Yes We Kend

GLOBAL EQUITIES RESEARCH

Nice finish from the US with a positive tone emerging in afternoon trading as select financial stocks were squeezed higher welcoming the efficient impact from the Fed’s mortgage buying program and a sudden drop by the U.S. dollar helped lift energy and materials stocks. Better Dell earnings (up 6.7%) released by mistake on website just before the close was also supportive.

Consumer Spending survey will be the focus today, and might shake the market as volume should be small due to a long weekend taking place in the UK with the Monday’s Bank of Holiday coming.

Next week data will be interesting with the Employment report as a focus, but the ISM on Tuesday will be confirming the manufacturing pick up, vehicle sales being obviously very strong (same day), factory orders bull on Wednesday, ISM non manufacturing increasing on Thursday. Just to say next week possible inflow from coming fund managers will be very much supported by the macro news flow, and help equity indices head higher toward their pre Lehman levels (1200 S&P and 3200 Eurostoxx). The last few days should be seen as some nice and healthy consolidation, which the back to school business should end with the upside trend resuming.

Fund managers left their desk sceptical that a recovery is taking place, believing that the equity indices rise then was a bull trap, and this is just about the opposite which happened with the equity indices still frontrunning the economic activity. As a matter of fact, the economic activity seems gradually growing and might now spread from the manufacturing sector to the other sectors, such as the ex transport durable orders data as well as the Tuesday’s consumer confidence survey increase was reflecting. Fund managers bullishness increased by 30% regarding growth, but they are still 30% cash overweight, and not even talking about the trillions of cash sleeping in monetary funds which sooner or later will switch to equity fund managers business becoming even more overweight.

This coming weekend elections in Japan, and the confirmation of a decisive Democratic Party of Japan (DPJ) victory on Sunday should provide a further near-term boost to the Nikkei and possibly the yen too, although this outcome is already slightly anticipated. The upside may therefore now be limited, especially as doubts will soon creep in about what the new government will actually do. The equity markets have already reacted positively to this prospect, although more because of dissatisfaction with the LDP rather than any great enthusiasm for the alternative. However, talk that the DPJ would adopt a more stimulatory fiscal policy and boost consumer spending more than the LDP has done (or would do) is always nice to hear and will keep some bullish biais on the Nikkei.

Shanghai index still very volatile, driven by banks dropping on reports that lending has been shrinking in August, trimming liquidity flowing into the market.

Opening up welcoming the nice US ending, we should be very quiet awaiting the consumer spending data, long weekend coming in the UK might trigger some positions cuts and be once more market supportive through the end of the session



ECONOMIC DATA WITH IMPACT


Euro-zone EC economic sentiment index (10.00 UK) probably increased for the fifth month in a row in August, boosted by improvements in industrial, services and consumer confidence. We expect a rise to 79, from 76 in July, which would be consistent with a positive quarterly rate of GDP growth in Q3.

Personal income & Spending (13h30 UK) expected 0.1% & 0.2% from previous –1.3% & 0.4% / important this week as to measure the consumer mood and possible help for the current recovery. It is granted that consumers are not taking part to the game for now, but if they were to increase spending then the economic growth upside becomes more certain and sustainable.

PCE (13h30 UK) expected 0.1% from previous 0.2% / minor for the time being

Michigan index (14h55 UK) expected 64 from previous 63.2 / minor as just a revision and consumer confidence already rebounded


POSITIVE IMPACTS



L’OREAL : H1 rev €8.77Bn (in line)/Op pft €1.373Bn (1.29e) / Net €1.083Bn (1.09 e) / Sales margin 15.7%(14.7% e)/ Confirms outlook

BOUYGUES : H1 Rev €14.9Bn (14.78 e) / H1 Op pft €789M (716.5e) / H1 Net pft €547M (562.2e) / Co to cancel 493417 shrs / FY sales tgt raised to €31.5Bn from 31.3

LAGARDERE : H1 Op pft b4 associates €186M (169 e) / Confirms tgt / Financial situation is healthy

BANK OF IRELAND hired Citigroup and Nomura to help it sell about $1bn of state-backed bonds (Source)

GERMAN BANKS : German measures to improve credit issuance to firms will likely be passed soon (German official told Reuters)

MAN AG is planning to slash administration costs by 20%($128.1M), in its commercial vehicles unit (Die Welt)

STEEL : VOESTALPINE says demand for flat steel “rebounded significantly” / Still sees risk of another eco slump in 2010

ADP : H1 Rev €1.286bn (€1.27bn e) / EBITDA €423.6m (€405m e) / Net pft €127.3m (€120m) / Reaffirms 2009 Rev & Ebitda tgt

DELL ‘s earnings released a few minutes by mistake on website were better with eps 0.28 vbs 0.22 expected / revenue 12.76 vs 12.59 / nice cost cutting trying to protect margins



NEGATIVE IMPACTS


CARREFOUR : H1 Op pft €1.01Bn (995 e)/ H1 EBIT €499.5M (446M to 1Bn e) / H1 Net loss €58.10M (58.7 e) / Confirms FY tgt

LUFTHANSA : S&P cuts rating to BBB- from BBB/ The outlook is negative

TELECOM ITALIA: The Argentine antitrust commission has ruled that TIT Italia must sell its Telecom Argentina assets

E.ON may be charged on at least half of their earnings from running nuclear power plants past scheduled shutdown dates if the next govt overturns a phase-out of nuclear energy (Handelsblatt)

BAE Systems has failed to win the $281M follow-on U.S. govt contract for armoured battlefield vehicles .

