GLOBAL EQUITIES RESEARCH
Next week will be important and thrilling as it will bring some fresh news which should impact fund managers decisions. Indeed the ISM to be released as soon as on Monday will tell whether the little drop from 55 to 52.7 was a little and healthy consolidation from the sharp rise from the previous month which sent the index on some 55 level (consensus is 53). As such, it will tell whether the more contrasted September economic activity was due to the sharp rise from July and August, cash for clunkers and Tax credit or not. Also the employment report will be as important as usually, with once more some possible positive impact as we are not yet in a period where employment is expected to get better (6/12 months lagging time), meaning any improvement at this stage would be very much cheered. Employment being the big need to make sure the economic activity pick up will be sustainable, so we find US consumption back on the scene, so important to the GDP (70%).
Talking about employment, October’s surprise fall in German unemployment is encouraging, although it is probably too soon to call the end of the labour market downturn. The fall of 26,000, which pushed the unemployment rate down to 8.1% from 8.2%, was the sharpest since August 2008 and the fourth in a row. While earlier data were flattered by statistical changes, that does not seem to have been the case this month. Together with the moderate rise in consumer confidence over recent months and recently announced income tax cuts, this is good news for the consumer sector. Admittedly, there are clouds on the horizon. Unemployment might well rise further as subsidies under the ‘Kurzarbeit’ scheme expire – note that surveys of employment still point to further job cuts to come. And there is no guarantee that cautious German consumers will spend the money gained from income tax cuts. Nonetheless, signs of improvement in the labour market support the view that Germany’s economic recovery will help the Euro zone. We still think the US recovery will be stronger
Japan's unemployment rate fell for the second straight month as companies gained more confidence in the stimulus-fuelled global recovery but prices continued to tumble, underscoring weak demand at home. The jobless rate stood at a seasonally adjusted 5.3 percent, down from 5.5 percent last month. A recent survey by Nikkei financial daily showed that major Japanese companies plan to hire 29 percent fewer graduates next spring than they did this year.
In the meantime, we might be ready for a new upside rally triggered by the friendly US GDP survey yesterday. Indeed, the good news is that the 3.5% annualised rebound in Q3 US GDP confirms that the most severe and longest recession since the 1930s is over. The economic growth should continue at this pace for another few quarters, as pent up investment demand is released, inventories are being restocked and the boost to infrastructure spending from the fiscal stimulus continues. The consumption increased by 3.4% in the Q3, boosted by a 22.3% surge in spending on durables, which mainly reflects the jump in vehicle purchases stemming from the Cash for Clunkers scheme. But that was a one-off surge, which my well have brought forward some sales that would otherwise have happened in Q4, putting even more pressure on the next quarter macro events (starting next week). Residential investment rebounded by an impressive 23.4%, perhaps boosted by the temporary tax credit for first time buyers (which is extended. That was the first gain in homebuilding in nearly 4 years. Both exports and imports rebounded strongly, by 14.7% and 16.4% respectively. The relatively modest contribution from inventories, which added only 0.9% to overall growth, is predicting some brighter days for Q4.
Island reversal possibility on the Nikkei (bull), which could find a reason through the (temporary ?) strength of the dollar following the better than expected GDP. Would we find a logic back on the currency ? with the yen weakening in line with the Japanese economy doubts while the dollar should be boosted by the strong US recovery which should last another few quarters (at least)
Wherever we head mid term, the current rally should remain for more than a couple sessions anyway.
ECONOMIC DATA WITH IMPACT
Personal Income & Personal spending (12h30 UK time) expected flat and –0.5% from previous 0.2% & 1.3% / interesting, would be nice to see higher income and higher spending for the economic recovery sustainability
PCE (12h30 UK time) expected 0.2% from previous 0.1% / minor as inflation is not the focus for now
Employment cost Index (12h30 UK time) expected 0.4% from previous 0.4% /not the focus for today / minor
POSITIVE IMPACTS
SANOFI :Q3 Sales €7.4Bn (7.435 exp) / Q3 Op income €2.955Bn (2.919 exp) / Q3 EPS €1.71 (1.61 exp) / Predicted adj EPS ex items to grow by around 11% (10% exp)
ACS : 9M sales €12.06 Bn / 9M EBITDA €1.09Bn (1.08 exp) / 9M net pft €1.79Bn (1.73 exp)
SANDVIK : Q3 Net sales SEK 16.6Bn (16.8 exp) / Q3 Pretax loss SEK523M (944m exp) / Order intake SEK17.2 Bn (16.5 exp)
SSAB : Q3 Sales SEK6.94Bn (5.78 exp) / Pretax loss SEK1.1 Bn (1.2 exp) / Demand for steel showed some sign of recovery / Cost saving program proceeding faster than expected
ERSTE BANK : Q3 NII €1.336bn (1.27bn exp) / Risk costs €557m (538m exp) / Core Tier1 6.5% Q3-end / No guidances for 2009
GERMAN BANKS : Germany wants to establish itself as a market for financial products that conform with Islamic law “seeing great interest from investors in Islamic countries” / Separatly CBK, HYPO must pay back state aid as soon as conditions allow (Eco min)
RIO TINTO : Ups 09 CAPEX goals from $2.5bn to at least $5Bn / 9M debt -42% at $22.3Bn / Cost reduction on track ($2.5Bn)
WPP :Q3 Rev £2.007Bn (2.02 exp) / Q3 LFL rev –8.7% (-9.1% exp ) /
LLOYDS may start its fundraising by Nov. 4, as CEO and his advisers begin detailed consultations with investors about the plan (FT). Daily Telegraph wrote that the rights offer could be priced at 30 pence a share.
SOCIETE GENERALE : CAC reweighting, SOC GEN weight will increase to 4.35% from 3.56%
NEGATIVE IMPACTS
BELGACOM : Q3 rev €1.48Bn (1.47 exp) / Q3 EBITDA €494M (483 exp) / Interim DIV €0.4 (0.50 exp) / Confirms FY guid
ALCATEL : Q3 Rev €3.69Bn (3.91 exp) / Adj Op loss €11M (-8 to -14.4 exp) / Net loss €182M (-252 exp) / Reafirms guidance.
RENAULT : Q3 rev €8.1bn (8.74 exp) / Q3 Global vehicules sales +0.8% on Yr / Reaffirms sees Positive FCF In FY 2009 as exp / Sees increase mkt shr in Europe in FY 2009
FERROVIAL : 9M Revenue €9.05bn (€9.11bn exp) / EBITDA €1.946bn (€1.96bn exp) / Construction EBITDA down 19.3% / Bottom line hit by capital loss on Gatwick sale / Net debt €22.2bn at end-Sept
CARREFOUR : A Taiwanese court has rejected an appeal by Carrefour against a fine for misleading advertisements,
SIEMENS : Deutsche Bahn is threatening the cancelling of a tender for 300 IC and ICE trains due to high price demands (Handelsblatt)
EADS : weaker $ very painful /benefits from good hedging rate to end eventualy / Made “big” mistakes with A400M / Aims to deliver as many aircraft in 09 as in 08
LINDE Should report Q3 Sales €2.9 bn vs 2.91 bloom expectations and Q3 Op pft €615M vs 628 bloom expectations (german press)
UBS is likely to show ongoing client outflows in the third quarter even as it reports a narrower quarterly net loss next week.
