Job Appetizer

GLOBAL EQUITIES RESEARCH

Some investors took the money and ran yesterday, just in case September would lack of upside catalysts, driven by a majority of sceptical investors doubting that the recovery is sustainable. Hopefully August data to come up through the month will keep on being supportive, but the employment report coming is seen as the dark point at this stage with the remaining fear that a too high number of job seeker will prevent consumer spending to increase. In this environment, yesterday’s drop should be seen as a nice and healthy consolidation, which might bring some more attractive entry point in singles stocks, while trading probably initiated short positions which as usual lately should be the engine of the next upside trend. Overall trading volume in the NYSE eclipsed 1.6 billion in what was the most actively traded session in nearly one month, suggesting there was plenty of conviction behind this session's selling effort. Weakness among stocks bled into commodities pits for the second straight session. That caused crude oil futures to reverse a 2.0% gain into a 2.7% loss. Oil prices settled at $68.05 per barrel, just above session lows.

Once more yesterday’s data were friendly.The recovery in the US manufacturing sector appears to be gathering pace, although it is still not creating any extra jobs yet. After jumping from 50.5 in July to 52.9 in August, the data showed that the ISM manufacturing index is now higher than when the recession first started in late 2007. It is consistent with GDP growth of more than 3% per annum. The gains were widespread with the new orders (up 10% to 65.9) and production indices rising strongly. Unfortunately, the recovery in industry has not yet created any extra jobs. At 46.4, the ISM employment balance remains unusually depressed and is still consistent with manufacturing payrolls falling by 50,000 a month. Meanwhile, the 2.3% m/m jump in residential construction spending and the 3.2% m/m gain in the pending home sales index showed that the housing market is getting back on its feet. The increase in residential spending was the biggest in four years and the pending home sales index is consistent with existing home sales rising from July's reading of 5.24m to around 5.50m. Non-residential construction spending fell by 1.0% m/m, but it was always going to lag the recovery in the residential market. The good news is that the recovery in the manufacturing and housing sectors appears to be gathering pace. The bad news is that it is still not creating any extra jobs, meaning that the US is heading for yet another jobless recovery.

Remember that a jobless recovery is a strong possibility for now, until the virtuous circle we started will require some hiring rather earlier than later. The upbeat economic reports seemed to support news from The Wall Street Journal that said the International Monetary Fund (IMF) expects the global economy to expand by slightly less than 3% in 2010. The IMF had forecast in July that the global economy would grow by 2.5% during 2010. Wellsfargo news that they would pay back the TARP loan to the government without any debt increase (announced after US close) makes the rumour regarding its balance sheet weakness unfounded, and rather good news on a deeper view

Would not stay short, and would take opportunity to do a nice shopping if some further drop was to occur (ADP data will be the one today).



ECONOMIC DATA WITH IMPACT


Mortgage Applications (12h UK) / previous was up 7.5% / minor / the higher the better

ADP Employment changes (13h15) expected –250k from previous –371k /appetizer to Friday’s employment report, although not always correlated / important as played negatively yesterday through the ISM, meaning any upside surprise would be cheered by equity indices

Non Farm Productivity and Unit Labour costs (Q2 final) / minor as just revision and should be seen as old news

Factory orders (15h UK) expected 2.2% from 0.4% /picturing once more the manufacturing recovery / minor as employment focus

Fed Minutes (19h UK) from August 12th meeting /


POSITIVE IMPACTS



TELECOM ITALIA : Telefonica may reach an agreement this month with TIT over the purchase of TIT’s German unit Hansenet / TEF & Telecom Italia will meet in coming days to discuss a possible deal / Telefonica may pay some €1.3 bn for Hansenet (El Economista)

LOGITECH : "The past quarter was definitely the low point. The worst is behind us." (CEO in Finanz und Wirtschaft) / Expects customer de-stocking to come to an end in the current quarter and to post a profit".

