GLOBAL EQUITIES RESEARCH
The key event of the day is the release of the advanced U.S. Q2 GDP data (13.30 BST). The pace of decrease of the GDP certainly decreased sharply, with and expected drawback of 1.0 % QoQ at an annualized rate in Q2 vs. 5.5 % in Q1 and -6.1 % in Q1. The biggest drag on GDP growth is undoubtedly business investment, with consumption, residential investment and the inventory rundown subtracting modestly. In contrast, the monthly international trade figures point to a big positive contribution from net external demand. Looking ahead to Q3, the slower pace of inventory rundown and a strong stimulus-related surge in government spending mean that there is a good chance that GDP will start to expand again. Today’s release will also incorporate the results of the 5-year benchmark revision to the GDP figures. Major methodological changes mean that those revisions could be very significant.
Is there a risk of the Chinese credit bubble bursting out? On July 15th, China reported a 7.9 % growth rate for Q2 2009 compared to the same period a year earlier. Meanwhile, China's stock markets are on fire, and its property markets are heating up fast as well. Shanghai's two stock markets are up 75 % and 95 % respectively so far this year. China's 8 % output growth target will be met because China's economic statistics are based on recorded production activity, rather than being a measure of expenditure growth--defined as the sum of consumption, investment, government spending, and net exports--as U.S. data are. The U.S. stimulus package, for example, attempts to boost GDP by undertaking measures that will boost consumption, investment, and government spending. China, however, decrees measures that will generate recorded increases in production spending. Part of the Chinese stimulus package involves large transfers of funds from the central-government planners directly to state-owned enterprises and to fixed-asset investment projects that are aimed at public works spending largely under its control. Chinese measures aimed at boosting demand growth to meet ambitious production growth targets intensified sharply at the end of Q2. In June, growth in the money supply measure known as M2 surged to 28.5 % YoY-up sharply from a 15 % rate at the beginning of the year, which was far more typical of the pace of money growth over the past decade. New loans by banks rose by about $1 trillion, or twice the expected rate, during H1 2009 and rose 34.5 % YoY in June from a 30.6 % growth rate in May. The worst outcome for China would be one that includes ever-rising inflation pressures, as money and credit flows augmented by "hot money" capital inflows push the inflation rate up to a level that threatens China's stability. That outcome would coincide with a likely bursting of the stock and property market bubbles that are inflating in China now on the hopes that a H2 recovery will validate China's goal of sustained 8 % growth in 2009.
Global equity markets are clearly on the upside. Q2 earnings are far better than analyst’s estimates: S&P 500’s Q2 earning estimates were revised to -25 % vs. -34 % earlier this month by analysts and they will certainly be revised again. “Green shoots” help the markets: a more positive Beige Book and weekly jobless claims below 600k again in the U.S., composite PMI up in the euro-zone, industrial production up +8.3 % in Q2 in Japan, are good incentives.
ECONOMIC DATA WITH IMPACT
US Q2 GDP data (13.30 BST) which is expected to have decreased by 1.0 % QoQ (annualized) vs. -5.5 % in Q1. /major.
Chicago PMI for July (14.45 BST) could move up to 42 from 39 pointing to an improvement in the manufacturing sectors, including car makers. /minor
Euro-zone, July’s CPI (10.00 BST) that will drop further in negative territory. German inflation fell from 0.0 % to -0.6 % and the Spanish rate fell from -1.0 % to -1.4 %. /minor
Euro-zone unemployment rate for June (10.00 BST) could rise from 9.5 % to 9.36 %. /minor
POSITIVE IMPACTS
FERROVIAL-CINTRA agreed to merge = Ferrovial will offer 1 of its shares for 4 Cintra shares / Shareholders will vote on the merger in Oct. / Ferrovial controls 67% of Cintra / Note that some Cintra minority shareholders requested a share swap ratio 1.5 at least
VALLOUREC : Q2 sales €1.08bn (942m exp) / Ebitda €238.5m (190m exp) / Anticipates a low point in activity in Q3 with destocking coming to an end / Promised deeper cost cuts in 2H after having cut operating costs by around €500m in 1H
PPR : H1 revenue €9.24bn (9.16bn exp) / Recurring operating income €707 m (€620 m exp)
SCHNEIDER : H1 revenue €7.8bn, in line / Ebita €726m (708m exp) / FCF €726m / Still targets 12% Ebita margin in 2009 and sees organic sales trend in the H2 in line with the level of the H1
L’OREAL : Q2 sales €4.4 bn, down 2.1% like-for-like (-2.4% exp) / Sees a gradual improvement in performance in the course of 2009
MICHELIN : H1 sales €7.14 bn (7.18bn exp) / Operating before non-recurring items €282 m (100m exp) / H1 FCF €575m / Said too early to talk about real upturn, but industry stocks have returned to more normal levels / Net debt down 10.7% at €3.82 bn at end-June
CNP : H1 revenue €17.6bn (17.1bn exp) / Ebit €877m (858m exp) / Embedded value per share at €70.9 / Solvency ratio 114%
UCB : H1 net sales €1.4 bn, in line / Rebitda €363m (295m exp) / Still sees FY revenue €3.1-3.3 bn, EBITDA of at least €680m
BELGACOM : H1 revenue €3bn, in line / Ebitda €994m (973m exp) / Still sees 1% revenue decline in 2009, EBITDA margin 32-33%
ENEL : H1 EBITDA €7.94 bln (7.67bn exp) / Net debt at €55.77 bn end June (56.3bn exp) / Sees FY results higher than in 2008 / The board will decide on 2009 interim dividend at Oct. 1 meeting / Plans to issue bonds up to €10 bn by 30 Jun. 2010
ANGLO-AMERICAN : H1 operating $2.1 bn (1.98bn exp) / Underlying EPS $0.91 (0.67 exp) / Net debt of $11.3 bn at 30 June 2009 (11bn exp) / Will not pay interim dividend
RENTOKIL : Q2 revenue £626m, in line / Adj. PTP £33.5m, in line / Greater progress than exp. on cost savings / FCF £116.7m
MEDIASET : H1 revenues €1.95 bn, in line / Net profit better / Stuck to guidance of lower FY 2009 operating and net result.
COMMERZBANK : Vontobel said it had agreed to buy Commerzbank's Swiss arm for an undisclosed amount / Separately, CBK is poised to sell its wealth management unit Bankhaus Reuschel to Conrad Hinrich Donner Bank
LUFTHANSA : Austria's Takeover Commission will grant Lufthansa its request for a deadline extension in its takeover of Austrian Airlines
HOCHTIEF : The consortium of which Hochtief's Australian Leighton unit is a member, has won a A$3.5 bn desalination project (press)
NEGATIVE IMPACTS
AIR FRANCE : Q1 operating loss €496m (-140m exp) / Strong liquidity at €5.7bn / Sees gradual H2 cargo activity stabilization but sees deterioration of passenger business in Q2 albeit at a slower pace…
BULGARI : Q2 revenue €218.3m (223m e) / Q2 loss €11m (-4m e) / Saw positive sales signals in July / Biggest problem is the US
VINCI : H1 sales down 3.2% to €15.2 bn, in line / Order book at end June +6% / Maintained financial targets
LAFARGE : H1 revenue 7.99 bn (€8.14bn e) / Operating €1.13bn, in line /Said that lower volume will pressure op. margins / Cut again its annual cement volumes growth forecasts = Sees volume in its markets down 4% to 8% overall from -2% to -5% before…
TOTALFINA : Q2 adj. Net income €1.7bn (1.66bn exp) / But prod. 2.18m boepd (2.22m exp) / Interim dividend €1.14, unch. & in line
ENI : Q2 adj. Ebit €2.55bn (2.52bn exp) / Adj. Net profit €900m (938m exp) / Q2 hydrocarbon output at 1.733 m boepd / Lowered interim 2009 dividend of €0.5/shr from €0.65 / Confirmed growth of FY hydrocarbon output at 2%
BRITISH AIRWAYS : Q1 revenue £1.98bn (2.02bn exp) / Operating loss of £94 m (-61m exp) / No visible signs of improvement
ALSTOM-SCHNEIDER : 5 other consortiums would be lining up for Areva’s T&D unit / An auction process is seen to star in September
THALES : As expected, Airbus urged airlines to switch a majority of speed sensors on long-haul jets to parts made by Goodrich in the wake of the Air France jet disaster / The move affects planes fitted with sensors manufactured by Thales
DBK’s CEO repeated that he doesn't see the financial crisis as over, and is awaiting a wave in credit defaults / Slumps in various sectors may stabilize in 2010, but still look far removed from a recovery (Die Zeit)
CONTINENTAL’s supervisory board approved a capital increase of as much as €1.5 bn aimed at stabilizing its finances / The fate of the CEO appears in doubt following the latest clash with Schaeffler Group.
GAS NATURAL : Repsol does not rule out reducing its about 30% stake in its Gas Natural affiliate if it needs to raise cash fast
TRADING IDEAS
BUY ALLIANZ / NOKIA / GSZ / VIVENDI / AMD on reversal head & shoulder
BUY YAHOO on double bottom possibility
BUY GLAXO / SELL ASTRA // BUY SWISS RE / SELL MUNICH RE // BUY HEINEKEN / SELL PERNOD // BUY PHILIPS / SELL SIEMENS // BUY AEGON / SELL AXA
BUY AMD / SELL INTEL // BUY BIOGEN / SELL AMGEN // BUY MARRIOTT / SELL LAS VEGAS SANDS // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
TNT RAISED TO BUY FROM HOLD BY ING
KBC RAISED TO HOLD FROM SELL BY DEUTSCHE BANK
LOGICA RAISED TO OVERWEIGHT BY MORGAN STANLEY
CAP GEMINI RAISED TO OVERWEIGHT FROM EQUAL BY MORGAN STANLEY
MORISSON RAISED TO NEUTRAL FROM REDUCE BY NOMURA
BT GROUP RAISED TO NEUTRAL FROM REDUCE BY NOMURA
EUROPE MEDIA STOCKS RAISED TO OVERWEIGHT FROM UNDERWEIGHT BY CREDIT SUISSE
LOGICA RAISE DO BUY FROM UNDERPERFOR
DEUTSCHE BANK CUT TO EQUALWEIGHT FROM OVER BY MORGAN STANLEY
AIR FRANCE – KLM CUT TO SELL FROM HOLD BY RBS
RIO TINTO CUT TO NEUTRAL FROM OUTPERFORM BY CREDIT SUISSE
ACS CUT TO HOLD FROM BUY BY CITIGROUP
LANXESS CUT TO UNDERWEIGHT FROM NEUTRAL BY HSBC
ERSTE BANK CUT TO NEUTRAL FROM BUY BY UBS
MAN GROUP CU TO SELL FROM NEUTRAL BY UBS
REED ELSEVIER CUT TO HOLD BY DEUTSCHE BANK
LANXESS CUT TO UNDERWEIGHT FROM NEUTRAL BY HSBC
RUSSIA STOCKS CUT TO UNDERWEIGHT FROM OVER BY CREDIT SUISSE
MOODY’S CUTS BANCO SANTANDER PUERTO RICO SENIOR UNSECURED RATION TO A3 FROM A2
MOODY’S CUTS BBVA PUERTO RICO DEBT AND DEPOSIT RATINGS TO A3 FROM A2
DATA
WTI : 67,6 (6,54 %)
Eur/$ : 1,4135 (0,42 %)
$ /Yen : 95,37 (-0,22 )
10 Yr US : 3,64 ( 2,78 bp)
10 Yr Euro : 3,43 ( 0,6 bp)
Indices : US close ; Europe close
SOX : 0,13 %;1,38%
S&P :1,19 %; 1,90 %
DOW: 0,92%; 1,73 %
NAS :0,84%; 1,57%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 3,28 %; 3,78 %
ENERGY : 1,26 %; 1,58 %
FINANCIAL : 2,31 %; 2,79 %
HEALTHCARE : 0,18 %; 1,10 %
TECHNO : 0,51 %; 1,43 %
TELECOM : 1,00 %; 1,18 %
INDUSTRIAL : 1,94 %; 2,55 %
UTILITIES : 1,32 %; 1,55 %
TO BE COMING
Today
Results :Total / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro / American Electric Power / Constellation Energy
Dividend :
Events :Singapore Airlines AGM / Nissan unveils new electric car on Sunday the second
Monday
Results : US car sales / Metro Group / Linde / Anglo American / HSBC / Arkema / Barlcays
Dividend : Banco Santander (€0,135234) / KPN (€ 0,23) / Xilinx ($0.14)
Events:
Tuesday
Results : BNP Paribas (BMO) / BMW / Beiersdorf / UBS / Givaudan / Statoil Hydro / Electronic Arts / Kraft Foods
Dividend :
Events :
Wednesday
Results : Soc Gen (BMO) / Fortis / Adidas / Allied Irish Bank / Swiss Re / Prudential / Lloyds / Carlsberg / OMV / Henkel / Activision Blizzard / Cisco Systems / Procter & Gamble
Dividend :Thomas Cook (GBp 4,166667) / Alcoa ($ 0,03) / Boeing ($0,42) / Intel ($ 0,14) / Pfizer($0,14) / Pfizer ($0,16) / Schering-Plough($0,065)
Events:
Thursday
Results :Deutsche Telekom / Portugal Telecom / Telecom Italia / Aviva / Commerzbank / KBC interim / Zurich Financial / Hannover Re / Ladbrokes / Unilever / Altana sales /CBS/ Comcast / El paso / AIG
Dividend : IBM ($0,55)
Events:American Superconductor AGM / Barclays General Meeting / British Airways General Meeting in relation to issue of £350,000,000 5.80 per cent Convertible Bonds due 2014
ECONOMIC DATA PREVIEW
Today in the United-States, watch the release of the first estimation of the GDP for the second quarter (13.30 GMT) that is expected to decline at a1.5 % pace following the 5.5 % drop of the first quarter. The US recession would probaly eased in the second quarter helped by the stimulus-related surge in government spending.
In the Eurozone, have a look at the estimate of the CPI (10.00 GMT) in July expected down again at –0.4 %
ECONOMY
United States: initial jobless claims
The US weekly initial jobless claims rose last week by 25 000 to 584 000 (the concensus expected 575 000 new claimants) from a previously revised 559 000. But the applications held below the levels of the last month where more than 600 000 claims were filed every week.
eurozone: the Economic Sentiment rose in July
The european economic confidence increased more than expected in July to 76 (the highest level since november 2008) from 73.2 (revised) in June. This good figure is a sign that this deepest recession is easing and that the growing confidence is an evidence that the worst of the recession has passed. Consumer, industrial and service sector sentiment all increased by a similar amount but remain at a low levels. But the recent hard data on industrial production, the continued rise in unemployment and tightening of credit conditions all suggest that this is too much to hope for and an actual expansion seems unlikely before the end of the year.
Friday, July 31, 2009
Thursday, July 30, 2009
Green Shoots
GLOBAL EQUITIES RESEARCH
“Green shoots” is the new catchphrase used by Ben Bernanke and others to refer to signs in financial markets and the U.S. and global economies that a recovery is in the offing. The appearance of “green shoots”, or at least the appearance of the term, has coincided with an increase in risk appetite in financial markets. Three events have helped to support a global increase in preference for risk assets, especially stocks, since March 9th. A slowing rate of contraction of some measures of economic activity in the U.S. has fuelled hopes for a H2 recovery despite the extraordinary collapse in Germany and Japan during Q1 at annualized rate of decline of around 15 %. The second source of support for the rising risk appetite has come from the transition of the financial crisis from an acute to a chronic phase. This occurred after the stress tests engineered by the Fed and the Treasury provided markets, hungry of reassurance, with some hope that the largest banks could stabilize their reserve positions with only modest capital increases totalling $75 bn. Finally signs of renewed growth in Asia (particularly in China), tied to massive credit and spending stimulus, have boosted hopes that an increase in Chinese domestic demand may ease global imbalances. Taken together, these three indications of slowing economic and financial deterioration have contributed to a rise in U.S. equity markets and a narrowing of risk spreads. One support of the “green shoots” scenario has been the proactive stance of the Obama administration toward the financial sector. This has included initiation and completion of stress tests to determine the viability of U.S. banks as operational (lending) entities. This step, coupled with the Fed’s commitment to quantitative easing, has helped to move what was an acute financial crisis with elements of panic to a contained chronic phase in which banks broadly have stabilised but have not yen begun to operate as lenders to U.S. households and corporations. If the hoped-for H2 return to positive growth of the U.S. economy is achieved, the “adverse feedback loop” running from the real economy back to the financial sector should be broken. If the financial sector crisis is restrained, the major question that remains is this: will the damage to the real economy begin to heal quickly enough to avoid another round of an adverse feedback loop that runs from the real economy and back to the financial sector?
Beige book = “green shoots”? For the first time in many months, the Beige Book was more optimistic and referred to “stabilization”. Reports from the 12 Federal Reserve Districts suggest that economic activity continued to be weak going into the summer, but most Districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level. Five Districts used the words "slow", "subdued", or "weak" to describe activity levels; Chicago and St. Louis reported that the pace of decline appeared to be moderating; and New York, Cleveland, Kansas City, and San Francisco pointed to signs of stabilization. Minneapolis said the District economy hadcontracted since the last report.
The 2.5% m/m decline in US durable goods orders in June was not nearly as bad as it looks because it was principally due to a 28.3% drop back in defence orders and a 38.5% drop back in orders for non-defence aircraft. In both cases, those categories are notoriously volatile and the declines in June reflect orders falling back to more normal levels after big surges in the preceding couple of months. Excluding transportation, orders increased by a solid 1.1% m/m. (If we exclude the 10.8% m/m drop in communications as well, most of which appears to have been a drop in military orders - the increase would have been nearer 1.5%.) The other encouraging news is that non-defence core capital goods orders increased by 1.4% m/m last month, following a 4.3% increase the month before. The three-month annualized rate of core capital goods orders turned positive. The actual shipments figures are not quite as strong – non-defence core capital goods shipments only increased by 0.1% m/m and the three-month annualized rate is still -16.2%. The upshot is that business investment probably fell quite sharply again in Q2, but it should stabilize or even record a modest rebound in Q3. Overall, this report adds to the evidence that the recession is over, or close to over.
There are currently many interesting moves in the markets. The dollar suddenly strengthened after U.S.-China Strategic & Economic Dialogue ended, with the EUR/USD plunging to a low of 1.4008 on July 29th from 1.4304 a day earlier (1.4051 this morning). The inverted correlation between oil prices and the dollar was confirmed again as oil prices slumped by nearly 6 % intraday (WTI at $63.35 /bbl from $67.23 /bbl) after commercial inventories rose by more than 5 million barrels to 347.8 million, near seasonally and historically records. Commodity prices followed the move with the CRB index falling from 250.2 to 243.5 intraday. Gold price sharply retreated as well: 929.55 /oz vs. 954.91 earlier this week. There were some fears of a credit bubble in China that weighed on the Shenzhen composite index that lost roughly 7.5 % in the last two sessions. Some investors start to fear that the surge in equities has outpaced the economy. But it seems to be a consolidation, more than the end of the rally as “green shoots” are consistent… This morning U.S. index futures were up: DJIA +0.30 %, S&P 500 +0.37 %, Nasdaq 100 +0.30 % (06.30 BST). The Nikkei was slightly up (+0.30 %) after industrial production was in line with expectations (+2.4 % MoM in June, -23.4 % YoY).
ECONOMIC DATA WITH IMPACT
US Initial Weekly Jobless Claims (7/25) that could be released below 600k (570k expected) for the fourth week in a row (13.30 BST), while Continuous Claims (7/18) may have decreased again after their peak of 6904 k on June 27th (6,200k expected). This may be good news for the July job report released on August 7th.
German unemployment figures for July(08.55 BST).
Euro-zone EC economic sentiment index (ESI) probably increased for a fourth month in a row in July (10.00 BST), mainly courtesy of a further improvement in industrial confidence. Services and consumer confidence probably improved too, but to a less extend, given the dire situation in the labour market. The index will probably point to a more moderate annual fall in GDP growth of around 2.5 %.
POSITIVE IMPACTS
FRANCE TEL : Q2 rev. €12.77bn (12.9bn e) / Ebitda €4.52bn (4.35bn e) / Interim div. €0.60 ex-date 28/08 paid Sept. 2 / Sees activity slightly lower in H2 but will try to limit EBITDA margin erosion / Confirmed FY FCF target of €8bn + debt target + pay-out ratio > 45%
AIR LIQUIDE : H1 sales €5.94 bn (5.73bn exp) / H1 recurring operating €889 m (868m exp) / Maintains objective for 2009 of revenue and net income to be close to 2008 levels
ALCATEL-LUCENT : Q2 revenue €3.91bn (3.86bn exp) / Adjusted EBIT loss €62 m (-89m exp) / Repeated guidance for FY breakeven at the adjusted operating income level / Reiterated view for market down between 8% and 12% at constant currency in 2009
BT : Q1 rev. £5.24bn (5.02bn e) / Ebitda £1.37bn (1.27bn e) / FCF £-122m (-475m e) / Pens. def -£5.8bn end June / FY outlook unch.
BAE SYSTEMS : H1 sales £9.94bn (9.72bn exp) / Adj. Ebitda £979m, in line / H1 div. 6.4p (6.27 exp) / Order book £45bn end June
TELEFONICA : Q2 rev 13.88bn (13.96bn exp) / Q2 OIBDA €5.59bn (5.45bn exp) / Reiterated guidance
IBERDROLA’s engineering unit won a $2bn contract in conjunction with Elecnor SA to build a power plant in Venezuela.