NOKIA : Samsung Electronics said it sold a record of 60.2 M phones in July-September quarter, with its mkt shr rising to 20.7%.
TRADING IDEAS
BUY NIKKEI INDEX on island reversal possibility + Dollar recovery which for ones fits with stronger US data (weak Yen good for exporters)
BUY BNP ahead of results next week that we believe will be very good.
BUYARCELORMITTAL with a buy opportunity with an island possibility still / BUY ADIDAS ahead of results next week
BUY PHILIPS / STM which closed their gap // BUY ACCOR to play upside trend now & BUY PINAULT on double bottom possibility
BUY SALZGITTER / SELL THYSSEN // BUY STM / SELL INFINEON // BUY REED ELSEVIER / SELL PEARSON / BUY LOCKHEED MARTIN / SELL HONEYWELL
BROKER METEOROLOGY
E.ON RAISED TO OVERWEIGHT FROM UNDERWEIGHT BY HSBC
FORTIS RATED NEW BUY BY DEUTSCHE BANK OF AMERICA – ML
PEUGEOT RAISED TO OVERWEIGHT FROM NEUTRAL BY HSBC
RENAULT RAISED TO HOLD FROM SELL
SOLVAY RAISED TO BUY FROM HOLD BY ING
NOVATEK ADDED TO RUSSIA FOCUS LIST BY GOLDMAN SACHS
LLOYDS RAISED TO NEUTRAL FROM UNDERWEIGHT BY EXANE
BHP BILLITON RAISED TO BUY FROM HOLD BY ING
LOGITECH RAISED TO NEUTRAL BY GOLDMAN SACHS
DASSAULT SYSTEMES RAISED TO NEUTRAL FROM SELL BY UBS
DEXIA RAISED TO NEUTRAL FROM UNDERWEIGHT BY JP MORGAN
SEB (SEBA SS) RAISED TO NEUTRAL FROM UNDERWEIGHT BY JP MORGAN
SWEDBANK RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
INTESA SANPAOLO RAISED TO BUY FROM HOLD BY CITIGROUP
TOMTOM CUT TO NEUTRAL BY UBS
NOVO NORDISK CUT TO HOLD FROM BUY BY CITIGROUP
DATA
WTI : 80,0 (3,47 %)
Eur/$ : 1,4843 (0,14 %)
$ /Yen : 91,05 (0,25 )
10 Yr US : 3,49 ( -1,14 bp)
10 Yr Euro : 3,32 ( 6,6 bp)
Indices : US close ; Europe close
SOX : 2,15 %;1,53%
S&P :2,25 %; 1,64 %
DOW: 2,05%; 1,40 %
NAS :1,84%; 1,52%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 4,05 %; 4,04 %
ENERGY : 2,43 %; 1,97 %
FINANCIAL : 3,91 %; 2,53 %
HEALTHCARE : 1,06 %; 0,52 %
TECHNO : 1,99 %; 1,37 %
TELECOM : 0,62 %; -0,11 %
INDUSTRIAL : 2,19 %; 2,09 %
UTILITIES : 0,93 %; 0,56 %
TO BE COMING
Today
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard / Symantec (AMC)
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events:
Monday
Results : EU \\ Abb / Alstom / AstraZeneca / BASF final details (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive / Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) / Procter & Gamble / Sprint /
Dividend : Inditex (€0.50)
Events: Pernod Ricard AGM
Tuesday
Results : EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal // Red Electrica / Sandvik / Sanofi-Aventis (BMO) / Shire / SSAB (BMO) / WPP trading statement
US \\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext /
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events : DuPont Annual investor meeting
Wednesday
Results : EU \\ Altran Technologies sales / Linde / Metro AG / TNT
US \\ Ford (BMO)
Dividend :Ashmore Group (GBp 9,266667)
Events: Cardinal Health
Thursday
Results :EU \\ Antofagasta production report / BMW / Endesa / Fresenius / Swiss Re / Telecom Italia Media / UBS
US \\ US car sales / Kraft Fodds (AMC) / Master Card (BMO)
Dividend :
Events:Coach AGM / Man Group analyst meeting
ECONOMIC DATA PREVIEW
Watch in the United-States the personal income and personal expenses for September (12.30 GMT). For September, we anticipate that household personal income up 1%, mainly led by the decline in job destruction and by the rise in wages. Meanwhile, household expenses which increased by 1.3% in August the sharpest rise since October 2001, should regress by 0.5% in September. This mainly due to the fall in retail sales in September impacted by the end of the cash for clunkers program.
Watch in the Euro zone the first estimation of the inflation for October (10.00 GMT). The deflation will still hit the euro area in October but to a smaller extent due to the rise in energy prices and commodities Consequently we anticipate the consumer prices index to be - 0.1%YoY in October. Nevertheless, it should get back to positive territories to reach 0.9% in December and 1.5% at the beginning of 2010.
ECONOMY
United-States: The GDP rose by 3.5% at the third quarter
After declining by 0.7% at the second quarter, the US GDP rose by 3.5% at the third quarter, meaning 0.5% more than the consensus forecast. Looking at the breakdown the US GDP was firstly boosted by the sharp rebound of household consumption rising by 3.4%(annualized) meaning its best performance since the first quarter 2007. Better, after fourteen quarters of decline, residential investment rise by 23.4% at the third quarter, the highest progression since the second quarter 1986. Meanwhile company’s capital spending is recovering. Indeed after six consecutives quarter of fall, equipment and software investment rise by 1.1% at the third quarter. If this rebound remained limited it open the way to the virtuous circle : growth-investment-employment-consumption. In addition the last ISM new order index are reaching very encouraging levels in regards to future productive investment. It is important to notice that the GDP rise at the third quarter has not been artificially boosted by foreign trade or by a massive restocking. For the future the very encouraging ISM (manufacturing and services) data; the Fed low interest rate, the under evaluated dollar not to mention the $ 450 bn upcoming public investment will boost the US GDP in the coming months. In such condition we that after falling by 2.2% in 2009, the US GDP will rise by 2.8% in 2010.
United-States: Initial jobless claims and continuing claims declined last week
Initial jobless claims declined slightly last week from 531000 to 530 000. This figures are confirming that the labour market is slowly recovering as after over laying off companies are now matching more closely economic fundamentals. On the other hand continuing claims declined sharply last week from 5 945 000 to 5 797 000. This is the sixtieth consecutive reduction of continuing claims confirming that the hiring process is progressively recovering in the United-States. Nevertheless has employment is a lagging indicator of the activity the unemployment rate should rise in the coming month to stabilize around 10% till the beginning of 2010.
Euro area: Sharp rise of the economic confidence in October
After reaching an historical low at 64.6 in March 2009, the euro area economic confidence index rose for a seventh consecutive month in October to reach 86.2 its highest level since September 2008 meaning just before the Lehman brother fall. Indeed, the euro zone economy is recovering as showed by the sharp rise in French business confidence indicator which reached its highest mark since September 2008, and by the seventh consecutive rise the IFO index in Germany in October. As the economic sentiment index is the best leading indicator of the Euro area GDP this suggest that the GDP should decline at a much slower pace at the third quarter 2009.
