Update

GLOBAL EQUITIES RESEARCH

Things are on the up. The better second quarter earnings season continue to outperform ! So far, 74.5% (272 out of 365) of the companies in the S&P 500 have reported positive surprises. With 19.49% of negative earnings growth, results are definitely better. One month earlier analysts were betting for a 34% earnings fall.

World stock markets mostly rose after economic data around the world raised hopes that the end of the recession is in sight and that some of the world's biggest economies may actually start growing again in the third quarter.

Wealth is coming back thanks to the bottoming of the housing industry, but also from the rebounding equity indices. The Eurostoxx rebounded 53% since early march lows, the S&P ..., which means $ 4 Tri bn additional wealth, and more spending to be expected at a time when the housing is bottoming. Indeed, last home sales survey showed that the inventory levels are down from 11 months to 8 months. Might not be a dream yet, but we are getting fast and close of the average 6 months level from a normal time. Same for the saving rates, which grew to 7%, up from 3/4% seen on the top of the crisis, hurting the spending obviously as the house holds are not so keen on borrowing even as the banks are less reluctant on lending, but the rising equity levels, and increasing wealth impact should bring the saving rates soon to the healthy 10% levels which will open door to some consumption pick up time.

The current denial is precisely the reason why we will head much higher. Instead of admitting the improving current economic landscape most players are looking for bear reasons of a new equity drop. Most of last week survey worldwide came out surprisingly better, such as the increasing Spanish Q2 GDP, the strength of the UK CBI distributive trades survey, the increase from UK mortgage approvals, the ECB bank lending survey showing that fewer banks are tightening credit conditions, the better US durable orders, the soon UK bank privatisation process with the government selling some of its shares from banks, the 4 month consecutive rise of the Japanese output, the increasing German employment survey, the European economic rising sentiment, are in addition to better than expected earnings releases clear facts that things are improving and shall not be ignore anymore. By the way, some 329 companies or 66% of the Standard & Poor's 500 have reported earnings for the quarter so far. The overall profit decline for these companies is 27%, which is pretty steep. But considering forecasts heading into earnings season were for a 36% drop, it was not that bad, especially when hearing the comments. The vicious circle has turned into a virtuous one. Get ready for it.

The jump in the US ISM manufacturing index to an 11-month high of 48.9 in July, from 44.8, leaves it at a level consistent with GDP growth of roughly 1.5% at an annualised rate. This adds to the growing evidence that the recession ended around the middle of the year. w strong the recovery will be and whether it can be sustained after the initial boost from pent-up demand fades? After dropping back slightly in June, the new orders index rebounded to a 2-year high of 55.3, from 49.2, leaving it at a level consistent with a continued recovery in core durable goods orders. The production index climbed to a 2-year high of 57.9, from 52.5, leaving it at a level consistent with a modest recovery in manufacturing output. The inventories index strengthened to 33.5 in July, from 30.8, but is still well below the levels seen earlier this year. Nevertheless, any improvement suggests that the rate of inventory liquidation is slowing, meaning that stocks will add to GDP growth in the third quarter. The increase in the employment index to 45.6, from 40.7, is consistent with monthly declines in manufacturing payrolls of roughly 75,000.

July’s UK PMI manufacturing suggests that the industrial sector is continuing to recover nicely. The rise in the headline PMI from 47.0 to 50.8 (the consensus was just 47.7) took it above the 50 “no-change” mark for the first time since March 2008. In addition, the rise in the output balance from 51.8 to 55.1 took it above the level which has generally been needed in the past to generate growth in manufacturing output. And most encouraging was the jump in the new orders balance, which suggests that the improvement in activity reflects more than just a restocking.

President Obama says the “cash for clunkers” program has succeeded well beyond all expectations. Actually it has worked better than any other stimulus program. But cash for clunkers has quickly run out the $1 Bn budgeted for it. Congress must now decide to pump more money into it or let it die. This program is especially interesting that it has already shown its efficacy in Europe where France, Germany or Spain have already adopted a similar program. Contrary to huge infrastructure programs which are very long to implement and take time before any first economic impact, the cash for clunker is easier to make in place and its efficacy can be already felt in yesterday’s US car sales figures. So, as long as the car industry needs federal support, it will be amazing that the US congress will not extend it.

US car sales hit an annualised pace of 11.2 million vehicles, a 13% jump over June rate. And while sales still fell 12% compared with July 2008, the performance was so much better than the 35% drop-off registered in the first half of this year. On the same month last year, Ford sales +2.3%, GM –19.8% and Chrysler –9.4% compared to falls of as much as 40% to 50% in preceding months.



