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 %.