Germany: Unemployment surprisingly declined in October
German unemployment dropped unexpectedly from 8.2% in September to 8.1% in October its level of March 2009. The fall of 26 000 was the sharpest since August 2008 and will boost in the short term household consumption. As employment remained a lagging indicator of the economic activity we cannot say to soon that this is the end of the labour market downturn and unemployment should rise in the coming month to reached 9.4% in 2009. It should stabilise at this level in 2010.
Friday, October 30, 2009
Thursday, October 29, 2009
Power
GLOBAL EQUITIES RESEARCH
A lot of important gaps have been closed yesterday which so far should be seen as another positive and welcome consolidation from sectors that could not breathe anymore such as the cyclical, techs and financials one (gap closed on the Nikkei, the Eurostoxx cash, STM, Philips, Socgen, Carrefour and partially on BNP). The resilience of the bond indices while facing some 41bn yesterday and another 31 bn today auctioned should be seen as a sign that the Fed unwinding policy is not for now. We should cross that bridge when we come to it, and for that we need a more robust economic recovery, which Q4 might tell us more about as soon as next week.
We understand the fear of the Fed easing policy unwinding, especially as the Treasury purchases program is ending this week. However, another buyer has come to the fore. US commercial banks increased their holdings of Treasuries (and agencies) substantially in Q3, and this might continue. Treasuries are liquid, zero risk-weighted assets in a financial system short of capital. Private sector loan demand is extremely soft. And the yield curve is very steep. Also, another point being that the Fed’s purchases have been a dual-edged sword for Treasuries. While they have helped to soak up supply, they have also achieved their stated aim – “to help improve conditions in private credit markets”. Ever since the buying began in March, risk appetite has grown. This, in turn, has nurtured expectations of economic recovery, inflation and eventual monetary tightening, with some likely upward effect on yields. The end of the program and the gradual withdrawal of other forms of credit easing – the Fed’s planned purchases of agency mortgage-backed securities and agency debt, for example, are due to be completed by the end of Q1 next year – will remove some of the excess liquidity sloshing around in asset markets. While it could be seen as a threat for riskier investments in term, the search for safety could prove to be a net positive for government bonds. And riskier investments will have to deal with it, which doesn’t mean they will fall. Things would just be gradually running as normal, in line with a more modest economic growth which one way or the other the Fed and US officials will keep on monitoring in order to reach their goal which is to create jobs back again. Also don’t forget China which will keep on growing fast in 2010.
In the meantime, Goldman’s downside Q3 GDP revision from 3 to 2.7% makes it even more worth it playing long ahead of the GDP data today. Indeed the data is full of random due to the inventories rebuilt unknown element which could subtract or add to Q3’s GDP, and might also be postponed to the following quarter in which case the market will be more forgiving in case of a disappointing report. On the other hand, any friendly report might be cheered given the sharp recent drop from some single stocks (see trading ideas below), as the main focus will be next week and the ISM manufacturing on Monday as well as the employment report on Friday dealing with October period, and so Q4 already. It seems that the economical pick up will be spread equally between Q3 and Q4, with Q4 profiting from a very friendly base effect as well as the inventories rebuild possible boost. An economic collapse would be surprising as the paradox is that in case of a too weak economy, there would be no rush to unwind the easy quantitative policy, one way or the other.
Indeed, we know for sure that after a strong July and August economic pace, September was more contrasted. This is what the relatively modest increase in durable goods orders and the drop back in new home sales last month indicated yesterday. About the Durable goods orders, half of the rise in headline orders was due to a jump in defence procurement, which says nothing about the strength of private demand. Excluding transport, core orders increased by 0.9% m/m, although the survey evidence suggests that might be as good as it gets. A good news is that non-defence core capital goods orders rebounded by 2.0%, which is a positive sign for fourth-quarter business investment. However, the news on Q3 was not so good. Shipments in the same category slipped by 0.2%, following a 2.2% drop in August. However, that doesn't change the view that today's report will show overall GDP expanded by more than 3% annualised. The other good news in this report is the smaller 1.0% decline in durable inventories in September, compared with a 1.5% decline the month before. Inventories are likely to make a big positive contribution to fourth-quarter GDP growth.
As to the New home sales, the disappointing survey is adding to the idea that the housing activity would drop back once the tax credit is over, such as the California’s state was picturing with the tax credit ending in August and new home sales in the west falling back from 113k to 101k. But already some rumours are spreading that the housing stimulus will be extended which could be announced as soon as next week. However, economists consider that any fall back in housing if any would be short lived given the improvement in affordability thanks to low mortgage rates and valuations.
Opening down, we should be recovering all day and get a boost from today’s GDP given the recent consolidation and the fear of the report increased by Goldman’s downside revision yesterday following the Durable Orders survey
ECONOMIC DATA WITH IMPACT
US Q3 GDP (12h30 UK time) expected 3.2% from previous –0.7% / important given the latest drop offering some upside on cyclical, techs and financial names / anything above would be cheered especially as Goldman did downgrade its preview to 2.7% from 3% / keep an eye on the inventories rebuilt, if it is small, then it should open the door to a strong Q4 which would profit from the inventories rebuilt / a 3.x% without much inventories help would be rather good news and promising for Q4
Personal Consumption (12h30 UK time) expected 3.1% from previous –0.9% / the higher the better / interesting
Jobless Claims (12h30 UK time) expected 525k from previous 531k / minor, just a weekly data, any improvement would be welcome though / employment on Friday in a week time will be the one regarding the labour sector
POSITIVE IMPACTS
TELENOR : Q3 Rev NOK24.3Bn (24.19 est) / Q3 EBITDA NOK8.52Bn (7.39 est) / Op. pft NOK4.5Bn (3.5 est) / PTP OK5.69Bn (4.40 est) / EPS NOK2.11 (1.83 est) / Cut CAPEX guid to 13% (13-15% est) /
SOLVAY : Q3 Sales €2.235Bn (2.2 est) / REBIT €285M (211 est) / Net pft €160M (116 est) / DIV €0.9 / Sees FY Op lower than 08
DBK “confirms Oct 21 Preliminary results” : Q3 Revenue €7.2bn / NII €3.13bn (€2.8bn exp) / PTP €1.3bn (In line) / Tier1 capital 11.7% Sept-end – Core Tier1 8.1% / Loan Loss prov €544m (653m exp) / Well prepared for challenge opportunities
ACERINOX : 9M net loss €236M (235 est) / Sees Steel price improving in Q1 2010
RANDSTAD : Q3 Sales €3.178 (3.1est) / Underlying EBITDA €93.4M (87 est) / In many mkt recovery still fragile / Need to keep an eye on costs in coming quarters in view of increased pressure on gross margin
ALSTOM : H1 Sales €9.68Bn (9.54 est) /H1 Orders €7.134Bn (7.8 est but very anticipated) / Op pft €828M (827 est) / Net €562M (590 est) / Confirms outlook / Sees orders improving in H2 / Bidding for Areva T&D still ongoing
ENI : Q3 Operating Profit €3.12bn (2.99bn exp) / Adj Net Profit €1.15bn (1.11bn exp) / Hydrocarbon Output 1.68m BOEPD / Sees FY Output unchanged from 1.797m boep in 2008 & gas sales in line with 2008, below planned 4casts due to eco crisis
ABB : Q3 Sales $7.91Bn (7.815 est) / Orders $7.1Bn (7.16 est) / Net $1bn (in line) / 09 and 2010 guid. remains uncertain
LUFTHANSA : Q3 Rev €5.936Bn (6.06 est/ Op pft €218M (54 est) / Net €184M (Loss 45M est) /Q4 to be challenging
NOVO NORDISK : Q3 Sales DKK12.51Bn (12.73 est) /Op pft DKK3.81Bn (3.6 est ) Net pft DKK2.76Bn (2.65 est) / Confirms guid/
ROCHE's partner Ipsen announced Taspoglutide met its primary endpoint in the first Phase III clinical trial.
