Mr T

GLOBAL EQUITIES RESEARCH

Markets have reacted positively to the interim results released by the major banks in the past few days. Indeed, the banking sector appears to be getting back on its feet. It is clearly encouraging that some banks are now making profits and that the losses of others were less than expected. Indeed, the banks now appear to have worked through most of the losses on their so-called toxic assets. All those profits will boost their capital and should encourage the banking system to lend progressively on to firms and households. For example, Lloyds has promised to lend £ 14Bn this year, HSBC reported £6.7 Bn of new mortgage lending in the first half of the year while Barclays said that its new lending to firm and households totalled £17 Bn over the same period.

Today, ECB is expected to keep interest rates on hold as it waits to see the impact of efforts to revive economy. At its July policy meeting, the ECB said it expected economic activity to remain weak for the rest of the year. Jean-Claude Trichet (Mister T) is likely to stick to a similar assessment at his news conference. However, while economists were confident that the ECB would make no change to policy this week, they have been divided about whether the U.K.'s central bank was likely to announce immediate further easing measures. Wednesday added to indications that the U.K. economy could return to growth as soon as the third quarter, possibly rendering unnecessary further easing steps by the BoE.

The latest UK data on both services and manufacturing suggest that a decent recovery is continuing across the economy. The healthy 0.5% monthly rise in industrial production in June echoed the upbeat tone of the CIPS survey released earlier this week. And the 0.6% drop in production in Q2 overall was a touch smaller than the 0.7% drop assumed by the ONS in its Q2 GDP estimate. Meanwhile, the timelier July CIPS/Markit report on services suggested that the pause in the survey seen in June was just a blip, with the headline business activity index rising strongly from 51.6 to 53.2 (consensus 51.8). And a weighted average of the manufacturing services and construction surveys is now just about consistent with rising GDP.

June’s fall in euro-zone retail sales is disappointing, but sales still fell by much less in Q2 than in Q1. In Q2 as a whole, retail sales fell by 0.5%, better than Q1’s 0.9% decline. Taken together with the very sharp rise in car sales, this points to a moderate quarterly increase in total consumer spending after Q1’s 0.4% fall. Clearly, this supports evidence from the business surveys that the rate of economic contraction eased in Q2. Looking ahead, spending should receive further support from sharp falls in inflation, which is already in negative territory.

Despite recent indications that overall economic activity is stabilizing, employment, which usually trails overall economic activity, is likely to decline for at least several more months. Downturn is moderating, private-sector employment in the United States fell by an estimated 371,000 jobs in the July ADP employment index, the smallest decline since October. The index comes two days before the government releases its tomorrow estimate of July Nonfarm payrolls. Economists surveyed by Bloomberg are looking for Nonfarm payrolls to drop by 328,000 in the government survey, which would be the smallest decline since August.

The unexpected dip in the US ISM non-manufacturing index to 46.4 in July, from 47.0, is a reminder that this will be a "two steps forward one step back" kind of recovery. The consensus forecast was 48.0. Nevertheless, the dip was fairly modest and the index is still well above the low of 33.3 reached last November. This is probably just a temporary blip. The new orders index also slipped, to 48.1, from 48.6.



ECONOMIC DATA WITH IMPACT


Germany Factory Orders MoM – June - (10.00 GMT) : exp +0.6% / prev +4.4%

UK BOE interrest rate (11.00 GMT) : exp unchanged +0.50%

ECB Interest rates (11.45 GMT) : expunchanged +1%

US Jobless claims (12.30 GMT) : exp 580 K / Prev 584 K


POSITIVE IMPACTS



DEUTSCHE TEL. : Q2 sales €16.24bn (16.29bn exp) / Adj. Ebitda €5.26bn (5.18bn exp) helped by the consolidation of Greek peer OTE, which contributed €1.5 bn to sales and €500 m to adj. Ebitda / Reiterated its FY outlook.

CBK : Q2 NII €1.84bn (€1.78bn exp) / Operating loss €201m (€ -304m exp) / Loan loss provisions €993m (€950m exp) / Tier1 11.3% 2009 will remain challenging / SOFFIN guarantees of €5bn to be returned ahead of time / Sees 12% post tax ROE in 2012

ZURICH FI : H1 operating $2.55bn ($2.37bn exp) / CR 96.2% (96.1% exp) / H1 Equity $25.2bn ($24.4bn exp) / ROE 10.8% (10.5%) / Solvency 180% / Remains confident well positioned in crisis / On track to meet saving targets

HANNOVER RE : Q2 Gross premiums €2.59bn (€2.28bn exp) / Operating €294.2m (€249m exp) / Investment income €371m (€246m exp) / CR = 98.9% (96.2% exp) / Says annual targets within reach / Sees a minimum ROE of 18% & EPS at least €5 for 2009