ECONOMIC DATA WITH IMPACT


UK industrial production (08.30 GMT) : exp 0.0% / prev –0.6%

Euro-Zone PPI (09.00 GMT) : exp +0.2% / prev -02%

US personal income (12.30 GMT) : exp -1% / previously +1.4%

US personal spending (12.30 GMT) : exp +0.3% / prev +0.3%

US PCE deflator (12.30 GMT) : exp +0.2% / prev +0.1%

US pending home sales (14.00 GMT) : exp +0.7% / prev +0.1%

US ABC consumer confidence (21.00 GMT) : exp –47 / prev -47


POSITIVE IMPACTS



XSTRATA : H1 sales $9.87bn (9.11bn exp) / EBITDA $2.82 bn (2.69bn exp) / Said no H1 dividend & will resume dividend payments at the earliest opportunity / Added some uncertainty remains over ST outlook but mid-longer term fundamentals for commodities very robust / Repeated its arguments for a "merger of equals" with Anglo American…

MUNICH RE : Q2 Gross Premiums written €10.32bn (€9.8bn exp) / Investment income €2.18bn (€1.6bn exp) / Operating €1.37bn (€1bn exp) / CR 98.1% (97.2% exp) / Sees 2009 gross premium revenue at €40bn-€42bn (€39bn-€41bn previously)

L&G : H1 EEV operating £657m (470m exp) / Cut interim dividend to 1.1p vs 2.01p (in line) / Mid-term positive but ST challenging

BEIERSDORF : H1 sales €2.94bn, in line / Ebit €291m (250m exp) / Will not be able to reach year-earlier sales level in 2009

GIVAUDAN : H1 sales SFR2bn (1.97bn exp) / Ebitda SFR424m (407m exp) /Quest integration well on track / Confirmed outlook

FRESENIUS : Q2 sales €3.52bn (3.49bn exp) / Ebit €508m (505m exp) / Confirmed 2009 outlook

FORTIS had its debt ratings raised two levels to BBB-, the lowest investment grade, from BB at S&P’s / Separately, S&’s cut the insurer financial strength and counterparty credit ratings of Fortis’s AG Insurance NV one level to A- from A

FIAT’s 3 brands car registrations in Italy +11.1% (Market +6.16%) / Market share 33.58%.

INTESA : BNP said it would buy majority control of Findomestic, its consumer credit JV with ISP, taking an extra 25% for €625 m.

INFINEON : Elpida Memory said that it was in talks about taking over the high-end graphics DRAM operations of Qimonda

US CAR SALES IN JULY -12.1% yoy : FORD +2.3% / VW -0.9% / CHRYSLER -9.4% / TOYOTA -11.4% …





NEGATIVE IMPACTS



UBS : Q2 revenue SFR5.77bn (5.9bn exp) / Net Loss SFR1.4bn (1.2bn exp) / Tier1 = 13.2% end-June / Charges Booked : Own credit SFR1.2bn - Restructuring SFR582m – Goodwill SFR492m / Net new money outflows of SFR16.5bn at wealth management & swiss bank / On track to reach cost cuts of SFR3.5bn-4bn by 2010 / Outlook remains cautious

BNP : Q2 revenue €9.04bn (€9.27bn exp) (without assets bought from Fortis) / Gross operating profit €4.06bn (€3.7bn exp) / Provisions €2.04bn (1.9bn exp) / Tier1 9.3% End-June / Fortis integration on Track / Q2 include positive €815 m effect from "badwill"

accounting treatment on Fortis…

STANDARD CHARTERED : Interim results = H1 NII $3.7bn, in line / PTP $2.84bn (2.5bn exp) / Cost income ratio down to 49.6% from 56.4% in 1H08 / Announces placement to raise £1bn through the issue of new ordinary shares by an accelerated bookbuilding

DSM : Q2 revenue €1.95bn (1.91bn exp) / Operating €1.92bn (1.93bn exp) / Interim dividend unchanged at €0.40 / Said that customer de-stocking now looks to be largely over… / No FY outlook provided

STATOILHYDRO : Q2 revenue NK105.2bn (112.5bn exp) / Operating NK24.3bn (28.7bn exp) / Oil & Gas output 1.73m boepd, in line

FMC : Q2 revenue $2.76bn, in line / Ebit $418m (430m exp) / Confirmed FY outlook for sales > $11.1bn + $850-890 m in net income

US CAR SALES IN JULY -12.1% yoy : PORSCHE -50.6% / BMW -26.7% / NISSAN -24.6% / MERCEDES -21.7% / GM -19.8% …



TRADING IDEAS

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 TOTAL / ALLIANZ / NOKIA / GSZ on reversal head & shoulder

