GLOBAL EQUITIES RESEARCH
Interesting week in term of economic data with obviously the Employment report as a focus on Friday. Today’s Chicago PMI will set the tone for the important ISM manufacturing tomorrow, as well as the factory orders on Wednesday and the ISM non manufacturing on Thursday. Fed’s Minutes on Wednesday will be watched, as well as the G-20 Ministers meeting in London happening on Friday with Treasury’s Geithner attending. The ECB on Thursday will leave interest rates on hold at 1.0% at its September policy meeting and is very unlikely to announce any new unconventional policy measures. The Bank is likely to treat recent signs of improvement in the economy with caution, supporting the view that monetary policy will remain as supportive as it is now for some time to come
Employment report should improve, or not be as bad with a lot of uncertainty still. The rate might keep on deteriorating, but the destruction figure should not be as bad. The continued steady improvement in initial jobless claims and the ongoing rebound in the employment balances of the manufacturing and non-manufacturing ISM surveys are the main reasons why payrolls might have declined in August by marginally less than the 247,000 drop recorded in July. What's more, the recent easing in the rate at which temporary employment is falling points to smaller declines in payrolls in the months ahead. Might be some friendly surprises next month.
Hiring is the last chance for bear strategists to reappear, with unfortunately for them not much chances to win their battle anymore. Last week Consumer confidence soared above the consensus forecast of 47.9 by posting a strong rebound to 54.1 from 47.1, spending remained strong, which both together is indicating that the consumer could take part to a recovery which started with no doubts for everyone now on the manufacturing sector. Further signs of trouble in the job market could undermine the confidence of consumers, and by extension, put a damper on consumer spending, which is seen as the engine that drives the economy in normal time. Dell reported better-than-expected earnings and said it expects improvement in IT spending in 2010. Intel raised its third quarter revenue expectations, driven by stronger-than-expected demand for microprocessors and chipsets. This week, expect the ISM manufacturing index (Tuesday) to improve, moving above the 50 mark that is supposed to separate expansion from contraction in the industrial sector, with further improvements likely in the months ahead. There are several reasons for optimism, but above all the regional manufacturing surveys have improved. Indeed, the forward-looking balances in these surveys suggest that the ISM index could reach the high 50s soon. The ISM non-manufacturing index (Thursday) should rise too, to around 49.0 in August compared to 46.4 in July, on the back a further increase in new orders. Ford Motor, General Motors and other auto makers release their August sales tally tomorrow. After a bounce in auto sales in July, helped by the U.S. "cash-for-clunkers" rebate program, the pace of car-buying likely increased again in August, analysts say.
In Europe, the euro-zone CPI (10.00 BST) should reveal that inflation is beginning to pick up again. Data from the European Commission suggest that petrol prices rose by about 1.5% in August. This, coupled with strong base effects, probably boosted the headline rate by 0.3 percentage points or so, cancelling the big idea of deflation fear. In the UK too, tomorrow ’s Bank of England household borrowing figures for July should reveal a rise from 48,000 to 51,000 in mortgage approvals. Since the end of last year, approvals have risen at an average rate of around 3,000 per month. And a similar rise looks likely in July, given the increases seen in the two alternative measures of mortgage approvals – the British Bankers’ Association measure rose by 2,500 in July, while the Lending Panel measure rose by 3,000. Having forewarned of the severity of the slump in manufacturing output in H2, the CIPS/Markit report on manufacturing (Tomorrow) now points to a very robust recovery in the sector over the coming months.
And regarding employment, not only it is a lagging indicator, which doesn’t prevent a "jobless recovery" to start with, but the strength of the recovery may well reverse the employment trend sooner than later as firms clearly followed the press and economist’s paranoia and were prepared for a long lasting economic slump which in the end only lasted a few months (better explaining the big shock). They might promptly need to hire back again, which already is happening in the financial sector by the way when looking at the UK.
Quiet day ahead obviously with the UK Bank Holiday, and last day of the month too. The Japanese election should be seen as non event and mostly played. But the yen hit a seven-week high against the dollar to 92.54 from 93.29. Although the DPJ victory is a good news, more because of dissatisfaction with the LDP rather than any great enthusiasm for the alternative. However, talk that the DPJ would adopt a more stimulatory fiscal policy and boost consumer spending more than the LDP has done is always nice to hear and will keep some bullish biais on the Nikkei mid term.. Take opportunity for an y sharp drop to step in, as this week's positive newsflow in addition to the new month inflow will be supportive.
ECONOMIC DATA WITH IMPACT
Chicago PMI (14h45 UK) expected 47.2 from previous 43.4 / minor, but might be moving due to lack of activity, and should be seen as leading indicator ahead fo the national ISM manufacturing tomorrow
POSITIVE IMPACTS
EADS : The EU signaled govts will proceed with subsidies for EADS’s Airbus SAS A350 even if a pending World Trade Organization decision finds previous aid to the planemaker violated global trade rules/ Sepratly CEO does not expect to see a longer lasting decline in demand in the aviation industry
L’OREAL plans to expand in emerging markets such as the Middle East & Africa (Investir)
VOLKSWAGEN will export enough vehicles to offset an expected sales drop in its home market (Sueddeutsche Zeitung) / Separatly, the 370k employees of VOW & Porsche plan to take a stake of up to 5% in the automotive group,
NOVARTIS plan to start a clinical trial on a swine flu vaccine in Japan as early as September (Nikkei)/ Separately, Novartis will deliver its first swine-flu vaccinations in October (Basler Zeitung )
LONZA, ROCHE : Roche subsidiary Genentech Singapore will buy Lonza's cell culture biologic manufacturing facility in Singapore for $290M + $70 M in milestone payments
BOUYGUES attracted 55k high-speed Internet connection subscribers in the 2nd quarter (Les Echos)
CREDIT SUISSE & JULIUS BAER ‘s Executives expect to avoid a U.S. tax investigation into their private banking businesses on the same scale as their peer UBS (FT)
IRISH BANKS : Ireland’s govt is prepared to take majority stakes in the country’s banks as part of the creation of the National Asset Management Agency (Finance Minister)
LUFTHANSA plans to seek regulatory approval to form a "code-share" agreement with JetBlue Airways (FT)
NEGATIVE IMPACTS
SANOFI :An experimental heart drug being developed by AstraZeneca significantly outperformed the blockbuster pill Plavix in a big clinical trial (Study)
BAYER : German pharma Boehringer Ingelheim said Sunday that its anti-clotting drug Pradaxa significantly reduced strokes and bleeding in patients with irregular heartbeats compared to the industry standard warfarin./ The drug competes with Bayer’s Xarelto. (already played last week)
UBS : Switzerland may provide the U.S. with details of UBS accounts held by American citizens, using criteria based on contraventions of U.S. law the bank admitted to in February (SonntagsBlick)
UBI : Q2 NII €654m (No Consensus but looks weak) / Net Profit €101.6m (€117m exp) / Core tier1 ratio 7.24% End-June
BANCO POPOLARE : Q2 NII €504.7m (€525m exp) / Net Loss €14.4m (€-50m exp) / Tier1 5.2% End June
FRENCH BANKS : France has secured the names and details of some 3k suspected tax evaders with Swiss bank accounts in what the budget minister described as a first in its battle against banking secrecy.
E.ON is refusing to supply electricity to new corporate clients with more than 50 sites because credit insurance is becoming increasing scarce (Sunday Telegraph) / Separatly environmentalists campaigning against climate change said they would attempt to shut down German utility E.ON's power station at Ratcliffe in central England in a mass action planned for October.
ACCIONA is bidding for four concessions in Canada worth a total of $3.3Bn (Spanish press)
DEUTSCHE POST :The mail unit of Deutsche Post DHL needs to cut costs to avoid posting losses over the long run (Executive)
TRADING IDEAS
BUY PERNOD / VIVENDI & VINCI ahead of results this week & BUY AHOLD to play island possibility still
BUY Energy names such as EDF / ENEL / ROYAL DUTCH / BP / TOTAL / ENI on eco recovery
BUY ERICSSON on double bottom possibility & BUY PEUGEOT on reversal Head & Shoulder possibility
BUY UNILEVER / SELL DANONE // BUY PHILIPS / SELL SAP // BUY NOVARTIS / SELL ROCHE // BUY EDF / SELL EON // BUY CONOCOPHILLIPS / SELL CHEVRON
BROKER METEOROLOGY
L’OREAL DOWNGRADED TO SELL FROM HOLD BY ING
DATA
WTI : 72,3 (-0,40 %)
Eur/$ : 1,4283 (-0,14 %)
$ /Yen : 92,73 (1,05 )
10 Yr US : 3,43 ( -1,85 bp)
10 Yr Euro : 3,25 ( 0,5 bp)
Indices : US close ; Europe close
SOX : 2,44 %;2,29%
S&P :-0,20 %; -0,08 %
DOW: -0,38%; -0,32 %
NAS :0,05%; 0,41%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,94 %; 0,71 %
ENERGY : -0,22 %; -0,24 %
FINANCIAL : 0,18 %; 0,14 %
HEALTHCARE : -0,87 %; -0,81 %
TECHNO : 0,37 %; 0,96 %
TELECOM : -0,43 %; -0,44 %
INDUSTRIAL : -0,34 %; -0,17 %
UTILITIES : -0,04 %; -0,35 %
TO BE COMING
Today
Results :Vinci (AMC) / Eiffage / Wendel / Sun Microsystems
Dividend :Halliburton ($ 0,09) / Schlumberger ($0.21)
Events :
Tuesday
Results : Vivendi (BMO) / US car sales
Dividend : Banco de Sabadell (€ 0,07)
Events: Global Industrials Conference at Morgan Stanley
Wednesday
Results : Bombardier
Dividend : BHP Billiton ( $ 0,455556) / Legal & General (GBp 1,233333) / CRH (€0.185) / Friends Provident ( GBp 1,444444)
Events :
Thursday
Results : Pernod Ricard
Dividend :Bank of America -ML ($0.01) / Merck & Co ($0.38)
Events: HMV AGM
Friday
Results :
Dividend : Nike ($0.25) / Sara Lee ($0.11)
Events:
ECONOMIC DATA PREVIEW
In the United States, watch the Chicago purchasing manager index (14.45 GMT) for August expected to improve from 43.4 to 47.2 as domestic and foreign demand are rebounding boosting companies investment.
In the Euro area, watch the estimation of the consumer price index for August expected to drop at a slower pace –0.4% YoY(previous –0.6%) confirming that the deflation situation is not over in the Euro area.
ECONOMY
United States: Personal income and personal spending remained weak in July
After dropping by 1.1% in June personal income were flat in July (expected ‘+0.1%). This weakness of personal income is not surprising as the unemployment remained high cutting household purchase power. In addition the fiscal stimulus which boosted incomes in spring is now less efficient and if we exclude the fiscal incentive incomes are in a low trend for the last seven months. As a consequence of the weak income , personal spending rose at a slower pace from +0.6% in July to +0.2% in August. Meanwhile personal spending core (excluding food and energy) remained weak as well and dropped from +0.2%QoQ,+1.5% YoY in July to +0.1% QoQ,+1.4% YoY in August. To put these figure into perspective it is important to bear in mind that household consumption account for 70% of the US GDP.
Euro area: European confidence rise more than foracast in August
After reaching a bottom level at 64.6 in March European economic sentiment rise for a fifth consecutive month at 80.6 in August. This jump was stronger than the consensus forecast (78.0) and represent the highest level since October 2008. Sentiment improve in all major Euro zone economies and reflect rises in consumer, industrial and more specifically service sector sentiment. Nevertheless if unemployment continue to contract, if energy prices pursued their rise trend and if the European Central Bank increase its leading rate the European economic sentiment (the best correlated statistic of the GDP) could stop is rising trend.
United Kingdom: GDP second estimation for the second quarter: slightly better than expected
United Kingdom’s GDP second estimation revealed to be slightly better than the advanced at -0.7% QoQ,-5.5%YoY (-0.8%QoQ,-5.6% YoY). The improvement since the first quarter –2.4% QoQ,-4.9% YoY was mainly due to an easing in the pace of destocking, meanwhile the boost on net trade was essentially due to a drop of imports rather that a rise of exports and the rise in government spending could be seen as a temporary improvement. More globally all improvement since the first quarter remained very fragile
Monday, August 31, 2009
Friday, August 28, 2009
Yes We Kend
GLOBAL EQUITIES RESEARCH
Nice finish from the US with a positive tone emerging in afternoon trading as select financial stocks were squeezed higher welcoming the efficient impact from the Fed’s mortgage buying program and a sudden drop by the U.S. dollar helped lift energy and materials stocks. Better Dell earnings (up 6.7%) released by mistake on website just before the close was also supportive.
Consumer Spending survey will be the focus today, and might shake the market as volume should be small due to a long weekend taking place in the UK with the Monday’s Bank of Holiday coming.
Next week data will be interesting with the Employment report as a focus, but the ISM on Tuesday will be confirming the manufacturing pick up, vehicle sales being obviously very strong (same day), factory orders bull on Wednesday, ISM non manufacturing increasing on Thursday. Just to say next week possible inflow from coming fund managers will be very much supported by the macro news flow, and help equity indices head higher toward their pre Lehman levels (1200 S&P and 3200 Eurostoxx). The last few days should be seen as some nice and healthy consolidation, which the back to school business should end with the upside trend resuming.
Fund managers left their desk sceptical that a recovery is taking place, believing that the equity indices rise then was a bull trap, and this is just about the opposite which happened with the equity indices still frontrunning the economic activity. As a matter of fact, the economic activity seems gradually growing and might now spread from the manufacturing sector to the other sectors, such as the ex transport durable orders data as well as the Tuesday’s consumer confidence survey increase was reflecting. Fund managers bullishness increased by 30% regarding growth, but they are still 30% cash overweight, and not even talking about the trillions of cash sleeping in monetary funds which sooner or later will switch to equity fund managers business becoming even more overweight.
This coming weekend elections in Japan, and the confirmation of a decisive Democratic Party of Japan (DPJ) victory on Sunday should provide a further near-term boost to the Nikkei and possibly the yen too, although this outcome is already slightly anticipated. The upside may therefore now be limited, especially as doubts will soon creep in about what the new government will actually do. The equity markets have already reacted positively to this prospect, although more because of dissatisfaction with the LDP rather than any great enthusiasm for the alternative. However, talk that the DPJ would adopt a more stimulatory fiscal policy and boost consumer spending more than the LDP has done (or would do) is always nice to hear and will keep some bullish biais on the Nikkei.
Shanghai index still very volatile, driven by banks dropping on reports that lending has been shrinking in August, trimming liquidity flowing into the market.
Opening up welcoming the nice US ending, we should be very quiet awaiting the consumer spending data, long weekend coming in the UK might trigger some positions cuts and be once more market supportive through the end of the session
ECONOMIC DATA WITH IMPACT
Euro-zone EC economic sentiment index (10.00 UK) probably increased for the fifth month in a row in August, boosted by improvements in industrial, services and consumer confidence. We expect a rise to 79, from 76 in July, which would be consistent with a positive quarterly rate of GDP growth in Q3.
Personal income & Spending (13h30 UK) expected 0.1% & 0.2% from previous –1.3% & 0.4% / important this week as to measure the consumer mood and possible help for the current recovery. It is granted that consumers are not taking part to the game for now, but if they were to increase spending then the economic growth upside becomes more certain and sustainable.
PCE (13h30 UK) expected 0.1% from previous 0.2% / minor for the time being
Michigan index (14h55 UK) expected 64 from previous 63.2 / minor as just a revision and consumer confidence already rebounded
POSITIVE IMPACTS
L’OREAL : H1 rev €8.77Bn (in line)/Op pft €1.373Bn (1.29e) / Net €1.083Bn (1.09 e) / Sales margin 15.7%(14.7% e)/ Confirms outlook
BOUYGUES : H1 Rev €14.9Bn (14.78 e) / H1 Op pft €789M (716.5e) / H1 Net pft €547M (562.2e) / Co to cancel 493417 shrs / FY sales tgt raised to €31.5Bn from 31.3
LAGARDERE : H1 Op pft b4 associates €186M (169 e) / Confirms tgt / Financial situation is healthy
BANK OF IRELAND hired Citigroup and Nomura to help it sell about $1bn of state-backed bonds (Source)
GERMAN BANKS : German measures to improve credit issuance to firms will likely be passed soon (German official told Reuters)
MAN AG is planning to slash administration costs by 20%($128.1M), in its commercial vehicles unit (Die Welt)
STEEL : VOESTALPINE says demand for flat steel “rebounded significantly” / Still sees risk of another eco slump in 2010
ADP : H1 Rev €1.286bn (€1.27bn e) / EBITDA €423.6m (€405m e) / Net pft €127.3m (€120m) / Reaffirms 2009 Rev & Ebitda tgt
DELL ‘s earnings released a few minutes by mistake on website were better with eps 0.28 vbs 0.22 expected / revenue 12.76 vs 12.59 / nice cost cutting trying to protect margins
NEGATIVE IMPACTS
CARREFOUR : H1 Op pft €1.01Bn (995 e)/ H1 EBIT €499.5M (446M to 1Bn e) / H1 Net loss €58.10M (58.7 e) / Confirms FY tgt
LUFTHANSA : S&P cuts rating to BBB- from BBB/ The outlook is negative
TELECOM ITALIA: The Argentine antitrust commission has ruled that TIT Italia must sell its Telecom Argentina assets
E.ON may be charged on at least half of their earnings from running nuclear power plants past scheduled shutdown dates if the next govt overturns a phase-out of nuclear energy (Handelsblatt)
BAE Systems has failed to win the $281M follow-on U.S. govt contract for armoured battlefield vehicles .
HERMES : H1 Operating Profit €199.8m (€211m e) / Maintains 2009 Target of flat sales FCC & slight drop in current operating profit
IBERIA : H1 Op loss €276.9M( 257.3 e) / H1 Net loss €165.4M (160.5 e)
ICADE : CDC sells 2.85% of Icade to institutional investors, (Now CDC holds 58.74% of Icade)
TRADING IDEAS
BUY VIVENDI & VINCI ahead of results next week & BUY AHOLD to play island possibility still
BUY Energy names such as EDF / ENEL / ROYAL DUTCH / BP / TOTAL / ENI on eco recovery
BUY NOKIA / ERICSSON on double bottom possibility & BUY PEUGEOT on reversal Head & Shoulder possibility
BUY PHILIPS / SELL SAP // BUY DEUTSCHE TEL / SELL FRANCE TEL // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY CONOCOPHILLIPS / SELL CHEVRON
BUY DEUTSCHE TEL / SELL FRANCE TEL // BUY AEGON / SELL MUNICH RE // BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY INTEL / SELL TEXAS // BUY CONOCOPHILLIPS / SELL CHEVRON
BROKER METEOROLOGY
NH HOTELES RAISED TO BUY FROM SELL BY UBS
EULER HERMES RAISED NEW OVERWEIGHT BY JP MORGAN
SUEZ ENVIRONNEMENT RAISED TO OVERWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
H&M RAISED TO EQUALWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
L’ORAL RAISED TO NEUTRAL FROM SELL BY UBS
L’ORAL RAISED TO BUY FROM NEUTRAL BY BANK OF AMERICA – ML
OMEGA PHARMA RAISED TO BUY FROM HOLD BY ING
JC DECAUX RAISED TO NEUTRAL FROM UNDERWEIGHT BY CREDIT SUISSE
BALOISE CUT TO NEUTRAL FROM BUY BY UBS
PREMIER OIL CUT TO HOLD FROM BUY BY JEFFERIES
SEADRILL CUT TO NEUTRAL FROM OVERWEIGHT BY CREDIT SUISSE
ENAGAS CUT TO NEUTRAL FROM BUY BY DEUTSCHE BANK
DATA
WTI : 72,6 (2,07 %)
Eur/$ : 1,4359 (0,12 %)
$ /Yen : 93,70 (-0,31 )
10 Yr US : 3,46 ( 0,55 bp)
10 Yr Euro : 3,25 ( 1 bp)
Indices : US close ; Europe close
SOX : 0,25 %;-1,23%
S&P :0,28 %; -0,83 %
DOW: 0,39%; -0,49 %
NAS :0,16%; -1,12%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,36 %; -1,48 %
ENERGY : -0,30 %; -1,91 %
FINANCIAL : 0,89 %; -0,53 %
HEALTHCARE : 0,19 %; -0,61 %
TECHNO : 0,39 %; -0,93 %
TELECOM : -0,57 %; -1,01 %
INDUSTRIAL : 0,65 %; -0,47 %
UTILITIES : -0,31 %; -0,76 %
TO BE COMING
Today
Results :Carrefour / Aegis
Dividend :France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events :
Monday
Results : Vinci (AMC) / Eiffage / Wendel / Sun Microsystems
Dividend : Halliburton ($ 0,09) / Schlumberger ($0.21)
Events:
Tuesday
Results : Vivendi (BMO) / US car sales
Dividend : Banco de Sabadell (€ 0,07)
Events : Global Industrials Conference at Morgan Stanley
Wednesday
Results : Bombardier
Dividend :BHP Billiton ( $ 0,455556) / Legal & General (GBp 1,233333) / CRH (€0.185) / Friends Provident ( GBp 1,444444)
Events:
Thursday
Results :Pernod Ricard
Dividend : Bank of America -ML ($0.01) / Merck & Co ($0.38)
Events:HMV AGM
ECONOMIC DATA PREVIEW
In the United States, watch the personal income and personal spending (13.30 GMT) for July. Personal income is expected to increase to reach positive territory lead by the low level of interest rate and by the decline of consumer prices and personal spending is expected to rise at a lower pace as the unemployment remained high.
In the United Kingdom, watch the preliminary release of the GDP for the second quarter expected to confirm the advance release at
-0.8%,-5.6% YoY. .