LLOYDS : (FT reports) Alistair Darling is to give Lloyds the go-ahead to market-test its ambitious plan for a £25bn refinancing in a clear sign that the chancellor is willing to release the bank from the govt ‘s toxic asset insurance scheme
KBC said it retains confidence in its bancassurance strategy and reported “good progress” in discussions with the EU Commission. Separately Co reiterated it doesn’t plan to sell shares to repay the state aid
VEOLIA : EDF expected to raise VEOLIA stake to 15% from the current 4% by mid 2010 according Henri Proglio (La Tribune)
DIAGEO ‘s CEO said Co may use its cash to boost its dividend if the U.K. company’s preferred takeover tgts don’t come up for sale at the right price.
NEGATIVE IMPACTS
FRANCE TEL : Q3 Sales €12.686 (12.811 est) / EBITDA €4.558 (4.58 est) / EDITDA margin 35.9% (35.7 est) / CAPEX €1.207 (1.375 est) / Confirms outlook / Sees no improvment in Q4 Sales / 2010 outlook depends on when consumer spending recovers … / To continue to make selective acquisitions / Keeps div distribution policy /
BASF : Q3 Sales €12.80Bn (12.83 est) /Q3 EBIT €971M (997 est ) Q3 Net pft €237M (413 est) / Sees Q4 sales at Q3 level /Faster integration of CIBA negativly impatcs 09 earnings / Unlikely to earn cost of capital in 2009
AXA : 9M Revenues €68.1bn (68.36bn exp) / Life savings €42.7bn (43.1bn exp) - P&C €20.5bn (In line) - APE €4.5bn (4.6bn exp) / Says improvement in markets gives it a more favorable environment for its business
DASSAULT SYSTEM : Q3 Sales €291.7M (298.5 est) / EPS €0.32 (0.34 est) / Confirms EPS & Op. Margin targets
FIAT : MEDIOBANCA said that it would sell its remaining 0.65% stake in FIAT
SUEDZUCKER said its target to lift operating profit by 55% this year and to keep sales stable will be “harder to achieve.”
GSK ‘s CEO said the company’s traditional core market of prescription drugs in developed countries may slip to 25% of total sales (FT)
TRADING IDEAS
BUY SOC GEN to play reweighting tomorrow, earnings on Wednesday
BUY BNP on thegap which will be closed soon (51.12/51.60 ) earnings next Thursday should be good
BUYARCELORMITTAL with a buy opportunity with an island possibility (Nippon Steel lift forecast this morning)
BUY PHILIPS / STM / CARREFOUR which closed their gap
BUY ACCOR to play buying opportunity after five sessions down, off 15% from the top levels, very US related and should profit from the GDP
BUY AIR FRANCE which retraced heavily on the downside, nice recoevry to expected, crash soon forgotten, good KLM synergies
BUY LAFARGE (-17% from its top levels) killed one more time yesterday on New home sales figures
BUY E.ON to play reversal Head & Shoulder possibility
BUY UNILEVER / SELL NESTLE // BUY RENAULT / SELL DAIMLER // BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON
BROKER METEOROLOGY
ANGLO AMERICAN RAISED TO OVERWEIGHT FROM EQUALWEIGHT BY MORGAN STANLEY
IBERDROLA RENOVABLES RAISED TO NEUTRAL BY BANK OF AMERICA – ML
EDP RENOVAVEIS RAISED TO BUY BY BANK OF AMERICA – ML
DEUTSCHE BOERSE RAISED TO OUTPERFORM FROM MARKETPERFORM BY BERNSTEIN
ING RAISED TO EQUALWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
DATA
WTI : 77,3 (-2,63 %)
Eur/$ : 1,4728 (0,15 %)
$ /Yen : 90,36 (0,26 )
10 Yr US : 3,41 ( -0,38 bp)
10 Yr Euro : 3,26 ( -1,1 bp)
Indices : US close ; Europe close
SOX : -2,80 %;-1,78%
S&P :-1,95 %; -1,11 %
DOW: -1,21%; -0,46 %
NAS :-2,67%; -1,74%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -4,00 %; -3,49 %
ENERGY : -3,15 %; -1,97 %
FINANCIAL : -2,93 %; -1,95 %
HEALTHCARE : -1,53 %; -0,48 %
TECHNO : -1,91 %; -1,26 %
TELECOM : 1,48 %; 1,56 %
INDUSTRIAL : -2,56 %; -1,64 %
UTILITIES : -1,13 %; -0,06 %
TO BE COMING
Today
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard / Symantec (AMC)
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events:
Friday
Results : EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal // Red Electrica / Sandvik / Sanofi-Aventis (BMO) / Shire / SSAB (BMO) / WPP trading statement
US \\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext /
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events: KBC Ancora AGM
Monday
Results : EU \\ Altran Technologies sales / Linde / Metro AG / TNT
US \\ Ford (BMO)
Dividend : Inditex (€0.50)
Events : Pernod Ricard AGM
Tuesday
Results : EU \\ Antofagasta production report / BMW / Endesa / Fresenius / Swiss Re / Telecom Italia Media / UBS
US \\ US car sales / Kraft Fodds (AMC) / Master Card (BMO)
Dividend :
Events: DuPont Annual investor meeting
Wednesday
Results :EU \\ Adidas / Aviva interim / Bureau Veritas / Cisco Systems / Clariant / Gazprom / Grifols / JCDecaux sales / Rhodia (BMO) / Sampo / Scor / SocieteGenerale (BMO) / StatoilHydro (BMO) / Total
US \\ Cisco (AMC) / Comcast / Garmin (BMO) / Qualcomm (AMC) / Time Warner (BMO)
Asia \\ Nissan Moto (AMC)
Dividend : Ashmore Group (GBp 9,266667)
Events:Cardinal Health
ECONOMIC DATA PREVIEW
Watch in the United-States the advanced release of the GDP (annualized) for the third quarter (12.30 GMT). The recession ended in the third quarter, as showed by the rebound in capital spending in the industry and services sectors, as well as the rise in US household consumption (70% of the American GDP) over this same period. As a matter of fact the US GDP should rise by 3.5% in the third quarter, a level which should be consolidated at the fourth quarter.