BUY YAHOO on double bottom possibility


BUY IBERDROLA / SELL VEOLIA // BUY CARREFOUR / SELL L OREAL // BUY GLAXO / SELL ASTRA // BUY

BUY AMD / SELL INTEL // BUY BIOGEN / SELL AMGEN


BROKER METEOROLOGY


HSBC RAISED TO OVERWEIGHT FROM UNDERWEIGHT BY JP MORGAN

HSBC RAISED TO NEUTRAL FROM UNDERPERFORM BY BANK OF AMERICA

SAIPEM RAISED TO NEUTRAL FROM UNDERWEIGHT BY JP MORGAN

REED ELSEVIER RAISED TO BUY FROM HOLD BY CITI


FRANCE TELECOM CUT TO NEUTRAL FROM BUY BY BANK OF AMERICA

METRO CUT TO HOLD FROM BUY BY ING

METRO CUT TO NEUTRAL FROM BUY BY BANK OF AMERICA

INTERNATIONAL POWER CUT TO NEUTRAL FROM OVERWEIGHT BY HSBC

EDF ENERGIES NOUVELLES CUT TO NEUTRAL FROM OVERWEIGHT BY HSBC


DATA


WTI : 71,1 (1,39 %)

Eur/$ : 1,4383 (-0,21 %)

$ /Yen : 95,20 (0,27 )

10 Yr US : 3,62 ( -0,96 bp)

10 Yr Euro : 3,34 ( 4,4 bp)


Indices : US close ; Europe close

SOX : 1,75 %;0,91%

S&P :1,53 %; 0,93 %

DOW: 1,25%; 0,77 %

NAS :1,52%; 0,62%



DJ Stoxx US Sectoral Indices : US close ; Europe close

BASIC MATERIALS : 4,07 %; 3,11 %

ENERGY : 2,44 %; 2,24 %

FINANCIAL : 2,53 %; 1,73 %

HEALTHCARE : 0,65 %; -0,30 %

TECHNO : 1,38 %; 0,68 %

TELECOM : 0,37 %; -0,29 %

INDUSTRIAL : 2,11 %; 1,33 %

UTILITIES : 0,91 %; 0,41 %



TO BE COMING



Today

Results :BNP Paribas (BMO) / BMW / Beiersdorf / UBS / Givaudan / Statoil Hydro / DSM / Deutsche Boerse / Fresenius Medical / Legal & General / Electronic Arts / Kraft Foods

Dividend :

Events :



Wednesday

Results : Soc Gen (BMO) / Axa / Fortis / Adidas / Allied Irish Bank / Swiss Re / Prudential / Lloyds / Carlsberg / OMV / Henkel / Activision Blizzard / Cisco Systems / Procter & Gamble

Dividend : Thomas Cook (GBp 4,166667) / Alcoa ($ 0,03) / Boeing ($0,42) / Intel ($ 0,14) / Pfizer($0,14) / Pfizer ($0,16) / Schering-Plough($0,065)

Events:



Thursday

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:



ECONOMIC DATA PREVIEW



Today in the United-States, watch the releases of the Personal Income (13.30 GMT) in July that is expected down –1 % from a 1.4 % rise in June. We have also the Personal Spending (13.30 GMT) in July that is expected unchanged at +0.3 %.

Have a look also at the Pending Home Sales (15.00 GMT) in June that are expected to rise for the fifth consecutive month by 0.7 % from (+0.1 % and +4.6 % YoY) in May.



In Europe, keep an eye on the Production Price Index in June that is expected to slightly rise 0.2 % after a 0.2 % decline in May. From a year ago, the PPI is expected to slow down by 6.6 % from the 5.8 % decline in May.



ECONOMY



United States: the US Manufacturing index shrank less in July

The US Manufacturing rose more than expected (46.5) to an 11-month high at 48.9 in July from 44.5 in June. The factory slump is abating as leaner investments, smaller cutbacks in investment and the federal “Cash-for-clunkers” program is also boosting demand for cars. This adds to the growing evidence that the recession ended around the middle of the year. the new orders index rebounded to a 2-year high of 55.3, from 49.2. the employment index rose to 45.6 from 40.7. Overall, a stronger than expected survey that suggests the economy is transitioning from recession to recovery.



United States: the construction spending rose in June

The US construction spending unexpectedly rose in June led by an improvement in real estate an gains in government projects. The 0.3 % improvement inn June followed a revised 0.8 %drop in May.



Eurozone: The PMI Manufacturing rose in July

The European manufacturing contraction slowed more than initially estimated at 46.3 (46 expected) in July from 46 in June. Even if the survey is still below 50 that indicate a contraction, the manufacturing activity in Europe is increasing for the fifth month after having bottomed out at 33.5 in February. Note that the UK’s Manufacturing activity climbed above 50 at 50.8 in July for the first time since March 2008. The UK’s output balance also climbed to 55.1 from 51.8 or a level that is needed to generate growth in manufacturing output. If this recovery is still fragile, conditions in the sector seem to improving.