ECONOMY
United States: US GDP decline remained at 1.0% (QoQ annualized) as per the second estimate
After slumping by 6.4% QoQ (annualised) at the first quarter the second estimations of the U.S GDP remained unchanged showing a contraction of 1.0% and confirming that the recession is easing since the first quarter. Looking at the breakdown of the second quarter GDP revision, inventories are now estimated to have subtracted and additional 0.6% from the global growth, business investment subtracted 0.2%. On the other hand consumption and net exports contributed positively by 0.2% to overall growth while government expenditure added 0.1%. As showed by the latest manufacturing ISM index and especially the sub indexes production and employment, investment is recovering in the United States. As a matter of fact the virtuous circle : investment, employment consumption should occur in the coming months. Consequently the U.S GDP should turn positive at the third quarter. Nevertheless if this fragile rebound generate a rise of oil and interest rate the trend could be quickly reverse.
United States: Initial jobless claims and continuing claims decreased last week
After rising for two consecutive weeks initial jobless claims fell by 10 000 to 570 000 last week(forecast 565 000) confirming that the labour market is improving lead by the government stimulus measures helping to stabilize the manufacturing sector and the housing market. Meanwhile continuing claims dropped from 6 252 000 to 6 133 000 last week confirming that the hiring process is progressively unfreezing. Indeed after having over laying off lead by a fear behaviour about the economic outlook companies are now putting them self together getting back to a more rational behaviour This progressive recovery of the labour market is a significant positive news for the activity as personal consumption represent around 70% of the U.S. GDP.
Nice finish from the US with a positive tone emerging in afternoon trading as select financial stocks were squeezed higher welcoming the efficient impact from the Fed’s mortgage buying program and a sudden drop by the U.S. dollar helped lift energy and materials stocks. Better Dell earnings (up 6.7%) released by mistake on website just before the close was also supportive.
Consumer Spending survey will be the focus today, and might shake the market as volume should be small due to a long weekend taking place in the UK with the Monday’s Bank of Holiday coming.
Next week data will be interesting with the Employment report as a focus, but the ISM on Tuesday will be confirming the manufacturing pick up, vehicle sales being obviously very strong (same day), factory orders bull on Wednesday, ISM non manufacturing increasing on Thursday. Just to say next week possible inflow from coming fund managers will be very much supported by the macro news flow, and help equity indices head higher toward their pre Lehman levels (1200 S&P and 3200 Eurostoxx). The last few days should be seen as some nice and healthy consolidation, which the back to school business should end with the upside trend resuming.
Fund managers left their desk sceptical that a recovery is taking place, believing that the equity indices rise then was a bull trap, and this is just about the opposite which happened with the equity indices still frontrunning the economic activity. As a matter of fact, the economic activity seems gradually growing and might now spread from the manufacturing sector to the other sectors, such as the ex transport durable orders data as well as the Tuesday’s consumer confidence survey increase was reflecting. Fund managers bullishness increased by 30% regarding growth, but they are still 30% cash overweight, and not even talking about the trillions of cash sleeping in monetary funds which sooner or later will switch to equity fund managers business becoming even more overweight.
This coming weekend elections in Japan, and the confirmation of a decisive Democratic Party of Japan (DPJ) victory on Sunday should provide a further near-term boost to the Nikkei and possibly the yen too, although this outcome is already slightly anticipated. The upside may therefore now be limited, especially as doubts will soon creep in about what the new government will actually do. The equity markets have already reacted positively to this prospect, although more because of dissatisfaction with the LDP rather than any great enthusiasm for the alternative. However, talk that the DPJ would adopt a more stimulatory fiscal policy and boost consumer spending more than the LDP has done (or would do) is always nice to hear and will keep some bullish biais on the Nikkei.
Shanghai index still very volatile, driven by banks dropping on reports that lending has been shrinking in August, trimming liquidity flowing into the market.
Opening up welcoming the nice US ending, we should be very quiet awaiting the consumer spending data, long weekend coming in the UK might trigger some positions cuts and be once more market supportive through the end of the session
ECONOMIC DATA WITH IMPACT
Euro-zone EC economic sentiment index (10.00 UK) probably increased for the fifth month in a row in August, boosted by improvements in industrial, services and consumer confidence. We expect a rise to 79, from 76 in July, which would be consistent with a positive quarterly rate of GDP growth in Q3.
Personal income & Spending (13h30 UK) expected 0.1% & 0.2% from previous –1.3% & 0.4% / important this week as to measure the consumer mood and possible help for the current recovery. It is granted that consumers are not taking part to the game for now, but if they were to increase spending then the economic growth upside becomes more certain and sustainable.
PCE (13h30 UK) expected 0.1% from previous 0.2% / minor for the time being
Michigan index (14h55 UK) expected 64 from previous 63.2 / minor as just a revision and consumer confidence already rebounded
POSITIVE IMPACTS
L’OREAL : H1 rev €8.77Bn (in line)/Op pft €1.373Bn (1.29e) / Net €1.083Bn (1.09 e) / Sales margin 15.7%(14.7% e)/ Confirms outlook
BOUYGUES : H1 Rev €14.9Bn (14.78 e) / H1 Op pft €789M (716.5e) / H1 Net pft €547M (562.2e) / Co to cancel 493417 shrs / FY sales tgt raised to €31.5Bn from 31.3
LAGARDERE : H1 Op pft b4 associates €186M (169 e) / Confirms tgt / Financial situation is healthy
BANK OF IRELAND hired Citigroup and Nomura to help it sell about $1bn of state-backed bonds (Source)
GERMAN BANKS : German measures to improve credit issuance to firms will likely be passed soon (German official told Reuters)
MAN AG is planning to slash administration costs by 20%($128.1M), in its commercial vehicles unit (Die Welt)
STEEL : VOESTALPINE says demand for flat steel “rebounded significantly” / Still sees risk of another eco slump in 2010
ADP : H1 Rev €1.286bn (€1.27bn e) / EBITDA €423.6m (€405m e) / Net pft €127.3m (€120m) / Reaffirms 2009 Rev & Ebitda tgt
DELL ‘s earnings released a few minutes by mistake on website were better with eps 0.28 vbs 0.22 expected / revenue 12.76 vs 12.59 / nice cost cutting trying to protect margins
NEGATIVE IMPACTS
CARREFOUR : H1 Op pft €1.01Bn (995 e)/ H1 EBIT €499.5M (446M to 1Bn e) / H1 Net loss €58.10M (58.7 e) / Confirms FY tgt
LUFTHANSA : S&P cuts rating to BBB- from BBB/ The outlook is negative
TELECOM ITALIA: The Argentine antitrust commission has ruled that TIT Italia must sell its Telecom Argentina assets
E.ON may be charged on at least half of their earnings from running nuclear power plants past scheduled shutdown dates if the next govt overturns a phase-out of nuclear energy (Handelsblatt)
BAE Systems has failed to win the $281M follow-on U.S. govt contract for armoured battlefield vehicles .
HERMES : H1 Operating Profit €199.8m (€211m e) / Maintains 2009 Target of flat sales FCC & slight drop in current operating profit
IBERIA : H1 Op loss €276.9M( 257.3 e) / H1 Net loss €165.4M (160.5 e)
ICADE : CDC sells 2.85% of Icade to institutional investors, (Now CDC holds 58.74% of Icade)
TRADING IDEAS
BUY VIVENDI & VINCI ahead of results next week & BUY AHOLD to play island possibility still
BUY Energy names such as EDF / ENEL / ROYAL DUTCH / BP / TOTAL / ENI on eco recovery
BUY NOKIA / ERICSSON on double bottom possibility & BUY PEUGEOT on reversal Head & Shoulder possibility
BUY PHILIPS / SELL SAP // BUY DEUTSCHE TEL / SELL FRANCE TEL // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY CONOCOPHILLIPS / SELL CHEVRON
BUY DEUTSCHE TEL / SELL FRANCE TEL // BUY AEGON / SELL MUNICH RE // BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY INTEL / SELL TEXAS // BUY CONOCOPHILLIPS / SELL CHEVRON
BROKER METEOROLOGY
NH HOTELES RAISED TO BUY FROM SELL BY UBS
EULER HERMES RAISED NEW OVERWEIGHT BY JP MORGAN
SUEZ ENVIRONNEMENT RAISED TO OVERWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
H&M RAISED TO EQUALWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
L’ORAL RAISED TO NEUTRAL FROM SELL BY UBS
L’ORAL RAISED TO BUY FROM NEUTRAL BY BANK OF AMERICA – ML
OMEGA PHARMA RAISED TO BUY FROM HOLD BY ING
JC DECAUX RAISED TO NEUTRAL FROM UNDERWEIGHT BY CREDIT SUISSE
BALOISE CUT TO NEUTRAL FROM BUY BY UBS
PREMIER OIL CUT TO HOLD FROM BUY BY JEFFERIES
SEADRILL CUT TO NEUTRAL FROM OVERWEIGHT BY CREDIT SUISSE
ENAGAS CUT TO NEUTRAL FROM BUY BY DEUTSCHE BANK
DATA
WTI : 72,6 (2,07 %)
Eur/$ : 1,4359 (0,12 %)
$ /Yen : 93,70 (-0,31 )
10 Yr US : 3,46 ( 0,55 bp)
10 Yr Euro : 3,25 ( 1 bp)
Indices : US close ; Europe close
SOX : 0,25 %;-1,23%
S&P :0,28 %; -0,83 %
DOW: 0,39%; -0,49 %
NAS :0,16%; -1,12%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,36 %; -1,48 %
ENERGY : -0,30 %; -1,91 %
FINANCIAL : 0,89 %; -0,53 %
HEALTHCARE : 0,19 %; -0,61 %
TECHNO : 0,39 %; -0,93 %
TELECOM : -0,57 %; -1,01 %
INDUSTRIAL : 0,65 %; -0,47 %
UTILITIES : -0,31 %; -0,76 %
TO BE COMING
Today
Results :Carrefour / Aegis
Dividend :France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events :
Monday
Results : Vinci (AMC) / Eiffage / Wendel / Sun Microsystems
Dividend : Halliburton ($ 0,09) / Schlumberger ($0.21)
Events:
Tuesday
Results : Vivendi (BMO) / US car sales
Dividend : Banco de Sabadell (€ 0,07)
Events : Global Industrials Conference at Morgan Stanley
Wednesday
Results : Bombardier
Dividend :BHP Billiton ( $ 0,455556) / Legal & General (GBp 1,233333) / CRH (€0.185) / Friends Provident ( GBp 1,444444)
Events:
Thursday
Results :Pernod Ricard
Dividend : Bank of America -ML ($0.01) / Merck & Co ($0.38)
Events:HMV AGM
ECONOMIC DATA PREVIEW
In the United States, watch the personal income and personal spending (13.30 GMT) for July. Personal income is expected to increase to reach positive territory lead by the low level of interest rate and by the decline of consumer prices and personal spending is expected to rise at a lower pace as the unemployment remained high.
In the United Kingdom, watch the preliminary release of the GDP for the second quarter expected to confirm the advance release at
-0.8%,-5.6% YoY. .
ECONOMY
United States: US GDP decline remained at 1.0% (QoQ annualized) as per the second estimate
After slumping by 6.4% QoQ (annualised) at the first quarter the second estimations of the U.S GDP remained unchanged showing a contraction of 1.0% and confirming that the recession is easing since the first quarter. Looking at the breakdown of the second quarter GDP revision, inventories are now estimated to have subtracted and additional 0.6% from the global growth, business investment subtracted 0.2%. On the other hand consumption and net exports contributed positively by 0.2% to overall growth while government expenditure added 0.1%. As showed by the latest manufacturing ISM index and especially the sub indexes production and employment, investment is recovering in the United States. As a matter of fact the virtuous circle : investment, employment consumption should occur in the coming months. Consequently the U.S GDP should turn positive at the third quarter. Nevertheless if this fragile rebound generate a rise of oil and interest rate the trend could be quickly reverse.
United States: Initial jobless claims and continuing claims decreased last week
After rising for two consecutive weeks initial jobless claims fell by 10 000 to 570 000 last week(forecast 565 000) confirming that the labour market is improving lead by the government stimulus measures helping to stabilize the manufacturing sector and the housing market. Meanwhile continuing claims dropped from 6 252 000 to 6 133 000 last week confirming that the hiring process is progressively unfreezing. Indeed after having over laying off lead by a fear behaviour about the economic outlook companies are now putting them self together getting back to a more rational behaviour This progressive recovery of the labour market is a significant positive news for the activity as personal consumption represent around 70% of the U.S. GDP.
Thursday, August 27, 2009
Always Better
GLOBAL EQUITIES RESEARCH
The better-than-expected Durable Orders and new home sales report brought about a broad-based buying effort in the US that took stocks to their best levels of the session. However, gains were capped as buyers seemed unwilling to chase stocks higher. That left the major indices to drift lower. Stocks did drift to afternoon lows following news that an auction of 5-year Treasuries produced a high yield of roughly 2.49% and a bid-to-cover ratio of approximately 2.5. A lack of conviction behind the selling effort enabled the stock market to make its way back to neutral territory. The lack of interest on the part of participants was also made evident by the lack of trading volume this session. Hardly 1 billion shares traded hands on the NYSE.
Quiet day today in term of newsflow, with a focus on the Jobless Claims. But the important one now this week will be the consumer spending tomorrow. Indeed the latest data on the manufacturing front were all good. The continued recovery in July durable goods orders released yesterday adds to the evidence that manufacturing is expanding again. The 4.9% m/m increase in headline orders catches the eye, but the 0.8% gain in non-transportation orders (the third consecutive monthly increase) was impressive, especially as the previous data was revised on the upside. The factory sector is obviously enjoying a rebound in demand, some of it from abroad and some of it linked to inventory rebuilding. Bear strategists are still hopelessly betting that the consumer demand is still struggling, preventing the foundations for a sustainable recovery. Already Tuesday consumer confidence rebound was a bad news for that scenario. So far so good, the macro background is always improving, and should remain as such for some more months given the government stimuli, supporting for a while both the economy and the equity markets.
A better economy, some better equity levels, some bottoming housing sectors, some banks doing money back again with government in the end cashing their profits from the time they had to inject cash to bail out, what else do you want for now ? Hiring. This lagging indicator should improve as well, and maybe as soon as in September as the short time workers will not false the employment report anymore. A recovery has to start somewhere, it seems to us that it has well started. Whether it is sustainable, why would it not be when so much money and power is focusing on that goal ?
The 9.6% m/m increase in US new home sales in July added to the evidence that the housing market has turned a corner. At 433,000 in July, new home sales have risen for four consecutive months, are well above January's trough of 329,000 and are more or less back at levels seen before the collapse of Lehmans last September. Moreover, the NAHB index suggests that new home sales will soon increase to 500,000. Perhaps the most encouraging development is the further fall in the months' supply of unsold homes, from 8.8 in June to a two-year low of 7.5. Nevertheless, bear players will tell you despite these improvements, new homes sales remain 70% below their peak and 40% below the long-run average. There is clearly a long way to go before the housing market returns to anything like normal. We find that situation even more bullish, as the upside in the housing sector is big then, and probably one of the reasons why some strategists hardly believe in a V shape recovery.
Not much news today, should offer the possibility of a little consolidation. The US Q2 GDP revision out today should be seen as old news, already July data belonging to Q3 are showing signs of improvement. Focus Consumer Spending tomorrow, and, unfortunately, UK long weekend with the Bank Holiday on Monday / M&A will be back (small 1.85 bn$ one this morning with Eldorado on Sino Gold Mining)
ECONOMIC DATA WITH IMPACT
Toll Brothers (DLTR) / Dell (DELL) / Marvell Technology (MRVL) / Novell (NOVL)
Jobless Claims (13h30 UK) expected 565k from previous 576k / minor as weekly data, although the lack of activity might trigger a little move short term
St Louis Fed President Bullard (16h UK)
DELL after US close
POSITIVE IMPACTS
GDF SUEZ : H1 EBITDA €7.9Bn ( 7.89 e) / H1 Net €3.3Bn (2.87 e) / Interim Div €0.8 /Reafirms growth tgt
ACCOR: H1 pre tax €182M (163 e) / FY tgt 400-450M / To study split of its biz in 2 units (Hotels & services )
CASINO : H1 Rev €13.45Bn (13.44 e) / H1 Op pft €488M (487.3e) / H1 Net €231M (229e) / H1 Trading pft €488M (498 e) / Confirms FY tgt / Confirms €1Bn of Asset disposals by end 2010
ESSILOR :H1 Sales €1.66Bn (in line) / H1 Net profit €202.4 (€204m exp) / Operating margin unchanged at18.2%
CREDIT AGRICOLE : Q2 Rev €4.56bn (€4.3bn e) / costs €2.99bn (In line) / gross Op pft €1.57bn ( €1.32bn e) / net pft €201m (€125m e) / Tier1 ratio 9.2% / says world eco environment still difficult but Co well placed / No plans to take 2nd phase of Govt support
BALOISE : H1 net profit chf234.6m (€223m exp) / CR 90.6% (92% exp) / Solvency ratio 209% / sees signs for rising premiums / Fully on track to meet targets / Confirms goal of 15% ROE over cycle
LLOYDS may sell part of its fund management biz, including a possible IPO of Scottish Widows, to raise cash after its bailout (Source) / Separatly Lloyds is hoping to reduce its use of the govt's insurance scheme for toxic assets by offering investors a new form of interest-paying capital instrument which could be converted into ordinary shrs for those who choose to subscribe ( the Times)
ALBK : Canadian Imperial Bk of Commerce’s CEO : “There are opportunities in many jurisdictions that we have & are looking at”. Said its 1st priority is to stengthen core biz but acquisition may help build capacity. Declines to confirm that is seeking a minority stake in ALBK
MININGS shares could be well supported following the Canadian Eldorado 1.85 bn$ bid all in stock on Sino Gold Mining which said ok / Eldorado used to own already 19.8% stake of Sino Gold (up 12% in Hong Kong and Sydney)
STEEL : China's crude steel output could hit a record in Aug as data from the China Iron & Steel Association (CISA) showed daily production was running at an all-time peak in the first 10 days of the month (source)
PEUGEOT ,CARS : Peugeot sees total car demand in Europe in the second half of the year falling less than expected,
GLAXOSMITHKLINE : Genmab got positive top-line results from a phase II study of its Arzerra cancer drug (co-developed with GSK)
NEGATIVE IMPACTS
DEXIA : Q2 Revenue €1.64bn ( €1.7bn exp) / Net Profit €283m (€390m exp) / Provisions €175m / Tier1 11.3% - Core tier1 10.4%
BUREAU VERITAS: H1 Sales €1.329Bn (1.35 e) / H1 Op pft €205.4 (213 e) /H1 Net €130.5M (130 e) /Lift 2009 tgt & confirms 2011 tgt
UK BANKS The chairman of FSA said he would back higher taxes on the country's financial sector to prevent institutions making excessive profits and to curb excessive pay.
TEL ITALIA: Argentine antitrust authorities have ruled that TIT must quit Telecom Argentina to avoid a telco monopoly (local media)
REPSOL will pay $203M in cash & vouchers to acquire a minority share in the Barua-Motatan oil field,
EDF :Creditors of Eggborough plant, have exercised an option to take control of 1 of Britain's biggest coal-fired plants, (FT)
DAIMLER:Chrysler has sued DAI, saying Co failed to honor supply contracts for parts essential for the prod of key Chrysler vehicles.
Q-CELLS may face a setback in its plan to build Germany’s biggest solar park with MEMC Electronic Materials (Handelsblatt)
TRADING IDEAS
BUY Energy names such as EDF / ENEL / ROYAL DUTCH / BP / TOTAL / ENI on eco recovery
BUY Retail names as AHOLD (to play island possibility) / CARREFOUR & L OREAL (ahead of results)
BUY NOKIA / ERICSSON on double bottom possibility & BUY PEUGEOT on reversal Head & Shoulder possibility
BUY DEUTSCHE TEL / SELL FRANCE TEL // BUY AEGON / SELL MUNICH RE // BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY INTEL / SELL TEXAS // BUY CONOCOPHILLIPS / SELL CHEVRON
BROKER METEOROLOGY
NATIXIS RAISED TO NEUTRAL FROM REDUCE BY NOMURA
NATIXIS RAISED TO BUY FROM SELL BY CITIGROUP
BARCLAYS RAISED TO OUTPERFORM FROM MARKETPERFORM BY KBW
DATA
WTI : 71,1 (-1,31 %)
Eur/$ : 1,4249 (-0,05 %)
$ /Yen : 93,71 (0,62 )
10 Yr US : 3,42 ( -0,93 bp)
10 Yr Euro : 3,24 ( -3,4 bp)
Indices : US close ; Europe close
SOX : 0,82 %;-0,01%
S&P :0,01 %; -0,22 %
DOW: 0,04%; -0,14 %
NAS :0,01%; -0,31%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -0,71 %; -0,88 %
ENERGY : 0,40 %; -0,16 %
FINANCIAL : -0,04 %; -0,28 %
HEALTHCARE : -0,23 %; -0,17 %
TECHNO : 0,05 %; -0,40 %
TELECOM : 0,75 %; 0,93 %
INDUSTRIAL : -0,70 %; -0,94 %
UTILITIES : -0,09 %; -0,16 %
TO BE COMING
Today
Results :Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend :Time Warner ($ 0,1875)
Events :
Friday
Results : Carrefour / Aegis
Dividend : France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events:
Monday
Results : Vinci (AMC) / Eiffage / Wendel / Sun Microsystems
Dividend : Halliburton ($ 0,09) / Schlumberger ($0.21)
Events :
Tuesday
Results : Vivendi (BMO) / US car sales
Dividend :Banco de Sabadell (€ 0,07)
Events: Global Industrials Conference at Morgan Stanley
Wednesday
Results :Bombardier
Dividend : BHP Billiton ( $ 0,455556) / Legal & General (GBp 1,233333)
Events:
ECONOMIC DATA PREVIEW
In the United States, watch the preliminary release of the GDP (annualized) (13.30 GMT) for the second quarter. After slumping by 6.4% QoQ (annualized) at the first quarter the preliminary release of the US GDP should reveal a sharper contraction than the advanced release at -1.5% Meanwhile US personal consumption should remained stable since the first quarter at -1.2% lead by the drop of prices and despite the employment situation.
In Germany, watch the consumer price index for August expected to drop at a slower pace but to remained in negative territory at -0.2% YoY confirming than the deflation trend in Germany .