CLARIANT : Q2 sales SFR1.61Bn (1.68bn e) / Adj Ebit 69m (45.7m e) / Sees weak sales in local cur. / Sees 2010 ROIC > mkt avg
SANOFI announced the acquisition of Merck's interest in Merial for $4bn in cash / Acquisition seen accretive from the first year
ABERTIS : H1 net pft €332m (300m exp) / Spain highway traffic –9.8%
GAMESA : H1 sales €1.62bn (1.59bn exp) / Net €65m (66.5m exp)
ERSTE BK : Q2 NII €1.28bn (1.23bn e) / Com. €444m (439m e) / Trading €199m (134m e) / Risk prov. €522m (470 e) / Net better
SOLVAY : Q2 rev 2.07 bn (2 exp)/ REBIT €164M (139 exp) / Net pft €77M (64 exp) / FY operating lower than last year
NEGATIVE IMPACTS
CAP GEMINI : H1 revenue €4.38bn, in line / Ebit €287m (282m exp) / Cut H2 revenues guidance = Sees H2 sales down by 4% to 6% like-for-like (-0.5 to -3.5% previously) but said it is “comfortable with market consensus of FY op. margin at 7%)
RENAULT : H1 sales €15.99bn, in line / Operating loss €946m (-858m exp) / FCF +€848m / Confirms positive FCF and market share increase in 2009 / Like Peugeot yesterday, has revised 2009 world market forecasts to -12% on 2008, vs an original forecast of -15%
EDF : H1 sales €34.9 bn (36bn exp) but Ebitda €10.14bn (9.97bn exp) / Reiterated FY targets with moderate org. Ebitda grwth in 2009
ACS : H1 €8.12 bn (€8.22 bn exp) / Ebitda €736m (764m exp) / Net profit €1.54 bn (€1.50bn exp) boosted by its sale of more than 35% of Union Fenosa to Gas Natural
BASF : Q2 Sales €12.5Bn (in line) / EBIT €772m (960m exp) / Expects significant decline in sales & earnings in 2009 / Sees in CIBA integration synergies of at least €400M per year
WACKER CHEMIE : Q2 Sales €925.5M ( 914 exp) / EBITDA €170M (166.6 exp)/ FY sales & operating earnings well below those of 2008 / Expects the global recession to continue in H2
POSTBANK : Q2 NII €566M (602 exp) / Pretax loss €69M ( 59 exp) / Trading loss €103M (51 exp) / Loan loss provision €157M (154 exp) / Sees improvement in H2
MAN : Q2 rev €3.1 Bn (3.09 exp) / Q2 Op pft €144M (in line) / Net Income €22M (93.8 exp) / No sign of eco situation improving /
CENTRICA : H1 Sales £11.66Bn (11.5exp) / H1 Op pft £936 (1bn exp) / Interim Div 3.66 pence/shr
SIEMENS : Q3 sales €18.3Bn (18.7 exp) / Q3 sector pft €1.67Bn (1.52 exp) / Order intake €17.2bn (18.9 exp) / Net income €1.26Bn (939 exp) / Energy rev €6.44 bn (6.37exp) / Healtcare rev. €2.87Bn (2.84 exp) / Confirms 2009 guidance
LUFTHANSA (yest. Just before close) : H1 revenue €10.2bn (10.6bn exp) / Operating €8m (+73m exp) / Still targets FY op. profit but sees considerable risks to profit goals
FINMECCANICA : H1 revenue €8.52bn (8.24bn exp) / Ebit €559m (555m exp) / New orders €8.33bn / Confirmed FY guidance
GAS NATURAL (Minor) is planning to issue €3.5 bn in bonds over the next 2 years (News agency EFE) / Gas Nat. is looking to issue up to €6 bn in bonds before the end of 2011, including a €2.5 bn bond it recently placed
INFINEON : The share price has remained so high since the announcement of its rights issue that U.S. financial investor Apollo Global Management, which is effectively underwriting the transaction, may fall well short of its 29.9% stake goal (FT)
CGG VERITAS (GEOPHYSIQUE) : Q2 sales $779m (802m exp) / Net loss $32m (+8m exp) / Order book $1.3bn at end of June
TRADING IDEAS
BUY VALLOUREC (ahead of results friday) / ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week
BUY NOKIA / GSZ / VIVENDI on reversal head & shoulder
BUY FTE / DTE to play economic recovery + gap above to be close
BUY SWISS RE / SELL MUNICH RE // BUY HEINEKEN / SELL PERNOD // BUY DTE / SELL TEF // BUY PHILIPS / SELL SIEMENS // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA
BUY MARRIOTT / SELL LAS VEGAS SANDS / BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
M6 RAISED TO BUY FROM HOLD BY GOLDMAN SACHS
INFINEON RAISED TO BUY FORM HOLD BY RBS
PEUGEOT RAISED TO NEUTRAL FROM UNDERWEIGHT BY HSBC
LEGRAND RAISED TO NEUTRAL FROM UNDERWEIGHT BY JP MORGAN
LOMIN RAISED TO BUY FROM HOLD BY CITIGROUP
SYNTHES RAISED TO HOLD FROM SELL BY DEUTSCHE BANK
NEXANS RAISED TO BUY BY BANK OF AMERICA
TECHNIP RAISED TO BUY FROM HOLD BY RBS
ALLIANZ CUT TO NEUTRAL FROM OUTPERFORM BY CREDIT SUISSE
SANOFI-AVENTIS CUT TO NEUTRAL FROM BUY BY NOMURA
RANDSTAD CUT TO HOLD FROM BUY BY ING
SYNTHES CUT TO NEUTRAL FROM BUY BY UBS
GAS NATURAL CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
DATA
WTI : 63,2 (-5,67 %)
Eur/$ : 1,4051 (0,01 %)
$ /Yen : 94,99 (0,00 )
10 Yr US : 3,68 ( 1,78 bp)
10 Yr Euro : 3,42 ( -0,3 bp)
Indices : US close ; Europe close
SOX : -0,86 %;-1,47%
S&P :-0,46 %; -0,81 %
DOW: -0,29%; -0,63 %
NAS :-0,39%; -0,79%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -2,59 %; -3,03 %
ENERGY : -2,13 %; -3,12 %
FINANCIAL : -0,33 %; -0,24 %
HEALTHCARE : 0,19 %; 0,28 %
TECHNO : -0,33 %; -1,05 %
TELECOM : 0,64 %; -0,02 %
INDUSTRIAL : -0,72 %; -1,02 %
UTILITIES : -0,42 %; -1,07 %
TO BE COMING
Today
Results :France Telecom / Siemens / L'Oreal sales / Alcatel Lucent / Vallourec / Centrica / Grupo Ferrovial / Air France-KLM / Renault / Repsol / EDF / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Dassault Systemes / Telefonica / Abertis / AstraZeneca /BAE Systems / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / British American Tobacco / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / International paper / Sony / NTT DoCoMo / Nec
Dividend :Bank of New York ($0,09)
Events :
Friday
Results : Total / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events: Singapore Airlines AGM
Monday
Results : US car sales / Metro Group / Linde / Anglo American / HSBC / Arkema / Barlcays
Dividend : Banco Santander (€0,135234) / KPN (€ 0,23) / Xilinx ($0.14)
Events :
Tuesday
Results : BNP Paribas (BMO) / BMW / Beiersdorf / UBS / Givaudan / Statoil Hydro / Electronic Arts / Kraft Foods
Dividend :
Events:
Wednesday
Results :Adidas / Allied Irish Bank / Carlsberg / Activision Blizzard / Procter & Gamble
Dividend : Thomas Cook (GBp 4,166667) / Alcoa ($ 0,03) / Boeing ($0,42) / Intel ($ 0,14) / Pfizer($0,14) / Pfizer ($0,16) / Schering-Plough($0,065)
Events:
ECONOMIC DATA PREVIEW
Today in the United-States, watch the release of the weekly initial jobless claims for the week ended July 25 due at 13.30 GMT. The consensus expects that the claims will rose by 24 000 to 554 000.
In the Eurozone, have a look at the Economic Confidence (10.00 GMT) expected up at 75 in July from 73.3 in June.
In Germany, watch the unemployment change and the unemployment rate (8.55 GMT) that is expected to climb again at 8.4 % in July from +8.3 % in June. / LC
ECONOMY
United States: Durable goods orders fell in June
The US durable goods orders retreated 2.5 % in June due to the defence orders that dropped back 28.3 % and the non-defence orders that plunged 38.5 %. The consensus was expecting only a 0.6 % decline and the last month was revised from +1.8 % to +1.3 %. But ex-transportation, the orders climbed 1.1 % in June for the second consecutive month or the most in four months. Otherwise, the non-defence core capital goods orders increased by 1.4% m/m last month, following a 4.3% increase the month before. Note that the three-month annualised rate of core capital goods orders turned positive…
United States: Fed’s Beige Book
In it’s report, the Fed indicated that “the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level”. Most Districts reported sluggish retail activity with decline in sales. Manufacturing activity showed some improvement but a low levels. Residential real estate markets stayed soft in most Districts, although many noted some signs of improvement. By contrast, commercial real estate markets weakened further in recent months in two-thirds of the Districts and remained slow in the others. Consumer spending in the early summer remained below previous-year levels in most Districts, as households continued to be price conscious. Auto sales were mixed across the country but sales of used vehicles continued to be strong or were strengthening.
“Green shoots” is the new catchphrase used by Ben Bernanke and others to refer to signs in financial markets and the U.S. and global economies that a recovery is in the offing. The appearance of “green shoots”, or at least the appearance of the term, has coincided with an increase in risk appetite in financial markets. Three events have helped to support a global increase in preference for risk assets, especially stocks, since March 9th. A slowing rate of contraction of some measures of economic activity in the U.S. has fuelled hopes for a H2 recovery despite the extraordinary collapse in Germany and Japan during Q1 at annualized rate of decline of around 15 %. The second source of support for the rising risk appetite has come from the transition of the financial crisis from an acute to a chronic phase. This occurred after the stress tests engineered by the Fed and the Treasury provided markets, hungry of reassurance, with some hope that the largest banks could stabilize their reserve positions with only modest capital increases totalling $75 bn. Finally signs of renewed growth in Asia (particularly in China), tied to massive credit and spending stimulus, have boosted hopes that an increase in Chinese domestic demand may ease global imbalances. Taken together, these three indications of slowing economic and financial deterioration have contributed to a rise in U.S. equity markets and a narrowing of risk spreads. One support of the “green shoots” scenario has been the proactive stance of the Obama administration toward the financial sector. This has included initiation and completion of stress tests to determine the viability of U.S. banks as operational (lending) entities. This step, coupled with the Fed’s commitment to quantitative easing, has helped to move what was an acute financial crisis with elements of panic to a contained chronic phase in which banks broadly have stabilised but have not yen begun to operate as lenders to U.S. households and corporations. If the hoped-for H2 return to positive growth of the U.S. economy is achieved, the “adverse feedback loop” running from the real economy back to the financial sector should be broken. If the financial sector crisis is restrained, the major question that remains is this: will the damage to the real economy begin to heal quickly enough to avoid another round of an adverse feedback loop that runs from the real economy and back to the financial sector?
Beige book = “green shoots”? For the first time in many months, the Beige Book was more optimistic and referred to “stabilization”. Reports from the 12 Federal Reserve Districts suggest that economic activity continued to be weak going into the summer, but most Districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level. Five Districts used the words "slow", "subdued", or "weak" to describe activity levels; Chicago and St. Louis reported that the pace of decline appeared to be moderating; and New York, Cleveland, Kansas City, and San Francisco pointed to signs of stabilization. Minneapolis said the District economy hadcontracted since the last report.
The 2.5% m/m decline in US durable goods orders in June was not nearly as bad as it looks because it was principally due to a 28.3% drop back in defence orders and a 38.5% drop back in orders for non-defence aircraft. In both cases, those categories are notoriously volatile and the declines in June reflect orders falling back to more normal levels after big surges in the preceding couple of months. Excluding transportation, orders increased by a solid 1.1% m/m. (If we exclude the 10.8% m/m drop in communications as well, most of which appears to have been a drop in military orders - the increase would have been nearer 1.5%.) The other encouraging news is that non-defence core capital goods orders increased by 1.4% m/m last month, following a 4.3% increase the month before. The three-month annualized rate of core capital goods orders turned positive. The actual shipments figures are not quite as strong – non-defence core capital goods shipments only increased by 0.1% m/m and the three-month annualized rate is still -16.2%. The upshot is that business investment probably fell quite sharply again in Q2, but it should stabilize or even record a modest rebound in Q3. Overall, this report adds to the evidence that the recession is over, or close to over.
There are currently many interesting moves in the markets. The dollar suddenly strengthened after U.S.-China Strategic & Economic Dialogue ended, with the EUR/USD plunging to a low of 1.4008 on July 29th from 1.4304 a day earlier (1.4051 this morning). The inverted correlation between oil prices and the dollar was confirmed again as oil prices slumped by nearly 6 % intraday (WTI at $63.35 /bbl from $67.23 /bbl) after commercial inventories rose by more than 5 million barrels to 347.8 million, near seasonally and historically records. Commodity prices followed the move with the CRB index falling from 250.2 to 243.5 intraday. Gold price sharply retreated as well: 929.55 /oz vs. 954.91 earlier this week. There were some fears of a credit bubble in China that weighed on the Shenzhen composite index that lost roughly 7.5 % in the last two sessions. Some investors start to fear that the surge in equities has outpaced the economy. But it seems to be a consolidation, more than the end of the rally as “green shoots” are consistent… This morning U.S. index futures were up: DJIA +0.30 %, S&P 500 +0.37 %, Nasdaq 100 +0.30 % (06.30 BST). The Nikkei was slightly up (+0.30 %) after industrial production was in line with expectations (+2.4 % MoM in June, -23.4 % YoY).
ECONOMIC DATA WITH IMPACT
US Initial Weekly Jobless Claims (7/25) that could be released below 600k (570k expected) for the fourth week in a row (13.30 BST), while Continuous Claims (7/18) may have decreased again after their peak of 6904 k on June 27th (6,200k expected). This may be good news for the July job report released on August 7th.
German unemployment figures for July(08.55 BST).
Euro-zone EC economic sentiment index (ESI) probably increased for a fourth month in a row in July (10.00 BST), mainly courtesy of a further improvement in industrial confidence. Services and consumer confidence probably improved too, but to a less extend, given the dire situation in the labour market. The index will probably point to a more moderate annual fall in GDP growth of around 2.5 %.
POSITIVE IMPACTS
FRANCE TEL : Q2 rev. €12.77bn (12.9bn e) / Ebitda €4.52bn (4.35bn e) / Interim div. €0.60 ex-date 28/08 paid Sept. 2 / Sees activity slightly lower in H2 but will try to limit EBITDA margin erosion / Confirmed FY FCF target of €8bn + debt target + pay-out ratio > 45%
AIR LIQUIDE : H1 sales €5.94 bn (5.73bn exp) / H1 recurring operating €889 m (868m exp) / Maintains objective for 2009 of revenue and net income to be close to 2008 levels
ALCATEL-LUCENT : Q2 revenue €3.91bn (3.86bn exp) / Adjusted EBIT loss €62 m (-89m exp) / Repeated guidance for FY breakeven at the adjusted operating income level / Reiterated view for market down between 8% and 12% at constant currency in 2009
BT : Q1 rev. £5.24bn (5.02bn e) / Ebitda £1.37bn (1.27bn e) / FCF £-122m (-475m e) / Pens. def -£5.8bn end June / FY outlook unch.
BAE SYSTEMS : H1 sales £9.94bn (9.72bn exp) / Adj. Ebitda £979m, in line / H1 div. 6.4p (6.27 exp) / Order book £45bn end June
TELEFONICA : Q2 rev 13.88bn (13.96bn exp) / Q2 OIBDA €5.59bn (5.45bn exp) / Reiterated guidance
IBERDROLA’s engineering unit won a $2bn contract in conjunction with Elecnor SA to build a power plant in Venezuela.
CLARIANT : Q2 sales SFR1.61Bn (1.68bn e) / Adj Ebit 69m (45.7m e) / Sees weak sales in local cur. / Sees 2010 ROIC > mkt avg
SANOFI announced the acquisition of Merck's interest in Merial for $4bn in cash / Acquisition seen accretive from the first year
ABERTIS : H1 net pft €332m (300m exp) / Spain highway traffic –9.8%
GAMESA : H1 sales €1.62bn (1.59bn exp) / Net €65m (66.5m exp)
ERSTE BK : Q2 NII €1.28bn (1.23bn e) / Com. €444m (439m e) / Trading €199m (134m e) / Risk prov. €522m (470 e) / Net better
SOLVAY : Q2 rev 2.07 bn (2 exp)/ REBIT €164M (139 exp) / Net pft €77M (64 exp) / FY operating lower than last year
NEGATIVE IMPACTS
CAP GEMINI : H1 revenue €4.38bn, in line / Ebit €287m (282m exp) / Cut H2 revenues guidance = Sees H2 sales down by 4% to 6% like-for-like (-0.5 to -3.5% previously) but said it is “comfortable with market consensus of FY op. margin at 7%)
RENAULT : H1 sales €15.99bn, in line / Operating loss €946m (-858m exp) / FCF +€848m / Confirms positive FCF and market share increase in 2009 / Like Peugeot yesterday, has revised 2009 world market forecasts to -12% on 2008, vs an original forecast of -15%
EDF : H1 sales €34.9 bn (36bn exp) but Ebitda €10.14bn (9.97bn exp) / Reiterated FY targets with moderate org. Ebitda grwth in 2009
ACS : H1 €8.12 bn (€8.22 bn exp) / Ebitda €736m (764m exp) / Net profit €1.54 bn (€1.50bn exp) boosted by its sale of more than 35% of Union Fenosa to Gas Natural
BASF : Q2 Sales €12.5Bn (in line) / EBIT €772m (960m exp) / Expects significant decline in sales & earnings in 2009 / Sees in CIBA integration synergies of at least €400M per year
WACKER CHEMIE : Q2 Sales €925.5M ( 914 exp) / EBITDA €170M (166.6 exp)/ FY sales & operating earnings well below those of 2008 / Expects the global recession to continue in H2
POSTBANK : Q2 NII €566M (602 exp) / Pretax loss €69M ( 59 exp) / Trading loss €103M (51 exp) / Loan loss provision €157M (154 exp) / Sees improvement in H2
MAN : Q2 rev €3.1 Bn (3.09 exp) / Q2 Op pft €144M (in line) / Net Income €22M (93.8 exp) / No sign of eco situation improving /
CENTRICA : H1 Sales £11.66Bn (11.5exp) / H1 Op pft £936 (1bn exp) / Interim Div 3.66 pence/shr
SIEMENS : Q3 sales €18.3Bn (18.7 exp) / Q3 sector pft €1.67Bn (1.52 exp) / Order intake €17.2bn (18.9 exp) / Net income €1.26Bn (939 exp) / Energy rev €6.44 bn (6.37exp) / Healtcare rev. €2.87Bn (2.84 exp) / Confirms 2009 guidance
LUFTHANSA (yest. Just before close) : H1 revenue €10.2bn (10.6bn exp) / Operating €8m (+73m exp) / Still targets FY op. profit but sees considerable risks to profit goals
FINMECCANICA : H1 revenue €8.52bn (8.24bn exp) / Ebit €559m (555m exp) / New orders €8.33bn / Confirmed FY guidance
GAS NATURAL (Minor) is planning to issue €3.5 bn in bonds over the next 2 years (News agency EFE) / Gas Nat. is looking to issue up to €6 bn in bonds before the end of 2011, including a €2.5 bn bond it recently placed
INFINEON : The share price has remained so high since the announcement of its rights issue that U.S. financial investor Apollo Global Management, which is effectively underwriting the transaction, may fall well short of its 29.9% stake goal (FT)
CGG VERITAS (GEOPHYSIQUE) : Q2 sales $779m (802m exp) / Net loss $32m (+8m exp) / Order book $1.3bn at end of June
TRADING IDEAS
BUY VALLOUREC (ahead of results friday) / ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week
BUY NOKIA / GSZ / VIVENDI on reversal head & shoulder
BUY FTE / DTE to play economic recovery + gap above to be close
BUY SWISS RE / SELL MUNICH RE // BUY HEINEKEN / SELL PERNOD // BUY DTE / SELL TEF // BUY PHILIPS / SELL SIEMENS // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA
BUY MARRIOTT / SELL LAS VEGAS SANDS / BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
M6 RAISED TO BUY FROM HOLD BY GOLDMAN SACHS
INFINEON RAISED TO BUY FORM HOLD BY RBS
PEUGEOT RAISED TO NEUTRAL FROM UNDERWEIGHT BY HSBC
LEGRAND RAISED TO NEUTRAL FROM UNDERWEIGHT BY JP MORGAN
LOMIN RAISED TO BUY FROM HOLD BY CITIGROUP
SYNTHES RAISED TO HOLD FROM SELL BY DEUTSCHE BANK
NEXANS RAISED TO BUY BY BANK OF AMERICA
TECHNIP RAISED TO BUY FROM HOLD BY RBS
ALLIANZ CUT TO NEUTRAL FROM OUTPERFORM BY CREDIT SUISSE
SANOFI-AVENTIS CUT TO NEUTRAL FROM BUY BY NOMURA
RANDSTAD CUT TO HOLD FROM BUY BY ING
SYNTHES CUT TO NEUTRAL FROM BUY BY UBS
GAS NATURAL CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
DATA
WTI : 63,2 (-5,67 %)
Eur/$ : 1,4051 (0,01 %)
$ /Yen : 94,99 (0,00 )
10 Yr US : 3,68 ( 1,78 bp)
10 Yr Euro : 3,42 ( -0,3 bp)
Indices : US close ; Europe close
SOX : -0,86 %;-1,47%
S&P :-0,46 %; -0,81 %
DOW: -0,29%; -0,63 %
NAS :-0,39%; -0,79%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -2,59 %; -3,03 %
ENERGY : -2,13 %; -3,12 %
FINANCIAL : -0,33 %; -0,24 %
HEALTHCARE : 0,19 %; 0,28 %
TECHNO : -0,33 %; -1,05 %
TELECOM : 0,64 %; -0,02 %
INDUSTRIAL : -0,72 %; -1,02 %
UTILITIES : -0,42 %; -1,07 %
TO BE COMING
Today
Results :France Telecom / Siemens / L'Oreal sales / Alcatel Lucent / Vallourec / Centrica / Grupo Ferrovial / Air France-KLM / Renault / Repsol / EDF / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Dassault Systemes / Telefonica / Abertis / AstraZeneca /BAE Systems / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / British American Tobacco / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / International paper / Sony / NTT DoCoMo / Nec
Dividend :Bank of New York ($0,09)
Events :
Friday
Results : Total / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events: Singapore Airlines AGM
Monday
Results : US car sales / Metro Group / Linde / Anglo American / HSBC / Arkema / Barlcays
Dividend : Banco Santander (€0,135234) / KPN (€ 0,23) / Xilinx ($0.14)
Events :
Tuesday
Results : BNP Paribas (BMO) / BMW / Beiersdorf / UBS / Givaudan / Statoil Hydro / Electronic Arts / Kraft Foods
Dividend :
Events:
Wednesday
Results :Adidas / Allied Irish Bank / Carlsberg / Activision Blizzard / Procter & Gamble
Dividend : Thomas Cook (GBp 4,166667) / Alcoa ($ 0,03) / Boeing ($0,42) / Intel ($ 0,14) / Pfizer($0,14) / Pfizer ($0,16) / Schering-Plough($0,065)
Events:
ECONOMIC DATA PREVIEW
Today in the United-States, watch the release of the weekly initial jobless claims for the week ended July 25 due at 13.30 GMT. The consensus expects that the claims will rose by 24 000 to 554 000.