Watch in the Euro zone the economic confidence for October (10.00 GMT). After reaching an historical low at 64.6 in March 2009, the euro area economic confidence index should rise for a seventh consecutive month in October to reach 83.2 its highest level since September 2008. Indeed, the euro zone economy is recovering as showed by the sharp rise in French business confidence indicator which reached its highest mark since September 2008, and by the seventh consecutive rise the IFO index in Germany in October.
Watch in the Germany the Unemployment for October (8.55 GMT). After surprisingly slightly decreasing in September, German unemployment should slightly rise from 8.2% to 8.3% meaning the same monthly rate than the three last month
ECONOMY
United-States: Durable goods orders rose in September.
After strongly rebounding in July rising by 4,8%, the fastest increase since July 2007, US durable goods orders declined by 2,6% in August. However this very volatile index increased in September by 1% as forecast. This improvement was indeed expected as the orders sub index of the ISM manufacturing indicator reached 60.8 in September. Half of the rise in headline orders was due to a jump in defence procurement but the good news is that non defence capital goods orders rebounded by 2% which is an encouraging sign for investment business at the Q4. Meanwhile excluding transportation orders which dropped by 0.4% in August, ending three consecutive up months , increased by 0.9% in September.
United-States: New home sales unexpectedly dropped in September.
New home sales surprisingly dropped from 417 000 in August to 402 000 in September (forecast 440 000) or -3.6%. Existing home sales dropped at the fastest pace since March 2009.Indeed despite the low mortgage rates and interest rate and despite the fact that less and less job are destroyed in the United-States the unemployment remained high (9.8%) in the United-States. Household gain in purchase power from the economic revival plan will not immediately go into the financial circuit as household are firstly reimbursing their debts, spending will be the second step.
A lot of important gaps have been closed yesterday which so far should be seen as another positive and welcome consolidation from sectors that could not breathe anymore such as the cyclical, techs and financials one (gap closed on the Nikkei, the Eurostoxx cash, STM, Philips, Socgen, Carrefour and partially on BNP). The resilience of the bond indices while facing some 41bn yesterday and another 31 bn today auctioned should be seen as a sign that the Fed unwinding policy is not for now. We should cross that bridge when we come to it, and for that we need a more robust economic recovery, which Q4 might tell us more about as soon as next week.
We understand the fear of the Fed easing policy unwinding, especially as the Treasury purchases program is ending this week. However, another buyer has come to the fore. US commercial banks increased their holdings of Treasuries (and agencies) substantially in Q3, and this might continue. Treasuries are liquid, zero risk-weighted assets in a financial system short of capital. Private sector loan demand is extremely soft. And the yield curve is very steep. Also, another point being that the Fed’s purchases have been a dual-edged sword for Treasuries. While they have helped to soak up supply, they have also achieved their stated aim – “to help improve conditions in private credit markets”. Ever since the buying began in March, risk appetite has grown. This, in turn, has nurtured expectations of economic recovery, inflation and eventual monetary tightening, with some likely upward effect on yields. The end of the program and the gradual withdrawal of other forms of credit easing – the Fed’s planned purchases of agency mortgage-backed securities and agency debt, for example, are due to be completed by the end of Q1 next year – will remove some of the excess liquidity sloshing around in asset markets. While it could be seen as a threat for riskier investments in term, the search for safety could prove to be a net positive for government bonds. And riskier investments will have to deal with it, which doesn’t mean they will fall. Things would just be gradually running as normal, in line with a more modest economic growth which one way or the other the Fed and US officials will keep on monitoring in order to reach their goal which is to create jobs back again. Also don’t forget China which will keep on growing fast in 2010.
In the meantime, Goldman’s downside Q3 GDP revision from 3 to 2.7% makes it even more worth it playing long ahead of the GDP data today. Indeed the data is full of random due to the inventories rebuilt unknown element which could subtract or add to Q3’s GDP, and might also be postponed to the following quarter in which case the market will be more forgiving in case of a disappointing report. On the other hand, any friendly report might be cheered given the sharp recent drop from some single stocks (see trading ideas below), as the main focus will be next week and the ISM manufacturing on Monday as well as the employment report on Friday dealing with October period, and so Q4 already. It seems that the economical pick up will be spread equally between Q3 and Q4, with Q4 profiting from a very friendly base effect as well as the inventories rebuild possible boost. An economic collapse would be surprising as the paradox is that in case of a too weak economy, there would be no rush to unwind the easy quantitative policy, one way or the other.
Indeed, we know for sure that after a strong July and August economic pace, September was more contrasted. This is what the relatively modest increase in durable goods orders and the drop back in new home sales last month indicated yesterday. About the Durable goods orders, half of the rise in headline orders was due to a jump in defence procurement, which says nothing about the strength of private demand. Excluding transport, core orders increased by 0.9% m/m, although the survey evidence suggests that might be as good as it gets. A good news is that non-defence core capital goods orders rebounded by 2.0%, which is a positive sign for fourth-quarter business investment. However, the news on Q3 was not so good. Shipments in the same category slipped by 0.2%, following a 2.2% drop in August. However, that doesn't change the view that today's report will show overall GDP expanded by more than 3% annualised. The other good news in this report is the smaller 1.0% decline in durable inventories in September, compared with a 1.5% decline the month before. Inventories are likely to make a big positive contribution to fourth-quarter GDP growth.
As to the New home sales, the disappointing survey is adding to the idea that the housing activity would drop back once the tax credit is over, such as the California’s state was picturing with the tax credit ending in August and new home sales in the west falling back from 113k to 101k. But already some rumours are spreading that the housing stimulus will be extended which could be announced as soon as next week. However, economists consider that any fall back in housing if any would be short lived given the improvement in affordability thanks to low mortgage rates and valuations.