ECONOMY
United States: Sharp increase of the durable goods orders in July
New orders for manufactured durable goods rise from -1.3%in June to + 4.9% in July, the third increase in the last four month and the largest percent increase since July 2007. This rise of durable goods orders is confirming the expansion of the manufacturing sector and more generally the progressive recovery in the United-States has showed by the latest economic statistics. Meanwhile durable goods ex transportations increase for a third consecutive month to reach + 0.8% confirming the fact that recent Boeing orders and motor vehicle sales (+ 0.9%) boosted July’s durable goods orders. Indeed if we look at the breakdown capital goods increase by 9.5% by ex aircraft orders fell by 0.3%. This increase of durable goods orders confirm as well the rebound in domestic and foreign demand and could lead the economy to a virtuous circle investment, employment , consumption.
United States: New home sales jumped in July
After reaching a bottom in January at 329 000 new home sales rose in July for the fifth time in six month and for the fourth consecutive month to reach 433 000 the highest level since September 2008. The 9.6% rise since June is the most important increase since February 2005 and underline the fact that the housing slump is ending lead by the Obama administration’s incentive and by the Fed’s action on the credit. The housing market which is bottoming out is another sign of the recovery in the United-States.
Germany: Business confidence increase for a fifht month in August
After a yearly historical recession during which German’s GDP fell by 6.9% it seems that Germany is now progressively recovering. Indeed following the sharp rise of the ZEW which reached its highest level since April 2006 (meaning that an increasing majority of investors expect economic condition to improve in the next six months than expect them to worsen), German IFO business confidence rose for a fifth month in August to one year high at 90.5 (expected 89.0). Meanwhile IFO expectation rose for a eight consecutive month to reach its higher level since May 2008 at 95.0 (expectation 92.0). This rise was mainly lead by the stimulus package in Germany and by the possible rebound of exports. Nevertheless this improvement of the IFO index should not stop the ECB to decrease its leading rate nor the German government to pursue its stimulus plan. Indeed if the euro continue to rise, if the energy prices pursued their rising trend and if the ECB increase its Refi rate the upcoming slight recovery could quickly disappear
The better-than-expected Durable Orders and new home sales report brought about a broad-based buying effort in the US that took stocks to their best levels of the session. However, gains were capped as buyers seemed unwilling to chase stocks higher. That left the major indices to drift lower. Stocks did drift to afternoon lows following news that an auction of 5-year Treasuries produced a high yield of roughly 2.49% and a bid-to-cover ratio of approximately 2.5. A lack of conviction behind the selling effort enabled the stock market to make its way back to neutral territory. The lack of interest on the part of participants was also made evident by the lack of trading volume this session. Hardly 1 billion shares traded hands on the NYSE.
Quiet day today in term of newsflow, with a focus on the Jobless Claims. But the important one now this week will be the consumer spending tomorrow. Indeed the latest data on the manufacturing front were all good. The continued recovery in July durable goods orders released yesterday adds to the evidence that manufacturing is expanding again. The 4.9% m/m increase in headline orders catches the eye, but the 0.8% gain in non-transportation orders (the third consecutive monthly increase) was impressive, especially as the previous data was revised on the upside. The factory sector is obviously enjoying a rebound in demand, some of it from abroad and some of it linked to inventory rebuilding. Bear strategists are still hopelessly betting that the consumer demand is still struggling, preventing the foundations for a sustainable recovery. Already Tuesday consumer confidence rebound was a bad news for that scenario. So far so good, the macro background is always improving, and should remain as such for some more months given the government stimuli, supporting for a while both the economy and the equity markets.
A better economy, some better equity levels, some bottoming housing sectors, some banks doing money back again with government in the end cashing their profits from the time they had to inject cash to bail out, what else do you want for now ? Hiring. This lagging indicator should improve as well, and maybe as soon as in September as the short time workers will not false the employment report anymore. A recovery has to start somewhere, it seems to us that it has well started. Whether it is sustainable, why would it not be when so much money and power is focusing on that goal ?
The 9.6% m/m increase in US new home sales in July added to the evidence that the housing market has turned a corner. At 433,000 in July, new home sales have risen for four consecutive months, are well above January's trough of 329,000 and are more or less back at levels seen before the collapse of Lehmans last September. Moreover, the NAHB index suggests that new home sales will soon increase to 500,000. Perhaps the most encouraging development is the further fall in the months' supply of unsold homes, from 8.8 in June to a two-year low of 7.5. Nevertheless, bear players will tell you despite these improvements, new homes sales remain 70% below their peak and 40% below the long-run average. There is clearly a long way to go before the housing market returns to anything like normal. We find that situation even more bullish, as the upside in the housing sector is big then, and probably one of the reasons why some strategists hardly believe in a V shape recovery.
Not much news today, should offer the possibility of a little consolidation. The US Q2 GDP revision out today should be seen as old news, already July data belonging to Q3 are showing signs of improvement. Focus Consumer Spending tomorrow, and, unfortunately, UK long weekend with the Bank Holiday on Monday / M&A will be back (small 1.85 bn$ one this morning with Eldorado on Sino Gold Mining)
ECONOMIC DATA WITH IMPACT
Toll Brothers (DLTR) / Dell (DELL) / Marvell Technology (MRVL) / Novell (NOVL)
Jobless Claims (13h30 UK) expected 565k from previous 576k / minor as weekly data, although the lack of activity might trigger a little move short term
St Louis Fed President Bullard (16h UK)
DELL after US close
POSITIVE IMPACTS
GDF SUEZ : H1 EBITDA €7.9Bn ( 7.89 e) / H1 Net €3.3Bn (2.87 e) / Interim Div €0.8 /Reafirms growth tgt
ACCOR: H1 pre tax €182M (163 e) / FY tgt 400-450M / To study split of its biz in 2 units (Hotels & services )
CASINO : H1 Rev €13.45Bn (13.44 e) / H1 Op pft €488M (487.3e) / H1 Net €231M (229e) / H1 Trading pft €488M (498 e) / Confirms FY tgt / Confirms €1Bn of Asset disposals by end 2010
ESSILOR :H1 Sales €1.66Bn (in line) / H1 Net profit €202.4 (€204m exp) / Operating margin unchanged at18.2%
CREDIT AGRICOLE : Q2 Rev €4.56bn (€4.3bn e) / costs €2.99bn (In line) / gross Op pft €1.57bn ( €1.32bn e) / net pft €201m (€125m e) / Tier1 ratio 9.2% / says world eco environment still difficult but Co well placed / No plans to take 2nd phase of Govt support
BALOISE : H1 net profit chf234.6m (€223m exp) / CR 90.6% (92% exp) / Solvency ratio 209% / sees signs for rising premiums / Fully on track to meet targets / Confirms goal of 15% ROE over cycle
LLOYDS may sell part of its fund management biz, including a possible IPO of Scottish Widows, to raise cash after its bailout (Source) / Separatly Lloyds is hoping to reduce its use of the govt's insurance scheme for toxic assets by offering investors a new form of interest-paying capital instrument which could be converted into ordinary shrs for those who choose to subscribe ( the Times)
ALBK : Canadian Imperial Bk of Commerce’s CEO : “There are opportunities in many jurisdictions that we have & are looking at”. Said its 1st priority is to stengthen core biz but acquisition may help build capacity. Declines to confirm that is seeking a minority stake in ALBK
MININGS shares could be well supported following the Canadian Eldorado 1.85 bn$ bid all in stock on Sino Gold Mining which said ok / Eldorado used to own already 19.8% stake of Sino Gold (up 12% in Hong Kong and Sydney)
STEEL : China's crude steel output could hit a record in Aug as data from the China Iron & Steel Association (CISA) showed daily production was running at an all-time peak in the first 10 days of the month (source)
PEUGEOT ,CARS : Peugeot sees total car demand in Europe in the second half of the year falling less than expected,
GLAXOSMITHKLINE : Genmab got positive top-line results from a phase II study of its Arzerra cancer drug (co-developed with GSK)
NEGATIVE IMPACTS
DEXIA : Q2 Revenue €1.64bn ( €1.7bn exp) / Net Profit €283m (€390m exp) / Provisions €175m / Tier1 11.3% - Core tier1 10.4%
BUREAU VERITAS: H1 Sales €1.329Bn (1.35 e) / H1 Op pft €205.4 (213 e) /H1 Net €130.5M (130 e) /Lift 2009 tgt & confirms 2011 tgt
UK BANKS The chairman of FSA said he would back higher taxes on the country's financial sector to prevent institutions making excessive profits and to curb excessive pay.
TEL ITALIA: Argentine antitrust authorities have ruled that TIT must quit Telecom Argentina to avoid a telco monopoly (local media)
REPSOL will pay $203M in cash & vouchers to acquire a minority share in the Barua-Motatan oil field,
EDF :Creditors of Eggborough plant, have exercised an option to take control of 1 of Britain's biggest coal-fired plants, (FT)
DAIMLER:Chrysler has sued DAI, saying Co failed to honor supply contracts for parts essential for the prod of key Chrysler vehicles.
Q-CELLS may face a setback in its plan to build Germany’s biggest solar park with MEMC Electronic Materials (Handelsblatt)
TRADING IDEAS
BUY Energy names such as EDF / ENEL / ROYAL DUTCH / BP / TOTAL / ENI on eco recovery
BUY Retail names as AHOLD (to play island possibility) / CARREFOUR & L OREAL (ahead of results)
BUY NOKIA / ERICSSON on double bottom possibility & BUY PEUGEOT on reversal Head & Shoulder possibility
BUY DEUTSCHE TEL / SELL FRANCE TEL // BUY AEGON / SELL MUNICH RE // BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY INTEL / SELL TEXAS // BUY CONOCOPHILLIPS / SELL CHEVRON
BROKER METEOROLOGY
NATIXIS RAISED TO NEUTRAL FROM REDUCE BY NOMURA
NATIXIS RAISED TO BUY FROM SELL BY CITIGROUP
BARCLAYS RAISED TO OUTPERFORM FROM MARKETPERFORM BY KBW
DATA
WTI : 71,1 (-1,31 %)
Eur/$ : 1,4249 (-0,05 %)
$ /Yen : 93,71 (0,62 )
10 Yr US : 3,42 ( -0,93 bp)
10 Yr Euro : 3,24 ( -3,4 bp)
Indices : US close ; Europe close
SOX : 0,82 %;-0,01%
S&P :0,01 %; -0,22 %
DOW: 0,04%; -0,14 %
NAS :0,01%; -0,31%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -0,71 %; -0,88 %
ENERGY : 0,40 %; -0,16 %
FINANCIAL : -0,04 %; -0,28 %
HEALTHCARE : -0,23 %; -0,17 %
TECHNO : 0,05 %; -0,40 %
TELECOM : 0,75 %; 0,93 %
INDUSTRIAL : -0,70 %; -0,94 %
UTILITIES : -0,09 %; -0,16 %
TO BE COMING
Today
Results :Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend :Time Warner ($ 0,1875)
Events :
Friday
Results : Carrefour / Aegis
Dividend : France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events:
Monday
Results : Vinci (AMC) / Eiffage / Wendel / Sun Microsystems
Dividend : Halliburton ($ 0,09) / Schlumberger ($0.21)
Events :
Tuesday
Results : Vivendi (BMO) / US car sales
Dividend :Banco de Sabadell (€ 0,07)
Events: Global Industrials Conference at Morgan Stanley
Wednesday
Results :Bombardier
Dividend : BHP Billiton ( $ 0,455556) / Legal & General (GBp 1,233333)
Events:
ECONOMIC DATA PREVIEW
In the United States, watch the preliminary release of the GDP (annualized) (13.30 GMT) for the second quarter. After slumping by 6.4% QoQ (annualized) at the first quarter the preliminary release of the US GDP should reveal a sharper contraction than the advanced release at -1.5% Meanwhile US personal consumption should remained stable since the first quarter at -1.2% lead by the drop of prices and despite the employment situation.
In Germany, watch the consumer price index for August expected to drop at a slower pace but to remained in negative territory at -0.2% YoY confirming than the deflation trend in Germany .
ECONOMY
United States: Sharp increase of the durable goods orders in July
New orders for manufactured durable goods rise from -1.3%in June to + 4.9% in July, the third increase in the last four month and the largest percent increase since July 2007. This rise of durable goods orders is confirming the expansion of the manufacturing sector and more generally the progressive recovery in the United-States has showed by the latest economic statistics. Meanwhile durable goods ex transportations increase for a third consecutive month to reach + 0.8% confirming the fact that recent Boeing orders and motor vehicle sales (+ 0.9%) boosted July’s durable goods orders. Indeed if we look at the breakdown capital goods increase by 9.5% by ex aircraft orders fell by 0.3%. This increase of durable goods orders confirm as well the rebound in domestic and foreign demand and could lead the economy to a virtuous circle investment, employment , consumption.
United States: New home sales jumped in July
After reaching a bottom in January at 329 000 new home sales rose in July for the fifth time in six month and for the fourth consecutive month to reach 433 000 the highest level since September 2008. The 9.6% rise since June is the most important increase since February 2005 and underline the fact that the housing slump is ending lead by the Obama administration’s incentive and by the Fed’s action on the credit. The housing market which is bottoming out is another sign of the recovery in the United-States.
Germany: Business confidence increase for a fifht month in August
After a yearly historical recession during which German’s GDP fell by 6.9% it seems that Germany is now progressively recovering. Indeed following the sharp rise of the ZEW which reached its highest level since April 2006 (meaning that an increasing majority of investors expect economic condition to improve in the next six months than expect them to worsen), German IFO business confidence rose for a fifth month in August to one year high at 90.5 (expected 89.0). Meanwhile IFO expectation rose for a eight consecutive month to reach its higher level since May 2008 at 95.0 (expectation 92.0). This rise was mainly lead by the stimulus package in Germany and by the possible rebound of exports. Nevertheless this improvement of the IFO index should not stop the ECB to decrease its leading rate nor the German government to pursue its stimulus plan. Indeed if the euro continue to rise, if the energy prices pursued their rising trend and if the ECB increase its Refi rate the upcoming slight recovery could quickly disappear
Wednesday, August 26, 2009
Altitude
GLOBAL EQUITIES RESEARCH
Another day of good news yesterday, or should we say another day of news, which we are now used to cheer as they are telling us we are getting out of the crisis, and the only question remains the speed of the economic growth to be expected in the coming years. Already the speed of the recovery, stimulus or not, is rather impressive and makes bear strategists postpone their Armagedon forecast for Q4 (which means in another life given the current market visibility, clearing out by the way a bit more every day).
The US housing market downturn appears to be drawing to a close. After falling by 32% since 2006, the Case-Shiller National index suggested that prices increased by a seasonally adjusted 1.4% in Q2. This is the first increase since prices started falling three years ago. The alternative FHFA index also suggests that prices have started to rise again. It recorded a 0.5% m/m increase in June. That 32% peak to trough decline had left housing looking slightly undervalued relative to incomes, so there is some scope for further rebound. The large inventory overhang and the weakness of mortgage applications are likely to constrain the recovery in prices for a start, but housing will now be adding to the GDP and will no longer be a drag, and the sector is joining the virtuous circle which makes any Armagedon forecast a pure fiction as time is passing by.
The important one this week was to be the Consumer Confidence, as any decline would have reinforce the view that the consumer is not part of the recovery for now, and being a so big component for the GDP a sustainable one would be far from safe. The Conference Board measure actually increased in August, from 47.4 in July to 54.1, reversing the decline of previous two months. This presumably reflects the recent surge in the S&P 500 above 1,000. Admitedly confidence remains well below its historical average of 95 and it has not even regained the level of 61 seen before the collapse of Lehmans almost a year ago. But the recovery is now happening on every front, starting with the manufacturing sector, going through the banks, which will be even more supported by the housing business increase, which with the equity markets rebound at a time of extremely low mortgage rates will boost households wealth effect, and might turn the so far artificial recovery into a complete and solid one.
Elsewhere, the news that Ben Bernanke has been nominated for a second term as Fed Chairman caused few ripples in the markets mainly as it was largely expected. But at the margins, the news that the deflation-conscious Bernanke is going to be at the helm for another four years provides tentative support that the zero-interest rate policy will remain in place until 2011 at the earliest. And this, once again is good news. Bernanke and Obama is the winning team to fight this rough moment, and they seem to own the weapon, the charisma, and the money to succeed in their mission.
Today's avalanche of news, ie good news, might keep the market very well supported, and make it move slightly but surely toward the pre Lehman levels 1200 on the S&P and 3200 on the cash Eurostoxx. Durable orders will be strong, and even stronger next month, while it makes no doubts anymore that the housing sector has been bottoming. (see eco data below)
ECONOMIC DATA WITH IMPACT
German Ifo business sentiment (09.00 UK time) expected up for a fifth consecutive month in August. Given further evidence of an improvement in global demand and signs in the hard data that Germany is starting to respond, the headline index should be rising from 87.3 to about 89.0 / minor as we already know Germany is doing well and its GDP will be positive in Q3 once more.
Mortgage Applications (12h UK) / previous was +5.6% / the higher the better / minor as weekly and volatile data
Durable goods orders (13.30 UK) expected +3% showing a strong rebound in July / ex transport +0.7% / Upside possibility to that consensus thanks to the continued improvement in the survey evidence – the ISM new orders index hit a two-year high in July – also pointing to another increase in core orders / expect a big rebound in the transportation sector. We already know that Boeing more than doubled the bookings it took last month while we suspect the success of the "cash for clunkers" scheme will also have prompted a rebound in orders for motor vehicles and parts / important, and should be even stronger next month
New home sales (15.00 UK) expected +386k from 384 previous / although July rebound is modest, it seems pretty clear that sales activity is passed the worst. Indeed, the current sales balance of the NAHB home-building index suggests that within three months the number of new home sales will have climbed from 384,000 in June to around 500,000 / interesting
Oil inventories (15h35 UK)
Atlanta Fed President Lockhart (16h30 UK)
POSITIVE IMPACTS
HEINEKEN : H1 rev €7.147Bn (6.94 e) / H1 Op pft €993M (927 e) / H1 Net pft €483M (446 e) / Co expects neg FX impact on result to be larger / Beer consumption decline to ease end 2009 / Interim Div €0.25
DAIMLER : Issues new € 2bn bond expiring 2014 with a 185 bp spread and a 4.65% coupon
NATIXIS : Q2 Revenue €568m (€750m exp) / Net Loss €883m (€-910m exp) / Has included an additional provision of €748m / / BPCE will cover €35bn of GAPC assets /Tier1 ratio 9.3% & core at 8.2% / Affirms return of profit in 2H2009 / Says 2012 ROE is over 12%
ING has asked for final bids for its private banking operations and is seeking about $1.8bn (Source) / At least 6 bidders are interested according source.
FRENCH BANKS : BNP, GLE & ACA have signed up to the new rules. It includes deferring traders’ bonuses over 3 years, paying 1/3 of awards in shares, and imposing strict LT performance criteria in order to receive full payment. The govt has also appointed bonus watchdogs at banks that have received state aid
SWISS LIFE H1 Total income chf10.2bn (10.9 e)/ H1 Gross Written Premiums chf10.387bn (sfr10.75bn e) / Net Profit chf172m (162m exp) / Solvency ratio 155% (in line) / Press conf at 8:00 UKT
SUEZ ENVIRONNEMENT H1 Revenue €5.87bn (In line) / EBITDA €951m (€926m exp) / Confirms 2009 Free cash flow target above 2008 / Sees overall stability in 2009 Sales & EBITDA vs Previous goal of low single-digit growth
GAZPROM Q1 Sales Rubles931bn (912bn exp) / Net income 104bn (75bn exp)
WPP : H1 rev £4.29Bn (4.32e)/ LFL Rev –8.3%(-7.8% e)/EBITDA £455.7M (434 e)/ Interim div 5.19p/Evidence of stronger order book
NEGATIVE IMPACTS
ROCHE failed to win expanded use for its Avastin tumor drug in the U.K. after the country’s medical spending adviser said the treatment and others cost too much to use in the most common type of kidney cancer.
SANOFI : Patients with a particular gene variation are 2 times more likely to have a heart attack or stroke while taking the Plavix than those without the variation, according to a study to be published Wednesday in the Journal of the American Medical Association
BAYER : Britain's healthcare cost-effectiveness watchdog has rejected an appeal to make 3 drugs available to kidney cancer patients on the state National Health Service (NHS).
TUI will be replaced by Aixtron AG (AIXG.DE) in its Dow Jones STOXX 600 Index on Sept 21.