In the Eurozone, have a look at the Economic Confidence (10.00 GMT) expected up at 75 in July from 73.3 in June.
In Germany, watch the unemployment change and the unemployment rate (8.55 GMT) that is expected to climb again at 8.4 % in July from +8.3 % in June. / LC
ECONOMY
United States: Durable goods orders fell in June
The US durable goods orders retreated 2.5 % in June due to the defence orders that dropped back 28.3 % and the non-defence orders that plunged 38.5 %. The consensus was expecting only a 0.6 % decline and the last month was revised from +1.8 % to +1.3 %. But ex-transportation, the orders climbed 1.1 % in June for the second consecutive month or the most in four months. Otherwise, the non-defence core capital goods orders increased by 1.4% m/m last month, following a 4.3% increase the month before. Note that the three-month annualised rate of core capital goods orders turned positive…
United States: Fed’s Beige Book
In it’s report, the Fed indicated that “the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level”. Most Districts reported sluggish retail activity with decline in sales. Manufacturing activity showed some improvement but a low levels. Residential real estate markets stayed soft in most Districts, although many noted some signs of improvement. By contrast, commercial real estate markets weakened further in recent months in two-thirds of the Districts and remained slow in the others. Consumer spending in the early summer remained below previous-year levels in most Districts, as households continued to be price conscious. Auto sales were mixed across the country but sales of used vehicles continued to be strong or were strengthening.
Wednesday, July 29, 2009
Before the Bell
BEFORE THE BELL
29 Jul 09
RESULTS
MCKESSON CORP +9% before the opening (published yesterday after the close)MCK,Health care distributor
$1.06 ($0.85 exp.) $0.83 n-1.
Revenue –0.2% at $26.657bn ($26.78bn exp.).
Net +22.5% at $288m ($235m n-1), Ebit +17.6%, operating +23.7%.
If trend continue should reach the top of EPS guidance, raised FY09 EPS at $4.15-4.30.
Cash & equivalent at $2.644bn, bought back $275m of stock leaving $555m on its authorization.
NORFOLK SOUTHERN -4.2% before the opening (published yesterday after the close)NSC,Railroads
$0.66 ($0.64 exp.) $1.18 n-1.
Revenue –32.8% at $1.857bn ($1.99bn exp.), -26% on volume and lower fuel related revenue.
Merchandise –31%, coal –34%.
Net –45.5% at $247m ($453m n-1), Ebit –46.6%.
Railway operating ratio at 74.8%.
COCA-COLA ENTERPRISES No pre-openingCCE,Soft drink
$0.67 ($0.51 exp.) $0.56 n-1.
Revenue –0.4% at $5.909bn ($5.973bn exp.), +6% ex negative forex impact.
Net at $313m (-$3.166bn with pre-tax charge $5.276bn for franchise impairment), operating exitems
+10.7%.
Raises FY09 EPS at $1.44-1.49 ($1.33 exp.), outlook cautious but improving.
Sees FY capital expenditures at $900m and Free cash flow ($650m in 09) will primarily used for
debt reduction. Raises annual dividend by 14%.
Net pricing/case +8%, sees NA volume declining in 2009.
CONOCOPHILLIPS -1.3% before the openingCOP,Integrated oil &gas
$0.87 ($0.86 exp.) $3.50 n-1.
Revenue –50.4% at $35.4bn ($32.752bn exp.)
Net –76.1% at $1.298bn ($5.439bn n-1), E&P earnings at $725m vs $3.999bn and downstream
(refining & marketing) loss at -$52m vs $664m benefit.
Production including share in Lukoil at 2.3m barrels/day, E&P production +7%.
$2.6bn in cash flow for the quarter, cash balance at $900m.
Debt at $30.4bn, debt to capital ratio at 34%.
Refining crude use capacity at 88% vs 93%.
GENERAL DYNAMICS +2.3% before the openingGD,Aerospace & defense
$1.61 ($1.56 exp.) $1.51 n-1.
Revenue +10.9% at $8.1bn ($8.139bn exp.).
Net –3.6% at $618m ($641m n-1), operating +2.6%, Ebit from continuing operations –0.2%.
Funded backlog +5.3% at $47.7bn, backlog +22.2% at 67.6bn.
Raised FY09 EPS to $6.05-6.15 ($6.14 exp.).
HES CORPORATION +1.2% before the opening
HES,
Integrated oil & gas
$0.31 ($0.01 exp.) $2.76 n-1.
Revenue –42.3% at $6.751bn ($7.436bn exp.).
Net –88.9% at $100m with charges ($900m n-1), net exploration & production –79% at 215m.
Oil & gas production +3.6% at 407k barrels per day.
Capital expenditures & exploratory down 36.7% to $785m from $1.24bn.
MEDCO HEALTH SOLUTIONS +3.1% before the openingMHS,Health care services
$0.69 ($0.65 exp.) $0.56 n-1.
Revenue +16.9% at $14.93bn ($14.56bn exp.)., specialty pharma +20.3%.
Net +18.8% at $312.1m ($262.7m n-1), ex-items +28%, Ebit +20.8%.
Generic dispensing rate increased 3.6%, total prescription volume +13.5% at 224.9m.
GM = 6.8% vs 7.3%, cash balance at $2.1bn, confident for the rest of the year.
Raised & narrowed FY09 EPS at $2.76-2.81 ex-items ($2.73exp.) from $2.67-2.77.
PRAXAIR -4% before the openingPX,Industrial gases
$0.96 ($0.99 exp.) $1.08 n-1.
Sales –26% at $2.138bn ($2.289bn exp.), -12% ex-currency & items, flat from previous quarter.
Net –14.3% at $299m ($349m n-1).
Strong cash flow at $563m, sees 2009 capital spending at $1.4bn.
Sees FY09 EPS at $3.85-4.05 ($4.02 exp.), revenue at $9bn (9.23bn exp.).
SOUTHERN CO No pre-openingSO,Electric utilities
$0.61 ($0.57 exp.) $0.63 n-1.
Revenue –7.8% at $3.885bn ($4.284bn exp.), industrial electricity sales –17.6%, residential –0.9ù
and commercial –0.6%.
Net +14.8% at $478.6m ($417m n-1), operating –4.1%.
WWW.GLOBAL-EQUITIES.COM / DEL SARTE TEAM / + 33 (0) 1 44 43 33 24
BEFORE THE BELL
29 Jul 09
SPRINT NEXTEL -4.3% before the openingS,Wireless communication
-$0.13 (-$0.01 exp.) $0.06 n-1.
Revenue –10.1% at $8.14bn ($8.133bn exp.), wireless flat sequentially at $6.4bn.
Net loss at -$384m (-$344m loss n-1), adjusted Oibda –16% at $1.769bn.
Oibda margin down to 23.1% from 24.4%, post paid churn at 2.05% vs 1.98%.
Wireless customers –257k including –991k post paid customers to 48.8 million.
Free cash flow at $676m, cash balance at $4.6bn after retiring $1.5 bn 2009 senior note maturities.
TIME WARNER CABLE -0.4% before the openingTWC,Cable & satellite
$0.89 ($0.79 exp.) $1.02 n-1.
Revenue +4.1% at $4.474bn ($4.44bn exp.), subscription +6% at $4.3bn.
Net +14.1% at $316m ($277m n-1), operating +19.5%, adjusted Oibda +5% at $1.7bn.
$1bn cash flow enable the company to reduce debt.
TIME WARNER INC -1.2% before the opening
TWX,
Movies & entertainment
$0.43 ($0.37 exp.) $0.72 n-1.
Revenue –8.8% at $6.809bn ($6.94bn exp.).
Net –34.5% at $519m ($792m n-1 with gain), adjusted Oibda –2% at $1.574bn with publishing and
AOL business down.
Bought back around 65m shares in the Q for around $3.1bn.
Reaffirms FY09 outlook, EPS around $1.98 ($1.99 exp.).
WELLPOINT -5% before the openingWLP,Managed health care
$1.50 ($1.43 exp.) $1.44 n-1.
Revenue –1.4% at $15.265bn ($15.406bn exp.).
Net –7.6% at $693.5m with items (750.5m n-1), ex-items –5% at $727.5m.
Medical enrollment –3% with 34.2 members. Benefit expense ratio at 82.9% vs 83.3%.
Sees FY09 EPS at $5.60-5.66 ($5.72 exp.), revenue at $60.6bn ($61.3bn exp.).
After the close : Aflac Corp ($1.13)
Results are for companies with a capitalization above $10bn and EPS is given with NON GAAP whereas Net Income is given with GAAP.
NEWS
EWS
CITIGROUP -0.7% before the openingC,Bank
Sumitomo Trust & Banking (8403.T) has agreed to buy Citigroup Japanese asset manager, Nikko
Asset Management, for about $1.1bn (Nikkei newspaper). Should be done by October.
GOOGLE -0.8% before the openingGOOG.O,Internet services
Microsoft (MSFT.O) +1% before the opening and Yahoo (YHOO.O) –6.7% before the opening
have agreed to an 10 years online search and advertising partnership, in an attempt to rival
Google that will be announced soon. Microsoft will not pay an upfront fee to Yahoo, and the focus
of the deal is on sharing revenue.
IPO : Private equity firm KKR is in advanced planning stage for an IPO of stock in discount US retailer
Dollar General (WSJ). KKR would be one of the lead with Goldman Sachs and Citigroup. KKR
valued its portfolio investment in Dollar General at $1.6bn in March.
Oil : Senior IEA analyst said : Oil prices have reached a floor of between $50-$60 a barrel and OPEC is
unlikely to announce major output cuts in September. The IEA is adviser to 28 industrialized
economies.
BROKERS RATINGS
BROKERS RATINGS
NATIOANL OILWELL : Cut to Neutral from Buy by Pritchard.
MCKESSON : Raised to Outperform from Neutral by Baird.
AFLAC: Cut to Hold from Buy by Citigroup.
MORGAN STANLEY: Cut to Neutral from Buy by Goldman Sachs.
BANKS: Goldman Sachs favors Bank Of America and JP Morgan among the big US banks.
MAJOR US ECONOMIC DATA
AJOR US ECONOMIC DATA
Time (France) Indicator Estimate (Reuters) Actual Prior
13.00 Mortgage market application N/A(est) -6.3%(actual) 2.8%(prior)
14.30 Durable goods -0.6% -2.5%(est) 1.3%(actual) (revised down)(prior)
14.30 Durable goods ex-defense 0%(est) -0.7%(actual) +0.9% (revised down)(prior)
14.30 Durable goods ex-transportation 0%(est) +1.1%(actual) +0.8% (revised down)(prior)
29 Jul 09
RESULTS
MCKESSON CORP +9% before the opening (published yesterday after the close)MCK,Health care distributor
$1.06 ($0.85 exp.) $0.83 n-1.
Revenue –0.2% at $26.657bn ($26.78bn exp.).
Net +22.5% at $288m ($235m n-1), Ebit +17.6%, operating +23.7%.
If trend continue should reach the top of EPS guidance, raised FY09 EPS at $4.15-4.30.
Cash & equivalent at $2.644bn, bought back $275m of stock leaving $555m on its authorization.
NORFOLK SOUTHERN -4.2% before the opening (published yesterday after the close)NSC,Railroads
$0.66 ($0.64 exp.) $1.18 n-1.
Revenue –32.8% at $1.857bn ($1.99bn exp.), -26% on volume and lower fuel related revenue.
Merchandise –31%, coal –34%.
Net –45.5% at $247m ($453m n-1), Ebit –46.6%.
Railway operating ratio at 74.8%.
COCA-COLA ENTERPRISES No pre-openingCCE,Soft drink
$0.67 ($0.51 exp.) $0.56 n-1.
Revenue –0.4% at $5.909bn ($5.973bn exp.), +6% ex negative forex impact.
Net at $313m (-$3.166bn with pre-tax charge $5.276bn for franchise impairment), operating exitems
+10.7%.
Raises FY09 EPS at $1.44-1.49 ($1.33 exp.), outlook cautious but improving.
Sees FY capital expenditures at $900m and Free cash flow ($650m in 09) will primarily used for
debt reduction. Raises annual dividend by 14%.
Net pricing/case +8%, sees NA volume declining in 2009.
CONOCOPHILLIPS -1.3% before the openingCOP,Integrated oil &gas
$0.87 ($0.86 exp.) $3.50 n-1.
Revenue –50.4% at $35.4bn ($32.752bn exp.)
Net –76.1% at $1.298bn ($5.439bn n-1), E&P earnings at $725m vs $3.999bn and downstream
(refining & marketing) loss at -$52m vs $664m benefit.
Production including share in Lukoil at 2.3m barrels/day, E&P production +7%.
$2.6bn in cash flow for the quarter, cash balance at $900m.
Debt at $30.4bn, debt to capital ratio at 34%.
Refining crude use capacity at 88% vs 93%.
GENERAL DYNAMICS +2.3% before the openingGD,Aerospace & defense
$1.61 ($1.56 exp.) $1.51 n-1.
Revenue +10.9% at $8.1bn ($8.139bn exp.).
Net –3.6% at $618m ($641m n-1), operating +2.6%, Ebit from continuing operations –0.2%.
Funded backlog +5.3% at $47.7bn, backlog +22.2% at 67.6bn.
Raised FY09 EPS to $6.05-6.15 ($6.14 exp.).
HES CORPORATION +1.2% before the opening
HES,
Integrated oil & gas
$0.31 ($0.01 exp.) $2.76 n-1.
Revenue –42.3% at $6.751bn ($7.436bn exp.).
Net –88.9% at $100m with charges ($900m n-1), net exploration & production –79% at 215m.
Oil & gas production +3.6% at 407k barrels per day.
Capital expenditures & exploratory down 36.7% to $785m from $1.24bn.
MEDCO HEALTH SOLUTIONS +3.1% before the openingMHS,Health care services
$0.69 ($0.65 exp.) $0.56 n-1.
Revenue +16.9% at $14.93bn ($14.56bn exp.)., specialty pharma +20.3%.
Net +18.8% at $312.1m ($262.7m n-1), ex-items +28%, Ebit +20.8%.
Generic dispensing rate increased 3.6%, total prescription volume +13.5% at 224.9m.
GM = 6.8% vs 7.3%, cash balance at $2.1bn, confident for the rest of the year.
Raised & narrowed FY09 EPS at $2.76-2.81 ex-items ($2.73exp.) from $2.67-2.77.
PRAXAIR -4% before the openingPX,Industrial gases
$0.96 ($0.99 exp.) $1.08 n-1.
Sales –26% at $2.138bn ($2.289bn exp.), -12% ex-currency & items, flat from previous quarter.
Net –14.3% at $299m ($349m n-1).
Strong cash flow at $563m, sees 2009 capital spending at $1.4bn.
Sees FY09 EPS at $3.85-4.05 ($4.02 exp.), revenue at $9bn (9.23bn exp.).
SOUTHERN CO No pre-openingSO,Electric utilities
$0.61 ($0.57 exp.) $0.63 n-1.
Revenue –7.8% at $3.885bn ($4.284bn exp.), industrial electricity sales –17.6%, residential –0.9ù
and commercial –0.6%.
Net +14.8% at $478.6m ($417m n-1), operating –4.1%.
WWW.GLOBAL-EQUITIES.COM / DEL SARTE TEAM / + 33 (0) 1 44 43 33 24
BEFORE THE BELL
29 Jul 09
SPRINT NEXTEL -4.3% before the openingS,Wireless communication
-$0.13 (-$0.01 exp.) $0.06 n-1.
Revenue –10.1% at $8.14bn ($8.133bn exp.), wireless flat sequentially at $6.4bn.
Net loss at -$384m (-$344m loss n-1), adjusted Oibda –16% at $1.769bn.
Oibda margin down to 23.1% from 24.4%, post paid churn at 2.05% vs 1.98%.
Wireless customers –257k including –991k post paid customers to 48.8 million.
Free cash flow at $676m, cash balance at $4.6bn after retiring $1.5 bn 2009 senior note maturities.
TIME WARNER CABLE -0.4% before the openingTWC,Cable & satellite
$0.89 ($0.79 exp.) $1.02 n-1.
Revenue +4.1% at $4.474bn ($4.44bn exp.), subscription +6% at $4.3bn.
Net +14.1% at $316m ($277m n-1), operating +19.5%, adjusted Oibda +5% at $1.7bn.
$1bn cash flow enable the company to reduce debt.
TIME WARNER INC -1.2% before the opening
TWX,
Movies & entertainment
$0.43 ($0.37 exp.) $0.72 n-1.
Revenue –8.8% at $6.809bn ($6.94bn exp.).
Net –34.5% at $519m ($792m n-1 with gain), adjusted Oibda –2% at $1.574bn with publishing and
AOL business down.
Bought back around 65m shares in the Q for around $3.1bn.
Reaffirms FY09 outlook, EPS around $1.98 ($1.99 exp.).
WELLPOINT -5% before the openingWLP,Managed health care
$1.50 ($1.43 exp.) $1.44 n-1.
Revenue –1.4% at $15.265bn ($15.406bn exp.).
Net –7.6% at $693.5m with items (750.5m n-1), ex-items –5% at $727.5m.
Medical enrollment –3% with 34.2 members. Benefit expense ratio at 82.9% vs 83.3%.
Sees FY09 EPS at $5.60-5.66 ($5.72 exp.), revenue at $60.6bn ($61.3bn exp.).
After the close : Aflac Corp ($1.13)
Results are for companies with a capitalization above $10bn and EPS is given with NON GAAP whereas Net Income is given with GAAP.
NEWS
EWS
CITIGROUP -0.7% before the openingC,Bank
Sumitomo Trust & Banking (8403.T) has agreed to buy Citigroup Japanese asset manager, Nikko
Asset Management, for about $1.1bn (Nikkei newspaper). Should be done by October.
GOOGLE -0.8% before the openingGOOG.O,Internet services
Microsoft (MSFT.O) +1% before the opening and Yahoo (YHOO.O) –6.7% before the opening
have agreed to an 10 years online search and advertising partnership, in an attempt to rival
Google that will be announced soon. Microsoft will not pay an upfront fee to Yahoo, and the focus
of the deal is on sharing revenue.
IPO : Private equity firm KKR is in advanced planning stage for an IPO of stock in discount US retailer
Dollar General (WSJ). KKR would be one of the lead with Goldman Sachs and Citigroup. KKR
valued its portfolio investment in Dollar General at $1.6bn in March.
Oil : Senior IEA analyst said : Oil prices have reached a floor of between $50-$60 a barrel and OPEC is
unlikely to announce major output cuts in September. The IEA is adviser to 28 industrialized
economies.
BROKERS RATINGS
BROKERS RATINGS
NATIOANL OILWELL : Cut to Neutral from Buy by Pritchard.
MCKESSON : Raised to Outperform from Neutral by Baird.
AFLAC: Cut to Hold from Buy by Citigroup.
MORGAN STANLEY: Cut to Neutral from Buy by Goldman Sachs.
BANKS: Goldman Sachs favors Bank Of America and JP Morgan among the big US banks.
MAJOR US ECONOMIC DATA
AJOR US ECONOMIC DATA
Time (France) Indicator Estimate (Reuters) Actual Prior
13.00 Mortgage market application N/A(est) -6.3%(actual) 2.8%(prior)
14.30 Durable goods -0.6% -2.5%(est) 1.3%(actual) (revised down)(prior)
14.30 Durable goods ex-defense 0%(est) -0.7%(actual) +0.9% (revised down)(prior)
14.30 Durable goods ex-transportation 0%(est) +1.1%(actual) +0.8% (revised down)(prior)
Inflator or Deflator
GLOBAL EQUITIES RESEARCH
With no surprise, the first round of the U.S.-China Strategic & Economic Dialogue didn’t bring any information about the dollar (it went below 1.42 EUR/USD yesterday).The United States will take measures to increase national saving as a share of GDP. The U.S. household saving rate has already risen sharply as a result of the crisis, contributing to a significant decline in the U.S. current account deficit, and the United States will adopt policies that will continue to encourage household saving. The United States will also reform its health care system with the aim of controlling rising health care costs for businesses and government while assuring high-quality, affordable health care for all Americans, and is committed to reducing the federal budget deficit relative to GDP to a sustainable level by 2013. China will continue to implement structural and macroeconomic policies to stimulate domestic demand and increase the contribution of consumption to GDP growth. China will further enhance access in its service market and expand areas and channels for non-government investment, with a view to expedite the development of its services industry and increase the share of services in GDP. China will also deepen social safety net reform, including strengthening its basic old-age insurance system and enterprise annuities.