Opening down, we should be recovering all day and get a boost from today’s GDP given the recent consolidation and the fear of the report increased by Goldman’s downside revision yesterday following the Durable Orders survey
ECONOMIC DATA WITH IMPACT
US Q3 GDP (12h30 UK time) expected 3.2% from previous –0.7% / important given the latest drop offering some upside on cyclical, techs and financial names / anything above would be cheered especially as Goldman did downgrade its preview to 2.7% from 3% / keep an eye on the inventories rebuilt, if it is small, then it should open the door to a strong Q4 which would profit from the inventories rebuilt / a 3.x% without much inventories help would be rather good news and promising for Q4
Personal Consumption (12h30 UK time) expected 3.1% from previous –0.9% / the higher the better / interesting
Jobless Claims (12h30 UK time) expected 525k from previous 531k / minor, just a weekly data, any improvement would be welcome though / employment on Friday in a week time will be the one regarding the labour sector
POSITIVE IMPACTS
TELENOR : Q3 Rev NOK24.3Bn (24.19 est) / Q3 EBITDA NOK8.52Bn (7.39 est) / Op. pft NOK4.5Bn (3.5 est) / PTP OK5.69Bn (4.40 est) / EPS NOK2.11 (1.83 est) / Cut CAPEX guid to 13% (13-15% est) /
SOLVAY : Q3 Sales €2.235Bn (2.2 est) / REBIT €285M (211 est) / Net pft €160M (116 est) / DIV €0.9 / Sees FY Op lower than 08
DBK “confirms Oct 21 Preliminary results” : Q3 Revenue €7.2bn / NII €3.13bn (€2.8bn exp) / PTP €1.3bn (In line) / Tier1 capital 11.7% Sept-end – Core Tier1 8.1% / Loan Loss prov €544m (653m exp) / Well prepared for challenge opportunities
ACERINOX : 9M net loss €236M (235 est) / Sees Steel price improving in Q1 2010
RANDSTAD : Q3 Sales €3.178 (3.1est) / Underlying EBITDA €93.4M (87 est) / In many mkt recovery still fragile / Need to keep an eye on costs in coming quarters in view of increased pressure on gross margin
ALSTOM : H1 Sales €9.68Bn (9.54 est) /H1 Orders €7.134Bn (7.8 est but very anticipated) / Op pft €828M (827 est) / Net €562M (590 est) / Confirms outlook / Sees orders improving in H2 / Bidding for Areva T&D still ongoing
ENI : Q3 Operating Profit €3.12bn (2.99bn exp) / Adj Net Profit €1.15bn (1.11bn exp) / Hydrocarbon Output 1.68m BOEPD / Sees FY Output unchanged from 1.797m boep in 2008 & gas sales in line with 2008, below planned 4casts due to eco crisis
ABB : Q3 Sales $7.91Bn (7.815 est) / Orders $7.1Bn (7.16 est) / Net $1bn (in line) / 09 and 2010 guid. remains uncertain
LUFTHANSA : Q3 Rev €5.936Bn (6.06 est/ Op pft €218M (54 est) / Net €184M (Loss 45M est) /Q4 to be challenging
NOVO NORDISK : Q3 Sales DKK12.51Bn (12.73 est) /Op pft DKK3.81Bn (3.6 est ) Net pft DKK2.76Bn (2.65 est) / Confirms guid/
ROCHE's partner Ipsen announced Taspoglutide met its primary endpoint in the first Phase III clinical trial.
LLOYDS : (FT reports) Alistair Darling is to give Lloyds the go-ahead to market-test its ambitious plan for a £25bn refinancing in a clear sign that the chancellor is willing to release the bank from the govt ‘s toxic asset insurance scheme
KBC said it retains confidence in its bancassurance strategy and reported “good progress” in discussions with the EU Commission. Separately Co reiterated it doesn’t plan to sell shares to repay the state aid
VEOLIA : EDF expected to raise VEOLIA stake to 15% from the current 4% by mid 2010 according Henri Proglio (La Tribune)
DIAGEO ‘s CEO said Co may use its cash to boost its dividend if the U.K. company’s preferred takeover tgts don’t come up for sale at the right price.
NEGATIVE IMPACTS
FRANCE TEL : Q3 Sales €12.686 (12.811 est) / EBITDA €4.558 (4.58 est) / EDITDA margin 35.9% (35.7 est) / CAPEX €1.207 (1.375 est) / Confirms outlook / Sees no improvment in Q4 Sales / 2010 outlook depends on when consumer spending recovers … / To continue to make selective acquisitions / Keeps div distribution policy /
BASF : Q3 Sales €12.80Bn (12.83 est) /Q3 EBIT €971M (997 est ) Q3 Net pft €237M (413 est) / Sees Q4 sales at Q3 level /Faster integration of CIBA negativly impatcs 09 earnings / Unlikely to earn cost of capital in 2009
AXA : 9M Revenues €68.1bn (68.36bn exp) / Life savings €42.7bn (43.1bn exp) - P&C €20.5bn (In line) - APE €4.5bn (4.6bn exp) / Says improvement in markets gives it a more favorable environment for its business
DASSAULT SYSTEM : Q3 Sales €291.7M (298.5 est) / EPS €0.32 (0.34 est) / Confirms EPS & Op. Margin targets
FIAT : MEDIOBANCA said that it would sell its remaining 0.65% stake in FIAT
SUEDZUCKER said its target to lift operating profit by 55% this year and to keep sales stable will be “harder to achieve.”
GSK ‘s CEO said the company’s traditional core market of prescription drugs in developed countries may slip to 25% of total sales (FT)
TRADING IDEAS
BUY SOC GEN to play reweighting tomorrow, earnings on Wednesday
BUY BNP on thegap which will be closed soon (51.12/51.60 ) earnings next Thursday should be good
BUYARCELORMITTAL with a buy opportunity with an island possibility (Nippon Steel lift forecast this morning)
BUY PHILIPS / STM / CARREFOUR which closed their gap
BUY ACCOR to play buying opportunity after five sessions down, off 15% from the top levels, very US related and should profit from the GDP
BUY AIR FRANCE which retraced heavily on the downside, nice recoevry to expected, crash soon forgotten, good KLM synergies
BUY LAFARGE (-17% from its top levels) killed one more time yesterday on New home sales figures
BUY E.ON to play reversal Head & Shoulder possibility
BUY UNILEVER / SELL NESTLE // BUY RENAULT / SELL DAIMLER // BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON
BROKER METEOROLOGY
ANGLO AMERICAN RAISED TO OVERWEIGHT FROM EQUALWEIGHT BY MORGAN STANLEY
IBERDROLA RENOVABLES RAISED TO NEUTRAL BY BANK OF AMERICA – ML
EDP RENOVAVEIS RAISED TO BUY BY BANK OF AMERICA – ML
DEUTSCHE BOERSE RAISED TO OUTPERFORM FROM MARKETPERFORM BY BERNSTEIN
ING RAISED TO EQUALWEIGHT FROM UNDERWEIGHT BY MORGAN STANLEY
DATA
WTI : 77,3 (-2,63 %)
Eur/$ : 1,4728 (0,15 %)
$ /Yen : 90,36 (0,26 )
10 Yr US : 3,41 ( -0,38 bp)
10 Yr Euro : 3,26 ( -1,1 bp)
Indices : US close ; Europe close
SOX : -2,80 %;-1,78%
S&P :-1,95 %; -1,11 %
DOW: -1,21%; -0,46 %
NAS :-2,67%; -1,74%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -4,00 %; -3,49 %
ENERGY : -3,15 %; -1,97 %
FINANCIAL : -2,93 %; -1,95 %
HEALTHCARE : -1,53 %; -0,48 %
TECHNO : -1,91 %; -1,26 %
TELECOM : 1,48 %; 1,56 %
INDUSTRIAL : -2,56 %; -1,64 %
UTILITIES : -1,13 %; -0,06 %
TO BE COMING
Today
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard / Symantec (AMC)
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events:
Friday
Results : EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal // Red Electrica / Sandvik / Sanofi-Aventis (BMO) / Shire / SSAB (BMO) / WPP trading statement
US \\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext /
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events: KBC Ancora AGM
Monday
Results : EU \\ Altran Technologies sales / Linde / Metro AG / TNT
US \\ Ford (BMO)
Dividend : Inditex (€0.50)
Events : Pernod Ricard AGM
Tuesday
Results : EU \\ Antofagasta production report / BMW / Endesa / Fresenius / Swiss Re / Telecom Italia Media / UBS
US \\ US car sales / Kraft Fodds (AMC) / Master Card (BMO)
Dividend :
Events: DuPont Annual investor meeting
Wednesday
Results :EU \\ Adidas / Aviva interim / Bureau Veritas / Cisco Systems / Clariant / Gazprom / Grifols / JCDecaux sales / Rhodia (BMO) / Sampo / Scor / SocieteGenerale (BMO) / StatoilHydro (BMO) / Total
US \\ Cisco (AMC) / Comcast / Garmin (BMO) / Qualcomm (AMC) / Time Warner (BMO)
Asia \\ Nissan Moto (AMC)
Dividend : Ashmore Group (GBp 9,266667)
Events:Cardinal Health
ECONOMIC DATA PREVIEW
Watch in the United-States the advanced release of the GDP (annualized) for the third quarter (12.30 GMT). The recession ended in the third quarter, as showed by the rebound in capital spending in the industry and services sectors, as well as the rise in US household consumption (70% of the American GDP) over this same period. As a matter of fact the US GDP should rise by 3.5% in the third quarter, a level which should be consolidated at the fourth quarter.
