GLOBAL EQUITIES RESEARCH
The 0.8% m/m increase in US industrial production in August is the second gain in as many months and supports Bernanke's comments that the recession is over. Indeed, production is one of the main four monthly indicators used by the NBER to date the business cycle. A 1.9% m/m rebound in utilities output meant that manufacturing output increased by a more modest 0.6%. Production of motor vehicles rose by 5.5%. This suggests that a good deal of the autos sold in the "Cash for Clunkers" scheme in August came out of inventories, although note that auto production jumped by 20.1% in July. The recovery in the industrial sector is more advanced than in other parts of the economy and is presumably being driven by the rebound in global trade and the fall in the dollar.
The next two important economic indicators will be the Employment report of course, out in two weeks on October 2ed, although the market will once more forgive a bad data since a jobless recovery could last one year, but the CPI next month should be looked at more carefully due to an unfriendly base effect. Prices collapsed last year at that time, and inflation will be the next threat as to put pressure on central banks, and hear investors fearing the stagflation scenario. Obviously Obama and its team won’t spoil a native recovery so easily, but too much inflation so soon would not be helping them in their task. In the meantime M&A deals and dividend increases (as JP CFO was saying if eco conditions keep on improving) will bring some support to equity indices, but we should have more selective investments unlike this year where every names were to be bought.
Today once more will be friendly in term of data. The housing starts will be boosted by the government’s tax credit for first time buyers and the Making Home Affordable Plan, which aims to reduce mortgage repayments and avoid necessary foreclosures. The Philadelphia index, along with the recovery in the national ISM index, will suggest the recession has abated and that the recovery is now picking up momentum. As to the jobless Claims, they should remain bad, and are not expected to improve so soon (meaning if they do then bull)
Opening slightly up welcoming the nice US close, we should be rangy down today, some downside pressure should appear, but will not head too far down due to long gamma players hedging their delta, in addition to fund managers which will take opportunity to jump in.
Resistance still on the cash Eurostoxx 2924 / 2978 / first target 3080& then 3200 / support 2851-2846 for today // resistance cash S&P 1100 and then 1134 target being 1200.
ECONOMIC DATA WITH IMPACT
Housing starts & Building Permits (13h30 UK) expected 596k & 581k from previous 581k & 560k / interesting as might confirm the housing bottoming and help making the recovery sustainable.
Jobless Claims (13h30 UK) expected 555k from previous 550k / interesting although the big focus will now be the employment report out next week
Philadelphia Fed index (15h UK) expected 8 from previous 4.2/ will be strong as usual lately through the manufacturing recovery / minor
POSITIVE IMPACTS
VIVENDI said it hasn't made a decision whether to exercise its right to sell a 20% stake in NBC Universal
ADP said that passenger traffic fell 3.5% in August / Traffic in the first 8 months of the year fell 5.6% / Passenger load factor reached 80.6% in August, compared to 78.99% in August 2008.
ALBK plans to raise €2bn over the next 12-18 months / The govt intents to support capital-raising measures / The new National Asset Management Agency will buy property & development loans with a BV of €77bn from Ireland's major banks, but only pay €54bn / Approximately €24bn of the loans being transferred to NAMA will come from AIB, but for less than the industrywide discount of 30%…
SWEDBANK plans to reduce outstanding subordinated debt + got the approval to buy back up to SEK3bn of some of its Tier 2 debt
VOLKSWAGEN - MAN : VOW is considering overhauling its trucks business in a move that could herald a tie-up with MAN AG (FT)
KINGFISHER : H1 sales £5.5bn, in line / PBT £288m (280m exp) / H1 dividend 1.925p a share / China repositioning plan on track
ROCHE : Patients receiving cancer drug Rituxan lived longer without their disease getting worse a Phase III study showed
EDF : The French finance ministry has recommended the reappointment of Pierre Gadonneix for another year as CEO (Challenges)
EDISON will meet its FY earnings forecast (CEO) / Sees the first signs of a recovery in power demand at the end of the year
TUI : Hapag-Lloyd plans to save significantly more than the €600 m it had planned for next year (FAZ)
TELE2 & SCANIA hold their capital markets day.