The high inflation of the 1970s was partly the result of monetary policy blunders that will not be repeated, Janet Yellen, San Francisco Fed president, said on Tuesday. Taking questions after a speech to bankers in Coeur D'Alene, Idaho, Yellen termed the 1970s stagflation as a formative experience for her and most of her Federal Open Market Committee colleagues. Timing the reversal of the Fed's highly accommodative monetary policy will be difficult, but moves will likely come even while the employment market is weak, Yellen said. Earlier, Yellen said that full employment in the United States, or a jobless rate near 5 percent, would likely not return for several years
So, inflation or deflation? The recent steps by the Fed to pre-empt deflation have-ironically and unexpectedly- prompted a surge in inflation fearsboth inside the U.S. and abroad, especially in China; Specifically, the Fed’s measures to go beyond the stimulus inherent in a 0 % Fed Funds target rate by purchasing Treasury and Mortgage securities has conjured visions – especially in the eyes of major buyers of Treasury securities, China foremost- of massive money printing to underwrite trillion of dollars of additional government borrowing at low interest rates. As markets have shown, if that were the Fed’s intention-which it decidedly is not - the effort would fail because excessive money printing - creating a money supply larger than the quantity of money demanded-would push up interest rates as inflation expectations rose. The Fed’s commitment to price stability remains firm, although markets have their doubts given the rise, since March, of more than 100 bp in inflation expectations that drove yields on 10-year notes as high as 4.00 % early in June. While that interest-rate level is not extraordinary by historical standards, the pace of the rise and its association with higher expected inflation are striking - especially a 59-year low of -1.3 % in the YoY CPI. As recently as mid-March, when the Fed committed itself to purchase $300bn of Treasury securities, yields on 10-year notes dropped sharply from 3.00 % to 2.50 %. A rise of 150 bps to nearly 4.00 %, with 100 bp of that move attributable to higher inflation expectations, certainly sounds an alarm bell that any central bank would take seriously, especially given the extremely negative consequences for the struggling housing sector as mortgage rates rise. Even more significant is the implied loss of confidence in the Fed’s commitment to price stability. The actual risks in the U.S. still tilt more toward deflation than inflation. For now there are three main bulwarks against a rise in U.S. inflation: 1) depressed demand growth worldwide, especially in the U.S., tied to persistent deleveraging by American consumers and banks 2) large and rising excess capacity tied to that sharply lower demand (especially in the traded-goods sector); and 3) finally, and most important, the Fed unshaken and unconditional commitment to price stability. The Fed’s problems and the concerns of holders of Treasury securities would be substantially reduced if the Obama administration showed some signs of concern about the rapid increase in U.S. budget deficit that, in turn, fuels concern about the Fed’s need to accelerate money printing. It would be far better not to force the Fed into a position in which it would have to demonstrate its commitment to price stability by engineering a sharp increase in real interest rates to contain rising inflationary expectations from the federal government’s extravagant debt issuance.
Major indexes wavered within a narrow range as mixed housing and confidence data provided little direction. The S&P/Case-Shiller home price index for May showed a mild improvement from the previous month, rising 0.5%, with 13 of 20 major metro markets showing gains. Prices declined 0.6% in April, indicating the rate of housing price declines is slowing. Consumer confidence data for July dropped to 46.6, down from 49.3 in June, according to the Conference Board. The drop was worse than expected, based on forecasts that showed a decline to 49.0. 2-year Treasuries reversed lower after Tuesday's record auction received weaker demand than the government received last month, bucking gains along much of the yield curve. The U.S. Treasury Department sold $42 billion in 2-year notes to demand that paled with the prior month's auction. The Treasury awarded the notes at 1.08%, down from last month's 1.151%. The bid-to-cover ratio -- which measures bids received to bids tendered -- fell to 2.75 from 3.19 last month
ECONOMIC DATA WITH IMPACT
US durable goods orders for June (13.30 BST), with headline data expected ‑0.6 % MoM and core data 0.0 % vs. +1.8 % (-24.9 % YoY) and +1.1 % in May. But the GM bankruptcy poses a downside risk as the closure of some assembly plants may have hit orders for motor vehicle parts. / (major)
The Beige Book (19.00 BST) should confirm that the pace of economic contraction is slowing and that conditions in financial markets have generally improved in recent months. / (major)
U.K. household borrowing that should show a rise in mortgage approvals (50.0k vs. 43.4k) and a stability in consumer credit in June (09.30 BST).
POSITIVE IMPACTS
AKZO NOBEL : Q2 revenue €3.67bn (3.54bn exp) / Ebit €370m (267m exp) / Outlook and medium-term targets reiterated
BAYER : Q2 sales of €8.01bn (7.95bn exp) / Ebitda €1.71bn (1.61bn exp) / Sees FY sales at €31-32 bn, in line + stuck with outlook of 5% decline in 2009 adj EBITDA / Said downturn is bottoming out, but no sustained improvement in sight …
ARCELORMITTAL : Q2 sales $15.17bn (14.9bn e) / Ebitda $1.2bn (1.17bn e) / Net -$800m (-300m e) due to $1.2bn one-offs / Sees Q3 EBITDA $1.4-1.8 bn (1.9bn e) / Said recovery will remain slow & progressive with selling prices stable or slightly lower in Q3
SANOFI : Q2 sales €7.44bn (7.22bn exp ) / Net income €2.27 Bn (2.06bn exp) / Raises growth forecast to 10% from at least 7% / Targets €2Bn recurring cost saving by 2013
SAP : Q2 sales €2.58bn (2.64bn exp) / EBIT €647m (620m exp) / Improved visibility in H2 / Raises outlook for FY op. margin
BG GROUP : Q2 revenue £3.22bn (3.09bn exp) / Operating £1.26bn (1.1bn exp) / But said 2009 production target of 680K boepd is expected to be achieved over 12 months to 31March 2010, 3 months later than expected…
RANDSTAD : Q2 revenue €2.99bn (3.03bn exp) / Ebita €67m (63m exp) / Said that the US staffing & inhouse businesses as well as its
main European markets clearly show some stabilization… but too early to declare a beginning of recovery
ABB won a $540m order in Brazil for world’s longest power transmission link
ROCHE said EU commission agreed to extended approval of Avastin in advanced (metastatic) breast cancer
SANTANDER is planning to hold an IPO of up to 20% of its Brazil unit within the next 3 months
DSM to sell DSM energy to TAQA / Expects book pft of €275m from the sale
RHODIA : Q2 recurring Ebitda €111m (€89m exp) / Net loss €40m (-47m exp) / Sees sequential improvement in Q3 demand / Remains focus on FCF generation / Q4 demands remains uncertain
EDF ENERGIES NOUVELLES : H1 revenue €413.8m (€391m exp) / EBITDA €140.2m (€131m exp) / Confirms 2009 targets
ATOS : H1 revenue $2.59bn, in line / Confirmed 2009 guidance with positive FCF + higher operating margin
M6 : H1 revenue €378.3m (373.6m exp) / Advertising revenue at core channel down 14.1% / Operating €107.5m (102m exp)
NEGATIVE IMPACTS
PEUGEOT : H1 sales €23.5bn (24.1bn exp) / Operating loss €1.33bn (-1bn exp) / Generated FCF of €467 m due to sharp inventory cuts / Sees European auto market down around 7% in H2 + recovery of European auto market towards end of 2010
STM : Q2 revenue $1.99 bn (1.89bn exp) / GM 26.1% (28.2% exp) / EPS loss $0.28 ex-items (-0.31 exp) / Sees Q3 gross margin 31% +/- 2% (33% exp) with revenue between $2.07-2.27bn (2.02bn exp) / No big drama but GM still disappointing…
INFINEON : Q3 revenue €845m (831m exp) / Net loss €23m (-46m exp) / Sees revenues to grow in the Q4 compared to the Q3 but
expects depreciation and amortization to exceed the previous forecast level of €500 m…
LEGRAND : H1 sales €1.81bn, in line / Operating €242m (265m exp) / Maintained its FY operating margin objective of 14% / Saw some recent encouraging signs such as a bottoming out in U.S. indicators… Read-across SCHNEIDER
BHP agreed with unnamed customers to take a 33-44% price cut for contracted iron ore shipments, covering 23% of its sales volumes
EDF : French Govt would have decided to raise electricity prices mid-Aug. = +1.9% for households, 4% for small Co & 5% for big Co
HMV Group Chief Executive has become the preferred pick to succeed Michael Grade as the chief of ITV (FT)
CEMEX : Q2 revenue $4.19bn (4.4bn exp) due to lower volumes, mainly from U.S. & Spanish ops + unfavorable forex / Ebitda $812m (837m exp) / Net a touch better thx to smaller losses on financial instruments / FCF could be at risk… / Partial read-across LAFARGE…
STEELMAKERS : India's JSW Steel has cut long steel product prices as a result of sluggish demand (DNA Money)
TRADING IDEAS
BUY VALLOUREC (ahead of results friday) / ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week
BUY NOKIA / GSZ / VIVENDI on reversal head & shoulder
BUY FTE / DTE to play economic recovery + gap above to be close soon
BUY DTE / SELL TEF // BUY PHILIPS / SELL SIEMENS // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA
BUY MARRIOTT / SELL LAS VEGAS SANDS / BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
BBVA RAISED TO BUY FROM HOLD BY S&P
BBVA RAISED TO BUY FROM HOLD BY RBS
BBVA PRICE TARGET RAISED TO 12 FROM 10 BY MORGAN STANLEY
BBVA PRICE TARGET RAISED TO 13 FROM 12 BY NOMURA
HOLCIM RAISED TO BUY FROM HOLD BY UBS
PORTUGAL TELECOM STARTED AT BUY BY ING
NEXANS RAISED TO NEUTRAL FROM SELL BY UBS
HERMES CUT TO UNDERPERFORM FROM NEUTRAL BY CREDIT SUISSE
SSAB CUT TO UNDERWEIGHT FROM NEUTRAL BY JP MORGAN
LEGAL & GENERAL CUT TO SELL BY DEUTSCHE BANK
TUI CFR (COST AND FREIGHT) CUT TO B3 FROM B2 BY MOODY’S
DATA
WTI : 66,7 (-2,59 %)
Eur/$ : 1,4172 (0,03 %)
$ /Yen : 94,25 (0,27 )
10 Yr US : 3,66 ( -2,54 bp)
10 Yr Euro : 3,43 ( -6 bp)
Indices : US close ; Europe close
SOX : 0,20 %;-1,12%
S&P :-0,26 %; -1,09 %
DOW: -0,13%; -0,89 %
NAS :0,39%; -0,78%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -1,05 %; -2,59 %
ENERGY : -1,62 %; -3,05 %
FINANCIAL : -0,31 %; -0,86 %
HEALTHCARE : 0,28 %; -0,01 %
TECHNO : 0,34 %; -1,06 %
TELECOM : 0,04 %; -0,55 %
INDUSTRIAL : -0,29 %; -1,02 %
UTILITIES : -1,46 %; -1,97 %
TO BE COMING
Today
Results :Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend :Stora Enso (€0.20) / GlaxoSmithKline ( GBp 15,55556) / ConocoPhillips ($ 0,47) / Morgan Stanley ($0,05) / Texas Instruments ($0,11)
Events :Unicredit EGM / Eletronic Arts AGM
Thursday
Results : Siemens / L'Oreal sales / Alcatel Lucent / Vallourec / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend : Bank of New York ($0,09)
Events:
Friday
Results : Total / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events : Singapore Airlines AGM
Monday
Results : US car sales / Metro Group / Linde / Anglo American / HSBC / Barlcays
Dividend :Banco Santander (€0,135234) / KPN (€ 0,23) / Xilinx ($0.14)
Events:
Tuesday
Results :BNP Paribas (BMO) / Beiersdorf / UBS / Givaudan / Statoil Hydro / Electronic Arts
Dividend :
Events:
ECONOMIC DATA PREVIEW
Today in the United-States, watch the release of the Durable Goods orders for June due at 13.30 GMT. The consensus expects a downward revision at –0.6 % after two months progression (+1.4 % in April and +1.8 % in May).
Have a look also at the Fed Beige Book Economic Report due at 19.00 GMT.
Also keep an eye on the preliminary Germany’s inflation rate that is expected to fell below 0 at –0.4 % (YOY) in July (from +0.1 % in June) or the lowest level in at least 13 years. / LC
ECONOMY
United States: Consumer confidence fell in July
The Conference Board’s confidence index among the US consumers fell for the second consecutive month in July at 46.6 from 49.3 in July while the consensus expected 49. The Conference Board’s measure of present conditions decreased to 23.4 in July from 25 the last month such as the expectations for the next six months that fell to 62 after 65.5 in June. The consumers are still worried about their jobs as shown by the proportion of consumers that said jobs are plentiful that dropped to 3.6 in July (the lowest level since 1983) after 4.5 in June and the proportion of people that said “jobs are hard to get” that climbed to 48.1 from 44.8 the last month. These figures corroborate unfortunately that unemployment is about to reach the 10 %. Concerning the incomes, 9.5 % of the consumers think that it will increase in the next 6 months from 10.1 % in June.
United States: CaseShiller Home price Index slightly up in May
The US home prices had their first monthly gain for the first time in three years. The S&P/Case-Shiller home price index rose 0.45 % in May at 139.84 from a 0.5 % decline in April or the first monthly gain since July 2006 showing signs of an upturn. But from a year ago the prices fell by 17.06 % in May (while the consensus expected a 17.90 % decline) and after –18.10 % in April.
United States: Richmond Fed Manufacturing Index climbed in July
The Richmond Fed Manufacturing index that is a survey of the manufacturing sector in the region, rose more than forecast at 14 in July after 6 in June and while the consensus expected 8. The index of overall activity was pushed by stronger readings for shipment and new orders.
With no surprise, the first round of the U.S.-China Strategic & Economic Dialogue didn’t bring any information about the dollar (it went below 1.42 EUR/USD yesterday).The United States will take measures to increase national saving as a share of GDP. The U.S. household saving rate has already risen sharply as a result of the crisis, contributing to a significant decline in the U.S. current account deficit, and the United States will adopt policies that will continue to encourage household saving. The United States will also reform its health care system with the aim of controlling rising health care costs for businesses and government while assuring high-quality, affordable health care for all Americans, and is committed to reducing the federal budget deficit relative to GDP to a sustainable level by 2013. China will continue to implement structural and macroeconomic policies to stimulate domestic demand and increase the contribution of consumption to GDP growth. China will further enhance access in its service market and expand areas and channels for non-government investment, with a view to expedite the development of its services industry and increase the share of services in GDP. China will also deepen social safety net reform, including strengthening its basic old-age insurance system and enterprise annuities.
The high inflation of the 1970s was partly the result of monetary policy blunders that will not be repeated, Janet Yellen, San Francisco Fed president, said on Tuesday. Taking questions after a speech to bankers in Coeur D'Alene, Idaho, Yellen termed the 1970s stagflation as a formative experience for her and most of her Federal Open Market Committee colleagues. Timing the reversal of the Fed's highly accommodative monetary policy will be difficult, but moves will likely come even while the employment market is weak, Yellen said. Earlier, Yellen said that full employment in the United States, or a jobless rate near 5 percent, would likely not return for several years
So, inflation or deflation? The recent steps by the Fed to pre-empt deflation have-ironically and unexpectedly- prompted a surge in inflation fearsboth inside the U.S. and abroad, especially in China; Specifically, the Fed’s measures to go beyond the stimulus inherent in a 0 % Fed Funds target rate by purchasing Treasury and Mortgage securities has conjured visions – especially in the eyes of major buyers of Treasury securities, China foremost- of massive money printing to underwrite trillion of dollars of additional government borrowing at low interest rates. As markets have shown, if that were the Fed’s intention-which it decidedly is not - the effort would fail because excessive money printing - creating a money supply larger than the quantity of money demanded-would push up interest rates as inflation expectations rose. The Fed’s commitment to price stability remains firm, although markets have their doubts given the rise, since March, of more than 100 bp in inflation expectations that drove yields on 10-year notes as high as 4.00 % early in June. While that interest-rate level is not extraordinary by historical standards, the pace of the rise and its association with higher expected inflation are striking - especially a 59-year low of -1.3 % in the YoY CPI. As recently as mid-March, when the Fed committed itself to purchase $300bn of Treasury securities, yields on 10-year notes dropped sharply from 3.00 % to 2.50 %. A rise of 150 bps to nearly 4.00 %, with 100 bp of that move attributable to higher inflation expectations, certainly sounds an alarm bell that any central bank would take seriously, especially given the extremely negative consequences for the struggling housing sector as mortgage rates rise. Even more significant is the implied loss of confidence in the Fed’s commitment to price stability. The actual risks in the U.S. still tilt more toward deflation than inflation. For now there are three main bulwarks against a rise in U.S. inflation: 1) depressed demand growth worldwide, especially in the U.S., tied to persistent deleveraging by American consumers and banks 2) large and rising excess capacity tied to that sharply lower demand (especially in the traded-goods sector); and 3) finally, and most important, the Fed unshaken and unconditional commitment to price stability. The Fed’s problems and the concerns of holders of Treasury securities would be substantially reduced if the Obama administration showed some signs of concern about the rapid increase in U.S. budget deficit that, in turn, fuels concern about the Fed’s need to accelerate money printing. It would be far better not to force the Fed into a position in which it would have to demonstrate its commitment to price stability by engineering a sharp increase in real interest rates to contain rising inflationary expectations from the federal government’s extravagant debt issuance.
Major indexes wavered within a narrow range as mixed housing and confidence data provided little direction. The S&P/Case-Shiller home price index for May showed a mild improvement from the previous month, rising 0.5%, with 13 of 20 major metro markets showing gains. Prices declined 0.6% in April, indicating the rate of housing price declines is slowing. Consumer confidence data for July dropped to 46.6, down from 49.3 in June, according to the Conference Board. The drop was worse than expected, based on forecasts that showed a decline to 49.0. 2-year Treasuries reversed lower after Tuesday's record auction received weaker demand than the government received last month, bucking gains along much of the yield curve. The U.S. Treasury Department sold $42 billion in 2-year notes to demand that paled with the prior month's auction. The Treasury awarded the notes at 1.08%, down from last month's 1.151%. The bid-to-cover ratio -- which measures bids received to bids tendered -- fell to 2.75 from 3.19 last month
ECONOMIC DATA WITH IMPACT
US durable goods orders for June (13.30 BST), with headline data expected ‑0.6 % MoM and core data 0.0 % vs. +1.8 % (-24.9 % YoY) and +1.1 % in May. But the GM bankruptcy poses a downside risk as the closure of some assembly plants may have hit orders for motor vehicle parts. / (major)
The Beige Book (19.00 BST) should confirm that the pace of economic contraction is slowing and that conditions in financial markets have generally improved in recent months. / (major)
U.K. household borrowing that should show a rise in mortgage approvals (50.0k vs. 43.4k) and a stability in consumer credit in June (09.30 BST).