HERMES : H1 Operating Profit €199.8m (€211m e) / Maintains 2009 Target of flat sales FCC & slight drop in current operating profit

IBERIA : H1 Op loss €276.9M( 257.3 e) / H1 Net loss €165.4M (160.5 e)

ICADE : CDC sells 2.85% of Icade to institutional investors, (Now CDC holds 58.74% of Icade)



TRADING IDEAS


BUY VIVENDI & VINCI ahead of results next week & BUY AHOLD to play island possibility still

BUY Energy names such as EDF / ENEL / ROYAL DUTCH / BP / TOTAL / ENI on eco recovery

BUY NOKIA / ERICSSON on double bottom possibility & BUY PEUGEOT on reversal Head & Shoulder possibility


BUY PHILIPS / SELL SAP // BUY DEUTSCHE TEL / SELL FRANCE TEL // BUY NOVARTIS / SELL ROCHE // BUY VINCI / SELL LAFARGE // BUY EDF / SELL EON // BUY CONOCOPHILLIPS / SELL CHEVRON


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


NH HOTELES RAISED TO BUY FROM SELL BY UBS

EULER HERMES RAISED NEW OVERWEIGHT BY JP MORGAN

SUEZ ENVIRONNEMENT RAISED TO OVERWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY

H&M RAISED TO EQUALWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY

L’ORAL RAISED TO NEUTRAL FROM SELL BY UBS

L’ORAL RAISED TO BUY FROM NEUTRAL BY BANK OF AMERICA – ML

OMEGA PHARMA RAISED TO BUY FROM HOLD BY ING

JC DECAUX RAISED TO NEUTRAL FROM UNDERWEIGHT BY CREDIT SUISSE


BALOISE CUT TO NEUTRAL FROM BUY BY UBS

PREMIER OIL CUT TO HOLD FROM BUY BY JEFFERIES

SEADRILL CUT TO NEUTRAL FROM OVERWEIGHT BY CREDIT SUISSE

ENAGAS CUT TO NEUTRAL FROM BUY BY DEUTSCHE BANK


DATA


WTI : 72,6 (2,07 %)

Eur/$ : 1,4359 (0,12 %)

$ /Yen : 93,70 (-0,31 )

10 Yr US : 3,46 ( 0,55 bp)

10 Yr Euro : 3,25 ( 1 bp)


Indices : US close ; Europe close

SOX : 0,25 %;-1,23%

S&P :0,28 %; -0,83 %

DOW: 0,39%; -0,49 %

NAS :0,16%; -1,12%



DJ Stoxx US Sectoral Indices : US close ; Europe close

BASIC MATERIALS : 0,36 %; -1,48 %

ENERGY : -0,30 %; -1,91 %

FINANCIAL : 0,89 %; -0,53 %

HEALTHCARE : 0,19 %; -0,61 %

TECHNO : 0,39 %; -0,93 %

TELECOM : -0,57 %; -1,01 %

INDUSTRIAL : 0,65 %; -0,47 %

UTILITIES : -0,31 %; -0,76 %



TO BE COMING



Today

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) / CRH (€0.185) / Friends Provident ( GBp 1,444444)

Events:



Thursday

Results :Pernod Ricard

Dividend : Bank of America -ML ($0.01) / Merck & Co ($0.38)

Events:HMV AGM



ECONOMIC DATA PREVIEW



In the United States, watch the personal income and personal spending (13.30 GMT) for July. Personal income is expected to increase to reach positive territory lead by the low level of interest rate and by the decline of consumer prices and personal spending is expected to rise at a lower pace as the unemployment remained high.



In the United Kingdom, watch the preliminary release of the GDP for the second quarter expected to confirm the advance release at

-0.8%,-5.6% YoY. .


ECONOMY



United States: US GDP decline remained at 1.0% (QoQ annualized) as per the second estimate

After slumping by 6.4% QoQ (annualised) at the first quarter the second estimations of the U.S GDP remained unchanged showing a contraction of 1.0% and confirming that the recession is easing since the first quarter. Looking at the breakdown of the second quarter GDP revision, inventories are now estimated to have subtracted and additional 0.6% from the global growth, business investment subtracted 0.2%. On the other hand consumption and net exports contributed positively by 0.2% to overall growth while government expenditure added 0.1%. As showed by the latest manufacturing ISM index and especially the sub indexes production and employment, investment is recovering in the United States. As a matter of fact the virtuous circle : investment, employment consumption should occur in the coming months. Consequently the U.S GDP should turn positive at the third quarter. Nevertheless if this fragile rebound generate a rise of oil and interest rate the trend could be quickly reverse.



United States: Initial jobless claims and continuing claims decreased last week

After rising for two consecutive weeks initial jobless claims fell by 10 000 to 570 000 last week(forecast 565 000) confirming that the labour market is improving lead by the government stimulus measures helping to stabilize the manufacturing sector and the housing market. Meanwhile continuing claims dropped from 6 252 000 to 6 133 000 last week confirming that the hiring process is progressively unfreezing. Indeed after having over laying off lead by a fear behaviour about the economic outlook companies are now putting them self together getting back to a more rational behaviour This progressive recovery of the labour market is a significant positive news for the activity as personal consumption represent around 70% of the U.S. GDP.