NEGATIVE IMPACTS
COLRUYT expects its net profit to rise by 4.6% in the year to €320 m, below expectations of €328 m
MEDIASET : News Corp. said that its Italian Pay-TV business Sky Italia has filed a lawsuit against Mediaset's RTI and Publitalia units for violation of antitrust rules.
E.ON : A German local government said it was partially blocking the process of awarding construction contracts for E.ON's power station project at Datteln. The decision prevents EON from taking further steps to complete the €1.2 bn project.
BASF will extend the suspension of reduced working hours at its main plant by 2 months / BASF had introduced reduced working hours at the Ludwigshafen plant in June / The company recently saw small improvements in the previously very low capacity utilization
DBK : Macquarie Group will bid for Sal. Oppenheim IB Unit (Handelsblatt)
ORACLE : Q1 revenue $5.06bn (5.25bn e) / EPS $0.30, in line / New license sales -17%, steeper than the 4-14% decline forecast in June / Sees Q2 EPS $0.35-0.36, in line / CEO said that a decline in sales at SAP was hurting sales, coz SAP is one of the top resellers
TRADING IDEAS
SELL DANONEto play double top possibility & SELL EDF (13% up in three days) / AIR LIQUIDE & LINDE seems toppish for now
An eye on TELEFONICA / MICHELIN with island possibility
BUY CARREFOUR / EON / RWE on double bottom possibility
BUY PHILIPS / SELL SIEMENS // BUY BASF / SELL AIR LIQUIDE or LINDE // BUY LVMH / SELL PINAULT
BUY AXA / SELL ALLIANZ // BUY EON / SELL EDF // BUY ENEL / SELL IBERDROLA
BUY CARREFOUR / SELL METRO // BUY SAINSBURY / SELL TESCO // BUY RAYTHEON / SELL HONEYWELL
BROKER METEOROLOGY
TOTAL RAISED TO NEUTRAL FORM UNDERWEIGHT BY CREDIT SUISSE
EADS RAISED TO OVERWEIGHT FROM EQUALWEIGHT BY MORGAN STANLEY
EASYJET RAISED TO OVERWEIGHT BY MORGAN STANLEY
BRITISH AIRWAYS ADDED TO CONVICTION BUY LIST BY GOLDMAN SACHS
HEINEKEN RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
CARNIVAL REMOVED FROM CONVICTION SELL LIST BY GOLDMAN SACHS
INFINEON CUT TO UNDERPERFORM BY BANK OF AMERICA - ML
ABB CUT TO HOLD FROM BUY BY DEUTSCHE BANK
ANGLO AMERICAN CUT TO EQUALWEIGHT FROM POSITIVE BY BARCLAYS
AIR FRANCE – KLM REMOVED FROM CONVICTION BUY LIST BY GOLDMAN SACHS
TOMTOM CUT TO UNDERPERFORM BY BANK OF AMERICA – ML
DATA
WTI : 72,2 (2,22 %)
Eur/$ : 1,4727 (0,12 %)
$ /Yen : 91,13 (-0,33 )
10 Yr US : 3,45 ( -1,68 bp)
10 Yr Euro : 3,34 ( 4,5 bp)
Indices : US close ; Europe close
SOX : 0,42 %;-0,44%
S&P :1,53 %; 0,67 %
DOW: 1,12%; 0,34 %
NAS :1,45%; 0,50%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 2,06 %; 1,65 %
ENERGY : 2,28 %; 1,42 %
FINANCIAL : 3,27 %; 1,91 %
HEALTHCARE : 0,70 %; -0,02 %
TECHNO : 0,93 %; 0,14 %
TELECOM : -0,62 %; -1,36 %
INDUSTRIAL : 1,70 %; 0,78 %
UTILITIES : 1,49 %; 0,48 %
TO BE COMING
Today
Results :FedEx (BMO) / Carnival / Palm
Dividend :
Events :Kingfisher analyst meeting
Friday
Results : Mediobanca
Dividend : Heinz ($0.42)
Events: Euler Hermes AGM
Monday
Results :
Dividend : ENI (€0.50)
Events : General Mills AGM / Nike AGM
Tuesday
Results : Imperial Tobacco trading statement / Carnival
Dividend :
Events: Power & Gas Leaders Conference at BoA - ML / Global Consumer & Retail Conference at BoA - ML / Commodities Conference at Credit Suisse / Swiss Equities Conference at Credit Suisse / Intel Developer Forum
Wednesday
Results :United Utilities trading statement / BB&B
Dividend : Aviva (GBp 10.00) / Ford 1 per 1 poison pill rights
Events:Steel and Mining conf at Credit Suisse
ECONOMIC DATA PREVIEW
Inthe United-Stateswatch the Housing starts and building permits (13.30 GMT) for August. After reaching an historical low in April, to 479,000 and 498,000 respectively, housing starts and building permits found an upward path in May and June, before slightly contracting in July However, the real estate sector reached a bottom floor as showed by the rise of the NAHB index a monthly survey of home builders. In addition, the weakness in prices and in mortgage rates boost housing sales in the United States. We thus anticipate housing starts and building permits to increase in August to reach 595,000 and 585,000 respectively. Keep on eye on the weekly release of the Initial jobless claims and continuing claims expected to slightly decrease as the labour market is progressively improving following the end of the recession in the United-States.