POSITIVE IMPACTS
AKZO NOBEL : Q2 revenue €3.67bn (3.54bn exp) / Ebit €370m (267m exp) / Outlook and medium-term targets reiterated
BAYER : Q2 sales of €8.01bn (7.95bn exp) / Ebitda €1.71bn (1.61bn exp) / Sees FY sales at €31-32 bn, in line + stuck with outlook of 5% decline in 2009 adj EBITDA / Said downturn is bottoming out, but no sustained improvement in sight …
ARCELORMITTAL : Q2 sales $15.17bn (14.9bn e) / Ebitda $1.2bn (1.17bn e) / Net -$800m (-300m e) due to $1.2bn one-offs / Sees Q3 EBITDA $1.4-1.8 bn (1.9bn e) / Said recovery will remain slow & progressive with selling prices stable or slightly lower in Q3
SANOFI : Q2 sales €7.44bn (7.22bn exp ) / Net income €2.27 Bn (2.06bn exp) / Raises growth forecast to 10% from at least 7% / Targets €2Bn recurring cost saving by 2013
SAP : Q2 sales €2.58bn (2.64bn exp) / EBIT €647m (620m exp) / Improved visibility in H2 / Raises outlook for FY op. margin
BG GROUP : Q2 revenue £3.22bn (3.09bn exp) / Operating £1.26bn (1.1bn exp) / But said 2009 production target of 680K boepd is expected to be achieved over 12 months to 31March 2010, 3 months later than expected…
RANDSTAD : Q2 revenue €2.99bn (3.03bn exp) / Ebita €67m (63m exp) / Said that the US staffing & inhouse businesses as well as its
main European markets clearly show some stabilization… but too early to declare a beginning of recovery
ABB won a $540m order in Brazil for world’s longest power transmission link
ROCHE said EU commission agreed to extended approval of Avastin in advanced (metastatic) breast cancer
SANTANDER is planning to hold an IPO of up to 20% of its Brazil unit within the next 3 months
DSM to sell DSM energy to TAQA / Expects book pft of €275m from the sale
RHODIA : Q2 recurring Ebitda €111m (€89m exp) / Net loss €40m (-47m exp) / Sees sequential improvement in Q3 demand / Remains focus on FCF generation / Q4 demands remains uncertain
EDF ENERGIES NOUVELLES : H1 revenue €413.8m (€391m exp) / EBITDA €140.2m (€131m exp) / Confirms 2009 targets
ATOS : H1 revenue $2.59bn, in line / Confirmed 2009 guidance with positive FCF + higher operating margin
M6 : H1 revenue €378.3m (373.6m exp) / Advertising revenue at core channel down 14.1% / Operating €107.5m (102m exp)
NEGATIVE IMPACTS
PEUGEOT : H1 sales €23.5bn (24.1bn exp) / Operating loss €1.33bn (-1bn exp) / Generated FCF of €467 m due to sharp inventory cuts / Sees European auto market down around 7% in H2 + recovery of European auto market towards end of 2010
STM : Q2 revenue $1.99 bn (1.89bn exp) / GM 26.1% (28.2% exp) / EPS loss $0.28 ex-items (-0.31 exp) / Sees Q3 gross margin 31% +/- 2% (33% exp) with revenue between $2.07-2.27bn (2.02bn exp) / No big drama but GM still disappointing…
INFINEON : Q3 revenue €845m (831m exp) / Net loss €23m (-46m exp) / Sees revenues to grow in the Q4 compared to the Q3 but
expects depreciation and amortization to exceed the previous forecast level of €500 m…
LEGRAND : H1 sales €1.81bn, in line / Operating €242m (265m exp) / Maintained its FY operating margin objective of 14% / Saw some recent encouraging signs such as a bottoming out in U.S. indicators… Read-across SCHNEIDER
BHP agreed with unnamed customers to take a 33-44% price cut for contracted iron ore shipments, covering 23% of its sales volumes
EDF : French Govt would have decided to raise electricity prices mid-Aug. = +1.9% for households, 4% for small Co & 5% for big Co
HMV Group Chief Executive has become the preferred pick to succeed Michael Grade as the chief of ITV (FT)
CEMEX : Q2 revenue $4.19bn (4.4bn exp) due to lower volumes, mainly from U.S. & Spanish ops + unfavorable forex / Ebitda $812m (837m exp) / Net a touch better thx to smaller losses on financial instruments / FCF could be at risk… / Partial read-across LAFARGE…
STEELMAKERS : India's JSW Steel has cut long steel product prices as a result of sluggish demand (DNA Money)
TRADING IDEAS
BUY VALLOUREC (ahead of results friday) / ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week
BUY NOKIA / GSZ / VIVENDI on reversal head & shoulder
BUY FTE / DTE to play economic recovery + gap above to be close soon
BUY DTE / SELL TEF // BUY PHILIPS / SELL SIEMENS // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA
BUY MARRIOTT / SELL LAS VEGAS SANDS / BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
BBVA RAISED TO BUY FROM HOLD BY S&P
BBVA RAISED TO BUY FROM HOLD BY RBS
BBVA PRICE TARGET RAISED TO 12 FROM 10 BY MORGAN STANLEY
BBVA PRICE TARGET RAISED TO 13 FROM 12 BY NOMURA
HOLCIM RAISED TO BUY FROM HOLD BY UBS
PORTUGAL TELECOM STARTED AT BUY BY ING
NEXANS RAISED TO NEUTRAL FROM SELL BY UBS
HERMES CUT TO UNDERPERFORM FROM NEUTRAL BY CREDIT SUISSE
SSAB CUT TO UNDERWEIGHT FROM NEUTRAL BY JP MORGAN
LEGAL & GENERAL CUT TO SELL BY DEUTSCHE BANK
TUI CFR (COST AND FREIGHT) CUT TO B3 FROM B2 BY MOODY’S
DATA
WTI : 66,7 (-2,59 %)
Eur/$ : 1,4172 (0,03 %)
$ /Yen : 94,25 (0,27 )
10 Yr US : 3,66 ( -2,54 bp)
10 Yr Euro : 3,43 ( -6 bp)
Indices : US close ; Europe close
SOX : 0,20 %;-1,12%
S&P :-0,26 %; -1,09 %
DOW: -0,13%; -0,89 %
NAS :0,39%; -0,78%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -1,05 %; -2,59 %
ENERGY : -1,62 %; -3,05 %
FINANCIAL : -0,31 %; -0,86 %
HEALTHCARE : 0,28 %; -0,01 %
TECHNO : 0,34 %; -1,06 %
TELECOM : 0,04 %; -0,55 %
INDUSTRIAL : -0,29 %; -1,02 %
UTILITIES : -1,46 %; -1,97 %
TO BE COMING
Today
Results :Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend :Stora Enso (€0.20) / GlaxoSmithKline ( GBp 15,55556) / ConocoPhillips ($ 0,47) / Morgan Stanley ($0,05) / Texas Instruments ($0,11)
Events :Unicredit EGM / Eletronic Arts AGM
Thursday
Results : Siemens / L'Oreal sales / Alcatel Lucent / Vallourec / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend : Bank of New York ($0,09)
Events:
Friday
Results : Total / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events : Singapore Airlines AGM
Monday
Results : US car sales / Metro Group / Linde / Anglo American / HSBC / Barlcays
Dividend :Banco Santander (€0,135234) / KPN (€ 0,23) / Xilinx ($0.14)
Events:
Tuesday
Results :BNP Paribas (BMO) / Beiersdorf / UBS / Givaudan / Statoil Hydro / Electronic Arts
Dividend :
Events:
ECONOMIC DATA PREVIEW
Today in the United-States, watch the release of the Durable Goods orders for June due at 13.30 GMT. The consensus expects a downward revision at –0.6 % after two months progression (+1.4 % in April and +1.8 % in May).
Have a look also at the Fed Beige Book Economic Report due at 19.00 GMT.
Also keep an eye on the preliminary Germany’s inflation rate that is expected to fell below 0 at –0.4 % (YOY) in July (from +0.1 % in June) or the lowest level in at least 13 years. / LC
ECONOMY
United States: Consumer confidence fell in July
The Conference Board’s confidence index among the US consumers fell for the second consecutive month in July at 46.6 from 49.3 in July while the consensus expected 49. The Conference Board’s measure of present conditions decreased to 23.4 in July from 25 the last month such as the expectations for the next six months that fell to 62 after 65.5 in June. The consumers are still worried about their jobs as shown by the proportion of consumers that said jobs are plentiful that dropped to 3.6 in July (the lowest level since 1983) after 4.5 in June and the proportion of people that said “jobs are hard to get” that climbed to 48.1 from 44.8 the last month. These figures corroborate unfortunately that unemployment is about to reach the 10 %. Concerning the incomes, 9.5 % of the consumers think that it will increase in the next 6 months from 10.1 % in June.
United States: CaseShiller Home price Index slightly up in May
The US home prices had their first monthly gain for the first time in three years. The S&P/Case-Shiller home price index rose 0.45 % in May at 139.84 from a 0.5 % decline in April or the first monthly gain since July 2006 showing signs of an upturn. But from a year ago the prices fell by 17.06 % in May (while the consensus expected a 17.90 % decline) and after –18.10 % in April.
United States: Richmond Fed Manufacturing Index climbed in July
The Richmond Fed Manufacturing index that is a survey of the manufacturing sector in the region, rose more than forecast at 14 in July after 6 in June and while the consensus expected 8. The index of overall activity was pushed by stronger readings for shipment and new orders.
Tuesday, July 28, 2009
Chinatown
GLOBAL EQUITIES RESEARCH
The new U.S.-China Strategic and Economic Dialogue that started yesterday is held in Washington till tonight, hosted by Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton. Closing Statements are released today (21.45 BST). The S&ED will focus on addressing the challenges and opportunities that both countries face on a wide range of bilateral, regional and global areas of immediate and long-term strategic and economic interests. This first meeting of the Dialogue will also set the stage for intensive, ongoing and future bilateral cooperative mechanisms. But, in the past, for two years, Henry Paulson focused on the twin phantoms of exchange-rate targets and trade imbalances. Congress embarked on a spree of protectionist rhetoric and China bashing. In return, Beijing did little to further liberalize its markets to foreign trade or address its corruption-ridden banking system. The main interest on the economic side will probably be whether the U.S. can coax China into an expression of support for the dollar. In broad terms, the two sides agree on a great deal, including the importance of reducing currency volatility, and the need to consolidate public finances while promoting a sustainable return to growth-diplomatic code for more wrangling over meaningless trade statistics. The two sides can also point to China’s continued purchases of dollars as evidence that it still supports the status quo, for now at least. This prompts the question of why Chinese officials have made a point of airing their concerns about the dollar. There may be three reasons. First, as a creditor, China has an interest in ensuring that the US is not tempted to inflate its way out of debt. By hinting that the dollar’s role is not inviolable, China is giving warning to the US that its concerns should be considered. Second, China’s officials see the issue as a useful way of pushing back against the criticism China is used to facing over its currency policy and other forms of export support. Third, and perhaps most importantly, the debate helps China’s government to recast debate over its foreign exchange reserves in terms of the dollar’s global role. In doing so, China’s government deflects attention from its responsibility in channelling a large share of China’s income into foreign assets and for any subsequent losses. Global markets may be listening closely, but Chinese criticism of the dollar is mainly directed towards audiences at home.
The 11% jump in U.S. new home sales to a seven-month high of 384k annualised in June, from 346k, is yet another sign that housing activity has bottomed out. New home sales have now been rising for three months in a row and the recent improvement in the NAHB homebuilders’ survey suggests that sales might even reach the 400k mark soon. To put that in perspective, however, even 400k would be less that a third of what sales were at the height of the boom in late 2005. Nevertheless, the rise in sales coupled with the continued decline in the number of homes on the market is now beginning to have a more pronounced impact on excess supply. The months supply of unsold homes fell to a 20-month low of 8.8 in June, from 10.2. Unfortunately, until that figure gets down to around 6 months worth of supply, the downward pressure on prices will remain. The median price of a new home fell by 12% over the year to June. In short, activity is stabilising, albeit at very low levels, but prices will continue to fall for the foreseeable future (watch for S&P / CS home price index released today at 14.00 BST).
June’s euro-zone money data showed that annual M3 growth continued its recent downward trend, slowing from 3.7% to 3.5%. The annual growth of private sector lending eased too, from 1.8% to 1.5% - a new record low. Lending to firms once again slowed particularly sharply. Admittedly, it is no surprise that bank lending is sluggish during a recession, as demand for loans will also have been weak. The slowdown in lending to firms will partly reflect the revival of alternative sources of finance as corporate paper markets get moving again. Finally, late June’s €442bn 12-month refinancing operation by the ECB will not have had time to feed through to the figures. Nonetheless, with the region’s banks likely to announce more write-downs on their toxic assets, loan defaults set to rise further and lending criteria still tightening in response to the economic slump, and surveys showing loan demand remaining weak, we still expect lending growth to continue to slow over the coming months.
Yesterday, the biggest jump in U.S. new-home sales in 8 years fostered the best DJIA’s 2-week rally since 2000. Homebuilders surged (Centex +9.1 %, Beazer Homes +13.9 %) pushing the S&P 500 homebuilders index (S5HOME) 40 % up since the rally began on July 10th. Targets are 1007 for the S&P 500 index and 2755 for the Eurostoxx 50.
Treasuries fell (10-year rate at 3.73 %, +5 bps) as the Treasury began selling a record $115bn in notes. $6bn in 20-year TIPS were auctioned at a rate of 2.387 %, higher than forecast. The Treasury will sell 2-, 5- and 7-year notes till Thursday (see yesterday’s daily mail for details).
Oil rose to $68.38 /bbl (+1.83$) while the dollar retreated to 1.4262 EUR/USD (vs. 1.4241 yesterday morning) and gold eased to $954.25 /oz (vs. 954.91).
Asian stocks were slightly up this morning (06.40 BST), with Japanese markets quite flat, and U.S. index futures were slightly down (DJIA -0.08 %, S&P 500 -0.143 %, Nasdaq 100 -0.141 %)..
ECONOMIC DATA WITH IMPACT
US S&P / CaseShiller home price index and the S&P / CaseShiller composite-20 for May (14.00 BST). The latter is expected at -17.90 % vs -18.12 % YoY, but the excess supply of unsold homes on the market is likely to continue putting downward pressure on prices for some time to come. /(major)
US consumer confidence index (15.00 BST) should show a small rebound in July, with gasoline prices now falling back, stock markets rallying and initial jobless claims beginning to ease (49.7 expected vs. 49.3). /(major)
The Richmond Fed Manufacturing Index (15.00 BST) is expected to rise from 6 to 8 in July. /(minor)
No major data released In the euro-zone.
POSITIVE IMPACTS
LVMH : H1 revenue €7.81bn, in line / Operating €1.36bn (1.34bn exp) / Indications of a slowdown in organic growth at the fashion & leather goods division over the period… However, approaches the H2 with confidence / Conf call 1400 UKT
BBVA : Q2 NII €3.59bn (3.32bn exp) / Net €1.56bn (1.3bn exp) / Bad loan ratio 3.2% end of June vs 2.8% end-March / Tier1 = 6.9%
BP : Q2 replacement cost profit $3.14bn (2.79bn exp) / Production 4.005m boep (3.948m exp) / Quarterly dividend, to be paid in September, is 14 cents per share ($0.84 per ADS) / Capex exp. to be less than $20 bn for the year / Refining outlook challenging
CONTINENTAL’s banks are pushing for a speedy capital increase of €1bn & want a separation from Schaeffler in the mid-term (FAZ)
VOLKSWAGEN plans to increase its capital mostly by issuing new preference shares, so as not to dilute the stakes of major shareholders (Handelsblatt)
SWEDBANK - ENSKILDA : The IMF & Latvia reached an agreement on policy measures which will help free up IMF funding alongside another €1.2 bn handout from the European Union / Both banks have the greatest exposure to the Baltics
SUBSEA : Q2 revenue $637m (562m exp) / Operating $118m (80m exp) / Order backlog $2.9bn (2.55bn exp)
SAGE : Trading in line with views / Robust balance sheet + strong FCF + net debt at June 30 fell to £491m (March 31: £558 m)
XSTRATA H1 production report : Thermal coal + 18% / Zinc in concentrate +30% / Ferrochrome -60% / Coal prod. volumes +11% / Total mined copper + 1% / Total mined nickel production +7%
PERNOD RICARD sold its Tia Maria coffee liqueur brand for €125 m in cash to Italy's Illva Saronno, bringing it closer to its €1bn disposal goal to help cut debt
GDF SUEZ : Russian PM Vladimir Putin will meet executives of GDF Suez Today to discuss joint projects…
REPSOL could be awarded E&P rights in Venezuela as it is part of a delegation accompanying Spain's foreign minister on an official visit
ACS's arm Cobra is part of a commercial delegation in Venezuela & could secure part of a €1.8 bn contract to develop Caracas metro
AMGEN : Q2 revenue $3.71bn (3.58bn exp) / EPS $1.29 (1.16 exp) / Sees FY EPS $4.80-4.95 (4.57 exp) + said FY revenue are trending toward the upper end of the current guidance of $14.4-14.8bn (14.33bn exp)
NEGATIVE IMPACTS
AHOLD : Q2 sales €6.4bn (6.56bn exp) / Stop&shop/Giant-landover sales $4.1 bn ($4.14 bn exp) / Giant-Carlisle sales $1.1 bn ($1.15bn e) / Albert Heijn sales €2.2 bn (€2.31bn e) / Continued to see changing customer with “inflation slowing considerably”
EADS : Q2 revenue €11.73 bn (10.74bn exp) / EBIT €656m (691.5m exp) on a new charge of €71 m on A400M / Sees Airbus’ goals challenging… but confirmed 2009 outlook + said revenue should be around previous year's level / Raised its FCF guidance
DBK : Q2 rev. €7.94bn (7.1bn e) / PTP €1.32bn (1.47bn e) / NII €2.76bn (3.35 bn e) / Com. 2.24bn, in line / Trading €2.6bn (1.76bn e) Risk provision €1bn (659m e) / Cost 5.62bn (4.90bn e) / Tier 1 = 11% / No outlook for 09 / Plans capital market issuance of €16bn
TRADING IDEAS
BUY ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week
BUY NOKIA / GSZ / VIVENDI on reversal head & shoulder
BUY FTE / DTE to play economic recovery + gap above to be close soon
BUY PHILIPS / SELL SIEMENS // BUY PEUGEOT / SELL RENAULT // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA
BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
TOTAL STARTED AT BUY BY UNICREDIT
SANOFI-AVENTIS RAISED TO OVERWEIGHT BY MORGAN STANLEY
PPR RAISED TO OVERWEIGHT FROM EQUAL BY MORGAN STANLEY
TOMTOM RAISED TO BUY FROM NEUTRAL BY UBS
DEUTSCHE POST RAISED TO BUY FROM NEUTRAL BY BANK OF AMERICA
ERICSSON CUT T SELL FROM BEUTRAL BY UBS
BANCO POPULAR CUT TO UNDERPERFORM BY BANK OF AMERICA
NORDEA CUT TO UNDERWEIGHT FROM NEUTRAL BY JP MORGAN
YARA CUT TO UNDERWEIGHT FROM EQUAL BY MORGAN STANLEY
DATA
WTI : 68,5 (-0,50 %)
Eur/$ : 1,4258 (0,18 %)
$ /Yen : 95,05 (-0,04 )
10 Yr US : 3,73 ( 1,2 bp)
10 Yr Euro : 3,49 ( 1 bp)
Indices : US close ; Europe close
SOX : 0,59 %;-0,41%
S&P :0,30 %; -0,09 %
DOW: 0,17%; -0,14 %
NAS :0,10%; -0,24%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,39 %; 0,68 %
ENERGY : 0,21 %; -0,15 %
FINANCIAL : 1,50 %; 1,31 %
HEALTHCARE : 0,07 %; -0,39 %
TECHNO : -0,30 %; -0,65 %
TELECOM : 0,22 %; -0,50 %
INDUSTRIAL : 0,50 %; 0,05 %
UTILITIES : -0,06 %; -0,41 %
TO BE COMING
Today
Results :Ahold (BMO) / Alleanza Assicurazioni / BBVA (BMO) / Banco Espirito Santo (BMO) / BP (BMO) / Bureau Veritas (AMC) / Deutesche Bank (BMO) / EADS / Endesa (BMO) / ST Micro (After US close) / Verbund /
Dividend :
Events :
Wednesday
Results : Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend : Stora Enso (€0.20)
Events: Unicredit EGM / Eletronic Arts AGM
Thursday
Results : Siemens / L'Oreal sales / Alcatel Lucent / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend :
Events :
Friday
Results : Total / Vallourec / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events: Singapore Airlines AGM
Monday
Results :US car sales / Linde / Anglo American / HSBC
Dividend : Banco Santander (€0,135234)
Events:
ECONOMIC DATA PREVIEW
Watch in the United-States the Conference Board consumer confidence for July due at 15.00 GMT. After dropping by 10% in June the Conference Board consumer confidence is expected to remained stable in July led by the drop of prices and by the effects of the Obama stimulus plan./JB
ECONOMY
United States: New home sales rise for a third consecutive month in June
New home sales rose for a third consecutive month from 346 000 in May to 384 000 (forecast 352 000) in June or 11%. Sales of new one-family house reached their highest level since November 2008 and rose the most in eight years. This increase was mainly led by falling prices and drop in mortgage rates add to the Obama stimulus plan effects. Following the recent improvement of the housing starts, building permits, NAHB index or existing home sales, the rise of new home sales is another concrete sign that housing activity has reach a ground floor. Nevertheless it is important to follow closely the employment market as a rise of unemployment could slow down the housing market positive trend.
The new U.S.-China Strategic and Economic Dialogue that started yesterday is held in Washington till tonight, hosted by Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton. Closing Statements are released today (21.45 BST). The S&ED will focus on addressing the challenges and opportunities that both countries face on a wide range of bilateral, regional and global areas of immediate and long-term strategic and economic interests. This first meeting of the Dialogue will also set the stage for intensive, ongoing and future bilateral cooperative mechanisms. But, in the past, for two years, Henry Paulson focused on the twin phantoms of exchange-rate targets and trade imbalances. Congress embarked on a spree of protectionist rhetoric and China bashing. In return, Beijing did little to further liberalize its markets to foreign trade or address its corruption-ridden banking system. The main interest on the economic side will probably be whether the U.S. can coax China into an expression of support for the dollar. In broad terms, the two sides agree on a great deal, including the importance of reducing currency volatility, and the need to consolidate public finances while promoting a sustainable return to growth-diplomatic code for more wrangling over meaningless trade statistics. The two sides can also point to China’s continued purchases of dollars as evidence that it still supports the status quo, for now at least. This prompts the question of why Chinese officials have made a point of airing their concerns about the dollar. There may be three reasons. First, as a creditor, China has an interest in ensuring that the US is not tempted to inflate its way out of debt. By hinting that the dollar’s role is not inviolable, China is giving warning to the US that its concerns should be considered. Second, China’s officials see the issue as a useful way of pushing back against the criticism China is used to facing over its currency policy and other forms of export support. Third, and perhaps most importantly, the debate helps China’s government to recast debate over its foreign exchange reserves in terms of the dollar’s global role. In doing so, China’s government deflects attention from its responsibility in channelling a large share of China’s income into foreign assets and for any subsequent losses. Global markets may be listening closely, but Chinese criticism of the dollar is mainly directed towards audiences at home.
The 11% jump in U.S. new home sales to a seven-month high of 384k annualised in June, from 346k, is yet another sign that housing activity has bottomed out. New home sales have now been rising for three months in a row and the recent improvement in the NAHB homebuilders’ survey suggests that sales might even reach the 400k mark soon. To put that in perspective, however, even 400k would be less that a third of what sales were at the height of the boom in late 2005. Nevertheless, the rise in sales coupled with the continued decline in the number of homes on the market is now beginning to have a more pronounced impact on excess supply. The months supply of unsold homes fell to a 20-month low of 8.8 in June, from 10.2. Unfortunately, until that figure gets down to around 6 months worth of supply, the downward pressure on prices will remain. The median price of a new home fell by 12% over the year to June. In short, activity is stabilising, albeit at very low levels, but prices will continue to fall for the foreseeable future (watch for S&P / CS home price index released today at 14.00 BST).
June’s euro-zone money data showed that annual M3 growth continued its recent downward trend, slowing from 3.7% to 3.5%. The annual growth of private sector lending eased too, from 1.8% to 1.5% - a new record low. Lending to firms once again slowed particularly sharply. Admittedly, it is no surprise that bank lending is sluggish during a recession, as demand for loans will also have been weak. The slowdown in lending to firms will partly reflect the revival of alternative sources of finance as corporate paper markets get moving again. Finally, late June’s €442bn 12-month refinancing operation by the ECB will not have had time to feed through to the figures. Nonetheless, with the region’s banks likely to announce more write-downs on their toxic assets, loan defaults set to rise further and lending criteria still tightening in response to the economic slump, and surveys showing loan demand remaining weak, we still expect lending growth to continue to slow over the coming months.
Yesterday, the biggest jump in U.S. new-home sales in 8 years fostered the best DJIA’s 2-week rally since 2000. Homebuilders surged (Centex +9.1 %, Beazer Homes +13.9 %) pushing the S&P 500 homebuilders index (S5HOME) 40 % up since the rally began on July 10th. Targets are 1007 for the S&P 500 index and 2755 for the Eurostoxx 50.