INBEV plans to raise beer prices in most U.S. markets later this year to help cover some input costs
LLOYDS may have to write off £500m on loans made to Admiral Taverns Ltd (FT reported) / Impression of “Déjà vu”
GERMAN BANKS : German Fin Minister Peer Steinbrueck said the govt may need to pump more money into credit markets if measures by the banks aren’t sufficient to feed the economy (Handelsblatt)
HYPO REAL ESTATE needs up to €7bn of new state aid (Bild reported)
RBS has delayed the sale of assets in India, China and Malaysia after an initial round of negotiations with STAN failed (Mint reported)/ Separatly ABN says to file legal demerger documentation with the Dutch chamber of commerce in September 2009....Legal separation from RBS still aimed to be achieved by the Year-end
ANTOFAGASTA : H1 rev $1.18Bn (1.195e) / H1 EPS 23.9cts (25.8 e)/ DIV 3.4 cts / To increase copper prod by over 50% to ~700k t from 2011 / Short term outlook remains uncertain
TRADING IDEAS
BUY Retail names as AHOLD (to play island possibility) / CARREFOUR & L OREAL (ahead of results) / METRO
BUY Cars such as RENAULT / PEUGEOT & BUY OIL names such as BP / TOTAL / ENI on eco recovery
BUY NOKIA / ERICSSON on double bottom possibility
BUY AEGON / SELL MUNICH RE // BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY INTEL / SELL TEXAS // BUY CONOCOPHILLIPS / SELL CHEVRON // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
DIAGEO RAISED TO OVERWEIGHT FROM EQUALWEIGHT ....................... BY MORGAN STANLEY
FORTIS CUT TO HOLD FROM BUY BY ING
LINDT CUT TO HOLD FROM OVERWEIGHT BY JP MORGAN
CADBURY CUT TO EQUALWEIGHT FROM OVERWEIGHT BY MORGAN STANLEY
SOLVAY CUT TO NEUTRAL FROM BUY BY UBS
CRH CUT TO NEUTRAL FROM BUY BY UBS
KBC CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
KLEPIERRE CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
DATA
WTI : 72,1 (-2,60 %)
Eur/$ : 1,4295 (-0,01 %)
$ /Yen : 94,17 (0,03 )
10 Yr US : 3,45 ( 1,28 bp)
10 Yr Euro : 3,27 ( -3,6 bp)
Indices : US close ; Europe close
SOX : 0,53 %;0,70%
S&P :0,24 %; 0,80 %
DOW: 0,32%; 0,85 %
NAS :0,31%; 0,69%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -0,87 %; 0,58 %
ENERGY : -1,43 %; -0,10 %
FINANCIAL : 1,08 %; 1,45 %
HEALTHCARE : 0,38 %; 0,56 %
TECHNO : 0,13 %; 0,52 %
TELECOM : 0,17 %; 0,79 %
INDUSTRIAL : 0,49 %; 1,08 %
UTILITIES : -0,47 %; 0,05 %
TO BE COMING
Today
Results :Suez Env sales / WPP / Natixis / Heineken / Corio / Dexia / Antofagasta / Irish Life / Swiss Life / Abengoa / Gazprom
Dividend :Intercontinental Hotels (GBp 8,111111) / QUALCOMM ($ 0,17)
Events :Semi conductor conf at Morgan Stanley
Thursday
Results : Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend : Time Warner ($ 0,1875)
Events:
Friday
Results : Carrefour / Aegis
Dividend : France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events :
Monday
Results : Vinci (AMC) / Eiffage / Wendel / Sun Microsystems
Dividend :Halliburton ($ 0,09) / Schlumberger ($0.21)
Events:
Tuesday
Results :Vivendi (BMO) / US car sales
Dividend : Banco de Sabadell (€ 0,07)
Events:Global Industrials Conference at Morgan Stanley
ECONOMIC DATA PREVIEW
In the United States, watch the Durable goods orders (13.30 GMT) for July expected to increase significantly from -2.5% to +3% lead by the incentive in the car sector. Meanwhile durable goods orders excluding transportation are expected to slightly decrease from +1.1% to +0.9%.
In Germany, watch the IFO business climate (9.00 GMT) expected to rise for a fifth consecutive month in August after reaching a low point in March 2009, confirming the progressive recovery in Germany.
ECONOMY
United States: Conference Board consumer confidence rebounded in August
After rising from 40.8 in April to 54.8 in may the Conference Board consumer confidence retreated for the next two months to reach 47.40 in July. August release revealed a much better figure than expected as the consumer confidence reached 54.10 (expected 47.9). Looking at the breakdown the Present Situation index increased slightly to 24.9 from 23.3 last month mainly lead by consumer’s assessment of the job market and the Expectations index improved from 63.4 in July. to 73.5 the highest level since December 2007. Nevertheless consumer confidence improvement needs to be putted into perspective looking as the data before Lehman Brother Bankrupty was showing an average level of 63.7 between January and September 2008.
Germany: The final release of the GDP for the second quarter confirm the progressive recovery
After slumping to an historical low at the first quarter (-3.5% QoQ, -6.7% YoY) German economy is progressively recovering as showed by the final release of the German GDP for the second quarter at +0.3% QoQ, -5.9 % YoY confirming the preliminary release. German’s GDP has been significantly lead by government spending increasing by 0.4% since the first quarter boosting private consumption which gained 0.7%. Meanwhile gross fixed capital investment rose by 0.8% and construction increase by 1.4%. Machinery equipment rose from -18.5% at the first quarter to -0.5% and exports rose from -10.5% to -1.2%. Nevertheless as Germany starts 2009 with a “growth deficit” of 2% the GDP in volume should contracted by 4.9% this year the sharpest contraction since the German reunification
Another day of good news yesterday, or should we say another day of news, which we are now used to cheer as they are telling us we are getting out of the crisis, and the only question remains the speed of the economic growth to be expected in the coming years. Already the speed of the recovery, stimulus or not, is rather impressive and makes bear strategists postpone their Armagedon forecast for Q4 (which means in another life given the current market visibility, clearing out by the way a bit more every day).
The US housing market downturn appears to be drawing to a close. After falling by 32% since 2006, the Case-Shiller National index suggested that prices increased by a seasonally adjusted 1.4% in Q2. This is the first increase since prices started falling three years ago. The alternative FHFA index also suggests that prices have started to rise again. It recorded a 0.5% m/m increase in June. That 32% peak to trough decline had left housing looking slightly undervalued relative to incomes, so there is some scope for further rebound. The large inventory overhang and the weakness of mortgage applications are likely to constrain the recovery in prices for a start, but housing will now be adding to the GDP and will no longer be a drag, and the sector is joining the virtuous circle which makes any Armagedon forecast a pure fiction as time is passing by.
The important one this week was to be the Consumer Confidence, as any decline would have reinforce the view that the consumer is not part of the recovery for now, and being a so big component for the GDP a sustainable one would be far from safe. The Conference Board measure actually increased in August, from 47.4 in July to 54.1, reversing the decline of previous two months. This presumably reflects the recent surge in the S&P 500 above 1,000. Admitedly confidence remains well below its historical average of 95 and it has not even regained the level of 61 seen before the collapse of Lehmans almost a year ago. But the recovery is now happening on every front, starting with the manufacturing sector, going through the banks, which will be even more supported by the housing business increase, which with the equity markets rebound at a time of extremely low mortgage rates will boost households wealth effect, and might turn the so far artificial recovery into a complete and solid one.
Elsewhere, the news that Ben Bernanke has been nominated for a second term as Fed Chairman caused few ripples in the markets mainly as it was largely expected. But at the margins, the news that the deflation-conscious Bernanke is going to be at the helm for another four years provides tentative support that the zero-interest rate policy will remain in place until 2011 at the earliest. And this, once again is good news. Bernanke and Obama is the winning team to fight this rough moment, and they seem to own the weapon, the charisma, and the money to succeed in their mission.
Today's avalanche of news, ie good news, might keep the market very well supported, and make it move slightly but surely toward the pre Lehman levels 1200 on the S&P and 3200 on the cash Eurostoxx. Durable orders will be strong, and even stronger next month, while it makes no doubts anymore that the housing sector has been bottoming. (see eco data below)
ECONOMIC DATA WITH IMPACT
German Ifo business sentiment (09.00 UK time) expected up for a fifth consecutive month in August. Given further evidence of an improvement in global demand and signs in the hard data that Germany is starting to respond, the headline index should be rising from 87.3 to about 89.0 / minor as we already know Germany is doing well and its GDP will be positive in Q3 once more.
Mortgage Applications (12h UK) / previous was +5.6% / the higher the better / minor as weekly and volatile data
Durable goods orders (13.30 UK) expected +3% showing a strong rebound in July / ex transport +0.7% / Upside possibility to that consensus thanks to the continued improvement in the survey evidence – the ISM new orders index hit a two-year high in July – also pointing to another increase in core orders / expect a big rebound in the transportation sector. We already know that Boeing more than doubled the bookings it took last month while we suspect the success of the "cash for clunkers" scheme will also have prompted a rebound in orders for motor vehicles and parts / important, and should be even stronger next month
New home sales (15.00 UK) expected +386k from 384 previous / although July rebound is modest, it seems pretty clear that sales activity is passed the worst. Indeed, the current sales balance of the NAHB home-building index suggests that within three months the number of new home sales will have climbed from 384,000 in June to around 500,000 / interesting
Oil inventories (15h35 UK)
Atlanta Fed President Lockhart (16h30 UK)
POSITIVE IMPACTS
HEINEKEN : H1 rev €7.147Bn (6.94 e) / H1 Op pft €993M (927 e) / H1 Net pft €483M (446 e) / Co expects neg FX impact on result to be larger / Beer consumption decline to ease end 2009 / Interim Div €0.25
DAIMLER : Issues new € 2bn bond expiring 2014 with a 185 bp spread and a 4.65% coupon
NATIXIS : Q2 Revenue €568m (€750m exp) / Net Loss €883m (€-910m exp) / Has included an additional provision of €748m / / BPCE will cover €35bn of GAPC assets /Tier1 ratio 9.3% & core at 8.2% / Affirms return of profit in 2H2009 / Says 2012 ROE is over 12%
ING has asked for final bids for its private banking operations and is seeking about $1.8bn (Source) / At least 6 bidders are interested according source.
FRENCH BANKS : BNP, GLE & ACA have signed up to the new rules. It includes deferring traders’ bonuses over 3 years, paying 1/3 of awards in shares, and imposing strict LT performance criteria in order to receive full payment. The govt has also appointed bonus watchdogs at banks that have received state aid
SWISS LIFE H1 Total income chf10.2bn (10.9 e)/ H1 Gross Written Premiums chf10.387bn (sfr10.75bn e) / Net Profit chf172m (162m exp) / Solvency ratio 155% (in line) / Press conf at 8:00 UKT
SUEZ ENVIRONNEMENT H1 Revenue €5.87bn (In line) / EBITDA €951m (€926m exp) / Confirms 2009 Free cash flow target above 2008 / Sees overall stability in 2009 Sales & EBITDA vs Previous goal of low single-digit growth
GAZPROM Q1 Sales Rubles931bn (912bn exp) / Net income 104bn (75bn exp)
WPP : H1 rev £4.29Bn (4.32e)/ LFL Rev –8.3%(-7.8% e)/EBITDA £455.7M (434 e)/ Interim div 5.19p/Evidence of stronger order book
NEGATIVE IMPACTS
ROCHE failed to win expanded use for its Avastin tumor drug in the U.K. after the country’s medical spending adviser said the treatment and others cost too much to use in the most common type of kidney cancer.
SANOFI : Patients with a particular gene variation are 2 times more likely to have a heart attack or stroke while taking the Plavix than those without the variation, according to a study to be published Wednesday in the Journal of the American Medical Association
BAYER : Britain's healthcare cost-effectiveness watchdog has rejected an appeal to make 3 drugs available to kidney cancer patients on the state National Health Service (NHS).
TUI will be replaced by Aixtron AG (AIXG.DE) in its Dow Jones STOXX 600 Index on Sept 21.
INBEV plans to raise beer prices in most U.S. markets later this year to help cover some input costs
LLOYDS may have to write off £500m on loans made to Admiral Taverns Ltd (FT reported) / Impression of “Déjà vu”
GERMAN BANKS : German Fin Minister Peer Steinbrueck said the govt may need to pump more money into credit markets if measures by the banks aren’t sufficient to feed the economy (Handelsblatt)
HYPO REAL ESTATE needs up to €7bn of new state aid (Bild reported)
RBS has delayed the sale of assets in India, China and Malaysia after an initial round of negotiations with STAN failed (Mint reported)/ Separatly ABN says to file legal demerger documentation with the Dutch chamber of commerce in September 2009....Legal separation from RBS still aimed to be achieved by the Year-end
ANTOFAGASTA : H1 rev $1.18Bn (1.195e) / H1 EPS 23.9cts (25.8 e)/ DIV 3.4 cts / To increase copper prod by over 50% to ~700k t from 2011 / Short term outlook remains uncertain
TRADING IDEAS
BUY Retail names as AHOLD (to play island possibility) / CARREFOUR & L OREAL (ahead of results) / METRO
BUY Cars such as RENAULT / PEUGEOT & BUY OIL names such as BP / TOTAL / ENI on eco recovery
BUY NOKIA / ERICSSON on double bottom possibility
BUY AEGON / SELL MUNICH RE // BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY INTEL / SELL TEXAS // BUY CONOCOPHILLIPS / SELL CHEVRON // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
DIAGEO RAISED TO OVERWEIGHT FROM EQUALWEIGHT ....................... BY MORGAN STANLEY
FORTIS CUT TO HOLD FROM BUY BY ING
LINDT CUT TO HOLD FROM OVERWEIGHT BY JP MORGAN
CADBURY CUT TO EQUALWEIGHT FROM OVERWEIGHT BY MORGAN STANLEY
SOLVAY CUT TO NEUTRAL FROM BUY BY UBS
CRH CUT TO NEUTRAL FROM BUY BY UBS
KBC CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
KLEPIERRE CUT TO NEUTRAL FROM OUTPERFORM BY EXANE
DATA
WTI : 72,1 (-2,60 %)
Eur/$ : 1,4295 (-0,01 %)
$ /Yen : 94,17 (0,03 )
10 Yr US : 3,45 ( 1,28 bp)
10 Yr Euro : 3,27 ( -3,6 bp)
Indices : US close ; Europe close
SOX : 0,53 %;0,70%
S&P :0,24 %; 0,80 %
DOW: 0,32%; 0,85 %
NAS :0,31%; 0,69%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -0,87 %; 0,58 %
ENERGY : -1,43 %; -0,10 %
FINANCIAL : 1,08 %; 1,45 %
HEALTHCARE : 0,38 %; 0,56 %
TECHNO : 0,13 %; 0,52 %
TELECOM : 0,17 %; 0,79 %
INDUSTRIAL : 0,49 %; 1,08 %
UTILITIES : -0,47 %; 0,05 %
TO BE COMING
Today
Results :Suez Env sales / WPP / Natixis / Heineken / Corio / Dexia / Antofagasta / Irish Life / Swiss Life / Abengoa / Gazprom
Dividend :Intercontinental Hotels (GBp 8,111111) / QUALCOMM ($ 0,17)
Events :Semi conductor conf at Morgan Stanley
Thursday
Results : Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend : Time Warner ($ 0,1875)
Events:
Friday
Results : Carrefour / Aegis
Dividend : France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events :
Monday
Results : Vinci (AMC) / Eiffage / Wendel / Sun Microsystems
Dividend :Halliburton ($ 0,09) / Schlumberger ($0.21)
Events:
Tuesday
Results :Vivendi (BMO) / US car sales
Dividend : Banco de Sabadell (€ 0,07)
Events:Global Industrials Conference at Morgan Stanley
ECONOMIC DATA PREVIEW
In the United States, watch the Durable goods orders (13.30 GMT) for July expected to increase significantly from -2.5% to +3% lead by the incentive in the car sector. Meanwhile durable goods orders excluding transportation are expected to slightly decrease from +1.1% to +0.9%.
In Germany, watch the IFO business climate (9.00 GMT) expected to rise for a fifth consecutive month in August after reaching a low point in March 2009, confirming the progressive recovery in Germany.
ECONOMY
United States: Conference Board consumer confidence rebounded in August
After rising from 40.8 in April to 54.8 in may the Conference Board consumer confidence retreated for the next two months to reach 47.40 in July. August release revealed a much better figure than expected as the consumer confidence reached 54.10 (expected 47.9). Looking at the breakdown the Present Situation index increased slightly to 24.9 from 23.3 last month mainly lead by consumer’s assessment of the job market and the Expectations index improved from 63.4 in July. to 73.5 the highest level since December 2007. Nevertheless consumer confidence improvement needs to be putted into perspective looking as the data before Lehman Brother Bankrupty was showing an average level of 63.7 between January and September 2008.
Germany: The final release of the GDP for the second quarter confirm the progressive recovery
After slumping to an historical low at the first quarter (-3.5% QoQ, -6.7% YoY) German economy is progressively recovering as showed by the final release of the German GDP for the second quarter at +0.3% QoQ, -5.9 % YoY confirming the preliminary release. German’s GDP has been significantly lead by government spending increasing by 0.4% since the first quarter boosting private consumption which gained 0.7%. Meanwhile gross fixed capital investment rose by 0.8% and construction increase by 1.4%. Machinery equipment rose from -18.5% at the first quarter to -0.5% and exports rose from -10.5% to -1.2%. Nevertheless as Germany starts 2009 with a “growth deficit” of 2% the GDP in volume should contracted by 4.9% this year the sharpest contraction since the German reunification
Tuesday, August 25, 2009
Turning Point
GLOBAL EQUITIES RESEARCH
One of this week’s key data release might be Today's Conference Board measure of consumer confidence for August. The recent fall back in consumer confidence supports bear view that households are in no state to drive the economic recovery. Given that it has come at a time of a rising stock market, the drop appears to reflect the impact on households' finances of rising unemployment and slowing wage growth. Some bear economists will tell you that with unemployment yet to peak and wage growth yet to trough, confidence might fall back again.
S&P Caseshiller index will be interesting too. Apart from the direct effect on the economy and its possible boost to the GDP to be expected, a recovery in the housing market will have a significant effect on the financial market, which once more helps turning the previous vicious circle into a virtuous one. An important factor being the housing prices. Today's publication of the S&P Case Shiller for June may provide some insides. Some higher prices will sooner or later rescue banks's exposures to mortgages. There is a strong relationship between house building activity and the performance of banks within the stock market. A housing recovery would then be a huge boost to the economic background, and so even bigger one for the stock market thanks to the banking sector stock upside potential.
Friday’s July personal income and spending figures might still underscore the weakness of the consumer sector. Incomes probably rose around 0.2%, and the retail sales figures for July suggest spending probably rose a similar amount. But the improving housing data, in addition to the market rise might turn the bear consumer mood into a brighter one, which the stimuli will keep on increasing even more in August. The recovery is happening on the manufacturing front, which sooner or later should spread to consumers and make what is a "fake" rally fit more worth fundamentals.
However, other suggest we might be starting the top of all V-shaped recoveries. According to top economists, referring to the past, the recovery looks like the largest "V" they have seen since records began 1968. Taken at face value it is pointing towards an acceleration in US GDP growth from -3.9% in 2Q09 to somewhere between +4% and +7.5% on a year-on-year basis and from -6.4% in 1Q09 to somewhere between +7% and +14% on quarter-on-quarter basis The emerging markets growth will be helping. A ‘decoupling’ of real GDP growth between the advanced economies and the newly industrialized ones is very evident in economists projections. World GDP growth is projected to stand at 4% next year – above the 1998-2007 average of 3.7%. For the G-7 economies, they forecast around 1.8%, below the 10-yr average of 2.3%, with the expansion held back primarily by a modest recovery in US final domestic demand. Meanwhile, the BRIC economies should be expanding at 8.7% in 2010 , compared to a 1998-2007 average of 7.4%.
The end of destocking will have a big impact on economic activity. GM will add 60,000 vehicles to its production schedule, 3Q production will be 35% higher q/q and 4Q is planned to be 20% higher than that. While most of the street is telling you we should not buy this market only driven by stimuli, fact is that these stimuli started a long time ago with the fed setting rates close to zero while the inflation threat was still one ('at the very beginning), and there seemed to be so far no limited budget in order to get the economy back on track once they understood the Lehman bankruptcy mistake, although Obama was not elected yet. The "clash for clunkers" is just one of the latest ideas, which might well be continued if needed by the way so much its impact proves to be positive while the economic background remains fragile. As such, Q3 GDP will be strong with now the ratio inventories/sales back to lower levels as sales are picking up, and firms had to deal with low inventories stance in order to fit with tough sudden economic conditions which might have last. Not only the car sector, but others peripheral sectors will be boosted by the output increase, and the virtuous circle is back, including the equity market rise which makes it even more safe that the governments will succeed.
Again, portfolio managers are not positioned as bullishly as sentiment surveys over the past couple of weeks have suggested. The most recent Bank of America-Merrill Lynch global fund managers survey showed average cash balances rose to 4.7 per cent in August from 4.2 per cent in July. While an additional 30% of the fund managers switched to bull, 30% of them remain underweight equity. Their positions did not follow their feelings, which will be very supportive, especially as we attend Q3 data to profit from the full speed of stimulus working in August, and Q3 as well as Q4 being a very friendly base effect. It is very brave at this stage to bet on the fact the stimuli will not help, and that once "the clash for clunkers" is over next Monday "we'll now get to see what the natural supply and demand dynamic is in the auto industry," as well as the other major program, the 'cash for shelter' plan providing tax credits for home purchases, which runs to Nov. 31, although there is already talk of enlarging its size and making it available to all home buyers, not just first time. Fact is that Obama and Bernanke are not stupid, and once again, from the recovery pace depends now the political one. Do not expect them to fail, and those predicting the Q4 Armagedon, might be the same ones predicting the Q2 Great Depression and the fake bear market rally, which might be fake but real on P&L.
We might though be getting today the little expected consolidation we were waiting for yesterday, which we did not get thanks to the buying inflow from the good weekend press. No worry though, just a buying opportunity if it was too sharp
ECONOMIC DATA WITH IMPACT
US Case-Shiller National House Price Index (Q2) / interesting as a possible housing activity rebound is an important to the economic activity (see intro) / as such higher prices would be welcome although doubtful for now
Consumer Confidence (15h UK time) expected 45 from previous 16 / such a fall would be more or less in line with the decline already recorded by the alternative University of Michigan measure / interesting, see intro
POSITIVE IMPACTS
AIR BERLIN : Q2 Rev €836.2 M (837 e) /Q2 Op pft €17.6M (16 e) / Q2 Net €7.1M (4.4 e) / Confirms guidance
NORDEX :Q2 rev €279.2M (274 e) / Q2 EBIT €9.2M ( 8 e) / Anticipates an increase in its own sales, but profitability is likely to be weaker
VOLKSWAGEN : Qatar has acquired “financial instruments” that give them rights to purchase 17% of VW .
