAY
prices in the short to mid-term. Over the past three weeks, Ryanair’s share price has appreciated 8%,
which compares favourably to its LCC peers easyJet (down 2.5%) and Air Berlin (flat) and more in line
with flag carriers, where fuel does not account for such a large percentage of costs (IAG +3%), Air France           Corporate              Economics
-KLM (+6%) and Lufthansa (+9%). Ryanair’s March passenger stats were in line with expectations, show-
ing continued growth in passenger numbers (up 8% month on month to 5.7m), with the airline carrying                   ASML Q1                 FR CPI
                                                                                                                    JPMorgan Q1           UK Employment
75.3m passengers (up 11% yoy) over the fiscal year (year end March). This gives us comfort in the com-             Fresnillo Output       US Retail Sales
pany reporting a 22% increase in FY11 earnings to 25.1c from a 21% increase in revenue to €3.6bn.                  Rio Tinto Output       Fed Beige Book
External shocks notwithstanding, look for price momentum to continue into the critical April passenger
stats out in early May, which includes the Easter holiday traffic.

US Earnings Season
US Financials
US earnings season kicks off next week, with two US banks reporting, JP Morgan on Wednesday and
Bank of America on Friday. In the coming earnings season we expect the US banking sector to continue
recovering as loan losses continue to decline and new lending increases. The steep yield curve is benefi-                    THURSDAY
cial for banks and with US interest rates remaining low in the coming quarters, the curve will remain. Two
ways to play this view is through JP Morgan bank equity or the Financial Select Sector SPDR Fund,
which includes US financial names such as JPM, WFC, Berkshire Hathaway, Citigroup and GS. This is a                   Corporate             Economics
diversified play on our view of the forthcoming results rather than picking one stock directly.
                                                                                                                      Google Q1          US Jobless Claims
US Industrials                                                                                                         BP AGM                 US PPI
We believe the US Industrial sector offers the potential for an earnings surprise in the up-coming US Q1             Nestle AGM            ECB Monthly
                                                                                                                    WHSmith IMS               Report
earnings season. The sector enjoys attractive characteristics of exposure to a recovering domestic econ-
                                                                                                                   Debenhams IMS
omy, high exposure to fast growing emerging markets, pricing power and the benefit of a weak US dollar              Rio Tinto AGM
which enhances the pricing proposition as well as profitability of overseas earnings. The three companies         Carrefour Q1 Sales
which we believe offer the best potential are Caterpillar, Illinois Tool Works (ITW) & General Electric            Danone Q1 Sales
(GE). Caterpillar will report Q1 earnings on 21st April and is expected to report EPS of $1.266, ITW re-           Roche Q1 Sales
ports on 26th April with EPS of $0.84 expected, while GE reports on 21st April with EPS of $0.276 ex-                BOI FY 2010
pected. While Caterpillar has the potential to exceed market expectations in earnings, the shares trading
at 18x 2011 earnings look fully valued, and we believe ITW offers the most attractive valuation trading on
14.2x earnings. GE offers a more diversified play on the sector and is still trading at near 10% discount to
our target price of $22 due largely to recent weakness post the Japanese nuclear disaster (GE supplies
components for nuclear power generators) despite a strong recovery in its finance division. The shares                            FRIDAY
trade at 15x FY 2011 EPS, however earnings are set to increase by 20% in 2011. We are comfortable
buying both ITW and GE at current levels ahead of their Q1 earnings releases.                                         Corporate             Economics

US Oil & Gas Majors                                                                                                   BAC Q1                  EC CPI
Another sector we expect to produce strong results is oil & gas. Our rationale for the call is the surge in oil       Mattel Q1          EC Trade Balance
prices which have risen by over 30% since January. This will lead to strong cash generation and poten-            Ladbrokes Trading           US CPI
tially increased shareholder distributions. Furthermore, the recent unrest in the Middle East & North Africa       Nestle Q1 Sales       US Industrial Prod
                                                                                                                                          Michigan Conf
has highlighted vulnerability in the world economy to creaking oil producing regimes which has resulted in
                                                                                                                                              CH CPI
an increased risk premium in the price of oil and the commodity now looks set to trade comfortably above                                     CH GDP
$100 for the remainder of 2011. Chevron and Exxon Mobil have already performed well in this environ-                                     CH Industrial Prod
ment and we still believe that there is further upside to this trade as the market discounts the higher oil
prices. We also expect the likes of BP, Royal Dutch Shell & Total to deliver strong results for Q1 and
feel that share prices in Europe do not fully reflect the recent move in oil prices.
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