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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.