CENTRICA : Venture Production Plc may end its opposition to the takeover by CNA as early as this morning and recommend remaining shareholders sell their stock to the U.K.’s utility company (FT)
ARCELOR-MITTAL : Resumes production in Germany and Spain
CAIRN ENERGY begins to pump oil from under western India. Cairn aims to draw 175k barrels/day (25% of India's current output)
TECHNIP has been awarded a lump sum contract by Marathon Oil Company for the Ozona field development in the Gulf of Mexico
GAMESA has won a contract to supply Vancouver-based Western Wind with over $160M on of wind turbines
NESTLE : Nestle Waters North Am. receives preliminary approval to produce arrowhead Spring Water in Chaffee County, Colorado
NATIXIS : BPCE will guarantee billions of toxic assets at Co. so the government will not have to back it (Les Echos)
CARS : Toyota plans to raise its production in Japan for the 1st time in 16 months in November thanks to a recovery in auto sales
NEGATIVE IMPACTS
CRH : H1 rev €8.29Bn (8.19 e) / H1 EBITDA €651M (724 e) / H1 Pre Tax pft €108M (132.2 e) / H1 Div 12.2C
RESOLUTION : London-Times reported that Co may be interested in buying Scottish Widows from LLOYDS although the bank is not believed to be a willing seller
RBS may sell its units in India & China to STANDARD CHARTERED as soon as next month (Bloomberg) / However, people familiar with the matter said the chances of STAN buying the China assets had fallen to “around 3 out of 10” (FT)
HENKEL : German consumer prices will start rising again soon, propelled by a rebound in the price of oil & other commodities (Henkel’s CEO) / The economic crisis ``isn't over yet,'' ``I think that the situation isn't looking as good as some people are suggesting,''
UK RETAIL : More than one-in-ten shops on an avg high street in Britain are now standing vacant, as the recession continues to force struggling retailers out of business (property agency Cushman & Wakefield)
TRADING IDEAS
BUY Retail names as AHOLD (to play island possibility) / CARREFOUR & L OREAL (ahead of results) / METRO
BUY Cars such as RENAULT / PEUGEOT & BUY OIL names such as BP / TOTAL / ENI on eco recovery
BUY ERICSSON / PERNOD on double bottom possibility
BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
SIEMENS RAISED TO BUY FROM NEUTRAL BY BANK OF AMERICA - MERRILL LYNCH
EUROPEAN PHONE STOCKS RAISED TO OVERWEIGHT BY JP MORGAN
TUI RAISED TO OVERWEIGHT FROM NEUTRAL BY MORGAN STANLEY
VOLVO CUT TO NEUTRAL FROM BUY BY NOMURA
SCHNEIDER ELECTRIC CUT TO UNDERPERFORM FROM NEUTRAL BY BANK OF AMERICA - MERRILL LYNCH
ALSTOM CUT TO NEUTRAL FROM BUY BY BANK OF AMERICA - MERRILL LYNCH
EUROPEAN METAL & MINING STOCKS CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
FORTIS CUT TO HOLD FROM BUY BY RBS
LOGICA CUT TO HOLD FROM BUY BY RBS
Q-CELLS CUT TO NEUTRAL FROM OUTPERFORM BY CREDIT SUISSE
SWATCH CUT TO SELL FROM HOLD BY RBS
DATA
WTI : 73,9 (2,31 %)
Eur/$ : 1,4297 (-0,05 %)
$ /Yen : 94,00 (0,67 )
10 Yr US : 3,46 ( -1,67 bp)
10 Yr Euro : 3,31 ( -0,7 bp)
Indices : US close ; Europe close
SOX : -0,78 %;0,43%
S&P :-0,06 %; 0,75 %
DOW: 0,04%; 0,67 %
NAS :-0,14%; 0,57%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -0,51 %; 1,13 %
ENERGY : 1,28 %; 1,68 %
FINANCIAL : -0,92 %; 1,46 %
HEALTHCARE : 0,34 %; 0,27 %
TECHNO : -0,14 %; 0,50 %
TELECOM : 0,19 %; 0,30 %
INDUSTRIAL : 0,00 %; 0,81 %
UTILITIES : 0,18 %; 0,07 %
TO BE COMING
Today
Results :Gemalto / Alpha Bank
Dividend :
Events :Tata Motors AGM
Wednesday
Results : Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend : Intercontinental Hotels (GBp 8,111111) / QUALCOMM ($ 0,17)
Events: Semi conductor conf at Morgan Stanley
Thursday
Results : Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend : Time Warner ($ 0,1875)
Events :
Friday
Results : Carrefour / Aegis
Dividend :France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events:
Monday
Results :Eiffage / Wendel / Sun Microsystems
Dividend : Halliburton ($ 0,09) / Schlumberger ($0.21)
Events:
ECONOMIC DATA PREVIEW
In United States, watch the Conference Board consumer confidence (15.00 GMT) for August expected to slightly increase from 46.6 to 48 as prices are in a down trend increasing consumer’s purchase power.
In Germany, watch the final figure of the GDP (7.00 GMT) expected to confirm the preliminary release at +0.3% QoQ, -5.9% YoY confirming that after reaching a bottom at the first quarter Germany is slowly recovering.
ECONOMY
United States: The Chicago Fed National activity remained in negative territory but improved in July
After reaching its lowest level at -4.03 in January 2009 the Chicago Fed National activity index improved significantly in July to reach
-0.74 the highest level since January 2008. All four broad categories of indicators improved in July but three of the four continued to make negative contribution to the index. The improvement in the index in July was mainly due to the production and income category of indicators. Indeed this category made a contribution of +0.26 to the index in July compared with -0.38 in June. Manufacturing production increasd + 1% in July the biggest increase since December 2006. Moreover the manufacturing capacity utilization increased to 65.4 in July from 64.7 in June. Meanwhile employment related indicators improved significantly in July making a contribution of -0.40 to the index versus -0.73 in June and the consumption and housing’s category’s contribution to the index improved as well to -0.49 after a contribution of -0.54 in June.
Euro zone: Industrial orders increase more than forecast in June
European industrial new orders increased from -0.5% in May to +3.1% in June (forecast +1.8%) the most in 19 months. This significant rise of orders to industrial companies is another sign of the fact that the worst of the recession is easing. Indeed after contracting for five straight quarter the euro area economy is slowly recovering and after shrinking by 0.1% at the second quarter the GDP could turn positive at the third quarter. Meanwhile from a year earlier June orders fell 25.1% (forecast -28.3% YoY) the best release since December 2008 ( -24.7% YoY) showing as well the progressive industrial recovery in the euro area after being hit by the credit crunch and by a high unemployment level. In any cases the economic recovery will be strongly linked to the level and to the efficiency of the stimulus plans in the main euro area countries like Germany or France.
One of this week’s key data release might be Today's Conference Board measure of consumer confidence for August. The recent fall back in consumer confidence supports bear view that households are in no state to drive the economic recovery. Given that it has come at a time of a rising stock market, the drop appears to reflect the impact on households' finances of rising unemployment and slowing wage growth. Some bear economists will tell you that with unemployment yet to peak and wage growth yet to trough, confidence might fall back again.
S&P Caseshiller index will be interesting too. Apart from the direct effect on the economy and its possible boost to the GDP to be expected, a recovery in the housing market will have a significant effect on the financial market, which once more helps turning the previous vicious circle into a virtuous one. An important factor being the housing prices. Today's publication of the S&P Case Shiller for June may provide some insides. Some higher prices will sooner or later rescue banks's exposures to mortgages. There is a strong relationship between house building activity and the performance of banks within the stock market. A housing recovery would then be a huge boost to the economic background, and so even bigger one for the stock market thanks to the banking sector stock upside potential.
Friday’s July personal income and spending figures might still underscore the weakness of the consumer sector. Incomes probably rose around 0.2%, and the retail sales figures for July suggest spending probably rose a similar amount. But the improving housing data, in addition to the market rise might turn the bear consumer mood into a brighter one, which the stimuli will keep on increasing even more in August. The recovery is happening on the manufacturing front, which sooner or later should spread to consumers and make what is a "fake" rally fit more worth fundamentals.
However, other suggest we might be starting the top of all V-shaped recoveries. According to top economists, referring to the past, the recovery looks like the largest "V" they have seen since records began 1968. Taken at face value it is pointing towards an acceleration in US GDP growth from -3.9% in 2Q09 to somewhere between +4% and +7.5% on a year-on-year basis and from -6.4% in 1Q09 to somewhere between +7% and +14% on quarter-on-quarter basis The emerging markets growth will be helping. A ‘decoupling’ of real GDP growth between the advanced economies and the newly industrialized ones is very evident in economists projections. World GDP growth is projected to stand at 4% next year – above the 1998-2007 average of 3.7%. For the G-7 economies, they forecast around 1.8%, below the 10-yr average of 2.3%, with the expansion held back primarily by a modest recovery in US final domestic demand. Meanwhile, the BRIC economies should be expanding at 8.7% in 2010 , compared to a 1998-2007 average of 7.4%.
The end of destocking will have a big impact on economic activity. GM will add 60,000 vehicles to its production schedule, 3Q production will be 35% higher q/q and 4Q is planned to be 20% higher than that. While most of the street is telling you we should not buy this market only driven by stimuli, fact is that these stimuli started a long time ago with the fed setting rates close to zero while the inflation threat was still one ('at the very beginning), and there seemed to be so far no limited budget in order to get the economy back on track once they understood the Lehman bankruptcy mistake, although Obama was not elected yet. The "clash for clunkers" is just one of the latest ideas, which might well be continued if needed by the way so much its impact proves to be positive while the economic background remains fragile. As such, Q3 GDP will be strong with now the ratio inventories/sales back to lower levels as sales are picking up, and firms had to deal with low inventories stance in order to fit with tough sudden economic conditions which might have last. Not only the car sector, but others peripheral sectors will be boosted by the output increase, and the virtuous circle is back, including the equity market rise which makes it even more safe that the governments will succeed.
Again, portfolio managers are not positioned as bullishly as sentiment surveys over the past couple of weeks have suggested. The most recent Bank of America-Merrill Lynch global fund managers survey showed average cash balances rose to 4.7 per cent in August from 4.2 per cent in July. While an additional 30% of the fund managers switched to bull, 30% of them remain underweight equity. Their positions did not follow their feelings, which will be very supportive, especially as we attend Q3 data to profit from the full speed of stimulus working in August, and Q3 as well as Q4 being a very friendly base effect. It is very brave at this stage to bet on the fact the stimuli will not help, and that once "the clash for clunkers" is over next Monday "we'll now get to see what the natural supply and demand dynamic is in the auto industry," as well as the other major program, the 'cash for shelter' plan providing tax credits for home purchases, which runs to Nov. 31, although there is already talk of enlarging its size and making it available to all home buyers, not just first time. Fact is that Obama and Bernanke are not stupid, and once again, from the recovery pace depends now the political one. Do not expect them to fail, and those predicting the Q4 Armagedon, might be the same ones predicting the Q2 Great Depression and the fake bear market rally, which might be fake but real on P&L.
We might though be getting today the little expected consolidation we were waiting for yesterday, which we did not get thanks to the buying inflow from the good weekend press. No worry though, just a buying opportunity if it was too sharp
ECONOMIC DATA WITH IMPACT
US Case-Shiller National House Price Index (Q2) / interesting as a possible housing activity rebound is an important to the economic activity (see intro) / as such higher prices would be welcome although doubtful for now
Consumer Confidence (15h UK time) expected 45 from previous 16 / such a fall would be more or less in line with the decline already recorded by the alternative University of Michigan measure / interesting, see intro
POSITIVE IMPACTS
AIR BERLIN : Q2 Rev €836.2 M (837 e) /Q2 Op pft €17.6M (16 e) / Q2 Net €7.1M (4.4 e) / Confirms guidance
NORDEX :Q2 rev €279.2M (274 e) / Q2 EBIT €9.2M ( 8 e) / Anticipates an increase in its own sales, but profitability is likely to be weaker
VOLKSWAGEN : Qatar has acquired “financial instruments” that give them rights to purchase 17% of VW .
CENTRICA : Venture Production Plc may end its opposition to the takeover by CNA as early as this morning and recommend remaining shareholders sell their stock to the U.K.’s utility company (FT)
ARCELOR-MITTAL : Resumes production in Germany and Spain
CAIRN ENERGY begins to pump oil from under western India. Cairn aims to draw 175k barrels/day (25% of India's current output)
TECHNIP has been awarded a lump sum contract by Marathon Oil Company for the Ozona field development in the Gulf of Mexico
GAMESA has won a contract to supply Vancouver-based Western Wind with over $160M on of wind turbines
NESTLE : Nestle Waters North Am. receives preliminary approval to produce arrowhead Spring Water in Chaffee County, Colorado
NATIXIS : BPCE will guarantee billions of toxic assets at Co. so the government will not have to back it (Les Echos)
CARS : Toyota plans to raise its production in Japan for the 1st time in 16 months in November thanks to a recovery in auto sales
NEGATIVE IMPACTS
CRH : H1 rev €8.29Bn (8.19 e) / H1 EBITDA €651M (724 e) / H1 Pre Tax pft €108M (132.2 e) / H1 Div 12.2C
RESOLUTION : London-Times reported that Co may be interested in buying Scottish Widows from LLOYDS although the bank is not believed to be a willing seller
RBS may sell its units in India & China to STANDARD CHARTERED as soon as next month (Bloomberg) / However, people familiar with the matter said the chances of STAN buying the China assets had fallen to “around 3 out of 10” (FT)
HENKEL : German consumer prices will start rising again soon, propelled by a rebound in the price of oil & other commodities (Henkel’s CEO) / The economic crisis ``isn't over yet,'' ``I think that the situation isn't looking as good as some people are suggesting,''
UK RETAIL : More than one-in-ten shops on an avg high street in Britain are now standing vacant, as the recession continues to force struggling retailers out of business (property agency Cushman & Wakefield)
TRADING IDEAS
BUY Retail names as AHOLD (to play island possibility) / CARREFOUR & L OREAL (ahead of results) / METRO
BUY Cars such as RENAULT / PEUGEOT & BUY OIL names such as BP / TOTAL / ENI on eco recovery
BUY ERICSSON / PERNOD on double bottom possibility
BUY AHOLD / SELL UNILEVER // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
SIEMENS RAISED TO BUY FROM NEUTRAL BY BANK OF AMERICA - MERRILL LYNCH
EUROPEAN PHONE STOCKS RAISED TO OVERWEIGHT BY JP MORGAN
TUI RAISED TO OVERWEIGHT FROM NEUTRAL BY MORGAN STANLEY
VOLVO CUT TO NEUTRAL FROM BUY BY NOMURA
SCHNEIDER ELECTRIC CUT TO UNDERPERFORM FROM NEUTRAL BY BANK OF AMERICA - MERRILL LYNCH
ALSTOM CUT TO NEUTRAL FROM BUY BY BANK OF AMERICA - MERRILL LYNCH
EUROPEAN METAL & MINING STOCKS CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
FORTIS CUT TO HOLD FROM BUY BY RBS
LOGICA CUT TO HOLD FROM BUY BY RBS
Q-CELLS CUT TO NEUTRAL FROM OUTPERFORM BY CREDIT SUISSE
SWATCH CUT TO SELL FROM HOLD BY RBS
DATA
WTI : 73,9 (2,31 %)
Eur/$ : 1,4297 (-0,05 %)
$ /Yen : 94,00 (0,67 )
10 Yr US : 3,46 ( -1,67 bp)
10 Yr Euro : 3,31 ( -0,7 bp)
Indices : US close ; Europe close
SOX : -0,78 %;0,43%
S&P :-0,06 %; 0,75 %
DOW: 0,04%; 0,67 %
NAS :-0,14%; 0,57%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -0,51 %; 1,13 %
ENERGY : 1,28 %; 1,68 %
FINANCIAL : -0,92 %; 1,46 %
HEALTHCARE : 0,34 %; 0,27 %
TECHNO : -0,14 %; 0,50 %
TELECOM : 0,19 %; 0,30 %
INDUSTRIAL : 0,00 %; 0,81 %
UTILITIES : 0,18 %; 0,07 %
TO BE COMING
Today
Results :Gemalto / Alpha Bank
Dividend :
Events :Tata Motors AGM
Wednesday
Results : Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend : Intercontinental Hotels (GBp 8,111111) / QUALCOMM ($ 0,17)
Events: Semi conductor conf at Morgan Stanley
Thursday
Results : Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend : Time Warner ($ 0,1875)
Events :
Friday
Results : Carrefour / Aegis
Dividend :France Telecom (€ 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events:
Monday
Results :Eiffage / Wendel / Sun Microsystems
Dividend : Halliburton ($ 0,09) / Schlumberger ($0.21)
Events:
ECONOMIC DATA PREVIEW
In United States, watch the Conference Board consumer confidence (15.00 GMT) for August expected to slightly increase from 46.6 to 48 as prices are in a down trend increasing consumer’s purchase power.
In Germany, watch the final figure of the GDP (7.00 GMT) expected to confirm the preliminary release at +0.3% QoQ, -5.9% YoY confirming that after reaching a bottom at the first quarter Germany is slowly recovering.
ECONOMY
United States: The Chicago Fed National activity remained in negative territory but improved in July
After reaching its lowest level at -4.03 in January 2009 the Chicago Fed National activity index improved significantly in July to reach
-0.74 the highest level since January 2008. All four broad categories of indicators improved in July but three of the four continued to make negative contribution to the index. The improvement in the index in July was mainly due to the production and income category of indicators. Indeed this category made a contribution of +0.26 to the index in July compared with -0.38 in June. Manufacturing production increasd + 1% in July the biggest increase since December 2006. Moreover the manufacturing capacity utilization increased to 65.4 in July from 64.7 in June. Meanwhile employment related indicators improved significantly in July making a contribution of -0.40 to the index versus -0.73 in June and the consumption and housing’s category’s contribution to the index improved as well to -0.49 after a contribution of -0.54 in June.
Euro zone: Industrial orders increase more than forecast in June
European industrial new orders increased from -0.5% in May to +3.1% in June (forecast +1.8%) the most in 19 months. This significant rise of orders to industrial companies is another sign of the fact that the worst of the recession is easing. Indeed after contracting for five straight quarter the euro area economy is slowly recovering and after shrinking by 0.1% at the second quarter the GDP could turn positive at the third quarter. Meanwhile from a year earlier June orders fell 25.1% (forecast -28.3% YoY) the best release since December 2008 ( -24.7% YoY) showing as well the progressive industrial recovery in the euro area after being hit by the credit crunch and by a high unemployment level. In any cases the economic recovery will be strongly linked to the level and to the efficiency of the stimulus plans in the main euro area countries like Germany or France.
Monday, August 24, 2009
Believe
GLOBAL EQUITIES RESEARCH
Another week last week of disillusion for bear players , who initiated some heavy shorts early in the week as the lack of data would prevent any further bullish run, especially as the previous ride did need a pause which the August post earnings period and the bad Lowe data did easily trigger. The scenario is the same since the beginning of July, a buying flow is being fed by the positive newsflow, with pension funds and hedge funds incoming cash to be invested, while traders are still looking at searching the top of the bear rally. The end of week and new fresh positive data keep are doing the rest, with some short covering pushing the market to new highs, as always. This is part of the plan, and the reason why we should reach 3200 and 1200 respectively on the cash Eurostoxx and the S&P very soon. UBS placement from the government reflecting the nice private equity placements which made the governments in rescuing banks all over the world, and the heavily rebounding Existing home sales were important symbols. Both housing and banking sectors back on track, the virtuous circle should last more than one would imagine, and definitely add to the idea that a big bear market rally from March 2000 to March 2009 is over, opening door to an even bigger bull one.
Some bright economists are examining what could turn this so-called "statistical recovery" into the real thing -- the "fake" recovery consists of output catching up with actual demand as the inventory cycle ends. A sustained recovery requires that demand recovers to it's underlying level. Most recoveries rely on increased demand for consumer durables and housing. These economists reckon the underlying demand for autos is 15.5 mln units per year (13 mln to replace scrapped vehicles and 2.5 mln due to population growth), compared to the current sales pace near 11 mln. Similarly, the underlying trend demand for housing is estimated to be around 1.5 mln units per year, largely due to population growth , whereas housing starts are currently 580,000 (only 40% of underlying demand). At 2.2%, they are not advocating robust growth for next year but do expect the recovery to be sustainable. They point to the possibility that we are all too focused on downside risks, while underestimating the potential for a rebound in demand (the consensus is looking for 2.2% growth over the next 4 quarters, compared to a post-war average of 5.8% in the first year of recovery).
The 7.2% m/m leap in US existing home sales in July takes sales to a two-year high of 5.24m and puts them well above the level seen before the collapse of Lehmans last September. This was the fourth consecutive monthly rise and leaves sales 16.7% above January's trough. Once again, some bear strategists are telling you there are three reasons not to get too carried away, which we disagree with : First, sales are still 28% below their peak, so activity is still very subdued, which we think is very promising as the upside is huge. Second, around 31% of sales are "forced" sales of foreclosed properties, which we think is weighting on prices and should no longer do anytime soon, in addition to reduce inventories quickly. Third, by holding at 9.4 the months' supply of unsold homes remains above the level of around 7.5 that has historically been consistent with stable prices, which we say come from 11 months a few months ago, meaning at that speed of rebound we should head toward a normal inventories level before the end of the year. Overall, these figures may suggest for some that the recovery in housing activity is gathering pace, but there is a long way to go yet. To us, they just sign the end of the very depressed period from the Housing and banking sectors, which combined to the stimuli in place will unfreeze the shy consumer spending thanks to an increasing wealth effect which the sharp rebound of equity indices will boost even more.
Already in Europe, data are pointing out some spending and growth in Q3, which the record increase in the composite PMI is reflecting . The record increase in the composite index, from 47.0 to 50.0, was far better that the consensus forecast for a rise to 47.8 and was the sixth consecutive monthly gain. The pick-up was driven by further rises in both the manufacturing and services indices. The latter recorded a particularly sharp rise from 45.7 to 49.5. On the face of it, the composite index now points to unchanged output on a quarter earlier . Given that the index looks set to be much higher than the Q2 average this quarter, it is not out the question that GDP might even have expanded modestly in Q3, after Q2’s 0.1% drop . The survey provided further encouraging signs that the worst of the labour market downturn could be over. The composite employment index now appears to be consistent with annual employment growth of around zero. This, coupled with the recent increase in consumer confidence, suggests that household spending could continue to expand over the coming quarters . The German and French composite PMIs also increased sharply on the month. Both indices are now above the 50 “no-change” level, indicating that both economies might have continued to expand in Q3. The upshot is that the worst of the downturn certainly now appears to be over and the economy might have stopped contracting.
This week confirms that the summer doldrums are in full effect this time of year, as always, but there are still a few noteworthy events scheduled. Consumer Confidence will be interesting tomorrow, as well as the Durable Orders and New home sales on Wednesday. Jobless Claims on Thursday will be in the shade of the personal spending on Friday.