Watch in the Euro zone the economic confidence for October (10.00 GMT). After reaching an historical low at 64.6 in March 2009, the euro area economic confidence index should rise for a seventh consecutive month in October to reach 83.2 its highest level since September 2008. Indeed, the euro zone economy is recovering as showed by the sharp rise in French business confidence indicator which reached its highest mark since September 2008, and by the seventh consecutive rise the IFO index in Germany in October.
Watch in the Germany the Unemployment for October (8.55 GMT). After surprisingly slightly decreasing in September, German unemployment should slightly rise from 8.2% to 8.3% meaning the same monthly rate than the three last month
ECONOMY
United-States: Durable goods orders rose in September.
After strongly rebounding in July rising by 4,8%, the fastest increase since July 2007, US durable goods orders declined by 2,6% in August. However this very volatile index increased in September by 1% as forecast. This improvement was indeed expected as the orders sub index of the ISM manufacturing indicator reached 60.8 in September. Half of the rise in headline orders was due to a jump in defence procurement but the good news is that non defence capital goods orders rebounded by 2% which is an encouraging sign for investment business at the Q4. Meanwhile excluding transportation orders which dropped by 0.4% in August, ending three consecutive up months , increased by 0.9% in September.
United-States: New home sales unexpectedly dropped in September.
New home sales surprisingly dropped from 417 000 in August to 402 000 in September (forecast 440 000) or -3.6%. Existing home sales dropped at the fastest pace since March 2009.Indeed despite the low mortgage rates and interest rate and despite the fact that less and less job are destroyed in the United-States the unemployment remained high (9.8%) in the United-States. Household gain in purchase power from the economic revival plan will not immediately go into the financial circuit as household are firstly reimbursing their debts, spending will be the second step.
Wednesday, October 28, 2009
Digestion
GLOBAL EQUITIES RESEARCH
Nice and healthy consolidation from equity indices which at this stage is perfectly understandable. The earnings releases have been out and fully confirmed the reason why the equity indices were rallying : things are improving, the stimulus from the Fed has been efficient and reached the real economy, banks are back to business, credit conditions are good and enjoying by the way some low yield environment which is supporting the housing sector. So, same as in Q2, as time is passing by, the 29 crisis threat seems to be totally avoided, and we even attend an economic pace which surprised everyone, bull and bears together.
However some further upside should remain, whether it is next week, or in a longer time. Indeed, in order to head higher we need something new, which is to say some new data from a fresh period which the equity indices have not played already. And that is what we should get as soon as next week with the important ISM on Monday. A consolidation at this stage is very welcome, and the reasons for the rise remain intact. It might have been too prompt according to some strategist, but remember the drop and the 25% lost in just a week time last October. Same as the market, the economy needs to find its pace on its own, and it seems that things being happening so well, we and the Fed might have to deal with this easy quantitative policies unwinding earlier than initially imagined. And not everything will always be rosy, which doesn’t mean the equity indices should collapse, as we hardly believe the economy will stall given the current friendly yield environment, the risk appetite increase, the back to normal situation which overall is rather good news on all front. The Fed won’t drop it, and the challenge remains, which is precisely the reason why a bear view is developing and justifies a profit taking. The Fed task will be ended once the employment is back on its feet, which is Obama, (so Bernanke)’s mandate.
Also, The rally in emerging market equities has been impressive, but it probably has further to go – at least until next spring. For a start, the economic outlook is fairly bright. Most economists expect GDP growth in emerging markets in 2010-11 to follow a similar trajectory to that in the US. With a stronger acceleration over the next few quarters. The rally in risky assets is already well advanced and valuations are no longer cheap. But it is more likely that risk appetite will wane than collapse. Strong capital flows should continue into emerging markets as investors in high-income countries seek out better returns elsewhere. The price/earnings (P/E) ratio in emerging markets as a whole does not look particularly expensive compared to that in developed markets. Admittedly, compelling value is now hard to find in Asia where 12m trailing P/E ratios are generally around 20 or higher (and over 30 in China). Markets are less stretched in Latin America, but those that could potentially perform best are in Emerging Europe despite the less favourable economic backdrop. P/E ratios in the region are still generally below 10.
Consumer confidence from October was rather bad news, and reflecting what we just said above, not everything is rosy, and economic conditions will be challenging once they run on their own. Indeed, it is very sobering that the Conference Board measure of US consumer confidence has yet to recover to the levels seen before the collapse of Lehman Brothers a year ago and has started to fall again. Clearly, the consumer recovery is built on some very shaky foundations. The fall in the headline index in October, from 53.4 in September to 47.7, was the second in as many months. Confidence is still above February's trough of 25.3, but it is below the level of 61.4 seen when Lehmans hit the wall and the historical average of 94.7. The fall this month is perhaps surprising given the equity market rally and rebound in house prices. Instead, it appears that these influences are being more than offset by falling employment and declining incomes. The alternative University of Michigan measure of confidence also fell in October. The expectations index of the Conference Board measure is now consistent with annual consumption growth of just 1.0%.
The rebound of the bond and bund yesterday was welcome by the way. Indeed unlike the previous session on Monday, the bond markets were able to rebound. Monday’s sharp sell-off ahead of a very heavy auction week, $123 bn this week to be tapped in the US with 41 bn to go today on the 5 year Note and 31 bn tomorrow on the 7 year one, open the door to the polemic of the end of the Fed quantitative easing policy. The Fed has been a big player in buying Treasuries since April (300bn), and it raises the question of the outcome of long term yields with no longer the Fed as a buyer. Obviously from it, the risk to see the housing sector recovery stall. As such yesterday’s rebound was welcome and a relief.
The good point being that we already fear Q4, and October data to be released in November are part of the reason for the current consolidation, which should be more forgiving once out and the next boost to the equity indices in case they come out strong. Don’t forget to play long today ahead of the Q3 GDP out tomorrow which might bring some positive surprises, and worth playing now that we moved 5% off the tops. The Nikkei closed its gap from 2 weeks ago this morning.