Treasuries fell (10-year rate at 3.73 %, +5 bps) as the Treasury began selling a record $115bn in notes. $6bn in 20-year TIPS were auctioned at a rate of 2.387 %, higher than forecast. The Treasury will sell 2-, 5- and 7-year notes till Thursday (see yesterday’s daily mail for details).
Oil rose to $68.38 /bbl (+1.83$) while the dollar retreated to 1.4262 EUR/USD (vs. 1.4241 yesterday morning) and gold eased to $954.25 /oz (vs. 954.91).
Asian stocks were slightly up this morning (06.40 BST), with Japanese markets quite flat, and U.S. index futures were slightly down (DJIA -0.08 %, S&P 500 -0.143 %, Nasdaq 100 -0.141 %)..
ECONOMIC DATA WITH IMPACT
US S&P / CaseShiller home price index and the S&P / CaseShiller composite-20 for May (14.00 BST). The latter is expected at -17.90 % vs -18.12 % YoY, but the excess supply of unsold homes on the market is likely to continue putting downward pressure on prices for some time to come. /(major)
US consumer confidence index (15.00 BST) should show a small rebound in July, with gasoline prices now falling back, stock markets rallying and initial jobless claims beginning to ease (49.7 expected vs. 49.3). /(major)
The Richmond Fed Manufacturing Index (15.00 BST) is expected to rise from 6 to 8 in July. /(minor)
No major data released In the euro-zone.
POSITIVE IMPACTS
LVMH : H1 revenue €7.81bn, in line / Operating €1.36bn (1.34bn exp) / Indications of a slowdown in organic growth at the fashion & leather goods division over the period… However, approaches the H2 with confidence / Conf call 1400 UKT
BBVA : Q2 NII €3.59bn (3.32bn exp) / Net €1.56bn (1.3bn exp) / Bad loan ratio 3.2% end of June vs 2.8% end-March / Tier1 = 6.9%
BP : Q2 replacement cost profit $3.14bn (2.79bn exp) / Production 4.005m boep (3.948m exp) / Quarterly dividend, to be paid in September, is 14 cents per share ($0.84 per ADS) / Capex exp. to be less than $20 bn for the year / Refining outlook challenging
CONTINENTAL’s banks are pushing for a speedy capital increase of €1bn & want a separation from Schaeffler in the mid-term (FAZ)
VOLKSWAGEN plans to increase its capital mostly by issuing new preference shares, so as not to dilute the stakes of major shareholders (Handelsblatt)
SWEDBANK - ENSKILDA : The IMF & Latvia reached an agreement on policy measures which will help free up IMF funding alongside another €1.2 bn handout from the European Union / Both banks have the greatest exposure to the Baltics
SUBSEA : Q2 revenue $637m (562m exp) / Operating $118m (80m exp) / Order backlog $2.9bn (2.55bn exp)
SAGE : Trading in line with views / Robust balance sheet + strong FCF + net debt at June 30 fell to £491m (March 31: £558 m)
XSTRATA H1 production report : Thermal coal + 18% / Zinc in concentrate +30% / Ferrochrome -60% / Coal prod. volumes +11% / Total mined copper + 1% / Total mined nickel production +7%
PERNOD RICARD sold its Tia Maria coffee liqueur brand for €125 m in cash to Italy's Illva Saronno, bringing it closer to its €1bn disposal goal to help cut debt
GDF SUEZ : Russian PM Vladimir Putin will meet executives of GDF Suez Today to discuss joint projects…
REPSOL could be awarded E&P rights in Venezuela as it is part of a delegation accompanying Spain's foreign minister on an official visit
ACS's arm Cobra is part of a commercial delegation in Venezuela & could secure part of a €1.8 bn contract to develop Caracas metro
AMGEN : Q2 revenue $3.71bn (3.58bn exp) / EPS $1.29 (1.16 exp) / Sees FY EPS $4.80-4.95 (4.57 exp) + said FY revenue are trending toward the upper end of the current guidance of $14.4-14.8bn (14.33bn exp)
NEGATIVE IMPACTS
AHOLD : Q2 sales €6.4bn (6.56bn exp) / Stop&shop/Giant-landover sales $4.1 bn ($4.14 bn exp) / Giant-Carlisle sales $1.1 bn ($1.15bn e) / Albert Heijn sales €2.2 bn (€2.31bn e) / Continued to see changing customer with “inflation slowing considerably”
EADS : Q2 revenue €11.73 bn (10.74bn exp) / EBIT €656m (691.5m exp) on a new charge of €71 m on A400M / Sees Airbus’ goals challenging… but confirmed 2009 outlook + said revenue should be around previous year's level / Raised its FCF guidance
DBK : Q2 rev. €7.94bn (7.1bn e) / PTP €1.32bn (1.47bn e) / NII €2.76bn (3.35 bn e) / Com. 2.24bn, in line / Trading €2.6bn (1.76bn e) Risk provision €1bn (659m e) / Cost 5.62bn (4.90bn e) / Tier 1 = 11% / No outlook for 09 / Plans capital market issuance of €16bn
TRADING IDEAS
BUY ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week
BUY NOKIA / GSZ / VIVENDI on reversal head & shoulder
BUY FTE / DTE to play economic recovery + gap above to be close soon
BUY PHILIPS / SELL SIEMENS // BUY PEUGEOT / SELL RENAULT // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA
BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
TOTAL STARTED AT BUY BY UNICREDIT
SANOFI-AVENTIS RAISED TO OVERWEIGHT BY MORGAN STANLEY
PPR RAISED TO OVERWEIGHT FROM EQUAL BY MORGAN STANLEY
TOMTOM RAISED TO BUY FROM NEUTRAL BY UBS
DEUTSCHE POST RAISED TO BUY FROM NEUTRAL BY BANK OF AMERICA
ERICSSON CUT T SELL FROM BEUTRAL BY UBS
BANCO POPULAR CUT TO UNDERPERFORM BY BANK OF AMERICA
NORDEA CUT TO UNDERWEIGHT FROM NEUTRAL BY JP MORGAN
YARA CUT TO UNDERWEIGHT FROM EQUAL BY MORGAN STANLEY
DATA
WTI : 68,5 (-0,50 %)
Eur/$ : 1,4258 (0,18 %)
$ /Yen : 95,05 (-0,04 )
10 Yr US : 3,73 ( 1,2 bp)
10 Yr Euro : 3,49 ( 1 bp)
Indices : US close ; Europe close
SOX : 0,59 %;-0,41%
S&P :0,30 %; -0,09 %
DOW: 0,17%; -0,14 %
NAS :0,10%; -0,24%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,39 %; 0,68 %
ENERGY : 0,21 %; -0,15 %
FINANCIAL : 1,50 %; 1,31 %
HEALTHCARE : 0,07 %; -0,39 %
TECHNO : -0,30 %; -0,65 %
TELECOM : 0,22 %; -0,50 %
INDUSTRIAL : 0,50 %; 0,05 %
UTILITIES : -0,06 %; -0,41 %
TO BE COMING
Today
Results :Ahold (BMO) / Alleanza Assicurazioni / BBVA (BMO) / Banco Espirito Santo (BMO) / BP (BMO) / Bureau Veritas (AMC) / Deutesche Bank (BMO) / EADS / Endesa (BMO) / ST Micro (After US close) / Verbund /
Dividend :
Events :
Wednesday
Results : Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend : Stora Enso (€0.20)
Events: Unicredit EGM / Eletronic Arts AGM
Thursday
Results : Siemens / L'Oreal sales / Alcatel Lucent / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend :
Events :
Friday
Results : Total / Vallourec / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events: Singapore Airlines AGM
Monday
Results :US car sales / Linde / Anglo American / HSBC
Dividend : Banco Santander (€0,135234)
Events:
ECONOMIC DATA PREVIEW
Watch in the United-States the Conference Board consumer confidence for July due at 15.00 GMT. After dropping by 10% in June the Conference Board consumer confidence is expected to remained stable in July led by the drop of prices and by the effects of the Obama stimulus plan./JB
ECONOMY
United States: New home sales rise for a third consecutive month in June
New home sales rose for a third consecutive month from 346 000 in May to 384 000 (forecast 352 000) in June or 11%. Sales of new one-family house reached their highest level since November 2008 and rose the most in eight years. This increase was mainly led by falling prices and drop in mortgage rates add to the Obama stimulus plan effects. Following the recent improvement of the housing starts, building permits, NAHB index or existing home sales, the rise of new home sales is another concrete sign that housing activity has reach a ground floor. Nevertheless it is important to follow closely the employment market as a rise of unemployment could slow down the housing market positive trend.
Monday, July 27, 2009
Bond Street
The U.S. bond market is on the forefront this week. The U.S. Treasury prepares to auction a record $155bn in notes this week amid an unprecedented pace of borrowing to stimulate the economy and service deficits. The government more than doubled note and bond offering to $963bn in the first half of 2009 as it tries to end the U.S. economic recession. It may sell another $1.1 trillion by year-end. The budget deficit this year is projected to reach $1.85 trillion, equivalent to 13 % of the nation’s GDP according to the CBO. The CBO expects $1.43 trillion deficit in 2010, $974Mn In 2011 and $633Mn in 2012 (4 % of GDP expected at that time). The government is depending on foreign investors like China, the largest foreign holder of U.S. debt with $801.5bn. It added a net $38bn to its holdings in May. Demand from indirect bidders, whose ranks include foreign central banks, increased to 30.4 % of debt sold through auctions this year, from 21.6 % in 2008. The U.S. Treasury plans to sell $6bn (reopening) in 19 years and 6 months TIPS (Treasury Inflation Protected Securities) today, $42bn in 2-year note tomorrow, $39bn in 5-year note on Wednesday July 29th and $28bn in 7-year on Thursday 30th. Auctions in 3- and 10-notes and 30-year bond will take place in August 11th, 12th and 13th. The previous record for nominal notes was $104bn in 2-, 5-, and 7-year notes sold the week of June 22th. The government and the Fed have spent, lent or pledged more than $12 trillion to snap the steepest recession in five decades and revive credit markets that froze last year.
Emerging-market equity funds drew $2.6bn ($2.1bn bor BRICs) in the week ended July 22nd, boosted by optimism that U.S. demand for exports will recover, according to EPFR. The inflows into emerging-market funds were the most since June 10th. Investors have funneled almost $32bn into emerging-market stock funds this year, helping the MSCI Emerging-Markets Index to a 45 % rally. Rebounding exports and increased household spending helped South Korea’s GDP jump 2.3 % in Q1. That’s the fastest pace in almost six years. The outperformance of China and emerging markets in recent months demonstrates that decoupling survived last year’s episodes. When investors last believed in decoupling back in 2007, there were substantial hot money inflows into China. That has started to resume.
The main data release this week is Friday’s U.S. Q2 GDP number. GDP may have contracted by 1.0% QoQ at an annualized rate in Q2, down from 5.5% in Q1. The biggest drag on GDP growth was undoubtedly business investment, with consumption, residential investment and the inventory rundown all subtracting modestly. In contrast, the monthly international trade figures point to a big positive contribution from net external demand. Looking ahead to Q3, the slower pace of inventory rundown and a strong stimulus-related surge in government spending mean that there is a good chance that GDP will start to expand again. Friday’s release will also incorporate the results of the five-year benchmark revision to the GDP figures. Major methodological changes mean that those revisions could, potentially at least, be very significant.
This morning (05.30 BST) Asian stocks rose for a 10th day. The MSCI Asia pacific Index climbed 1.3 percent to 109.43. Acceleration in China’s economic growth and better-than-expected U.S. earnings have helped drive a 12 % climb in the past 10 days. That’s the longest winning streak since January 2004. Japan’s Nikkei 225 rose 1.8 % to 10,118.27. South Korea’s Kospi Index gained 1.3 % as a central bank index showed the country’s consumer confidence rose to the highest in almost seven years in July.
ECONOMIC DATA WITH IMPACT
US new home sales-June (15.00 BST) that should show a modest rebound (355 k annualized expected, +3.8 % MoM). The recovery in the NAHB homebuilders’ current sales index points to an increase in new home sales in the next few months.
Dallas Fed manufacturing index for July (minor) should also be on the upside (15.30 BST).
Euro-zone M3 money supply data (09.00 BST) for June that will reveal whether the ECB’s record 12-month €442bn refinancing operation to euro-zone banks encouraged them to lend to firms and consumers. M3 may have increased slightly in June, while private sector lending decelerated to around 1.5% on a year earlier – a fresh record low.
POSITIVE IMPACTS
ARCELORMITTAL might form a JV spinoff of its $3bn stainless steel unit (FT) / Posco & Outokumpu would be 2 possible candidates
SUEZ ENVIRONNEMENT could cede a 2% stake it owns in GAS NATURAL in the long term (CEO in Expansion)
ERICSSON said it had won an auction for the wireless assets of Nortel Networks, paying $1.13 bn
BMW & DAIMLER will expand their cooperation in purchasing automotive components (BMW’s board member in WirtschaftsWoche)
COMMERZBANK's revamp of its investment banking operation is proceeding well ahead of schedule (Handelsblatt)
PEARSON : H1 revenue £2.4bn (2.28bn exp) / PTP £62m (53m exp) / Interim div. 12.2P / Trading ahead of expectations
NATIONAL GRID : Current trading in line with expectations / Strong operational and financial performance in 2009/10
JULIUS BAER : H1 revenue SFR1.22Bn (in line) / PTP 391m (368m e) / Tier 1 ratio 16.7% / Private Banking inflows Healthy / Net new private banking asset of SFR4Bn (5.8bn exp) / Expects to cut cost by 10-15%
CREDIT SUISSE : Israeli holding company Koor Industries said it had once again raised its stake in CSGN, to 2.33% from 1.73%
SANOFI said it is taking control of Indian vaccine maker Shantha Biotechnics / Transaction values Shantha Biotechnics at €550 m
TF1 : H1 sales down 16% to €1.13 bn, in line / Kept outlook for 13% fall in consolidated revenues for 2009 / Said that July followed June trends on advertising sales but was "less difficult" than previous months…
THOMSON signed a restructuring agreement with its senior creditors = The plan involves converting €1.29 bn of the senior debt into stock + 2 types of notes, leaving €1.55 bn of debt (-45%), with modified terms + lengthened maturities / The debt reduction will come via a €350 m rights issue + the issue of €639 m of redeemable notes + €300m of notes which will be paid by the end of 2010 / TMS reported H1 revenue -1.9% with net loss of €325m, including a €306m non-cash impairment / Cash position of €511m at June 30.
WOLSELEY : Trading environment remains in line with expectations set out in the May / Trading challenging until at least the end of the calendar year / Has decided to sell the Belgium, slovakian and czech republic businesses
LUFTHANSA : Today is the deadline for Lufthansa to tell the Austrian takeover commission whether it wants to extend its Austrian Airlines takeover deadline beyond July 31
NATIONAL EXPRESS is set to reject the £500 m bid it received last week from Capital Partners & Cosmen family (Sunday Express) / Stagecoach would have appointed DBK to draw up plans for an all-share takeover offer (Sunday Times)
NEGATIVE IMPACTS
VOLKSWAGEN may look at a €4 bn capital increase to secure its planned takeover of Porsche because its management is worried that Porsche's debt, reportedly €14 bn, could hurt its credit rating (FTD) / VW wants to buy half of Porsche soon and the rest in 2011
BARCLAYS’ CEO said thatthe worst of the crisis is still ahead, with the end of the ongoing recession dependent on unemployment, which has yet to peak (Corriere della Sera)
PORSCHE : DBK told the owner families of Porsche a K increase would not be enough to pay for Porsche's obligations (Der Spiegel)
RYANAIR : Q1 PTP €135m (122m exp) / Results distorted by 42% reduction in fuel costs / Sees FY net profit towards lower end of €200 to €300 m range previously guided / Limited visibility beyond next 2 months
TNT : Q2 rev. €2.53bn (2.54bn exp) / Ebit €178m (184m exp) / Interim div. €0.18 / Ups cost-saving targets to €550-600m from €400m
THALES : H1 rev. €5.74 bn, in line / Ebit €68m, after provision of €102 m on A400m (300m exp) / New orders booked in H1 = €5.86 bn
THOMAS COOK : Creditor for Arcandor have hired UBS to review the options for Arcandor’s 53% stake in Thomas Cook / In addition to a possible IPO or a sale, UBS is seeking to renegotiate Thomas Cook's credit / Rewe, previously interested in buying Thomas Cook, is losing interest in such a transaction (WirtschaftsWoche)
UK FACES CREDIT CARD CRISIS ON US SCALE : The IMF has predicted that of the $2,467bn of consumer debt in Europe, much of which comes from the UK, 7% will be lost…
TRADING IDEAS
BUY ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week & BUY AHOLD / BAYER ahead of results this week
BUY NOKIA / GSZ on reversal head & shoulder & VIVENDI / ENEL on island possibility still
BUY FTE / DTE to play economic recovery
BUY PEUGEOT / SELL RENAULT // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA // BUY BAYER / SELL BASF
BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
DEXIA STARTED AT BUY BY UBS
LLOYDS RAISED TO BUY FROM REDUCE BY NOMURA
OMV RAISED TO EQUALWEIGHT FROM UNDER BY MORGAN STANLEY
TOMTOM RAISED TO NEUTRAL FROM UNDERWEIGHT BY JP MORGAN
LONMIN RAISED TO NEUTRAL FROM SELL BY GOLDMAN SACHS
UBI BANCA RAISED TO HOLD FROM SELL BY DEUTSCHE BANK
ASML REMOVED FROM BENELUX TOP PICKS LIST AND CUT TO HOLD FROM BUY BY ING
ASTRAZENECA CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
MONTE PASCHI CUT TO SELL FROM HOLD BY CITIGROUP
INTESA CUT TO HOLD FROM BUY BY CITIGROUP
DANONE CUT DO THOLD FROM BUY BY DEUTSCHE
HEINEKEN CUT TO HOLD FROM BUY BY RBS
INBEV CUT TO HOLD FROM BUY BY RBS
SABMILLER CUT TO SELL FROM HOLD BY RBS
DATA
WTI : 68,8 (2,88 %)
Eur/$ : 1,4240 (0,26 %)
$ /Yen : 94,80 (-0,28 )
10 Yr US : 3,67 ( 1,19 bp)
10 Yr Euro : 3,48 ( 1,8 bp)
Indices : US close ; Europe close
SOX : -1,26 %;-2,98%
S&P :0,30 %; -0,53 %
DOW: 0,26%; -0,30 %
NAS :-0,39%; -1,17%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 1,01 %; -0,28 %
ENERGY : 1,09 %; 0,06 %
FINANCIAL : -0,18 %; -0,89 %
HEALTHCARE : 1,65 %; 0,78 %
TECHNO : -0,73 %; -1,51 %
TELECOM : 0,03 %; -0,46 %
INDUSTRIAL : 0,24 %; -0,77 %
UTILITIES : 1,49 %; 0,33 %
TO BE COMING
Today
Results :Union Fenosa / Honeywell / Banco Popular Espanol / Thales / SSAB (BMO) / Ubisoft / Amgen / Verizon
Dividend :ABB (CHF 0.48) / Swiss Life (CHF 5.00)
Events :
Tuesday
Results : Ahold (BMO) / Alleanza Assicurazioni / BBVA (BMO) / Banco Espirito Santo (BMO) / BP (BMO) / Bureau Veritas (AMC) / Deutesche Bank (BMO) / EADS / Endesa (BMO) / ST Micro (After US close) / Verbund /
Dividend :
Events:
Wednesday
Results : Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend :
Events : Unicredit EGM / Eletronic Arts AGM
Thursday
Results : Siemens / L'Oreal sales / Alcatel Lucent / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend :
Events:
Friday
Results :Total / Vallourec / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events:Singapore Airlines AGM
ECONOMIC DATA PREVIEW
Watch in the United-States the release of the new home sales for June due at 15.00 GMT. New home sales are expected to rise by around 4.0% lead by the rise of household purchase power due to the Obama stimulus plan and to the effects of the drop of interest rates.
Keep an eye in France to the total jobseekers for June due at 17.00 GMT, expected to increase as domestic and foreign demand remained weak forcing companies to cut jobs./JB
ECONOMY
Euro zone: PMI manufacturing and services rise in July
After reaching an historical low at 33.5 in February, the PMI manufacturing, rose for four consecutive months, and rise again in July to reach the level of 46. This index which seems to have reached a low point is progressively recovering getting closer to the level of 50 marking the border between contracting and the expanding activity. Meanwhile, the indicator of the PMI services index also increase for the five consecutive month to reach a level of 45.6. Even if these data are encouraging they remained very fragile as explained below.
Germany: Significant increase of the IFO business climate
After reaching a low point in March at 82.2 the IFO business climate rise for three consecutive months. July revealed a new increase of this index from 85.9 to 87.3. Meanwhile IFO current assessment increase from 82.4 to 84.3 and IFO expectations rise from 89.5 to 90.4. This rise of industrial business sentiment suggest that the worst have passed in Germany after the sharp drop of the GDP at the first quarter (.-3.8%,-6.9% YoY). Nevertheless this improvements remained very fragile. Indeed if the euro and energy prices remained high and if the rise of commodity prices do not end the trend could be reverse.
United Kingdom: Sharp drop of the GDP at the second quarter
The sharp drop of the GDP at the first quarter (-2.4%,-4.9% YoY) did not mean that the UK economy reached a ground floor. Indeed the advanced released of the GDP for the second is particularly bleak (-0.8%,-5.6% YoY) and far worse than the consensus forecast (-0.3%,-5.2% YoY) Mainly based on finances the UK economy remained strongly hit by the effects of the credit crunch and at the opposite of the United-States it will take a long time before the economy recover.
Emerging-market equity funds drew $2.6bn ($2.1bn bor BRICs) in the week ended July 22nd, boosted by optimism that U.S. demand for exports will recover, according to EPFR. The inflows into emerging-market funds were the most since June 10th. Investors have funneled almost $32bn into emerging-market stock funds this year, helping the MSCI Emerging-Markets Index to a 45 % rally. Rebounding exports and increased household spending helped South Korea’s GDP jump 2.3 % in Q1. That’s the fastest pace in almost six years. The outperformance of China and emerging markets in recent months demonstrates that decoupling survived last year’s episodes. When investors last believed in decoupling back in 2007, there were substantial hot money inflows into China. That has started to resume.