The world's central bankers aren't ready to step away from playing an active role in the global economy as it follows a slow, tenuous path to recovery. European Central Bank President Jean-Claude Trichet said Saturday central bankers must do everything they can to prevent a repeat of the past year's crisis. "Now that we see some signs confirming that the real economy is starting to get out of the period of 'free fall' -- which does not mean at all that we do not have a very bumpy road ahead of us -- the largest mistake we could make would be to forget the importance and the urgency of this task".
While some see the small activity as a sign that upside run is fake, we would recommend to believe it is real, and will also turn things increasingly into bullish ones as time is passing by. While some are telling you the recovery can not happen as consumers, weighting 2 thirds of the GDP, are not part of the game, we would suggest that the GDPs are not doing so bad for now, and might just be rocketing if somehow consumers are coming back thanks to an increasing wealth effect which is well happening now by the way.
As usual, lack of data and Friday's short covering should make today's a typical Monday sell-off , which end of week events will make a buying opportunity once more. Next week is a new month, fund managers come back, heavily underweight equity, will do the rest.
ECONOMIC DATA WITH IMPACT
Chicago Fed National Activity Index -July – (13.30 BST) : prev –1.80 (Minor)
POSITIVE IMPACTS
SULZER :H1 sales SFR1.72Bn (1.58e) / H1 EBIT SFR214.4M (167e) / H1 net pft SFR155.6M(125e) / Doesn’t expect quick recovery in its key mkts
RBS – LLOYDS have set up subsidiaries that buy the properties taken over by the bailed-out banks, in a bid to stave off bn of losses that would be incurred if the repossessed assets were sold in the open market (Times)
POSTBANK wants to report a "clearly positive" fin. result by the end of 10, although it could also do so by the middle of that year (CEO)
COMMERZBANK :Close Brothers has made a bid for Kleinwort Benson, a private bank being sold by CBK (Sunday Times)
DEUTSCHE BANK (minor) Deutsche Bank Private Wealth Management has hired 7 specialists from rivals including Credit Suisse, UBS and Barclays as it expands its UK business.
BBVA took over Guaranty Financial Group Inc. of Texas. (as expected)
BNP agreed to sell its retail banking operations in Argentina to the local unit of Banco Santander SA.
ERSTE BANK : Criteria CaixaCorp (investment arm of La Caixa) has raised its stake in Erste Group to 7.85% from 5.1%
LLOYDS is in early talks with RESOLUTION about the possible sale of the bank’s Clerical Medical subsidiary, which could fetch up to £4bn. (The Mail on Sunday) / Separately Win Bischoff is facing pressure from investors to reshuffle the board (Sunday Times)
SIEMENS : Siemens & Deutsche Bahn AG may jointly pursue orders for U.S.high-speed trains (Der Spiegel)
DEUTSCHE TEL will offer a high-capacity radio network for quick Internet connections in metropolitan areas of India from 2010. (India is among the fastest growing telco mkt, and market researchers expect the number of mobile phone users to rise by 30% in 2009 to 450M)
BT has shut its graduate recruitment program amid a cost-saving plan that will result in more job cuts by the end of the year (FT)
RIO TINTO : Chinalco, is willing to open discussions Rio for cooperation in bauxite & alumina production (WSJ)
BALFOUR BEATTY’s US unit selected for $415M road project in Texas
CONTINENTAL : Schaeffler offered banks options for stakes in a possible biz entity with Conti in return for refinancing debt (Welt)
LUFTHANSA has held talks with Virgin Atlantic Airways Ltd. About the possible sale or merger of its BMI airline (Sunday Times)
NOVARTIS receives approval in EU for Xolair to treat children age 6 to 11 y suffering from severe persistent allergic asthma
GERMANY : Bundesbank President Axel Weber, said that the contraction of the German eco. appears to have come to a halt and the first signs of a pending recovery have emerged. Weber added that the possibility of revising up next year's GDP growth has improved.
NEGATIVE IMPACTS
EADS : GULF AIR could renegotiate (number & size ) its order with Airbus & Boeing / In order : 35 Airbus, 24 Boeing
WATER UTILITIES (minor) : China’s Ministry of Housing & Urban-Rural Development may be investigating whether some
foreign water companies are manipulating water prices in some cities (Jinan Daily )
BASF has a “defense plan” if the Co become a takeover target because of its dispersed ownership structure (CEO in Wirtschaftswoche)
LONZA : JLL Partners rejected a $3.55 per-share bid for Canada’s Patheon ( JLL owns 57%of Patheon)
UBS will meet with Canadian tax officials next month in connection with bank accounts and tax evasion (Canadian National Rev Minister)
BMPS ‘s shareholder won’t allow the lender to be a hostile takeover target (chairman of the Fondazione Monte dei Paschi)
TELIASONERA makes offers for TEO LT ($213M) and Eesti Telekom ($475M)
TRADING IDEAS
BUY AHOLD to play island possibility & BUY Cars such as RENAULT / PEUGEOT & BUY OIL names such as BP / TOTAL / ENI on eco recovery
BUY ERICSSON / PERNOD on double bottom possibility & BUY AEGON / MUNICH RE / ALLIANZ to resume their upside trend
BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY BOEING / SELL UNITED TECH // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
REPSOL RAISED TO BUY FROM NEUTRAL BY UBS
WPP RAISED TO BUY FROM HOLD BY DEUTSCHE BANK
ERAMET RAISED TO BUY FROM HOLD BY NOMURA
BBVA RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
SANTANDER RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
DSM RAISED TO BUY FROM HOLD BY RBS
VIVENDI CUT TO HOLD FROM BUY BY DEUTSCHE BANK
NOKIA CUT TO HOLD FROM BUY BY DEUTSCHE BANK
DATA
WTI : 74,3 (2,73 %)
Eur/$ : 1,4329 (0,02 %)
$ /Yen : 94,80 (-0,47 )
10 Yr US : 3,57 ( 0,93 bp)
10 Yr Euro : 3,31 ( 5,7 bp)
Indices : US close ; Europe close
SOX : 1,65 %; -%
S&P :1,86 %; - %
DOW: 1,67 %; -%
NAS :1,59 %; -%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 2,81 %; - %
ENERGY : 2,69 %; - %
FINANCIAL : 2,12 %; - %
HEALTHCARE : 1,06 %; - %
TECHNO : 1,49 %; - %
TELECOM : 1,93 %; - %
INDUSTRIAL : 2,35 %; - %
UTILITIES : 1,82 %; - %
TO BE COMING
Today
Results :Sulzer / Orascom Telecom
Dividend :STMicroelectronics ($ 0,03)
Events :
Tuesday
Results : Gemalto
Dividend :
Events: Tata Motors AGM
Wednesday
Results : Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend : Intercontinental Hotels (GBp 8,111111) / QUALCOMM ($ 0,17)
Events : Semi conductor conf at Morgan Stanley
Thursday
Results : Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend :Time Warner ($ 0,1875)
Events:
Friday
Results :Carrefour
Dividend : France Telecom (GBp 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events:
ECONOMIC DATA PREVIEW
Sales of existing US homes climbed more than expected to the highest level in almost two years. Purchases increased by 7.2 % for the fifth consecutive month to a 5.24 million annual rate following a 3.6 % rise in June at 4.89 Million. Falling home values and government stimulus efforts such as the tax credit for first-time buyers are boosting sales and stemming the housing meltdown that triggered the financial crisis.
ECONOMY
United States: existing home sales surged in July
Sales of existing US homes climbed more than expected to the highest level in almost two years. Purchases increased by 7.2 % for the fifth consecutive month to a 5.24 million annual rate following a 3.6 % rise in June at 4.89 Million. Consensus forecasted sales to rise to 5 million. in July. Remember that resales reached their lowest level at 4.49 million pace in January 2009. From a year earlier, purchases of existing homes rose by 5 %. Falling home values and government stimulus efforts such as the tax credit for first-time buyers are boosting sales and stemming the housing meltdown that triggered the financial crisis. The Median prices fell to $178 400 in July from $182 000 in may and $210 100 in July 2008. The average prices rose to $ 237 400 in July to $227 900 the previous month but prices dropped more than 6 % from a year ago at $253 000.
Eurozone: PMI Composite climbed in August
The Eurozone composite PMI Index rose more than expected at 50 in August from 47 in July while consensus expected a rise to 48. The PMI composite climbed for the sixth consecutive month from the lowest level of February at 36.2. This record rise was driven by an improvement on both Manufacturing and Service. The PMI Manufacturing increased at 47.9 (vs 47.5 expected) from 46.3 and the PMI Services climbed to 49.5 (vs 46.5 expected) following 45.7 in July. Note that a reading below 50 indicates a contraction and a reading above 50 signals an expansion. This adds to evidence that economic conditions continued to improve and that recession ended around the middle of the year.
In France, PMI Manufacturing was above the 50 level at 50.2 (49 expected) from 48.1 the previous month. The PMI Services rose at 48.9 from 45.5 in July (46.3 expected); But the composite PMI surged at 50.9 in August, the highest level in15 months and following 47.3 in July.
In Germany, PMI Manufacturing improved at 49 (47 expected) in August from 45.7 the previous month. PMI in Services surged above 50 at 54.1 in August for the first time in 11 months. The composite PMI increased at 54.2, its highest level since May 2008.
Another week last week of disillusion for bear players , who initiated some heavy shorts early in the week as the lack of data would prevent any further bullish run, especially as the previous ride did need a pause which the August post earnings period and the bad Lowe data did easily trigger. The scenario is the same since the beginning of July, a buying flow is being fed by the positive newsflow, with pension funds and hedge funds incoming cash to be invested, while traders are still looking at searching the top of the bear rally. The end of week and new fresh positive data keep are doing the rest, with some short covering pushing the market to new highs, as always. This is part of the plan, and the reason why we should reach 3200 and 1200 respectively on the cash Eurostoxx and the S&P very soon. UBS placement from the government reflecting the nice private equity placements which made the governments in rescuing banks all over the world, and the heavily rebounding Existing home sales were important symbols. Both housing and banking sectors back on track, the virtuous circle should last more than one would imagine, and definitely add to the idea that a big bear market rally from March 2000 to March 2009 is over, opening door to an even bigger bull one.
Some bright economists are examining what could turn this so-called "statistical recovery" into the real thing -- the "fake" recovery consists of output catching up with actual demand as the inventory cycle ends. A sustained recovery requires that demand recovers to it's underlying level. Most recoveries rely on increased demand for consumer durables and housing. These economists reckon the underlying demand for autos is 15.5 mln units per year (13 mln to replace scrapped vehicles and 2.5 mln due to population growth), compared to the current sales pace near 11 mln. Similarly, the underlying trend demand for housing is estimated to be around 1.5 mln units per year, largely due to population growth , whereas housing starts are currently 580,000 (only 40% of underlying demand). At 2.2%, they are not advocating robust growth for next year but do expect the recovery to be sustainable. They point to the possibility that we are all too focused on downside risks, while underestimating the potential for a rebound in demand (the consensus is looking for 2.2% growth over the next 4 quarters, compared to a post-war average of 5.8% in the first year of recovery).
The 7.2% m/m leap in US existing home sales in July takes sales to a two-year high of 5.24m and puts them well above the level seen before the collapse of Lehmans last September. This was the fourth consecutive monthly rise and leaves sales 16.7% above January's trough. Once again, some bear strategists are telling you there are three reasons not to get too carried away, which we disagree with : First, sales are still 28% below their peak, so activity is still very subdued, which we think is very promising as the upside is huge. Second, around 31% of sales are "forced" sales of foreclosed properties, which we think is weighting on prices and should no longer do anytime soon, in addition to reduce inventories quickly. Third, by holding at 9.4 the months' supply of unsold homes remains above the level of around 7.5 that has historically been consistent with stable prices, which we say come from 11 months a few months ago, meaning at that speed of rebound we should head toward a normal inventories level before the end of the year. Overall, these figures may suggest for some that the recovery in housing activity is gathering pace, but there is a long way to go yet. To us, they just sign the end of the very depressed period from the Housing and banking sectors, which combined to the stimuli in place will unfreeze the shy consumer spending thanks to an increasing wealth effect which the sharp rebound of equity indices will boost even more.
Already in Europe, data are pointing out some spending and growth in Q3, which the record increase in the composite PMI is reflecting . The record increase in the composite index, from 47.0 to 50.0, was far better that the consensus forecast for a rise to 47.8 and was the sixth consecutive monthly gain. The pick-up was driven by further rises in both the manufacturing and services indices. The latter recorded a particularly sharp rise from 45.7 to 49.5. On the face of it, the composite index now points to unchanged output on a quarter earlier . Given that the index looks set to be much higher than the Q2 average this quarter, it is not out the question that GDP might even have expanded modestly in Q3, after Q2’s 0.1% drop . The survey provided further encouraging signs that the worst of the labour market downturn could be over. The composite employment index now appears to be consistent with annual employment growth of around zero. This, coupled with the recent increase in consumer confidence, suggests that household spending could continue to expand over the coming quarters . The German and French composite PMIs also increased sharply on the month. Both indices are now above the 50 “no-change” level, indicating that both economies might have continued to expand in Q3. The upshot is that the worst of the downturn certainly now appears to be over and the economy might have stopped contracting.
This week confirms that the summer doldrums are in full effect this time of year, as always, but there are still a few noteworthy events scheduled. Consumer Confidence will be interesting tomorrow, as well as the Durable Orders and New home sales on Wednesday. Jobless Claims on Thursday will be in the shade of the personal spending on Friday.
The world's central bankers aren't ready to step away from playing an active role in the global economy as it follows a slow, tenuous path to recovery. European Central Bank President Jean-Claude Trichet said Saturday central bankers must do everything they can to prevent a repeat of the past year's crisis. "Now that we see some signs confirming that the real economy is starting to get out of the period of 'free fall' -- which does not mean at all that we do not have a very bumpy road ahead of us -- the largest mistake we could make would be to forget the importance and the urgency of this task".
While some see the small activity as a sign that upside run is fake, we would recommend to believe it is real, and will also turn things increasingly into bullish ones as time is passing by. While some are telling you the recovery can not happen as consumers, weighting 2 thirds of the GDP, are not part of the game, we would suggest that the GDPs are not doing so bad for now, and might just be rocketing if somehow consumers are coming back thanks to an increasing wealth effect which is well happening now by the way.
As usual, lack of data and Friday's short covering should make today's a typical Monday sell-off , which end of week events will make a buying opportunity once more. Next week is a new month, fund managers come back, heavily underweight equity, will do the rest.
ECONOMIC DATA WITH IMPACT
Chicago Fed National Activity Index -July – (13.30 BST) : prev –1.80 (Minor)
POSITIVE IMPACTS
SULZER :H1 sales SFR1.72Bn (1.58e) / H1 EBIT SFR214.4M (167e) / H1 net pft SFR155.6M(125e) / Doesn’t expect quick recovery in its key mkts
RBS – LLOYDS have set up subsidiaries that buy the properties taken over by the bailed-out banks, in a bid to stave off bn of losses that would be incurred if the repossessed assets were sold in the open market (Times)
POSTBANK wants to report a "clearly positive" fin. result by the end of 10, although it could also do so by the middle of that year (CEO)
COMMERZBANK :Close Brothers has made a bid for Kleinwort Benson, a private bank being sold by CBK (Sunday Times)
DEUTSCHE BANK (minor) Deutsche Bank Private Wealth Management has hired 7 specialists from rivals including Credit Suisse, UBS and Barclays as it expands its UK business.
BBVA took over Guaranty Financial Group Inc. of Texas. (as expected)
BNP agreed to sell its retail banking operations in Argentina to the local unit of Banco Santander SA.
ERSTE BANK : Criteria CaixaCorp (investment arm of La Caixa) has raised its stake in Erste Group to 7.85% from 5.1%
LLOYDS is in early talks with RESOLUTION about the possible sale of the bank’s Clerical Medical subsidiary, which could fetch up to £4bn. (The Mail on Sunday) / Separately Win Bischoff is facing pressure from investors to reshuffle the board (Sunday Times)
SIEMENS : Siemens & Deutsche Bahn AG may jointly pursue orders for U.S.high-speed trains (Der Spiegel)
DEUTSCHE TEL will offer a high-capacity radio network for quick Internet connections in metropolitan areas of India from 2010. (India is among the fastest growing telco mkt, and market researchers expect the number of mobile phone users to rise by 30% in 2009 to 450M)
BT has shut its graduate recruitment program amid a cost-saving plan that will result in more job cuts by the end of the year (FT)
RIO TINTO : Chinalco, is willing to open discussions Rio for cooperation in bauxite & alumina production (WSJ)
BALFOUR BEATTY’s US unit selected for $415M road project in Texas
CONTINENTAL : Schaeffler offered banks options for stakes in a possible biz entity with Conti in return for refinancing debt (Welt)
LUFTHANSA has held talks with Virgin Atlantic Airways Ltd. About the possible sale or merger of its BMI airline (Sunday Times)
NOVARTIS receives approval in EU for Xolair to treat children age 6 to 11 y suffering from severe persistent allergic asthma
GERMANY : Bundesbank President Axel Weber, said that the contraction of the German eco. appears to have come to a halt and the first signs of a pending recovery have emerged. Weber added that the possibility of revising up next year's GDP growth has improved.
NEGATIVE IMPACTS
EADS : GULF AIR could renegotiate (number & size ) its order with Airbus & Boeing / In order : 35 Airbus, 24 Boeing
WATER UTILITIES (minor) : China’s Ministry of Housing & Urban-Rural Development may be investigating whether some
foreign water companies are manipulating water prices in some cities (Jinan Daily )
BASF has a “defense plan” if the Co become a takeover target because of its dispersed ownership structure (CEO in Wirtschaftswoche)
LONZA : JLL Partners rejected a $3.55 per-share bid for Canada’s Patheon ( JLL owns 57%of Patheon)
UBS will meet with Canadian tax officials next month in connection with bank accounts and tax evasion (Canadian National Rev Minister)
BMPS ‘s shareholder won’t allow the lender to be a hostile takeover target (chairman of the Fondazione Monte dei Paschi)
TELIASONERA makes offers for TEO LT ($213M) and Eesti Telekom ($475M)
TRADING IDEAS
BUY AHOLD to play island possibility & BUY Cars such as RENAULT / PEUGEOT & BUY OIL names such as BP / TOTAL / ENI on eco recovery
BUY ERICSSON / PERNOD on double bottom possibility & BUY AEGON / MUNICH RE / ALLIANZ to resume their upside trend
BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY BOEING / SELL UNITED TECH // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
REPSOL RAISED TO BUY FROM NEUTRAL BY UBS
WPP RAISED TO BUY FROM HOLD BY DEUTSCHE BANK
ERAMET RAISED TO BUY FROM HOLD BY NOMURA
BBVA RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
SANTANDER RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
DSM RAISED TO BUY FROM HOLD BY RBS
VIVENDI CUT TO HOLD FROM BUY BY DEUTSCHE BANK
NOKIA CUT TO HOLD FROM BUY BY DEUTSCHE BANK
DATA
WTI : 74,3 (2,73 %)
Eur/$ : 1,4329 (0,02 %)
$ /Yen : 94,80 (-0,47 )
10 Yr US : 3,57 ( 0,93 bp)
10 Yr Euro : 3,31 ( 5,7 bp)
Indices : US close ; Europe close
SOX : 1,65 %; -%
S&P :1,86 %; - %
DOW: 1,67 %; -%
NAS :1,59 %; -%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 2,81 %; - %
ENERGY : 2,69 %; - %
FINANCIAL : 2,12 %; - %
HEALTHCARE : 1,06 %; - %
TECHNO : 1,49 %; - %
TELECOM : 1,93 %; - %
INDUSTRIAL : 2,35 %; - %
UTILITIES : 1,82 %; - %
TO BE COMING
Today
Results :Sulzer / Orascom Telecom
Dividend :STMicroelectronics ($ 0,03)
Events :
Tuesday
Results : Gemalto
Dividend :
Events: Tata Motors AGM
Wednesday
Results : Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend : Intercontinental Hotels (GBp 8,111111) / QUALCOMM ($ 0,17)
Events : Semi conductor conf at Morgan Stanley
Thursday
Results : Accor / L'Oreal / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend :Time Warner ($ 0,1875)
Events:
Friday
Results :Carrefour
Dividend : France Telecom (GBp 0.60) / Lockheed Martin ($ 0,57) / McDonald's ( $ 0,5)
Events:
ECONOMIC DATA PREVIEW
Sales of existing US homes climbed more than expected to the highest level in almost two years. Purchases increased by 7.2 % for the fifth consecutive month to a 5.24 million annual rate following a 3.6 % rise in June at 4.89 Million. Falling home values and government stimulus efforts such as the tax credit for first-time buyers are boosting sales and stemming the housing meltdown that triggered the financial crisis.
ECONOMY
United States: existing home sales surged in July
Sales of existing US homes climbed more than expected to the highest level in almost two years. Purchases increased by 7.2 % for the fifth consecutive month to a 5.24 million annual rate following a 3.6 % rise in June at 4.89 Million. Consensus forecasted sales to rise to 5 million. in July. Remember that resales reached their lowest level at 4.49 million pace in January 2009. From a year earlier, purchases of existing homes rose by 5 %. Falling home values and government stimulus efforts such as the tax credit for first-time buyers are boosting sales and stemming the housing meltdown that triggered the financial crisis. The Median prices fell to $178 400 in July from $182 000 in may and $210 100 in July 2008. The average prices rose to $ 237 400 in July to $227 900 the previous month but prices dropped more than 6 % from a year ago at $253 000.
Eurozone: PMI Composite climbed in August
The Eurozone composite PMI Index rose more than expected at 50 in August from 47 in July while consensus expected a rise to 48. The PMI composite climbed for the sixth consecutive month from the lowest level of February at 36.2. This record rise was driven by an improvement on both Manufacturing and Service. The PMI Manufacturing increased at 47.9 (vs 47.5 expected) from 46.3 and the PMI Services climbed to 49.5 (vs 46.5 expected) following 45.7 in July. Note that a reading below 50 indicates a contraction and a reading above 50 signals an expansion. This adds to evidence that economic conditions continued to improve and that recession ended around the middle of the year.
In France, PMI Manufacturing was above the 50 level at 50.2 (49 expected) from 48.1 the previous month. The PMI Services rose at 48.9 from 45.5 in July (46.3 expected); But the composite PMI surged at 50.9 in August, the highest level in15 months and following 47.3 in July.
