Weekly Markets

Perspectives

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

n

No

vem

be

r1

2th

,2

01

2

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

Disclosure Section

This research report is based on information obtained from sources which we believe to be credible and reliable, but is

not guaranteed as to accuracy or completeness. All the information contained herein is based upon information

available to the public.

The recipient of this report must make its own independent assessment and decisions regarding any securities or

financial instruments mentioned herein.

This report is not, and should not be construed as an offer or a solicitation to buy or sell any securities or related

financial instruments. The investment discussed or recommended in this report may be unsuitable for investors

depending on their specific investment objectives and financial position.

The material in this research report is general information intended for recipients who understand the risks associated

with investment. It does not take account of whether an investment, course of action, or associated risks are suitable

for the recipient.

Investors should seek financial advice regarding the appropriateness of investing in any securities or investment

strategies discussed or recommended in this research report and should understand that the statements regarding

future prospects may not be realized. Investors may receive back less than initially invested. Past performance is not a

guarantee for future performance.

Fincor – Sociedade Corretora, S.A. accepts no liability of any type for any indirect or direct loss arising from the use of

this research report.

Recommendations and opinions expressed are our current opinions as of the date referred on this research report.

Current recommendations or opinions are subject to change as they depend on the evolution of the company or may

become outdated as a consequence of changes in the environment.

Fincor - Sociedade Corretora, S.A. provides services of reception, execution, and transmission of orders.

Fincor – Sociedade Corretora, S.A.

Rua Castilho, 44 4º Andar

1250-071 Lisboa

Portugal