AVIVA named 5 banks to oversee the €1bn IPO of its Delta Lloyd unit (Reuters)

VOLKSWAGEN plans to rely more on inhouse components production rather than buying from outside suppliers in order to secure a productivity target (Braunschweiger Zeitung)

AUG. US VEHICLES SALES +4.9% : HYUNDAI +57.9% / VOLVO +29.6% / FORD +21.7% / VW +19% / HONDA +14.2% / PORSCHE +12.9% / TOYOTA +10.5%

FIAT : Italian new car registrations rose 8.54% in August thks to government incentives / Fiat's 3 brands up 10.7% leading Fiat to reach a 33.72% market share from 33.06% a year ago / However, August car sales in Brazil, Fiat's 2nd-biggest market, slid 9.54% from July

EADS-THALES are in talks with the UAE to supply a version of the A320 with military electronic surveillance capability (Les Echos) / The order, if agreed, would be worth €700-900m

HAVAS-AEGIS : French businessman Vincent Bollore said "all doors are open" concerning Aegis and Havas…̀

DSGI : Q1 LFL sales down 6% (-7 to -11% exp) / UK trading in line with exp. / Overall group performance remains in line with exp



WELLS FARGO expects repay $25 bn from the government's Troubled Asset Relief Program without a new share sale (CEO)



NEGATIVE IMPACTS


MAERSK said it intends to sell up to 250K treasury B shares, worth up to DKK9.2 bn (€1.25bn) to boost its financial flexibility / Placement represents approximately 5.7% of the total share capital of the Company

EDF is expected to name a successor to Chief Executive Pierre Gadonneix on Sept. 23 when the supervisory board meets (Les Echos )

RWE has launched a €2 bn loan to refinance existing debt and support its commercial paper programme

DAIMLER has hired 9 banks to arrange a €3 bn loan to refinance an existing facility that matures in October

ALCATEL launched a €750m offering of convertible bondsto refinance its debt / Interest rate of between 5% & 5.50% per annum

AUGUST US VEHICLES SALES +4.9% : BMW -18.3% / GM -17.3% / CHRYSLER -12.2% / MERCEDES -4% / NISSAN +0.8%

LLOYDS has won backing from its investors to raise £10 bn bn to reduce its dependence on the taxpayer (The Guardian)

FORTIS : Belgium's financial markets regulator said it would deepen its investigation into Fortis over its communication of a solvency plan the troubled group issued in June 2008.

UK INSURERS (Not new) fear they will be forced to tap investors for more than £50bn in fresh equity as a result of proposed new European rules that they warn would lead to a dramatic increase in premium rates (FT)


CHINA : Chinese banks extended around CNY320 bn ($47bn) in new loans in August, the lowest monthly amount so far this year (Shanghai Securities News) / The figure was much lower than market expectations of CNY500 bn,



TRADING IDEAS


BUY PERNOD ahead of results tomorrow

BUY DT BOERSE to play double bottom, fitting with a possible increase from the volumes anytime soon

BUY EON on its 27.97 gap level

BUY RENAULT (closed its gap on close) & DAIMLER to play car sector redound

BUY MUNICH RE / PHILIPS / ST GOBAIN / SIEMENS / ACCOR killed yesterday

BUY ROYAL DUTCH / BP / TOTAL / REPSOL / ENI on eco recovery + oil prices rise

BUY BOUYGUES in 33 gap level

BUY VALLOUREC on 101 gap closure level

BUY PEUGEOT on 18.45 gap closure level

BUY ERICSSON on double bottom possibility & REED ELSEVIER on reversal Head & Shoulder possibility


BUY AEGON / SELL AXA // BUY FRANCE TEL / SELL TELEFONICA // BUY MUNICH RE / SELL ALLIANZ // BUY BNP / SELL SOC GEN // BUY UNILEVER / SELL DANONE // BUY NOVARTIS / SELL ROCHE // BUY JUNIPER / SELL QUALCOMM


BROKER METEOROLOGY


MUNICH RE RAISED TO OUTPERFORM FROM NEUTRAL BY CREDIT SUISSE

NEXANS RAISED TO BUY FROM NEUTRAL BY UBS

SIEMENS RAISED TO NEUTRAL FROM SELL BY UBS

ABB RAISED TO NEUTRAL FROM SELL .. BY UBS

VOLVO RAISED TO NEUTRAL FROM SELL BY UBS

HOLCIM RAISED TO EQUALWEIGHT FROM UNDERWEIGHT

H&M RATED NEW BUY BY MORGAN STANLEY

MARKS & SPENCER RATED NEW BUY BY BANK OF AMERICA – ML

HOME RETAIL RATED NEW BUY BY BANK OF AMERICA – ML

LEGAL & GENERAL RAISED TO BUY FROM NEUTRAL BY NOMURA

FRIENDS PROVIDENT RAISED TO NEUTRAL FROM REDUCE BY NOMURA


INDITEX RATED NEW UNDERPERFORM BY BANK OF AMERICA - ML

CARREF0UR CUT TO HOLD FROM BUY BY S&P


DATA


WTI : 68,5 (-2,55 %)

Eur/$ : 1,4217 (-0,05 %)

$ /Yen : 92,88 (0,10 )

