Director’s Cut -- Weak USD translates to strong US earnings .:Macquarie Research

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Director’s Cut
Weak USD translates to strong US
earnings
 After reviewing results from the US reporting season, Bryan Raymond
concludes the US recovery still exceeds expectations. >> Read Report
 First quarter profits were 7% ahead of expectations, leading to analyst
upgrades that lifted the full year EPS growth forecast to 15%. The strong
earnings momentum in the US is reflected in the 2011 earnings revision ratio,
with net upgrades in all major sectors.
 After the earnings upgrades, the S&P500 is still on a forward PER of 12-13
times, which is well below the post-tech boom average of 14.7 times. Within
the US market, Bryan thinks the sectors offering value are Media, IT, Energy
and Banks, while Telco and Retail look expensive.
 With Richard Gibbs and our global economics team expecting the US
economy to maintain its upward momentum, driven by exports and business
investment, US results may continue to surprise the market.
 Given the expected strength of the US recovery, a key issue for investors is
when the Fed will lift interest rates. On this, Richard believes the Fed will hold
its balance sheet constant after QE2, before changing its tone on inflation and
growth toward year end, with the first rate hike forecast for early 2012.
>> Read Report
 With our above consensus view on US growth, and that China might reverse
course on monetary tightening in the second half, we see the pull-back in
commodity stocks as a buying opportunity.
 In today’s Commodities Comment, Jim Lennon and the global commodities
team say they are more bullish on iron ore. As we said yesterday, they also
see signs that copper has turned the corner, and now also see zinc and lead
as strong buys. >> Read Report
Highlight Reel
 Partly due to our upgraded iron ore price forecasts, Lee Bowers argues
fundamental valuation support remains strong for the big diversifieds, BHP
Billiton and Rio Tinto.
 Given our increasing confidence that the copper market has tightened,
Christina Lee believes it is time to buy Jiangxi Copper.
 Rakesh Arora argues investors should take advantage of weakness in
commodity prices to accumulate Jindal Steel & Power.
 Riaz Hyder was right, with XL Axiata included in the MSCI Indonesia Index,
as he anticipated, and now expected to outperform.