Inthe Euro areawatch the Trade balance(10.00 GMT) for July. The trade surplus is expected to rise from 1.0 bn euros in July to 1.2 bn euros in August as exports should rise following the economic rebound.
ECONOMY
United-States: Deflation is slowing down
Consumer price index, which have been impacted by rising prices in energy, rose in May and in June and stabilized in July, dropping by 2.1% YoY. In August consumer prices rise by 0.4% led by the increase of oil prices and by the recovery in the United States. The year on year data slightly decreased to - 1.5% (prior -2.1%) confirming that the deflation is slowing down. The subjacent index (Ex food and energy) increased by 0.1% in August as in July and by 1.4% in annual slide. In 2009 prices should decrease by 0.6% YoY (yearly average), but in 2010 inflation will be back as prices should rise by 2.7% YoY (yearly average).
United-States: Industrial production increased in August as well as the capacity utilization
After the sharp rise of the ISM manufacturing and the ISM services for more than three months, after the substantial rise of retail sales (with and excluding cars) it’s the time to the industrial production to sharply increase. Indeed after rising by 1.0% in July (revised from 0.5%) industrial production rise by 0.8% in August. This increase was partially led by a “correction effect” and by the rebound of the car industry (+20.1% in July and +5.5% in August), knowing that most of the sectors increased. Starting with business equipment : +1.1% in July and +0.6% in August and consumer goods : respectively +0.8% and +1.3%. In other words the US recovery is not only due to the budgetary revival plan but is already boosted by private motors as household consumption and business investment. And this is not over, indeed the sharp rise of the ISM manufacturing index revealed that the YoY industrial production should reach 4% at the beginning of 2009, knowing that despite the last months recovery this index is presently felling by 10.7%YoY. It must be said that at the third quarter industrial production had already a “growth gain” of 0.7%. During this same quarter the GDP progression could consequently be close to 3% annualised. In such condition we can say that the virtuous circle : investment-employment-consumption is back in the United-States.
United-States: NAHB index slightly rose in September
The US National Association of Home Builders confidence index climbed for the fourth consecutive month at 19 or its highest level since May 2008. Lower prices and government tax credits for first-time buyer helped home sales. Remember that the index reached a record low of 8 in January.
Euro area: Consumer prices declined for a third consecutive month in August
Consumer price index rose from -0.7% in July to +0.3% in August as forecast led by the rise of energy prices (+1.8% from previous month). Meanwhile from a year ago prices declined for a third consecutive month in August by 0.2% (previous -0.7%) This drop occurred as energy prices decreased by 10% in August from a year ago and as unemployment curbed household spending. This rising trend will last and inflation in the Euro area should rise by 0.6% YoY in 2009 and by 2.2% YoY in 2010. Unfortunately the European Central Bank will probably not wait the return of inflation to increase its refi rate which will give no chance to a consistent growth in the euro area. Finally the core CPI in August rise by 1.3% showing that even if we exclude the increase of energy, prices are on a rise trend in the euro area
Thursday, September 17, 2009
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