The main data release this week is Friday’s U.S. Q2 GDP number. GDP may have contracted by 1.0% QoQ at an annualized rate in Q2, down from 5.5% in Q1. The biggest drag on GDP growth was undoubtedly business investment, with consumption, residential investment and the inventory rundown all subtracting modestly. In contrast, the monthly international trade figures point to a big positive contribution from net external demand. Looking ahead to Q3, the slower pace of inventory rundown and a strong stimulus-related surge in government spending mean that there is a good chance that GDP will start to expand again. Friday’s release will also incorporate the results of the five-year benchmark revision to the GDP figures. Major methodological changes mean that those revisions could, potentially at least, be very significant.
This morning (05.30 BST) Asian stocks rose for a 10th day. The MSCI Asia pacific Index climbed 1.3 percent to 109.43. Acceleration in China’s economic growth and better-than-expected U.S. earnings have helped drive a 12 % climb in the past 10 days. That’s the longest winning streak since January 2004. Japan’s Nikkei 225 rose 1.8 % to 10,118.27. South Korea’s Kospi Index gained 1.3 % as a central bank index showed the country’s consumer confidence rose to the highest in almost seven years in July.
ECONOMIC DATA WITH IMPACT
US new home sales-June (15.00 BST) that should show a modest rebound (355 k annualized expected, +3.8 % MoM). The recovery in the NAHB homebuilders’ current sales index points to an increase in new home sales in the next few months.
Dallas Fed manufacturing index for July (minor) should also be on the upside (15.30 BST).
Euro-zone M3 money supply data (09.00 BST) for June that will reveal whether the ECB’s record 12-month €442bn refinancing operation to euro-zone banks encouraged them to lend to firms and consumers. M3 may have increased slightly in June, while private sector lending decelerated to around 1.5% on a year earlier – a fresh record low.
POSITIVE IMPACTS
ARCELORMITTAL might form a JV spinoff of its $3bn stainless steel unit (FT) / Posco & Outokumpu would be 2 possible candidates
SUEZ ENVIRONNEMENT could cede a 2% stake it owns in GAS NATURAL in the long term (CEO in Expansion)
ERICSSON said it had won an auction for the wireless assets of Nortel Networks, paying $1.13 bn
BMW & DAIMLER will expand their cooperation in purchasing automotive components (BMW’s board member in WirtschaftsWoche)
COMMERZBANK's revamp of its investment banking operation is proceeding well ahead of schedule (Handelsblatt)
PEARSON : H1 revenue £2.4bn (2.28bn exp) / PTP £62m (53m exp) / Interim div. 12.2P / Trading ahead of expectations
NATIONAL GRID : Current trading in line with expectations / Strong operational and financial performance in 2009/10
JULIUS BAER : H1 revenue SFR1.22Bn (in line) / PTP 391m (368m e) / Tier 1 ratio 16.7% / Private Banking inflows Healthy / Net new private banking asset of SFR4Bn (5.8bn exp) / Expects to cut cost by 10-15%
CREDIT SUISSE : Israeli holding company Koor Industries said it had once again raised its stake in CSGN, to 2.33% from 1.73%
SANOFI said it is taking control of Indian vaccine maker Shantha Biotechnics / Transaction values Shantha Biotechnics at €550 m
TF1 : H1 sales down 16% to €1.13 bn, in line / Kept outlook for 13% fall in consolidated revenues for 2009 / Said that July followed June trends on advertising sales but was "less difficult" than previous months…
THOMSON signed a restructuring agreement with its senior creditors = The plan involves converting €1.29 bn of the senior debt into stock + 2 types of notes, leaving €1.55 bn of debt (-45%), with modified terms + lengthened maturities / The debt reduction will come via a €350 m rights issue + the issue of €639 m of redeemable notes + €300m of notes which will be paid by the end of 2010 / TMS reported H1 revenue -1.9% with net loss of €325m, including a €306m non-cash impairment / Cash position of €511m at June 30.
WOLSELEY : Trading environment remains in line with expectations set out in the May / Trading challenging until at least the end of the calendar year / Has decided to sell the Belgium, slovakian and czech republic businesses
LUFTHANSA : Today is the deadline for Lufthansa to tell the Austrian takeover commission whether it wants to extend its Austrian Airlines takeover deadline beyond July 31
NATIONAL EXPRESS is set to reject the £500 m bid it received last week from Capital Partners & Cosmen family (Sunday Express) / Stagecoach would have appointed DBK to draw up plans for an all-share takeover offer (Sunday Times)
NEGATIVE IMPACTS
VOLKSWAGEN may look at a €4 bn capital increase to secure its planned takeover of Porsche because its management is worried that Porsche's debt, reportedly €14 bn, could hurt its credit rating (FTD) / VW wants to buy half of Porsche soon and the rest in 2011
BARCLAYS’ CEO said thatthe worst of the crisis is still ahead, with the end of the ongoing recession dependent on unemployment, which has yet to peak (Corriere della Sera)
PORSCHE : DBK told the owner families of Porsche a K increase would not be enough to pay for Porsche's obligations (Der Spiegel)
RYANAIR : Q1 PTP €135m (122m exp) / Results distorted by 42% reduction in fuel costs / Sees FY net profit towards lower end of €200 to €300 m range previously guided / Limited visibility beyond next 2 months
TNT : Q2 rev. €2.53bn (2.54bn exp) / Ebit €178m (184m exp) / Interim div. €0.18 / Ups cost-saving targets to €550-600m from €400m
THALES : H1 rev. €5.74 bn, in line / Ebit €68m, after provision of €102 m on A400m (300m exp) / New orders booked in H1 = €5.86 bn
THOMAS COOK : Creditor for Arcandor have hired UBS to review the options for Arcandor’s 53% stake in Thomas Cook / In addition to a possible IPO or a sale, UBS is seeking to renegotiate Thomas Cook's credit / Rewe, previously interested in buying Thomas Cook, is losing interest in such a transaction (WirtschaftsWoche)
UK FACES CREDIT CARD CRISIS ON US SCALE : The IMF has predicted that of the $2,467bn of consumer debt in Europe, much of which comes from the UK, 7% will be lost…
TRADING IDEAS
BUY ENI / ROYAL DUTCH / BP / TOTAL to play US energy names reporting this week & BUY AHOLD / BAYER ahead of results this week
BUY NOKIA / GSZ on reversal head & shoulder & VIVENDI / ENEL on island possibility still
BUY FTE / DTE to play economic recovery
BUY PEUGEOT / SELL RENAULT // BUY SAINSBURY / SELL TESCO // BUY AEGON / SELL AXA // BUY BAYER / SELL BASF
BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
DEXIA STARTED AT BUY BY UBS
LLOYDS RAISED TO BUY FROM REDUCE BY NOMURA
OMV RAISED TO EQUALWEIGHT FROM UNDER BY MORGAN STANLEY
TOMTOM RAISED TO NEUTRAL FROM UNDERWEIGHT BY JP MORGAN
LONMIN RAISED TO NEUTRAL FROM SELL BY GOLDMAN SACHS
UBI BANCA RAISED TO HOLD FROM SELL BY DEUTSCHE BANK
ASML REMOVED FROM BENELUX TOP PICKS LIST AND CUT TO HOLD FROM BUY BY ING
ASTRAZENECA CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
MONTE PASCHI CUT TO SELL FROM HOLD BY CITIGROUP
INTESA CUT TO HOLD FROM BUY BY CITIGROUP
DANONE CUT DO THOLD FROM BUY BY DEUTSCHE
HEINEKEN CUT TO HOLD FROM BUY BY RBS
INBEV CUT TO HOLD FROM BUY BY RBS
SABMILLER CUT TO SELL FROM HOLD BY RBS
DATA
WTI : 68,8 (2,88 %)
Eur/$ : 1,4240 (0,26 %)
$ /Yen : 94,80 (-0,28 )
10 Yr US : 3,67 ( 1,19 bp)
10 Yr Euro : 3,48 ( 1,8 bp)
Indices : US close ; Europe close
SOX : -1,26 %;-2,98%
S&P :0,30 %; -0,53 %
DOW: 0,26%; -0,30 %
NAS :-0,39%; -1,17%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 1,01 %; -0,28 %
ENERGY : 1,09 %; 0,06 %
FINANCIAL : -0,18 %; -0,89 %
HEALTHCARE : 1,65 %; 0,78 %
TECHNO : -0,73 %; -1,51 %
TELECOM : 0,03 %; -0,46 %
INDUSTRIAL : 0,24 %; -0,77 %
UTILITIES : 1,49 %; 0,33 %
TO BE COMING
Today
Results :Union Fenosa / Honeywell / Banco Popular Espanol / Thales / SSAB (BMO) / Ubisoft / Amgen / Verizon
Dividend :ABB (CHF 0.48) / Swiss Life (CHF 5.00)
Events :
Tuesday
Results : Ahold (BMO) / Alleanza Assicurazioni / BBVA (BMO) / Banco Espirito Santo (BMO) / BP (BMO) / Bureau Veritas (AMC) / Deutesche Bank (BMO) / EADS / Endesa (BMO) / ST Micro (After US close) / Verbund /
Dividend :
Events:
Wednesday
Results : Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend :
Events : Unicredit EGM / Eletronic Arts AGM
Thursday
Results : Siemens / L'Oreal sales / Alcatel Lucent / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend :
Events:
Friday
Results :Total / Vallourec / Schneider Electric / Michelin / Eiffage sales / Ciments Français / Italcementi / Assicurazioni Generali / CNP sales / JC Decaux / PPR / Rexel / Belgacom / SAB Miller / Enel / British Airways / Anglo American / Anglo gold / Chevron / Sun Micro
Dividend :
Events:Singapore Airlines AGM
ECONOMIC DATA PREVIEW
Watch in the United-States the release of the new home sales for June due at 15.00 GMT. New home sales are expected to rise by around 4.0% lead by the rise of household purchase power due to the Obama stimulus plan and to the effects of the drop of interest rates.
Keep an eye in France to the total jobseekers for June due at 17.00 GMT, expected to increase as domestic and foreign demand remained weak forcing companies to cut jobs./JB
ECONOMY
Euro zone: PMI manufacturing and services rise in July
After reaching an historical low at 33.5 in February, the PMI manufacturing, rose for four consecutive months, and rise again in July to reach the level of 46. This index which seems to have reached a low point is progressively recovering getting closer to the level of 50 marking the border between contracting and the expanding activity. Meanwhile, the indicator of the PMI services index also increase for the five consecutive month to reach a level of 45.6. Even if these data are encouraging they remained very fragile as explained below.
Germany: Significant increase of the IFO business climate
After reaching a low point in March at 82.2 the IFO business climate rise for three consecutive months. July revealed a new increase of this index from 85.9 to 87.3. Meanwhile IFO current assessment increase from 82.4 to 84.3 and IFO expectations rise from 89.5 to 90.4. This rise of industrial business sentiment suggest that the worst have passed in Germany after the sharp drop of the GDP at the first quarter (.-3.8%,-6.9% YoY). Nevertheless this improvements remained very fragile. Indeed if the euro and energy prices remained high and if the rise of commodity prices do not end the trend could be reverse.
United Kingdom: Sharp drop of the GDP at the second quarter
The sharp drop of the GDP at the first quarter (-2.4%,-4.9% YoY) did not mean that the UK economy reached a ground floor. Indeed the advanced released of the GDP for the second is particularly bleak (-0.8%,-5.6% YoY) and far worse than the consensus forecast (-0.3%,-5.2% YoY) Mainly based on finances the UK economy remained strongly hit by the effects of the credit crunch and at the opposite of the United-States it will take a long time before the economy recover.
Friday, July 24, 2009
AD AUGUSTA PER ANGUSTA- 24-Jul-09
GLOBAL EQUITIES RESEARCH
To high places by narrow roads…Yesterday morning, equity indexes were testing major resistances, following the strong rally that started on July 10th: 956 pts for the S&P 500, 2549 for the Eurostoxx 50. Then, weekly initial jobless claims data below 600 k for the third week in a row (554 k on July 18th); a decrease in continuous claims (6225 k on July 11th vs. 6313 a week earlier) and an increase in existing home sales (4.89M annualized in June vs. 4.72M in May) sparked an intraday rally that burst through this resistances. Next targets are 1007 pts for the S&P 500 (yesterday’s close at 976.29), 2608 pts for the Eurostoxx 50 (yesterday’s close at 2585.79). Yesterday, the CAC 40 closed at 3373.72 pts below the resistance (3399, next 3426). The current rally will certainly be fostered by a higher level of liquidity, triggered by increasing net inflows: U.S. mutual funds received $1.5bn of net inflows this week, the most since May 13th, according to AMG Data Services.
The equity risk premium and the corporate bond spread can be usefully compared. The spread of BBB-rated 7-10 year US Corporate bonds over equivalent maturity Treasuries is now less than the equity risk premium – the cyclically-adjusted earnings yield (CAEY) of the S&P 500 minus the yield on 10-year US Treasury Treasury Inflation-Protected Securities (TIPS) – for the first time since the onset of the credit crunch. The equity risk premium as described above is equal to the stock market’s earnings yield less the real yield on 10-year TIPS. If the stock market is in equilibrium – by which investors required rate of return on equity and firm’s expected return on equity are identical – then the equity risk premium will simply be equal to the discount rate that investors use to value the stock market less the real yield on long-dated government bonds. But the corporate bond spread and the equity risk premium have not always moved together. The 1990’s stock market bubble in the U.S. is a notable example. Much of the explanation lies in the fact that the stock market is not always in equilibrium – indeed it is often far from it. The difference between the CAEY and the real yield on long-dated government bonds will then also depend on firms’ payout ratio and their expected return on equity. If firms’ expected return on equity rises relative to investors’ required return on equity – as it did in the late 1990’s in the U.S. – then the earning yield will fall independently of any change in the discount rate that investors use to value equities. Temporary wedges between investor’s required return on equity and firms’ expected return on equity eventually tend to even themselves out. But such wedges can be sustained for some time. A drawn out period in which the equity risk premium lies substantially above the corporate bond spread is most likely to occur after the worst of a recession has ended.
The eurozone composite PMI index may have continued to climb in July (09.00 BST), courtesy of an improvement especially on the manufacturing side (43.5 expected vs. 42.6) and on services (45.2 expected vs. 44.7). At 45.3 (vs. 44.6), the composite index could possibly be at the highest level since last September, thus adding to the evidence that the pace of economic contraction eased further at the beginning of Q3. If the historical relationship between the composite PMI index and GDP Growth reasserted itself, a level of 45.3 for the PMI index would point to a quarterly contraction of GDP of around 0.5 % in Q3 – quite an improvement from the record 2.5 % fall in Q1 ( 4.9 % YoY). We forecast -1.0 % QoQ and -5.5 % YoY for Q2.
German IFO business sentiment may have improved further in July (09.00 BST), despite the latest drop in ZEW investor confidence. June’s third consecutive rise in the headline business climate index left it at its highest in nearly a year and consistent, in the face of it with a sharp slowdown in the rate of economic contraction. July’s fall in ZEW investor sentiment probably reflected the sharp decline in equity prices (between June 1st and July 10th) and the ECB’s continued reluctance to engage in quantitative easing, factors that might not feature as heavily in businesses’ own assessments of economic conditions. Further signs of improvement in global demand may have caused another increase in IFO business expectations in July. The current conditions index has been slow to pick up, but with industrial production rising (+3.7 % MoM in May vs. -2.6 % MoM in April), there may be an increase this month. In all, the headline composite index may rise to 87.5 vs. 85.9. The ECB’s harmonised competitiveness indicators (HCIs) confirm that Germany has improved its competitiveness since the inception of the euro-zone while the Netherlands as seen a considerable deterioration, such as Italy and Spain. France recorded a light decline. So, Germany seems better positioned to benefit from the global recovery when it comes. Germany (the biggest economy in the euro zone) may be one of the first euro-zone countries to expand again next year.
ECONOMIC DATA WITH IMPACT
Euro-zone, July composite PMI index (09.00 BST)
German IFO (09.00 BST), both expected significantly higher.
U.K provisional estimate of Q2 GDP (09.03 BST) expected at -0.3 % QoQ and -5.2 % YoY (vs. 4.9 % Q1).
POSITIVE IMPACTS
SAINT-GOBAIN : H1 revenue €18.7bn (18.9bn exp) / Sees H2 operating and net income better than H1 / Raised FY cost cutting targets to €1.1bn from €600m previously estimated…
DANONE : H1 sales €7.52bn (7.55bn exp) / Operating €1.21bn (1.19bn exp) / Repeated FY sales, op. margin & EPS growth targets
ALSTOM & SCHNEIDER said they are considering a joint bid for Areva's transmission and distribution unit, valued at €3-5bn
ERICSSON : Q2 sales SK52.1bn (52.9bn e) / GM 36.3% (35.7% exp) / Operating (ex-restructuring charges and its loss-making JVs)SK6.9bn (6bn exp) / Q2 restructuring charges of SK3.6bn, related to its announced cost-cutting plan making net coming below exp.
TELIASONERA : Q2 Sales SK 27.48Bn (27.30e) / EBITDA before Items 9.04Bn (8.81e) / Raised forecast for EBITDA margin in 2009
INFINEON-STM… : Samsung Electronics said its semiconductor business posted a Q2 consolidated operating profit margin of 4% versus a Q1 loss margin of 13%
BANCO POPULAR sees its non-performing loan ratio growing in coming months, but at a slower pace (CEO in Expansion)
NATIONAL EXPRESS : Spain's Cosmen family & private equity grp CVC have made a joint takeover approach for National Express (FT)
HYNIX : Q2 sales W1.68Trl (1.55Trl exp) / Operating loss W211bn (-198bn exp) / But said the average price of its DRAM chips rose 20% in the Q2 after falling 7% in the Q1 / NAND flash memory prices rose 23% compared with a 10% rise in the Q1
SAMSUNG ELEC. : Q2 sales W21Trl (20Trl exp) / Operating Trl1.06 (1.63Trl exp) / Head of investor relations for said the company "cautiously" expected its overall profitability to improve in the Q3 from the Q2, without elaborating.
BURLINGTON SANTE FE (No. 2 U.S. railroad) : Q2 revenue $3.32bn (3.43bn exp) / EPS $1.18 (1.01 exp) / CEO said : “We are beginning to see volume stabilize in our more economic sensitive businesses […]”
AMERICAN EXPRESS : Q2 revenue $6.09bn (6.29bn exp) / EPS $0.27, in line / ROE 13% (7% exp) / Tier 1 = 9.6% / CEO said : "Although it is still too early to point to any sure signs of an economic recovery, the number of cardmembers who are falling behind in their payments, the volume of bankruptcy filings and the level of loan write-offs were better than we had expected"
CAPITAL ONE : Q2 revenue $4.15bn (3.88bn exp) / Loss of $0.65 (-0.73 exp) including TARP repayment / But executives warned that delinquencies and loan losses won't improve any time soon / The net charge-off rate in its lending biz rose to 8% from 7.55% in the Q1 while the deliquency rate rose to 5.82% from 5.70%...
NEGATIVE IMPACTS
AIR FRANCE : Q1 revenue €5.19bn (5.5bn exp) / Passenger revenue -18.7% to €4.01 bn / Cargo revenue -41.5% to €544m / Sees more limited deterioration in Q2 with slight improvement in H2 / Maintained current forecasts
LAGARDERE : H1 rev. €3.72bn (3.74bn exp) / Still cannot give guidance for Lagardere active as lack of visibility / Kept 2009 guidance on other activities
SYNGENTA : H1 sales $6.65bn (7.02bn e) / Ebitda $2bn (2.25bn e) / Said achieving FY EPS growth has become more challenging
MERCK : Q2 sales €1.9bn, in line / EBIT €184.5 m (210m exp) / Guidance given in April for the group remains unchanged
VODAFONE : Q1 revenue £10.74 bn (£10.83bn exp) / Organic service rev. fell 2.1%, dragged down by declines in Europe / Repeated FY earnings guidance of FCF in 2010 of between £6 &£6.5 bn and adjusted operating of between £11.0 bn and £11.8 bn
BRITISH AIRWAYS : Negotiations between the airline and trade union Unite aiming to break the deadlock over the carrier's proposals to axe thousands of jobs and freeze pay have collapsed
THOMSON will comment on its balance sheet Today after the close of the Paris market / On June 16, Thomson extended a moratorium on its debt restructuring in order to continue talks with all its creditors until July 24.