In Germany, PMI Manufacturing improved at 49 (47 expected) in August from 45.7 the previous month. PMI in Services surged above 50 at 54.1 in August for the first time in 11 months. The composite PMI increased at 54.2, its highest level since May 2008.
Friday, August 21, 2009
Bolt Upright
GLOBAL EQUITITES RESEARCH
The OECD said the turning point at which its 30 member nations start to show economic growth rather than contraction is likely to arrive sooner than previously expected. Forward-looking economic indicators from major countries suggest the lowest point of the nearly two-year economic downturn may have been reached already or could occur a few months earlier than previously expected. The group's "swing from negative to positive growth could come forward in time," the OECD said. But it cautioned that the eventual economic recovery for OECD countries as a whole will probably still be weak. GDP in the OECD countries stabilized between April and June, as export growth in Germany and Japan broke a one-year string of quarterly declines.
The rebound in the Philly Fed manufacturing index back into positive territory and the fourth consecutive monthly rise in the index of leading indicators both add to the growing evidence that the recession ended around the middle of the year. The Philly Fed index jumped to +4.5 in August, from -7.5, putting it at the highest level since the recession started in late 2007. The details of the survey were also encouraging, with the orders, shipments and inventories balances all moving into positive territory. At -12.9, the employment balance is still low, but even that reading represents a big improvement on the -25.3 recorded the month before.
The index of leading indicators increased by 0.6% m/m in July, driven by the decline in jobless claims, the increasing interest rate spread and the rebound in hours worked. Falling consumer expectations and shrinking real money supply subtracted from the overall index. This increase will grab the headlines, but it is the news that the index of coincident indicators was unchanged in July that is of most interest to business cycle wonks. This index incorporates the same four series - non-farm payrolls, personal income ex. transfers, industrial production and real business sales - used by the NBER to date turning points in the cycle. As it stands now, it appears that the economy stopped contracting in July, i.e the recession ended.
Yesterday’s Q2 GDP data showed that Taiwan is coming back strongly. The economy expanded 4.8% q/q. Exports climbed on the back of China’s economic upswing, while investment made a strong contribution. Household spending picked up too, on fiscal support measures, positive wealth effects from the rise in stocks, and on the boost to real incomes from the collapse in inflation. Q2 is probably as good as it will get until far into 2010. The government expects the economy to expand by 3.9% in 2010.
Corporate bonds on the rise: according to Dealogic, global corporate bond volumes (excluding banks and other financial institutions) rose 22 % in July, to $1.1trn from the previous record high of $898bn set in 2007, with more than four months left in the year. The utility and energy sector has made the largest contribution to the rise with $188.4bn issued so far this year. In Europe, where companies have traditionally preferred loans from banks over bonds, the volume of non-financial bond issuance totalled $426.5bn in the year to date, up 47 % from $290.4bn raised in 2008. Meanwhile, loans have fallen dramatically. The volume of high-value, syndicated loans issued to European borrowers has declined to €235bn so far this year from €651bn in 2008. On a global basis, loan volumes have dropped to $1.1bn year to date in 2009, compared with $3bn in 2008. A shift to bond financing from loans was already underway in 2006 and 2007 as corporations sought to diversify and looked for longer-term funding. Typically, bonds have a longer maturity than loans.
World Gold Council Q2 2009: the volume of total identifiable gold demand in Q2 09 was down 9% on the levels of a year earlier, equivalent to a 6 % decline in $US value terms to $21.3bn. During the four quarters ended June 2009, total tonnage was a healthy 21 % higher than the levels of the corresponding period a year earlier. ETF demand, at 56.7 tonnes in Q2 09, was robust on a historical basis but nevertheless marked a significant reduction on the 465.1 tonnes experienced in Q1 09.
Ahead of the Kansas City Fed’s Jackson Hole annual conference (Bernanke’s speech topic is “Reflections on a Year of Crisis”), U.S. stocks rose for a third day, with the S&P 500 index well above 1,000 pts, as AIG (+21 %) said it expects to repay the government and economic indicators added to evidence the recession may be ending. European equity indexes were upbeat as well, with the CAC 40 index closing above 3,500 pts. But this morning, Asian stocks fell (with the Nikkei down 1.2 % at 06.30 BST), dragging the MSCI Asia Pacific Index to its biggest weekly drop in five months, as earnings at Insurance Australia Group and Billabong International missed estimates. At 06.30 BST, U.S. index futures were down; DJIA ‑0.51 %, S&P 500 -0.52 %, Nasdaq 100 -0.63 %. Weak opening expected in European equity markets.
ECONOMIC DATA WITH IMPACT
Eurostoxx options expiry 1100 BST // DAX option expiry 1200 BST // CAC options & Index expiry 1500 BST // Equity options expiry at regular time…
US Existing Home Sales for July (15.00 BST) expected to rise by 1.5 % to around 5.00m. The months’ supply of unsold homes may fall below 9.4, the latest data (the peak was at 11 months last November).
In the Euro-zone composite PMI for August (09.00 BST), expected to rise to 47.7 from 47.0.
POSITIVE IMPACTS
MAERSK : H1 Rev DKK127.39Bn (127.33 e) / H1 EBITDA DKK23.73Bn (22.18 e) / H1 pretax pft DKK6.25Bn (4.79 e) / Outlook for rest of 2009 subject to considerable uncertainty
BMW has submitted applications to regulators to set up an auto financing company with its Chinese JV partner.
MITTAL will restart two blast furnaces in the United States as a result of improving steel demand
RIO TINTO to sell Jacobs Ranch to Arch Coal for $761M (US FTC cleared the deal)
VOLKSWAGEN has decided to double its spending in India to expand production capacity (the Hindu Business Line)
ACS, FERROVIAL, SACYR … : Spain will spend €6.1Bn on infrastructure projects before the end of the year, €4.4Bn on railroads & €1.1Bn on highways (the Development Ministry)
GAP : Q2 Revenue $3.25bn (In Line) / EPS $0.33 ($0.32 expected) / Gross margin 39.7% (+150 bps vs 2008) / Operating margin 11.6% (vs 10.7% 08Q2). Co announced that it will likely resume share repurchases in Q3.
NEGATIVE IMPACTS
RBS : The U.K. Treasury will face a court hearing in October about whether it violated its own environmental standards by using public funds to bail out RBS Group (FT citing a High Court decision).
LONZA had submitted an unbinding offer to buy Patheon Inc. for $3.55/shr (valuing the gp at $460M)
CARS : The US cash-for-clunkers car scrappage scheme to end Aug 24
PORSCHE was raided by German prosecutors probing possible violations of securities law and market manipulation.
ENI is interested in E.ON (probably some of Eon’s asset….) to expand its network of natural-gas distribution (CEO Paolo Scaroni). ENI is also “looking with great interest” at oil exploration around Lake Albert, near Uganda and the Democratic Republic of Congo (Bloomberg)
TRADING IDEAS
BUY AHOLD to play island possibility & BUY VALLOUREC / SANOFI / ENI / PERNOD on double bottom possibility
BUY Cyclicals such as TOTAL / ST GOBAIN / ARCELORMITTAL / ALSTOM etc… as recovery is a fact for now, whatever the speed, which coming indicators should tell us even more
BUY CARREFOUR / AEGON / MUNICH RE / ALLIANZ / FRANCE TEL / TELEFONICA which consolidated seriously, should resume their upside trend
BUY VINCI / SELL LAFARGE // BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY ENI / SELL ROYAL DUTCH // BUY BOEING / SELL UNITED TECH // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
ADP RESUMED AT OVERWEIGHT BY MORGAN STANLEY
ALPHA BANK CUT TO NEUTRAL FROM BUY BY NOMURA
LONZA CUT TO SELL FROM NEUTRAL BY MORGAN STANLEY
DATA
WTI : 72,2 (-0,53 %)
Eur/$ : 1,4212 (-0,30 %)
$ /Yen : 93,57 (0,96 )
10 Yr US : 3,38 ( -5,17 bp)
10 Yr Euro : 3,26 ( 0,6 bp)
Indices : US close ; Europe close
SOX : 1,02 %;0,18%
S&P :1,10 %; 0,76 %
DOW: 0,76%; 0,39 %
NAS :1,02%; 0,61%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,53 %; 0,76 %
ENERGY : 0,93 %; 0,71 %
FINANCIAL : 2,44 %; 2,05 %
HEALTHCARE : 0,61 %; 0,37 %
TECHNO : 1,04 %; 0,60 %
TELECOM : 0,82 %; 0,51 %
INDUSTRIAL : 1,11 %; 0,82 %
UTILITIES : 0,57 %; 0,02 %
TO BE COMING
Today
Results :
Dividend :ArcelorMittal ($0,1875) / Goldman Sachs ($ 0.35) / Johnson & Johnson ($ 0,49)
Events :
Monday
Results : Sulzer / Orascom Telecom
Dividend : STMicroelectronics ($ 0,03)
Events:
Tuesday
Results : Gemalto
Dividend :
Events : Tata Motors AGM
Wednesday
Results : Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend :Intercontinental Hotels (GBp 8,111111 ) / QUALCOMM ($ 0,17)
Events: Semi conductor conf at Morgan Stanley
Thursday
Results :Accor / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend : Time Warner ($ 0,1875)
Events:
ECONOMIC DATA PREVIEW
In United States, watch the Existing Home Sales (15.00 GMT) expected to rise for the fourth consecutive month by 2.1 % in July at 5.00 Million following 4.89 Million in June.
In Euro-zone, look at the PMI Manufacturing (09.00 GMT) expected slightly at 47.5 in August from 46.3 in July, the PMI Services that is expected to increase at 46.5 from 45.7
ECONOMY
United States: Conference Board US Leading Index rose less than expected in July
The US leading economic indicators rose in July for a fourth consecutive month. This is another encouraging sign that the recession is almost over. The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.6 %, less than forecast, after a revised 0.8 % increase in June. The July gain marks the longest series of increases since 2004. The coincident indicators index, a gauge of current economic activity was unchanged after falling every month since October.
United States: Philadelphia Fed business outlook survey rose in August
Manufacturing in the Philadelphia region unexpectedly expanded in August for the first time in almost a year. The Federal Reserve Bank of Philadelphia’s general economic index climbed to 4.2, the highest level since November 2007, from -7.5 in July, It was the first positive reading, signalling expansion, since September. Manufacturing may contribute to a recovery in coming months as factories speed assembly lines after cutting inventories at a record pace in the first half of 2009.
United States: 28-day RPX composite index decreased less in June
The 28-day measures by Radar Logic of actual prices paid for US residential real estate in 25 US Metropolitan Statistical Area improved in June for the fifth consecutive month. Prices contracted by 14.61 % from a year ago after having dropped by a record 23.03 % in January.
United States: weekly initial jobless claims rose
US weekly initial jobless claims rose more than expected the week ended August 15. American filing claims for jobless benefits increased by 15 000 to 576 000 (550 000 expected) following 561 000 the previous week. The number of people collecting unemployment benefits advanced at 6 241 0000 (6 239 000 the week earlier). Companies keep paring jobs but a slower pace. Today’s data coincides with the week the government collects information for its monthly employment report. While the economy has lost 6.7 million jobs since the recession started in December 2007, the 247,000 decline in payrolls reported for July was the smallest in almost a year.
United Kingdom : retail sales climbed in July
UK retail sales rose for a second month in July led by more sales in furniture and electrical goods. The sales climbed by 0.4 % in July after the 1.3 % rise the previous month. From a year ago, retail sales increased by 3.3 % from +3.1 % in June and while consensus expected a 2.7 % rise. The volume sales in non-food stores rose by 1.1 % in July from +1.7 % in June. The household goods stores volume increased by 4.5 % after a 1 % decline in June. The retail sector clearly has built up a decent amount of positive momentum, which could well last a few months more.
The OECD said the turning point at which its 30 member nations start to show economic growth rather than contraction is likely to arrive sooner than previously expected. Forward-looking economic indicators from major countries suggest the lowest point of the nearly two-year economic downturn may have been reached already or could occur a few months earlier than previously expected. The group's "swing from negative to positive growth could come forward in time," the OECD said. But it cautioned that the eventual economic recovery for OECD countries as a whole will probably still be weak. GDP in the OECD countries stabilized between April and June, as export growth in Germany and Japan broke a one-year string of quarterly declines.
The rebound in the Philly Fed manufacturing index back into positive territory and the fourth consecutive monthly rise in the index of leading indicators both add to the growing evidence that the recession ended around the middle of the year. The Philly Fed index jumped to +4.5 in August, from -7.5, putting it at the highest level since the recession started in late 2007. The details of the survey were also encouraging, with the orders, shipments and inventories balances all moving into positive territory. At -12.9, the employment balance is still low, but even that reading represents a big improvement on the -25.3 recorded the month before.
The index of leading indicators increased by 0.6% m/m in July, driven by the decline in jobless claims, the increasing interest rate spread and the rebound in hours worked. Falling consumer expectations and shrinking real money supply subtracted from the overall index. This increase will grab the headlines, but it is the news that the index of coincident indicators was unchanged in July that is of most interest to business cycle wonks. This index incorporates the same four series - non-farm payrolls, personal income ex. transfers, industrial production and real business sales - used by the NBER to date turning points in the cycle. As it stands now, it appears that the economy stopped contracting in July, i.e the recession ended.
Yesterday’s Q2 GDP data showed that Taiwan is coming back strongly. The economy expanded 4.8% q/q. Exports climbed on the back of China’s economic upswing, while investment made a strong contribution. Household spending picked up too, on fiscal support measures, positive wealth effects from the rise in stocks, and on the boost to real incomes from the collapse in inflation. Q2 is probably as good as it will get until far into 2010. The government expects the economy to expand by 3.9% in 2010.
Corporate bonds on the rise: according to Dealogic, global corporate bond volumes (excluding banks and other financial institutions) rose 22 % in July, to $1.1trn from the previous record high of $898bn set in 2007, with more than four months left in the year. The utility and energy sector has made the largest contribution to the rise with $188.4bn issued so far this year. In Europe, where companies have traditionally preferred loans from banks over bonds, the volume of non-financial bond issuance totalled $426.5bn in the year to date, up 47 % from $290.4bn raised in 2008. Meanwhile, loans have fallen dramatically. The volume of high-value, syndicated loans issued to European borrowers has declined to €235bn so far this year from €651bn in 2008. On a global basis, loan volumes have dropped to $1.1bn year to date in 2009, compared with $3bn in 2008. A shift to bond financing from loans was already underway in 2006 and 2007 as corporations sought to diversify and looked for longer-term funding. Typically, bonds have a longer maturity than loans.
World Gold Council Q2 2009: the volume of total identifiable gold demand in Q2 09 was down 9% on the levels of a year earlier, equivalent to a 6 % decline in $US value terms to $21.3bn. During the four quarters ended June 2009, total tonnage was a healthy 21 % higher than the levels of the corresponding period a year earlier. ETF demand, at 56.7 tonnes in Q2 09, was robust on a historical basis but nevertheless marked a significant reduction on the 465.1 tonnes experienced in Q1 09.
Ahead of the Kansas City Fed’s Jackson Hole annual conference (Bernanke’s speech topic is “Reflections on a Year of Crisis”), U.S. stocks rose for a third day, with the S&P 500 index well above 1,000 pts, as AIG (+21 %) said it expects to repay the government and economic indicators added to evidence the recession may be ending. European equity indexes were upbeat as well, with the CAC 40 index closing above 3,500 pts. But this morning, Asian stocks fell (with the Nikkei down 1.2 % at 06.30 BST), dragging the MSCI Asia Pacific Index to its biggest weekly drop in five months, as earnings at Insurance Australia Group and Billabong International missed estimates. At 06.30 BST, U.S. index futures were down; DJIA ‑0.51 %, S&P 500 -0.52 %, Nasdaq 100 -0.63 %. Weak opening expected in European equity markets.
ECONOMIC DATA WITH IMPACT
Eurostoxx options expiry 1100 BST // DAX option expiry 1200 BST // CAC options & Index expiry 1500 BST // Equity options expiry at regular time…
US Existing Home Sales for July (15.00 BST) expected to rise by 1.5 % to around 5.00m. The months’ supply of unsold homes may fall below 9.4, the latest data (the peak was at 11 months last November).
In the Euro-zone composite PMI for August (09.00 BST), expected to rise to 47.7 from 47.0.
POSITIVE IMPACTS
MAERSK : H1 Rev DKK127.39Bn (127.33 e) / H1 EBITDA DKK23.73Bn (22.18 e) / H1 pretax pft DKK6.25Bn (4.79 e) / Outlook for rest of 2009 subject to considerable uncertainty
BMW has submitted applications to regulators to set up an auto financing company with its Chinese JV partner.
MITTAL will restart two blast furnaces in the United States as a result of improving steel demand
RIO TINTO to sell Jacobs Ranch to Arch Coal for $761M (US FTC cleared the deal)
VOLKSWAGEN has decided to double its spending in India to expand production capacity (the Hindu Business Line)
ACS, FERROVIAL, SACYR … : Spain will spend €6.1Bn on infrastructure projects before the end of the year, €4.4Bn on railroads & €1.1Bn on highways (the Development Ministry)
GAP : Q2 Revenue $3.25bn (In Line) / EPS $0.33 ($0.32 expected) / Gross margin 39.7% (+150 bps vs 2008) / Operating margin 11.6% (vs 10.7% 08Q2). Co announced that it will likely resume share repurchases in Q3.
NEGATIVE IMPACTS
RBS : The U.K. Treasury will face a court hearing in October about whether it violated its own environmental standards by using public funds to bail out RBS Group (FT citing a High Court decision).
LONZA had submitted an unbinding offer to buy Patheon Inc. for $3.55/shr (valuing the gp at $460M)
CARS : The US cash-for-clunkers car scrappage scheme to end Aug 24
PORSCHE was raided by German prosecutors probing possible violations of securities law and market manipulation.
ENI is interested in E.ON (probably some of Eon’s asset….) to expand its network of natural-gas distribution (CEO Paolo Scaroni). ENI is also “looking with great interest” at oil exploration around Lake Albert, near Uganda and the Democratic Republic of Congo (Bloomberg)
TRADING IDEAS
BUY AHOLD to play island possibility & BUY VALLOUREC / SANOFI / ENI / PERNOD on double bottom possibility
BUY Cyclicals such as TOTAL / ST GOBAIN / ARCELORMITTAL / ALSTOM etc… as recovery is a fact for now, whatever the speed, which coming indicators should tell us even more
BUY CARREFOUR / AEGON / MUNICH RE / ALLIANZ / FRANCE TEL / TELEFONICA which consolidated seriously, should resume their upside trend
BUY VINCI / SELL LAFARGE // BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY ENI / SELL ROYAL DUTCH // BUY BOEING / SELL UNITED TECH // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
ADP RESUMED AT OVERWEIGHT BY MORGAN STANLEY
ALPHA BANK CUT TO NEUTRAL FROM BUY BY NOMURA
LONZA CUT TO SELL FROM NEUTRAL BY MORGAN STANLEY
DATA
WTI : 72,2 (-0,53 %)
Eur/$ : 1,4212 (-0,30 %)
$ /Yen : 93,57 (0,96 )
10 Yr US : 3,38 ( -5,17 bp)
10 Yr Euro : 3,26 ( 0,6 bp)
Indices : US close ; Europe close
SOX : 1,02 %;0,18%
S&P :1,10 %; 0,76 %
DOW: 0,76%; 0,39 %
NAS :1,02%; 0,61%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,53 %; 0,76 %
ENERGY : 0,93 %; 0,71 %
FINANCIAL : 2,44 %; 2,05 %
HEALTHCARE : 0,61 %; 0,37 %
TECHNO : 1,04 %; 0,60 %
TELECOM : 0,82 %; 0,51 %
INDUSTRIAL : 1,11 %; 0,82 %
UTILITIES : 0,57 %; 0,02 %
TO BE COMING
Today
Results :
Dividend :ArcelorMittal ($0,1875) / Goldman Sachs ($ 0.35) / Johnson & Johnson ($ 0,49)
Events :
Monday
Results : Sulzer / Orascom Telecom
Dividend : STMicroelectronics ($ 0,03)
Events:
Tuesday
Results : Gemalto
Dividend :
Events : Tata Motors AGM
Wednesday
Results : Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend :Intercontinental Hotels (GBp 8,111111 ) / QUALCOMM ($ 0,17)
Events: Semi conductor conf at Morgan Stanley
Thursday
Results :Accor / Credit Agricole / Bureau Veritas / Premier Oil / SeaDrill / Baloise / Casino / Diageo / Cimpor / Essilor / Bouygues / Fortis / GDF Suez / Natixis / Ingenico / OZ Minerals / Lagardere / Dell
Dividend : Time Warner ($ 0,1875)
Events:
ECONOMIC DATA PREVIEW
In United States, watch the Existing Home Sales (15.00 GMT) expected to rise for the fourth consecutive month by 2.1 % in July at 5.00 Million following 4.89 Million in June.
In Euro-zone, look at the PMI Manufacturing (09.00 GMT) expected slightly at 47.5 in August from 46.3 in July, the PMI Services that is expected to increase at 46.5 from 45.7
ECONOMY
United States: Conference Board US Leading Index rose less than expected in July
The US leading economic indicators rose in July for a fourth consecutive month. This is another encouraging sign that the recession is almost over. The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.6 %, less than forecast, after a revised 0.8 % increase in June. The July gain marks the longest series of increases since 2004. The coincident indicators index, a gauge of current economic activity was unchanged after falling every month since October.
United States: Philadelphia Fed business outlook survey rose in August
Manufacturing in the Philadelphia region unexpectedly expanded in August for the first time in almost a year. The Federal Reserve Bank of Philadelphia’s general economic index climbed to 4.2, the highest level since November 2007, from -7.5 in July, It was the first positive reading, signalling expansion, since September. Manufacturing may contribute to a recovery in coming months as factories speed assembly lines after cutting inventories at a record pace in the first half of 2009.
United States: 28-day RPX composite index decreased less in June
The 28-day measures by Radar Logic of actual prices paid for US residential real estate in 25 US Metropolitan Statistical Area improved in June for the fifth consecutive month. Prices contracted by 14.61 % from a year ago after having dropped by a record 23.03 % in January.