KBC : Q2 NII €1.44 (€1.38bn exp) / Gross earned premiums €1.26bn (€1.04bn exp) / Impairment €430m / Underlying Profit €409m (€368m exp) / Operating environment has improved since start of year

DELHAIZE : Q2 sales €5.1bn (5.06bn exp) / Ebit €244m (240m exp) / Q2 U.S. comparable store sales growth a bit light…

UNILEVER : Underlying Q2 sales growth 4.1% (+3.7% exp) / Adj. EPS $0.33, in line / Saw return to volume growth

NOVO NORDISK : Q2 sales DK13bn (12.82bn exp) / Operating DK4.09bn (3.76bn exp) / Raised FY op. profit target to +12-14% from +10% thanks to better cost control (FY fin. Costs seen at DK 900m from 1.5bn) / Raised slightly its FCF target

AVIVA : MCEV operating £1.68bn (1.29bn e) / IFRS operating £1.05bn (936m e) / Interim div. reduced by 31% to 9 pence / CR 97% / Plans for partial IPO of Delta Lloyd / Says sales volumes will continue to be subdued

RSA : H1 Net written premiums of £3.5bn, in line / Operating £392m (390m exp) / Interim div +7% to 2.92 p / Sees FY CR at 95%

PRO 7 : Q2 sales €694m (700m exp) / Adj. Ebitda €201.1m (171m exp) / Plans to intensify cost cutting / No FY outlook

FRENCH TELECOM OPERATORS : The number of mobile users continues to rise in France with 91.8% of residents subscribing to wireless services as of end-June, up from 88.1% a year ago

HOCHTIEF : Leighton has seen a pick up in demand for mining contractors since the end of the Q1, its CEO said

FRAPORT : Q2 revenue €493.5m (497m exp) / Ebitda €155.6m (149m exp) / Continues to anticipate passenger decline of 6-9%

PETROPLUS : Q2 revenue $3.96bn (4.07bn exp) / Ebit $260.5m (224m exp) / Expects markets to improve over the next few months.

AEGON won’t have to adjust its past annual reports for the assets of pension fund Optas which was acquired in 2007 (Amsterdam Court)

SYNGENTA announced the acquisition of Monsanto’s global hybrid sunflower seeds activities for a consideration of $160 m


PRUDENTIAL US : Q2 revenue $6.34bn ($6.55 bn exp) / EPS $1.25 ($1.20 exp) / Sees EPS 2009 of $5.00-5.25 ( $4.72 exp)



NEGATIVE IMPACTS



VEOLIA : H1 revenue €17.43bn (€18.27bn exp) / Recurring profit €276.5m (€379m exp) / FCF €1.98bn (€2.03bn exp) / Confirms 2009

PUBLICIS is the front-runner to buy Microsoft's digital ad. agency Razorfish for $500-600m (WSJ)

VIVENDI : Activision Blizzard offered a disappointing quarterly forecast + cut its FY revenue outlook with 2 major games delayed till 2010

TELEFONICA : O2 may lose its exclusive deal to sell iPhone in the U.K. (FT)

NOKIAN : Q2 sales €191.1 m (209 m exp) / Ebit €20.3 m (28m exp) / Saw signs of stabilization (Read-across Michelin)

NORSKE SKOG : Q2 sales NK5.16bn (5.38bn e) / Ebitda NK568m (575m e) / Sees no clear signs of improvement over the near term

UBS : Although the US & Switzerland are exp. to reach a final settlement Friday, details of the deal won't be public that day (Reuters)



TRADING IDEAS



BUY AHOLD ahead of US retailers July results

BUY DEUTSCHE BANK / TOTAL / NOKIA / GSZ / EXXON / NEW MONT MINING on reversal head & shoulder

BUY AIR FRANCE to play restructuring plan to be set up in September + Pitot plane speed sensor will be switch in the next three weeks as European regulation is asking + eco picking up

BUY YAHOO on double bottom possibility


BUY BASF / SELL LINDE // BUY PEUGEOT / SELL DAIMLER // BUY CARREFOUR / SELL L OREAL // BUY GLAXO / SELL ASTRA

BUY VISA / SELL MASTERCARD // BUY EXXON / SELL CHEVRON // BUY AMD / SELL INTEL


BROKER METEOROLOGY


SWISS RE RAISED TO NEUTRAL FROM SELL BY UBS

RENAULT RAISED TO NEUTRAL FROM SELL BY GOLDMAN SACHS

HENKEL RAISED TO HOLD FROM SELL BY SOC GEN


BMW CUT TO NEUTRAL FROM BUY BY UBS

OMV CUT TO SELL FROM HOLD BY UBS

BASF CUT TO NEUTRAL FROM BUY BY UBS

LLOYDS CUT TO HOLD FROM BUY BY DEUTSCHE BANK

SCHNEIDER CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS

INVENSYS CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS

STANDARD LIFE CUT TO HOLD FROM BUY BY CITIGROUP


MOODY’S DOWNGRADES BANK OF SCOTLAND (IRELAND) TO BAA1 FROM A2

S&P DOWNGRADES JAMAICA’S LONG TERM RATINGS TO CCC+ FRIL B-


DATA


WTI : 71,3 (-0,24 %)