EADS : German defense minister expects the delay for Airbus' military transporter A400M to be around 4 years (FAZ)
LLOYDS & RBS submitted restructuring proposals to the European Commission that could lead to the banks shedding assets (FT)
MICROSOFT : Q4 revenue $13.10bn (14.46bn exp) / EPS $0.36, in line / Annual sales of Windows fell for the first time on record / CFO aid that “while things are not necessarily getting better, they may have bottomed out…
AMAZON : Q2 revenue $4.65bn (4.69bn exp) / EPS $0.32, in line / Sees Q3 revenue $4.75-5.25bn (4.95bn exp) & operating profit between $120 m and $210 m (190m exp) / But the Stock is up 80-plus % since the start of 2009 …
TRADING IDEAS
BUY AHOLD / BAYER ahead of results next week
BUY GSZ / DT BOERSE on reversal head & shoulder & EDF / VIVENDI / ENEL on island possibility still
BUY NOKIA / BOUYGUES / FTE / DTE / IBERDROLA to play economic recovery
BUY SAINSBURY / SELL TESCO // BUY FIAT / SELL RENAULT // BUY ALSTOM / SELL SIEMENS // BUY AEGON / SELL AXA orING //BUY BAYER / SELL BASF
BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
AKZO NOBEL RAISED TO BUY FRO HOLD BY ING
FAURECIA RAISED TO BUY FROM HOLD DEUTSCHE BANK
ABB RAISED TO EQUALWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
CASINO CUT TO SELL FROM NEUTRAL BY UBS
MERCK KGaA CUT TO UNDERWEIGHT FROM NEUTRAL BY JP MORGAN
ASM INTERNAT CUT TO SELL FROM HOLD BY ING
DATA
WTI : 66,8 (1,83 %)
Eur/$ : 1,4157 (0,10 %)
$ /Yen : 94,81 (0,07 )
10 Yr US : 3,65 ( -0,75 bp)
10 Yr Euro : 3,46 ( 7,9 bp)
Indices : US close ; Europe close
SOX : 0,98 %;0,23%
S&P :2,33 %; 2,13 %
DOW: 2,12%; 1,92 %
NAS :2,45%; 1,97%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 3,30 %; 3,35 %
ENERGY : 3,03 %; 2,70 %
FINANCIAL : 2,86 %; 1,79 %
HEALTHCARE : 2,43 %; 2,35 %
TECHNO : 1,85 %; 1,70 %
TELECOM : 2,81 %; 3,70 %
INDUSTRIAL : 2,56 %; 2,01 %
UTILITIES : 2,59 %; 1,63 %
TO BE COMING
Today
Results :Vodafone / United Utilities / Acciona / Danone / Ericsson (BMO) / Kesko / Saab / Ericsson / Metso / Merck KGaA / Syngenta (BMO) / Havas sales / TF1 / Telia Sonera (BMO) / Schlumberger (BMO) / Black & Decker
Dividend :
Events :
Monday
Results : Union Fenosa / Honeywell / Banco Popular Espanol / Thales / SSAB (BMO) / Ubisoft / Amgen / Verizon
Dividend : ABB (CHF 0.48) / Swiss Life (CHF 5.00)
Events:
Tuesday
Results : Ahold (BMO) / Alleanza Assicurazioni / BBVA (BMO) / Banco Espirito Santo (BMO) / BP (BMO) / Bureau Veritas (AMC) / Deutesche Bank (BMO) / EADS / Endesa (BMO) / ST Micro (After US close) / Verbund /
Dividend :
Events :
Wednesday
Results : Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend :
Events: Unicredit EGM / Eletronic Arts AGM
Thursday
Results :Siemens / L'Oreal sales / Alcatel Lucent / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Mediaset / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend :
Events:
ECONOMIC DATA PREVIEW
Watch in Germany the release of the IFO business climate for July due at 9.00 GMT. The IFO index is expected to slightly increase confirming that Germany’s economy reached a bottom at the first quarter and is progressively recovering.
Watch in the Euro zone the release of the purchasing managers PMI manufacturing and services survey for July due at 9.00 GMT, both survey are expected to slightly increase, getting slowly closer to the level of 50 marking the border between a contraction and an expand of the activity./JB
ECONOMY
United-States: existing home sales rose for a third consecutive month
US existing home sales rose for a third consecutive month from 4.72 million in May to 4.89 millions or +3.6% in June (forecast 4.84 millions,+1.5%) their highest level in 2009. This rise was mainly led by the drop of interest rate and by the gain of purchase power due to the Obama stimulus plan. Following the rise of housing starts and building permits, the increase of the NAHB index and the rise of house prices this is another significant sign of the progressive recovery of housing market.
United-States: initial jobless claims rose and continuing claims declined
After declining for three consecutive months, initial jobless claims slightly rose last week from 524 000 to 554 000. Meanwhile continuing claims declined from 6 313 000 to 6 225 000 the lowest level since April 10th.These encouraging data confirmed that a ground floor has been reached on the labour market and after over laying off companies are now starting to have a more realistic behaviour. Indeed if 60% of the lay off are due to the drop of the GDP, 40% can be considered as an over adjustment disconnected from the real drop of the activity. More generally this over adjustments behaviour concerned as well stocks and investments confirming the gap between economic fundamentals and US companies management.
France: Rise of the business confidence indicator in July
Following the rise of the industrial production in May and the increase of the household consumption in June French economy is shining during this summer. Indeed after three consecutive months of rise France business confidence indicator increase again in June to reach the level of 78 showing a rise of 10 pts in four months. This leading indicator of industrial activity reached its highest level since November 2008. In fact this rise is a technical correction after the slump observed since a year and a half as showed by the sub index of the INSEE survey. Starting with the orders books gaining 2 pts with foreign countries and 1 pt overall. Meanwhile overall production outlook remained at a level of - 40 but it must be said that its average level since 1976 is -9. Nevertheless the real good news of the survey is showed by the 3 pts rise of the own production outlook (the best leading indicator of industrial activity). With a level of -14 this indicator rose by 33 pts since its lowest point in March. Finally we can say that the rebound of French industry is more a technical rebound than a lasting recovery. Indeed to confirm this encouraging data France needs a lower euro , lower interest rates and the end of the commodities rise trend.
Japan: Increase of the trade surplus in June
After reaching a lowest point with a trade deficit of Yen 376 billion in January the Japanese trade balance slowly recovered to reach positive territory and showed a surplus in March. The trade balance has improved regularly since then to reach Yen 438 billion in June (forecast Yen 480 billion). This rise is mainly explained by the fact that exports fell at a slower pace in June( -35.7% ) versus -40.9% in May as the demand is slowly recovering worldwide and as the Yen/USD rise only by 1.3% in June. Meanwhile imports dropped at a slower pace as well from 41.9% in June versus 42.4% in May. As Japan’s growth is mainly based on exports the country recovery is strongly linked to the rebound of the US economy its main trade partner with China.
To high places by narrow roads…Yesterday morning, equity indexes were testing major resistances, following the strong rally that started on July 10th: 956 pts for the S&P 500, 2549 for the Eurostoxx 50. Then, weekly initial jobless claims data below 600 k for the third week in a row (554 k on July 18th); a decrease in continuous claims (6225 k on July 11th vs. 6313 a week earlier) and an increase in existing home sales (4.89M annualized in June vs. 4.72M in May) sparked an intraday rally that burst through this resistances. Next targets are 1007 pts for the S&P 500 (yesterday’s close at 976.29), 2608 pts for the Eurostoxx 50 (yesterday’s close at 2585.79). Yesterday, the CAC 40 closed at 3373.72 pts below the resistance (3399, next 3426). The current rally will certainly be fostered by a higher level of liquidity, triggered by increasing net inflows: U.S. mutual funds received $1.5bn of net inflows this week, the most since May 13th, according to AMG Data Services.
The equity risk premium and the corporate bond spread can be usefully compared. The spread of BBB-rated 7-10 year US Corporate bonds over equivalent maturity Treasuries is now less than the equity risk premium – the cyclically-adjusted earnings yield (CAEY) of the S&P 500 minus the yield on 10-year US Treasury Treasury Inflation-Protected Securities (TIPS) – for the first time since the onset of the credit crunch. The equity risk premium as described above is equal to the stock market’s earnings yield less the real yield on 10-year TIPS. If the stock market is in equilibrium – by which investors required rate of return on equity and firm’s expected return on equity are identical – then the equity risk premium will simply be equal to the discount rate that investors use to value the stock market less the real yield on long-dated government bonds. But the corporate bond spread and the equity risk premium have not always moved together. The 1990’s stock market bubble in the U.S. is a notable example. Much of the explanation lies in the fact that the stock market is not always in equilibrium – indeed it is often far from it. The difference between the CAEY and the real yield on long-dated government bonds will then also depend on firms’ payout ratio and their expected return on equity. If firms’ expected return on equity rises relative to investors’ required return on equity – as it did in the late 1990’s in the U.S. – then the earning yield will fall independently of any change in the discount rate that investors use to value equities. Temporary wedges between investor’s required return on equity and firms’ expected return on equity eventually tend to even themselves out. But such wedges can be sustained for some time. A drawn out period in which the equity risk premium lies substantially above the corporate bond spread is most likely to occur after the worst of a recession has ended.
The eurozone composite PMI index may have continued to climb in July (09.00 BST), courtesy of an improvement especially on the manufacturing side (43.5 expected vs. 42.6) and on services (45.2 expected vs. 44.7). At 45.3 (vs. 44.6), the composite index could possibly be at the highest level since last September, thus adding to the evidence that the pace of economic contraction eased further at the beginning of Q3. If the historical relationship between the composite PMI index and GDP Growth reasserted itself, a level of 45.3 for the PMI index would point to a quarterly contraction of GDP of around 0.5 % in Q3 – quite an improvement from the record 2.5 % fall in Q1 ( 4.9 % YoY). We forecast -1.0 % QoQ and -5.5 % YoY for Q2.
German IFO business sentiment may have improved further in July (09.00 BST), despite the latest drop in ZEW investor confidence. June’s third consecutive rise in the headline business climate index left it at its highest in nearly a year and consistent, in the face of it with a sharp slowdown in the rate of economic contraction. July’s fall in ZEW investor sentiment probably reflected the sharp decline in equity prices (between June 1st and July 10th) and the ECB’s continued reluctance to engage in quantitative easing, factors that might not feature as heavily in businesses’ own assessments of economic conditions. Further signs of improvement in global demand may have caused another increase in IFO business expectations in July. The current conditions index has been slow to pick up, but with industrial production rising (+3.7 % MoM in May vs. -2.6 % MoM in April), there may be an increase this month. In all, the headline composite index may rise to 87.5 vs. 85.9. The ECB’s harmonised competitiveness indicators (HCIs) confirm that Germany has improved its competitiveness since the inception of the euro-zone while the Netherlands as seen a considerable deterioration, such as Italy and Spain. France recorded a light decline. So, Germany seems better positioned to benefit from the global recovery when it comes. Germany (the biggest economy in the euro zone) may be one of the first euro-zone countries to expand again next year.
ECONOMIC DATA WITH IMPACT
Euro-zone, July composite PMI index (09.00 BST)
German IFO (09.00 BST), both expected significantly higher.
U.K provisional estimate of Q2 GDP (09.03 BST) expected at -0.3 % QoQ and -5.2 % YoY (vs. 4.9 % Q1).
POSITIVE IMPACTS
SAINT-GOBAIN : H1 revenue €18.7bn (18.9bn exp) / Sees H2 operating and net income better than H1 / Raised FY cost cutting targets to €1.1bn from €600m previously estimated…
DANONE : H1 sales €7.52bn (7.55bn exp) / Operating €1.21bn (1.19bn exp) / Repeated FY sales, op. margin & EPS growth targets
ALSTOM & SCHNEIDER said they are considering a joint bid for Areva's transmission and distribution unit, valued at €3-5bn
ERICSSON : Q2 sales SK52.1bn (52.9bn e) / GM 36.3% (35.7% exp) / Operating (ex-restructuring charges and its loss-making JVs)SK6.9bn (6bn exp) / Q2 restructuring charges of SK3.6bn, related to its announced cost-cutting plan making net coming below exp.
TELIASONERA : Q2 Sales SK 27.48Bn (27.30e) / EBITDA before Items 9.04Bn (8.81e) / Raised forecast for EBITDA margin in 2009
INFINEON-STM… : Samsung Electronics said its semiconductor business posted a Q2 consolidated operating profit margin of 4% versus a Q1 loss margin of 13%
BANCO POPULAR sees its non-performing loan ratio growing in coming months, but at a slower pace (CEO in Expansion)
NATIONAL EXPRESS : Spain's Cosmen family & private equity grp CVC have made a joint takeover approach for National Express (FT)
HYNIX : Q2 sales W1.68Trl (1.55Trl exp) / Operating loss W211bn (-198bn exp) / But said the average price of its DRAM chips rose 20% in the Q2 after falling 7% in the Q1 / NAND flash memory prices rose 23% compared with a 10% rise in the Q1
SAMSUNG ELEC. : Q2 sales W21Trl (20Trl exp) / Operating Trl1.06 (1.63Trl exp) / Head of investor relations for said the company "cautiously" expected its overall profitability to improve in the Q3 from the Q2, without elaborating.
BURLINGTON SANTE FE (No. 2 U.S. railroad) : Q2 revenue $3.32bn (3.43bn exp) / EPS $1.18 (1.01 exp) / CEO said : “We are beginning to see volume stabilize in our more economic sensitive businesses […]”
AMERICAN EXPRESS : Q2 revenue $6.09bn (6.29bn exp) / EPS $0.27, in line / ROE 13% (7% exp) / Tier 1 = 9.6% / CEO said : "Although it is still too early to point to any sure signs of an economic recovery, the number of cardmembers who are falling behind in their payments, the volume of bankruptcy filings and the level of loan write-offs were better than we had expected"
CAPITAL ONE : Q2 revenue $4.15bn (3.88bn exp) / Loss of $0.65 (-0.73 exp) including TARP repayment / But executives warned that delinquencies and loan losses won't improve any time soon / The net charge-off rate in its lending biz rose to 8% from 7.55% in the Q1 while the deliquency rate rose to 5.82% from 5.70%...
NEGATIVE IMPACTS
AIR FRANCE : Q1 revenue €5.19bn (5.5bn exp) / Passenger revenue -18.7% to €4.01 bn / Cargo revenue -41.5% to €544m / Sees more limited deterioration in Q2 with slight improvement in H2 / Maintained current forecasts
LAGARDERE : H1 rev. €3.72bn (3.74bn exp) / Still cannot give guidance for Lagardere active as lack of visibility / Kept 2009 guidance on other activities
SYNGENTA : H1 sales $6.65bn (7.02bn e) / Ebitda $2bn (2.25bn e) / Said achieving FY EPS growth has become more challenging
MERCK : Q2 sales €1.9bn, in line / EBIT €184.5 m (210m exp) / Guidance given in April for the group remains unchanged
VODAFONE : Q1 revenue £10.74 bn (£10.83bn exp) / Organic service rev. fell 2.1%, dragged down by declines in Europe / Repeated FY earnings guidance of FCF in 2010 of between £6 &£6.5 bn and adjusted operating of between £11.0 bn and £11.8 bn
BRITISH AIRWAYS : Negotiations between the airline and trade union Unite aiming to break the deadlock over the carrier's proposals to axe thousands of jobs and freeze pay have collapsed
THOMSON will comment on its balance sheet Today after the close of the Paris market / On June 16, Thomson extended a moratorium on its debt restructuring in order to continue talks with all its creditors until July 24.
EADS : German defense minister expects the delay for Airbus' military transporter A400M to be around 4 years (FAZ)
LLOYDS & RBS submitted restructuring proposals to the European Commission that could lead to the banks shedding assets (FT)
MICROSOFT : Q4 revenue $13.10bn (14.46bn exp) / EPS $0.36, in line / Annual sales of Windows fell for the first time on record / CFO aid that “while things are not necessarily getting better, they may have bottomed out…
AMAZON : Q2 revenue $4.65bn (4.69bn exp) / EPS $0.32, in line / Sees Q3 revenue $4.75-5.25bn (4.95bn exp) & operating profit between $120 m and $210 m (190m exp) / But the Stock is up 80-plus % since the start of 2009 …
TRADING IDEAS
BUY AHOLD / BAYER ahead of results next week
BUY GSZ / DT BOERSE on reversal head & shoulder & EDF / VIVENDI / ENEL on island possibility still
BUY NOKIA / BOUYGUES / FTE / DTE / IBERDROLA to play economic recovery
BUY SAINSBURY / SELL TESCO // BUY FIAT / SELL RENAULT // BUY ALSTOM / SELL SIEMENS // BUY AEGON / SELL AXA orING //BUY BAYER / SELL BASF
BUY RESEARCH IN MOTION / SELL APPLE // BUY DELL / SELL HEWLETT PACKARD
BROKER METEOROLOGY
AKZO NOBEL RAISED TO BUY FRO HOLD BY ING
FAURECIA RAISED TO BUY FROM HOLD DEUTSCHE BANK
ABB RAISED TO EQUALWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
CASINO CUT TO SELL FROM NEUTRAL BY UBS
MERCK KGaA CUT TO UNDERWEIGHT FROM NEUTRAL BY JP MORGAN
ASM INTERNAT CUT TO SELL FROM HOLD BY ING
DATA
WTI : 66,8 (1,83 %)
Eur/$ : 1,4157 (0,10 %)
$ /Yen : 94,81 (0,07 )
10 Yr US : 3,65 ( -0,75 bp)
10 Yr Euro : 3,46 ( 7,9 bp)
Indices : US close ; Europe close
SOX : 0,98 %;0,23%
S&P :2,33 %; 2,13 %
DOW: 2,12%; 1,92 %
NAS :2,45%; 1,97%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 3,30 %; 3,35 %
ENERGY : 3,03 %; 2,70 %
FINANCIAL : 2,86 %; 1,79 %
HEALTHCARE : 2,43 %; 2,35 %
TECHNO : 1,85 %; 1,70 %
TELECOM : 2,81 %; 3,70 %
INDUSTRIAL : 2,56 %; 2,01 %
UTILITIES : 2,59 %; 1,63 %
TO BE COMING
Today
Results :Vodafone / United Utilities / Acciona / Danone / Ericsson (BMO) / Kesko / Saab / Ericsson / Metso / Merck KGaA / Syngenta (BMO) / Havas sales / TF1 / Telia Sonera (BMO) / Schlumberger (BMO) / Black & Decker
Dividend :
Events :
Monday
Results : Union Fenosa / Honeywell / Banco Popular Espanol / Thales / SSAB (BMO) / Ubisoft / Amgen / Verizon
Dividend : ABB (CHF 0.48) / Swiss Life (CHF 5.00)
Events:
Tuesday
Results : Ahold (BMO) / Alleanza Assicurazioni / BBVA (BMO) / Banco Espirito Santo (BMO) / BP (BMO) / Bureau Veritas (AMC) / Deutesche Bank (BMO) / EADS / Endesa (BMO) / ST Micro (After US close) / Verbund /
Dividend :
Events :
Wednesday
Results : Sanofi Aventis / Arcelor Mittal / Gas Natural / France Telecom / Santander / ACS / Acerinox / Akzo Nobel / Acciona / Infineon / SAP / Atos / Saipem / Maroc Telecom / M6 Metropole TV / EDF Energies Nouvelles sales / Rhodia / Bayer / Daimler / Time Warner / ConocoPhillipsSymantec / General Dynamics / Nissan / Honda MotorNec Electronics / Nomura
Dividend :
Events: Unicredit EGM / Eletronic Arts AGM
Thursday
Results :Siemens / L'Oreal sales / Alcatel Lucent / Centrica / Grupo Ferrovia / Air France-KLM / Renault / Repsol / Enel / Royal Dutch Shell / ENI / Vinci sales / BASF / Maurel & Prom / Solvay / Clariant / Air Liquide / Mediaset / HeidelbergCement / Deutsche Postbank / Lufthansa / Dassault Systemes / Mediaset / Telefonica / Abertis / AstraZeneca / B Sky B (BMO) / Capgemini / CGGVeritas / Continental AG / Exxon Mobil / Neste Oil / Kellogg / Goodyear / Colgate Palmolive / Mastercard / Motorola / Walt Disney / Sony / NTT DoCoMo / Nec
Dividend :
Events:
ECONOMIC DATA PREVIEW
Watch in Germany the release of the IFO business climate for July due at 9.00 GMT. The IFO index is expected to slightly increase confirming that Germany’s economy reached a bottom at the first quarter and is progressively recovering.
Watch in the Euro zone the release of the purchasing managers PMI manufacturing and services survey for July due at 9.00 GMT, both survey are expected to slightly increase, getting slowly closer to the level of 50 marking the border between a contraction and an expand of the activity./JB
ECONOMY
United-States: existing home sales rose for a third consecutive month
US existing home sales rose for a third consecutive month from 4.72 million in May to 4.89 millions or +3.6% in June (forecast 4.84 millions,+1.5%) their highest level in 2009. This rise was mainly led by the drop of interest rate and by the gain of purchase power due to the Obama stimulus plan. Following the rise of housing starts and building permits, the increase of the NAHB index and the rise of house prices this is another significant sign of the progressive recovery of housing market.
United-States: initial jobless claims rose and continuing claims declined
After declining for three consecutive months, initial jobless claims slightly rose last week from 524 000 to 554 000. Meanwhile continuing claims declined from 6 313 000 to 6 225 000 the lowest level since April 10th.These encouraging data confirmed that a ground floor has been reached on the labour market and after over laying off companies are now starting to have a more realistic behaviour. Indeed if 60% of the lay off are due to the drop of the GDP, 40% can be considered as an over adjustment disconnected from the real drop of the activity. More generally this over adjustments behaviour concerned as well stocks and investments confirming the gap between economic fundamentals and US companies management.
France: Rise of the business confidence indicator in July
Following the rise of the industrial production in May and the increase of the household consumption in June French economy is shining during this summer. Indeed after three consecutive months of rise France business confidence indicator increase again in June to reach the level of 78 showing a rise of 10 pts in four months. This leading indicator of industrial activity reached its highest level since November 2008. In fact this rise is a technical correction after the slump observed since a year and a half as showed by the sub index of the INSEE survey. Starting with the orders books gaining 2 pts with foreign countries and 1 pt overall. Meanwhile overall production outlook remained at a level of - 40 but it must be said that its average level since 1976 is -9. Nevertheless the real good news of the survey is showed by the 3 pts rise of the own production outlook (the best leading indicator of industrial activity). With a level of -14 this indicator rose by 33 pts since its lowest point in March. Finally we can say that the rebound of French industry is more a technical rebound than a lasting recovery. Indeed to confirm this encouraging data France needs a lower euro , lower interest rates and the end of the commodities rise trend.
Japan: Increase of the trade surplus in June
After reaching a lowest point with a trade deficit of Yen 376 billion in January the Japanese trade balance slowly recovered to reach positive territory and showed a surplus in March. The trade balance has improved regularly since then to reach Yen 438 billion in June (forecast Yen 480 billion). This rise is mainly explained by the fact that exports fell at a slower pace in June( -35.7% ) versus -40.9% in May as the demand is slowly recovering worldwide and as the Yen/USD rise only by 1.3% in June. Meanwhile imports dropped at a slower pace as well from 41.9% in June versus 42.4% in May. As Japan’s growth is mainly based on exports the country recovery is strongly linked to the rebound of the US economy its main trade partner with China.
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