United States: weekly initial jobless claims rose
US weekly initial jobless claims rose more than expected the week ended August 15. American filing claims for jobless benefits increased by 15 000 to 576 000 (550 000 expected) following 561 000 the previous week. The number of people collecting unemployment benefits advanced at 6 241 0000 (6 239 000 the week earlier). Companies keep paring jobs but a slower pace. Today’s data coincides with the week the government collects information for its monthly employment report. While the economy has lost 6.7 million jobs since the recession started in December 2007, the 247,000 decline in payrolls reported for July was the smallest in almost a year.
United Kingdom : retail sales climbed in July
UK retail sales rose for a second month in July led by more sales in furniture and electrical goods. The sales climbed by 0.4 % in July after the 1.3 % rise the previous month. From a year ago, retail sales increased by 3.3 % from +3.1 % in June and while consensus expected a 2.7 % rise. The volume sales in non-food stores rose by 1.1 % in July from +1.7 % in June. The household goods stores volume increased by 4.5 % after a 1 % decline in June. The retail sector clearly has built up a decent amount of positive momentum, which could well last a few months more.
Wednesday, August 19, 2009
Move Your Body
GLOBAL EQUITIES RESEARCH
Consolidation mood on every market in a quiet summer time trading activity might not last much longer. According to a big US broker, global investors' sentiment toward Europe is improving: while a net 2% of asset allocators still want to be underweight the Euro zone on a 12-month horizon, this is a big improvement on last month's 30%, which marked record low in sentiment toward Europe. In the past, a shift in relative preference toward Europe has signalled European out performance vis-à-vis other developed markets. Growth expectations again rose strongly. Two-thirds (a net 66%) of respondents see the economy strengthen on a 12-month horizon - the highest reading since May 2006 and almost double last month's level of 34%. The percentage of respondents expecting profits to rise over the coming year almost trebled to a net 62% - the strongest reading since June 2004. In summary portfolio managers are much more optimistic on the macro outlook but despite this cash levels actually rose over the month (29% overweight), hence they believe market corrections will be modest and should remain buyers on dips, the positioning is not inline with sentiment. We obviously believe the same, this is reason why at best 2550 on the cash Eurostoxx is a maximum downside target.
Activity should gradually pick up as time is passing by, as we get out of the summer holidays season, with a consolidation which will even more boost the business capacity once fund managers will be back. The previous 2258–2733 on way rise had to be retraced (886-1017 on the S&P), and Q3 earnings as well as macro data to be released for some as soon as September will be very friendly. Already tomorrow’s Existing home sales and Bernanke speech will bring further friendly clues. Even today, US earnings and Jobless Claims as well as the Leading indicators reports might bring some more activity than the last few days.
Despite an upswing this morning, the Shanghai Composite Index retreated roughly 20 % since the beginning of August. It rose 90 % between the beginning of the year and the end of July, and 100 % since the trough by the end of October 2008, a stellar performance compared to major world indexes. Property markets were heating up fast as well. So, are threats of a financial bubble emerging in China weighing on Chinese equity markets and, more generally, on global indexes? It is important to understand how China’s remarkable reported economic performance is possible in the midst of a global downturn. China enacted a massive stimulus package last November worth about 14 % of GDP and aimed at boosting domestic demand as exports fell sharply (-23 % YoY in July). China has a planned economy and the 8% growth target for 2009 will be achieved, almost by definition. 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 export-as U.S. data are. The U.S. stimulus package attempts to boost consumption, investment and government spending, while the Chinese stimulus package involves large transfer of funds from 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. It permits the Government to consider funds from the stimulus package as part of production before they are actually spent - to count production and shipments as de facto outlays by end users, as well as to record shipments to retailers as sales. But a large flow of funds may transit by domestic equity markets, helped along by $25bn of “hot money” from foreigners, eager to get a piece of the indexes’ surge. Chinese measures aimed at boosting demand growth to meet ambitious production growth targets intensified sharply. At the end of July, M2 surged 28.4 % YoY, up sharply from 15 % in the beginning of the year. New loans by banks rose 34.5% YoY in June. The worst outcome for China would be one that includes ever-rising inflation pressure and the burst of stock markets’ bubble. But prospects for growth being sustained by a strong domestic demand are still pertinent: yesterday, PetroChina signed a liquefied natural gas import deal with Exxon Mobil, from the Gorgon gas field off-shore of Australia, valued at $41bn over the next 20 years…
ECONOMIC DATA WITH IMPACT
US earnings : Barnes & Noble (BKS), H. J. Heinz (HNZ), Sears Holdings (SHLD), Gap (GPS)
Jobless Claims (13h30 BST)expected 550k from previous 558K /employment is an important and weak sector for now, which will be the lagging one to improve, but Obama’s focus. As such it will keep on improving sooner or later, which is what operators will try to see through today’s report / minor though as weekly data
US Leading Indicators (15H BST)expected +0.7% from previous +0.7% /the higher the better / minor
Philadelphia Index (15h BST) expected –2 from previous –7.5 / minor
POSITIVE IMPACTS
HOLCIM : H1 Sales SFR10.082Bn (10.399 e) / H1 Op. EBITDA SFR2.143Bn (2.01 e) / Op Pft SFR1.306Bn (1.173 e) / Europe & N. America stimulus programs will have a positive impact on demand building up gradualy over the next year
AHOLD : Q2 EBIT €295M (276 e) / Q2 Net pft €195M (183.9 e) / Retail Op margin 4.9%
SAP expects firmer mkt conditions in Asia next year as its order pipeline for the 2nd half of the year continues to strengthen (Executive)
NOKIA wants to be a global leader in new technologies by offering software and solutions to its 1.5bn handset users across the world, investing heavily in services such as navigation, music, media, messaging… (CEO in The Eco Times)
BBVA won the bidding from FDIC to take over ailing Texas lender Guaranty Financial Group (Source)
STANDARD CHARTERED ’s India consumer unit plans to double its base of wealthy “priority” clients in the 3 three years (WSJ)
VOESTALPINE: Q1 EBIT €-24M (-30 e)/ Q1 Net loss €67.3M (92.8 e)/1st signs of stabilization are visible /Tgt break even EBIT in Q2’10
SANOFI : Data from tests on adults show it is safe to start trying out the new H1N1 swine flu vaccine in children (U.S. officials)
GLAXOSMITHKLINE : The FDA has approved GSK's Hiberix Hib vaccines as a booster dose for children ages 15 months to 4 years
CARS A. Merkel's cabinet agreed a plan to get a million electric cars on Germany's roads by 2020 & transform the country into the world's top electric car market.
NEGATIVE IMPACTS
VOLKSWAGEN (to be noted) has seen a doubling of short interest in its stock by hedge funds since the middle of last month, with 2% of the company's shares, and almost a third of the common stock available for borrowing, out on loan (WSJ)
UBS : The Swiss govt said it would convert all of its its mandatory convertible notes in UBS & sell the shares to institutional investors
BAYER has suffered defeat in an Indian court in a crucial legal dispute over approval of a copycat version of its cancer drug Nexavar.
VEDANTA : Sterlite Industries (unit of Vedanta) has raised its offer for bankrupt U.S miner Asarco by $500M to $2.1Bn
TRADING IDEAS
BUY VALLOUREC / SANOFI / ENI / PERNOD on double bottom possibility
BUY Cyclicals such as TOTAL / ST GOBAIN / ARCELORMITTAL / ALSTOM etc… as recovery is a fact for now, whatever the speed, which coming indicators should tell us even more
BUY CARREFOUR / AEGON / MUNICH RE / ALLIANZ / FRANCE TEL / TELEFONICA which consolidated seriously, should resume their upside trend
BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY ENI / SELL ROYAL DUTCH // BUY BOEING / SELL UNITED TECH // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
DEUTSCHE POSTBANK RAISED TO BUY FROM NEUTRAL BY UBS
SWEDBANK RAISED TO OVERWEIGHT BY MORGAN STANLEY
MICHEAL PAGE RAISED HOLD FROM SELL BY ING
HOCHTIEF RAISED TO BUY FROM HOLD BY DEUTSCHE BANK
DAIMLER ADDED TO BEST IDEA LIST BY MORGAN STANLEY
SOLARWORKLD CUT TO SELL FROM NEUTRAL BY GOLDMAN SACHS
Q-CELLS ADDED TO CONVITCTION SELL LIST BY GOLDMAN SACHS
HENNES & MAURITZ CUT TO HOLD FROM BUY BY DEUTSCHE BANK
INDITEX CUT TO SELL FROM HOLD BY DEUTSCHE BANK
ASTRAZENECA CUT TO HOLD FROM BUY BY CITIGROUP
COMMERZBANK CUT TO SELL FROM NEUTRAL BY UBS
DIAGEO CUT TO HOLD FROM BUY BY ING
BMW REMOVED TO BEST IDEA LIST BY MORGAN STANLEY
DATA
WTI : 72,6 (3,84 %)
Eur/$ : 1,4227 (0,03 %)
$ /Yen : 94,39 (-0,36 )
10 Yr US : 3,48 ( 3,14 bp)
10 Yr Euro : 3,25 ( -4,6 bp)
Indices : US close ; Europe close
SOX : 0,60 %;-0,45%
S&P :0,69 %; -0,17 %
DOW: 0,66%; -0,18 %
NAS :0,68%; -0,32%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,92 %; -0,57 %
ENERGY : 1,87 %; 0,72 %
FINANCIAL : -0,03 %; -0,55 %
HEALTHCARE : 1,29 %; 0,43 %
TECHNO : 0,44 %; -0,60 %
TELECOM : 0,60 %; -0,25 %
INDUSTRIAL : 0,18 %; -0,65 %
UTILITIES : 0,76 %; -0,06 %
TO BE COMING
Today
Results :Ahold / Holcim / Heinz / Gap / Rio Tinto / Sears
Dividend :
Events :
Friday
Results :
Dividend : ArcelorMittal ($0,1875) / Goldman Sachs ($ 0.35) / Johnson & Johnson ($ 0,49)
Events:
Monday
Results : Sulzer / Orascom Telecom
Dividend : STMicroelectronics ($ 0,03)
Events :
Tuesday
Results : Gemalto
Dividend :
Events: Tata Motors AGM
Wednesday
Results :Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend : Intercontinental Hotels (GBp 8,111111 ) / QUALCOMM ($ 0,17)
Events:Semi conductor conf at Morgan Stanley
ECONOMIC DATA PREVIEW
In United States, watch the Leading Index of the Conference Board (15.00 GMT) expected up for the fourth consecutive month by 0.7 % in July following a 0.7 % increase in June.
Have a look at the Philadelphia Fed Business Outlook Index (15.00 GMT) expected up at –2 following –7.5 the previous month.
Watch the weekly initial jobless claims (13.30 GMT) expected to ease at 550 000 the week ended August 15th and after 558 000 the previous week.
In United Kingdom, look at the Retail Sales for July expected slightly up by 0.4 % after a 1.5 % rise in June. From a year ago, Retail Sales are expected to climb 2.7 % from +2.9 % the previous month.
ECONOMY
Germany : Producer prices dropped in July
German producer prices fell at the fastest pace in 60 years in July as energy costs declined. From a year earlier prices tumbled by 7.8 % after a 4.6 % drop the previous month while the consensus expected prices to fell by 6.5 %. From the previous month, producer prices retreated 1.5 % following a 0.1 % drop in June. Excluding energy costs, prices fell 0.2 % in July and 3.6 % from a year ago. From a year earlier, prices for electricity declined 10.8%, petroleum prices retreated 28.8 % and heating oil dropped 49.8 %.
Consolidation mood on every market in a quiet summer time trading activity might not last much longer. According to a big US broker, global investors' sentiment toward Europe is improving: while a net 2% of asset allocators still want to be underweight the Euro zone on a 12-month horizon, this is a big improvement on last month's 30%, which marked record low in sentiment toward Europe. In the past, a shift in relative preference toward Europe has signalled European out performance vis-à-vis other developed markets. Growth expectations again rose strongly. Two-thirds (a net 66%) of respondents see the economy strengthen on a 12-month horizon - the highest reading since May 2006 and almost double last month's level of 34%. The percentage of respondents expecting profits to rise over the coming year almost trebled to a net 62% - the strongest reading since June 2004. In summary portfolio managers are much more optimistic on the macro outlook but despite this cash levels actually rose over the month (29% overweight), hence they believe market corrections will be modest and should remain buyers on dips, the positioning is not inline with sentiment. We obviously believe the same, this is reason why at best 2550 on the cash Eurostoxx is a maximum downside target.
Activity should gradually pick up as time is passing by, as we get out of the summer holidays season, with a consolidation which will even more boost the business capacity once fund managers will be back. The previous 2258–2733 on way rise had to be retraced (886-1017 on the S&P), and Q3 earnings as well as macro data to be released for some as soon as September will be very friendly. Already tomorrow’s Existing home sales and Bernanke speech will bring further friendly clues. Even today, US earnings and Jobless Claims as well as the Leading indicators reports might bring some more activity than the last few days.
Despite an upswing this morning, the Shanghai Composite Index retreated roughly 20 % since the beginning of August. It rose 90 % between the beginning of the year and the end of July, and 100 % since the trough by the end of October 2008, a stellar performance compared to major world indexes. Property markets were heating up fast as well. So, are threats of a financial bubble emerging in China weighing on Chinese equity markets and, more generally, on global indexes? It is important to understand how China’s remarkable reported economic performance is possible in the midst of a global downturn. China enacted a massive stimulus package last November worth about 14 % of GDP and aimed at boosting domestic demand as exports fell sharply (-23 % YoY in July). China has a planned economy and the 8% growth target for 2009 will be achieved, almost by definition. 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 export-as U.S. data are. The U.S. stimulus package attempts to boost consumption, investment and government spending, while the Chinese stimulus package involves large transfer of funds from 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. It permits the Government to consider funds from the stimulus package as part of production before they are actually spent - to count production and shipments as de facto outlays by end users, as well as to record shipments to retailers as sales. But a large flow of funds may transit by domestic equity markets, helped along by $25bn of “hot money” from foreigners, eager to get a piece of the indexes’ surge. Chinese measures aimed at boosting demand growth to meet ambitious production growth targets intensified sharply. At the end of July, M2 surged 28.4 % YoY, up sharply from 15 % in the beginning of the year. New loans by banks rose 34.5% YoY in June. The worst outcome for China would be one that includes ever-rising inflation pressure and the burst of stock markets’ bubble. But prospects for growth being sustained by a strong domestic demand are still pertinent: yesterday, PetroChina signed a liquefied natural gas import deal with Exxon Mobil, from the Gorgon gas field off-shore of Australia, valued at $41bn over the next 20 years…
ECONOMIC DATA WITH IMPACT
US earnings : Barnes & Noble (BKS), H. J. Heinz (HNZ), Sears Holdings (SHLD), Gap (GPS)
Jobless Claims (13h30 BST)expected 550k from previous 558K /employment is an important and weak sector for now, which will be the lagging one to improve, but Obama’s focus. As such it will keep on improving sooner or later, which is what operators will try to see through today’s report / minor though as weekly data
US Leading Indicators (15H BST)expected +0.7% from previous +0.7% /the higher the better / minor
Philadelphia Index (15h BST) expected –2 from previous –7.5 / minor
POSITIVE IMPACTS
HOLCIM : H1 Sales SFR10.082Bn (10.399 e) / H1 Op. EBITDA SFR2.143Bn (2.01 e) / Op Pft SFR1.306Bn (1.173 e) / Europe & N. America stimulus programs will have a positive impact on demand building up gradualy over the next year
AHOLD : Q2 EBIT €295M (276 e) / Q2 Net pft €195M (183.9 e) / Retail Op margin 4.9%
SAP expects firmer mkt conditions in Asia next year as its order pipeline for the 2nd half of the year continues to strengthen (Executive)
NOKIA wants to be a global leader in new technologies by offering software and solutions to its 1.5bn handset users across the world, investing heavily in services such as navigation, music, media, messaging… (CEO in The Eco Times)
BBVA won the bidding from FDIC to take over ailing Texas lender Guaranty Financial Group (Source)
STANDARD CHARTERED ’s India consumer unit plans to double its base of wealthy “priority” clients in the 3 three years (WSJ)
VOESTALPINE: Q1 EBIT €-24M (-30 e)/ Q1 Net loss €67.3M (92.8 e)/1st signs of stabilization are visible /Tgt break even EBIT in Q2’10
SANOFI : Data from tests on adults show it is safe to start trying out the new H1N1 swine flu vaccine in children (U.S. officials)
GLAXOSMITHKLINE : The FDA has approved GSK's Hiberix Hib vaccines as a booster dose for children ages 15 months to 4 years
CARS A. Merkel's cabinet agreed a plan to get a million electric cars on Germany's roads by 2020 & transform the country into the world's top electric car market.
NEGATIVE IMPACTS
VOLKSWAGEN (to be noted) has seen a doubling of short interest in its stock by hedge funds since the middle of last month, with 2% of the company's shares, and almost a third of the common stock available for borrowing, out on loan (WSJ)
UBS : The Swiss govt said it would convert all of its its mandatory convertible notes in UBS & sell the shares to institutional investors
BAYER has suffered defeat in an Indian court in a crucial legal dispute over approval of a copycat version of its cancer drug Nexavar.
VEDANTA : Sterlite Industries (unit of Vedanta) has raised its offer for bankrupt U.S miner Asarco by $500M to $2.1Bn
TRADING IDEAS
BUY VALLOUREC / SANOFI / ENI / PERNOD on double bottom possibility
BUY Cyclicals such as TOTAL / ST GOBAIN / ARCELORMITTAL / ALSTOM etc… as recovery is a fact for now, whatever the speed, which coming indicators should tell us even more
BUY CARREFOUR / AEGON / MUNICH RE / ALLIANZ / FRANCE TEL / TELEFONICA which consolidated seriously, should resume their upside trend
BUY CARREFOUR / SELL METRO // BUY EDF / SELL EON // BUY ENI / SELL ROYAL DUTCH // BUY BOEING / SELL UNITED TECH // BUY GENERAL ELECTRIC / SELL 3M
BROKER METEOROLOGY
DEUTSCHE POSTBANK RAISED TO BUY FROM NEUTRAL BY UBS
SWEDBANK RAISED TO OVERWEIGHT BY MORGAN STANLEY
MICHEAL PAGE RAISED HOLD FROM SELL BY ING
HOCHTIEF RAISED TO BUY FROM HOLD BY DEUTSCHE BANK
DAIMLER ADDED TO BEST IDEA LIST BY MORGAN STANLEY
SOLARWORKLD CUT TO SELL FROM NEUTRAL BY GOLDMAN SACHS
Q-CELLS ADDED TO CONVITCTION SELL LIST BY GOLDMAN SACHS
HENNES & MAURITZ CUT TO HOLD FROM BUY BY DEUTSCHE BANK
INDITEX CUT TO SELL FROM HOLD BY DEUTSCHE BANK
ASTRAZENECA CUT TO HOLD FROM BUY BY CITIGROUP
COMMERZBANK CUT TO SELL FROM NEUTRAL BY UBS
DIAGEO CUT TO HOLD FROM BUY BY ING
BMW REMOVED TO BEST IDEA LIST BY MORGAN STANLEY
DATA
WTI : 72,6 (3,84 %)
Eur/$ : 1,4227 (0,03 %)
$ /Yen : 94,39 (-0,36 )
10 Yr US : 3,48 ( 3,14 bp)
10 Yr Euro : 3,25 ( -4,6 bp)
Indices : US close ; Europe close
SOX : 0,60 %;-0,45%
S&P :0,69 %; -0,17 %
DOW: 0,66%; -0,18 %
NAS :0,68%; -0,32%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 0,92 %; -0,57 %
ENERGY : 1,87 %; 0,72 %
FINANCIAL : -0,03 %; -0,55 %
HEALTHCARE : 1,29 %; 0,43 %
TECHNO : 0,44 %; -0,60 %
TELECOM : 0,60 %; -0,25 %
INDUSTRIAL : 0,18 %; -0,65 %
UTILITIES : 0,76 %; -0,06 %
TO BE COMING
Today
Results :Ahold / Holcim / Heinz / Gap / Rio Tinto / Sears
Dividend :
Events :
Friday
Results :
Dividend : ArcelorMittal ($0,1875) / Goldman Sachs ($ 0.35) / Johnson & Johnson ($ 0,49)
Events:
Monday
Results : Sulzer / Orascom Telecom
Dividend : STMicroelectronics ($ 0,03)
Events :
Tuesday
Results : Gemalto
Dividend :
Events: Tata Motors AGM
Wednesday
Results :Suez Env sales / WPP / Heineken / Corio / Dexia / Heineken / Antofagasta / Irish Life / Swiss Life / Abengoa
Dividend : Intercontinental Hotels (GBp 8,111111 ) / QUALCOMM ($ 0,17)
Events:Semi conductor conf at Morgan Stanley
ECONOMIC DATA PREVIEW
In United States, watch the Leading Index of the Conference Board (15.00 GMT) expected up for the fourth consecutive month by 0.7 % in July following a 0.7 % increase in June.
Have a look at the Philadelphia Fed Business Outlook Index (15.00 GMT) expected up at –2 following –7.5 the previous month.
Watch the weekly initial jobless claims (13.30 GMT) expected to ease at 550 000 the week ended August 15th and after 558 000 the previous week.
In United Kingdom, look at the Retail Sales for July expected slightly up by 0.4 % after a 1.5 % rise in June. From a year ago, Retail Sales are expected to climb 2.7 % from +2.9 % the previous month.
ECONOMY
Germany : Producer prices dropped in July
German producer prices fell at the fastest pace in 60 years in July as energy costs declined. From a year earlier prices tumbled by 7.8 % after a 4.6 % drop the previous month while the consensus expected prices to fell by 6.5 %. From the previous month, producer prices retreated 1.5 % following a 0.1 % drop in June. Excluding energy costs, prices fell 0.2 % in July and 3.6 % from a year ago. From a year earlier, prices for electricity declined 10.8%, petroleum prices retreated 28.8 % and heating oil dropped 49.8 %.
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