Research Takeaways, Week of June 13, 2011

Financial: Capital One Financial has made a bid for ING’s U.S. online bank.

GDP: U.S. GDP is expected to improve in 2H’11, but there is a very low historical correlation between GDP growth and S&P performance.

Global Investing: At the 15th Global Investment Seminar in Spain, “54% of clients thought that DM deleveraging and sovereign risk was the most important driver of markets over the next five years. While the general belief was that the US economy would bounce back in the second half, attendees thought risks around a China slowdown were growing after a period of excessive credit creation and rising inflation.” — Morgan Stanley Research, June 14, 2011

“China ordered lenders to set aside more cash as reserves after inflation accelerated to the fastest pace in almost three years in May and industrial production rose more than estimates.” — Bloomberg, June 14, 2011

Greek Unions Stage Strike Against Austerity — Bloomberg, June 14, 2011

Inflation: Taming Runaway Inflation by Jack Bouroudjian     “The producer price index (PPI) number came out this morning, and it was right in line with expectations— 0.2%. The concern over runaway inflation has waned.” — June 15, 2011

PCs: Commercial and retail PC unit sales increase, but inventory overbuild raises the caution flag.

Retail: Apparel sales are soft and inflation is the tail wagging that dog. Could get worse in 2H’11.

Tobacco: The FDA is seriously reviewing menthol science, which potentially harms Lorillard (LO). Shift tobacco money toward Altria (MO) or Philip Morris (PM). …. …. UPDATE: The FDA made a report without recommending any policy changes: “…the report remains hostile to menthol cigarettes, concluding that ‘Removal of menthol cigarettes from the marketplace would benefit public health in the United States….’ ” — Morgan Stanley research, 06/17/11

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