Eur/$ : 1,4406 (0,01 %)

$ /Yen : 95,12 (-0,17 )

10 Yr US : 3,74 ( -0,18 bp)

10 Yr Euro : 3,34 ( -0,7 bp)


Indices : US close ; Europe close

SOX : -1,09 %;-1,41%

S&P :-0,29 %; -0,82 %

DOW: -0,42%; -0,91 %

NAS :-0,91%; -1,26%



DJ Stoxx US Sectoral Indices : US close ; Europe close

BASIC MATERIALS : 0,60 %; -0,68 %

ENERGY : -1,10 %; -1,29 %

FINANCIAL : 2,91 %; 0,94 %

HEALTHCARE : -1,26 %; -1,32 %

TECHNO : -0,88 %; -1,16 %

TELECOM : -1,64 %; -1,34 %

INDUSTRIAL : -0,79 %; -1,26 %

UTILITIES : -0,91 %; -1,13 %



TO BE COMING



Today

Results :Deutsche Telekom / Portugal Telecom / Telecom Italia / Aviva / Delhaize / Commerzbank / KBC interim / Zurich Financial / Hannover Re / Ladbrokes / Unilever / Altana sales /CBS/ Comcast / El paso / AIG

Dividend :IBM ($0,55)

Events :American Superconductor AGM / Barclays General Meeting / British Airways General Meeting in relation to issue of £350,000,000 5.80 per cent Convertible Bonds due 2014



Friday

Results : Allianz / Fugro Hypo Real Estate / Logica /

Dividend :

Events:



Monday

Results : Clear Channel

Dividend :

Events :



Tuesday

Results : Adecco / Friends Provident / Geberit / Intercontinental Hotels / Renewable Energy / International Power / Applied Materials

Dividend :Applied Materials ($0.06) / Wyeth ($0,3)

Events:



Wednesday

Results :BHP Bilitton / E.On / ING / TUI Travel trading statement / Lanxess / Sara Lee

Dividend : BT Group (GBp 1,222222) / Northumbrian Water (GBp 9,444444) / Wal-Mart Stores($0,2725)

Events:Heinz AGM / Xilinx AGM



ECONOMIC DATA PREVIEW



Today in the United-States, watch the release of the weekly Jobless claims (13.30 GMT) expected slightly down at 580 000 new claimants for the week end July 25, from 584 000 the previous week.



In Europe, The ECB will announce its interest rates decision at 12.45 GMT. The ECB would leave the rates unchanged at 1 % such as the Bank of England is expected to maintain its interest rates at 0.5 % (12.00 GMT)



ECONOMY



United States: the ISM Non – Manufacturing fell in July

The US Institute for Supply Management’s Index of non-manufacturing businesses which make up almost 90 percent of the economy, fell more than expected (48) in July to 46.4 from 47 in June. The dip was fairly modest and the index was still above the lowest level of 33.3 reached in November.. The measure of new export orders slumped to 47.5 from 54.5. The ISM non-manufacturing industries employment index fell to 41.5 from 43.4 the prior month, and its gauge of new orders decreased to 48.1 from 48.6. Service industries in the U.S. shrank more than forecast in July, and companies cut another 371,000 jobs, indicating rising unemployment will erode spending. These figures are not very encouraging before the Labor Department’s payrolls report due Friday that would show another 328 00 0 job cuts and an unemployment rate close to 10 %.



United States: the ADP employment change declined in July

The ADP National Employment report in the private employment showed that companies cut more staff in July than expected by the consensus. The ADP survey indicated that private payrolls fell by 371 000 in July (350 000 expected, down from 463,000 the month before. But according to the Challenger US job cut, the employers announced for the first time since 2007, 5.7 % fewer job cuts in July following –9 % in June. Consumer spending, which accounts for 70 percent of the economy, may be slow to gain speed as home prices fall, wages stagnate and unemployment climbs.



United States: the factory orders slightly rose in June

The US factory order unexpectedly rose for a third month in June by 0.4 % (the consensus expected a 0.8 % decline) following +1.1 % in May. Ex-transportation, orders rose 2.3 %. The factory slump is easing as leaner inventories, signs business investment may pick up and improving demand from overseas reinforce forecasts that the recession will end this year.



Eurozone: retail sales declined in June

The European retail sales fell 0.2 % in June while consensus waited a 0.3 % rise following a revised 0.5 % contraction the previous month. The store revenue in Europe declined 2.4 % from a year earlier after 3 % drop in May. Consumers are holding back on spending as the worst global recession prompts companies to reduce staff. Last week the jobless rate in the euro region increased to 9.4 % in June.