10 Yr US : 3,38 ( 1,46 bp)

10 Yr Euro : 3,24 ( -1,6 bp)


Indices : US close ; Europe close

SOX : -2,46 %;-1,61%

S&P :-2,21 %; -1,85 %

DOW: -1,96%; -1,86 %

NAS :-2,00%; -1,60%



DJ Stoxx US Sectoral Indices : US close ; Europe close

BASIC MATERIALS : -2,56 %; -2,17 %

ENERGY : -1,63 %; -1,64 %

FINANCIAL : -4,76 %; -3,22 %

HEALTHCARE : -1,28 %; -1,41 %

TECHNO : -1,97 %; -1,61 %

TELECOM : -2,44 %; -2,16 %

INDUSTRIAL : -1,91 %; -1,71 %

UTILITIES : -0,84 %; -0,75 %



TO BE COMING



Today

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 / Sun Microsystems

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

Events: HMV AGM



Friday

Results :

Dividend : Nike ($0.25) / Sara Lee ($0.11)

Events :



Monday

Results :

Dividend :

Events: Tenaris investor day / TeliaSonera investor day



Tuesday

Results :

Dividend : Baxter International ($ 0,26)

Events:



ECONOMIC DATA PREVIEW



In the United States, watch the factory orders (15.00 GMT) for July expected to increase by 1.5% (previous +0.4%) meaning a fourth consecutive month rise. This rise will confirm the investment recovery in the United-States lead by the increase of domestic and foreign demand.



In the Euro area, watch the preliminary release of the GDP (10.00 GMT) for the second quarter expected to drop for a fifth consecutive month and to confirm the advanced release at -0.1% QoQ,-4.7% YoY. This data showed that the historical drop of the GDP at the first quarter (-2.5%,-4.9% YoY) constitute a ground floor and is very slowly improving.


ECONOMY



United States: ISM manufacturing reached a highest since June 2007

After reaching an historical low in December 2008 at 32.9 and after being around the level of 40 since July 2009 the ISM manufacturing and advance indicator of the industrial activity and more generally of the GDP reached 52.9 in August. This index is now over the limit of 50 representing the border between the contraction and the expand of the activity for the first time since January 2008 and reached a highest since June 2007 meaning two month before the sub prime crisis. Looking at the breakdown most of the sub indexes are rising. Starting by the new orders increasing from 55.3 in July to 64.9 a highest since December 2004. Meaning that after over cutting investments US industrial are now massively investing. Meanwhile the sub index “production” increased by 4 points in August at 61.9 a highest since October 2005 confirming that after an historical recession the US economy find its way to a lasting growth. As a consequence the sub index “prices” rise as well by 10 pts reaching the level of 50, confirming that the deflation is slowing down in the United-States. Finally even if the sub index “employment” did not cross the level of 50 we can see an improvement at 46.4 the highest level since August 2008 and a rise of 20.3 pts since the bottom of February 2009. Meaning that we can expect some job creation at the beginning of 2010. After approaching the worst the US economy is getting back to the virtuous circle: Investment, employment, consumption and will be widely helped by the 450 billion of the Obama plan in 2010. In such condition after getting out of the recession at the third quarter 2009 the US GDP should reach around 2.7% in 2010.



Euro area: unemployment rate rise the most in ten years

Unemployment in the euro area rise for a fourteen consecutive month in July at 9.50% the highest in more than ten years (June 1999). As the euro area economy is expected to contract for a fifth consecutive month but at a slower pace, unemployment in Europe is now rising at a slower pace showing very progressive improvement of the activity. Nevertheless this improvement remained very fragile and needs to be confirmed. Indeed investment did not rebound yet and if energy price rise as well as the euro and if the European Central Bank remained less accommodating it could block the virtuous circle investment, employment consumption. As a matter of fact as employment remained the first adjustment criteria for companies , unemployment could start again to rise in the coming months in the euro area.



Euro area: The manufacturing contraction eased more than expected in August

After reaching an historical low in February the PMI manufacturing index an advanced indicator of the investment in the Euro area rise for a sixth consecutive months in August to reach 48.2 (expected 47.9) the highest level in fourteen months. Looking at the breakdown France reached 50.8 and Germany 49.2 The European manufacturing industry contraction is easing getting closer to the level of 50 marking the boarder between a contraction and an expand of the activity. Nevertheless the investment did not recover yet in the Euro area and the high level of the euro as well as a less accommodating policy of the European Central Bank could reverse the trend. The final question being to have a virtuous circle investment, employment, consumption