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