ECONOMIC DATA WITH IMPACT
Mortgage Applications (11h UK time) / previous was down 13.7% / the highest the better / minor
Durable Orders (12h30 UK time) expected 1% from previous –2.6% // ex transport 0.7% from –0.3% /the recent rebound in durable orders has been fairly muted, it should increase its pace over the next few months / minor as September related data
New Home sales (14h UK time) expected 440k from previous 429k /the rebound in new home sales has not been as strong as the one in existing home sales, but the low mortgage rates level, the improvement in valuations and the tax credit for first time buyers may bring upside surprises / minor as already profited from nice Existing home sales last Friday
POSITIVE IMPACTS
MITTAL : Q3 Sales $16.2 Bn (15.9 to 17.2 est ) / Q3 EBITDA $1.6BN (1.67 est) / Q3 Net pft $903M (-14M to +58M est) / DIV $0.75 for 2010 (in line) / Sees gradual improvement through 2010, operating environment remains challenging /
HEINEKEN : Q3 Rev e 4.07Bn (4.12 est) / Raised its f’cast for organic net profit growth to low double digit for the full year 2009 (high single digit est. ) / UK continued to gain mkt share & further reduced costs in Q3
TELIASONERA : Q3 Sales SEK 27.1Bn (26.9 est) / Q3 EBITDA ex items SEK9.8Bn (9.3 est)/ Q3 Op pft SEK8.18Bn (7.52 est) / Q3 Net pft SEK5.04Bn (5.13 est) / 09 Outlook unch / Baltic situation remains challenging
HANDELSBANKEN : Q3 Total Income sek7.8bn (7.9bn exp) / NII sek5.6bn (5.5bn exp) / Net Comm sek1.8bn (1.72bn exp) / Loan losses sek866m (-1.27bn exp) / Tier1 ratio 13.5% / conf call at 8:00 UKT
NORDEA : Q3 NII €1.3bn (In line) / Operating profit €832m (557m exp) / Net Loan losses €358m (495m exp) / Tier1 12% / Says FY cost growth to be at the same level as in the first 9-Month / conf call at 9:00 UKT
PRUDENTIAL : Q3 Total group Insurance sales £700m (653m consensus reuters) / Says strong capital position & well positioned to benefit from the next stage of the eco cycle
BG Group : Q3 Rev £2.2Bn (2.03est) / Q3 Earning £474M ( 444 est) / Q3 Op pft £856M (in line) / Q3 PTP £838M (780 est)
NOVOZYMES : Q3 Sales DKK2.12Bn (2.14 est) / Q3 Op pft DKK428M (435.4) / Q3 PTP DKK428M (398 est) / Q3 net pft DKK316M( 307.1 est) / Sees FY net pft +8-10% (5-10% est) / FY 09 Free cashflow DKK400-500M (300-400 est) /
PEUGEOT / VOW / GM : Malaysia is scouting for a partner for national carmaker Proton as it faces mounting foreign competition. Recent newspaper reports have speculated that Proton could again try for a tie-up with VOW or seek out GM or Peugeot as a potential partner
NESTLE : ALCON reported Q3 Rev 1.6 Bn (1.54 est) / Q3 EPS 1.71 (1.45est) / Raised forecast $6.6-6.7 ( 6.43 est)
UCB it had closed its retail five-year bond issue after raising €750M .
EADS : UK agreed to take 19 A400M instead of 25 , while paying the same amount of money.
KLEPIERRE : 3M Rev €239.2M (239.6 est)
DB1 is emerging as the front-runner to bid for the Warsaw Stock Exchange, although analysts say that the Polish government might be expecting too high a price (Reuters)
EDP RENOVAVEIS : 9M net pft €70.10 (67M est)
STOREBRAND : Q3 Group profit nok908m (632m exp) / Helped by Life Insurance (nok893m vs 625m exp) / Says was in a good Fin position at end of Q3 / Conf call at 14:00 UKT
VISA : Q4 Revenue $1.9bn ($1.8bn exp) / EPS $0.74 ($0.72 exp) / said it plans to buy back as much as $1bn in shares and increased its quarterly dividend payment amount by 19%.
CEMEX Q3 sales $4.2 bn vs 4.29 expected / net profit 121 mn vs 128 exp / ebitda 806 vs 871 exp / lost 20% from its top in 8 sessions
NEGATIVE IMPACTS
SAP : Q3 Rev €2.51 Bn (2.63 est) / Q3 Op pft €606M (633 est) / Software sales €525M (570 est) / Net pft €487M ( 443 est) / 09 Software & software related svc cut to down 6-8% ( down 4-6% est)
SANOFI :The U.S. FDA has sent a warning letter to Sanofi accusing them of distributing misleading promotional material on its Uroxatral treatment for urinary problems caused by an enlarged prostate.
SALZGITTER : CEO warned against over-optimism, recovery in steel-sector demand in recent weeks is not likely to be sustained.The market remains unstable and at best will be flat.
HSBC : The biggest foreign issuer of credit cards in the U.S. said defaults surged 48% in Sept as most of its largest competitors posted declines (Bloom)
LLOYS , RBS, NRK will be broken up and parts of their businesses sold off to create 3 new banks.
EDF - VEOLIA : Henri Proglio is not planning a full merger between EDF and VEOLIA, politicians who questioned Proglio .
CENTRICA to invest £725M to biuld 270MW offshore wind farm / announces equity partner & refinancing of existing wind portfolio
TRADING IDEAS
BUY ACCOR to play buying opportunity after five sessions down, off 5% from the top levels, ahead of GDP tomorrow which should be strong
BUYRENAULT (-16% from its top) / PEUGEOT (-10%) & BUY LAFARGE (-10% /Home sales today)
BUY E.ON / FRANCE TELECOM to play reversal Head & Shoulder possibility
BUY ALLIANZ / AEGON / QUALCOMM on double bottom possibility
BUY CARREFOUR which close its gap / Take a look on BNP and SOC GEN gaps which will be closed soon (51.12/51.74 & 44.64/44.68 respectively)
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY GSZ / SELL EDF // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
ERICSSON RAISED TO NEUTRAL FROM SELL BY UBS
ING RAISED TO BUY BY BANK OF AMERICA – ML
BBVA RAISED TO NEUTRAL FROM UNDERPERFORM BY BANK OF AMERICA - ML
VOLVO RAISED TO HOLD FROM SELL BY DEUTSCHE BANK
SWISS RE RAISED TO BUY FROM NEUTRAL BY NOMURA
HANNOVER RE RAISED TO NEUTRAL FROM REDUCE BY NOMURA
ACCIONA RATED NEW OVERWEIGHT BY HSBC
GAS NATURAL RAISED TO BUY FROM NEUTRAL BY UBS
DASSAULT SYSTEMES RAISED TO HOLD FROM SELL BY CITIGROUP
HELLENIC TELECOM ITALIA RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
BT RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
DEUTSCHE TELECOM RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
TELEFONICA RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
KPN RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
NOBEL BIOCARE RAISED TO BUY FROM HOLD BY CITIGROUP
BP RAISED TO EQUALWEIGHT FROM NEUTRAL BY BARCALYS CAPITAL
BP RAISED TO NEUTRAL FROM SELL BY GOLDMAN SACHS
BP REMOVED FROM PAN EUROP SELL LIST BY GOLDMAN SACHS
ADP RAISED TO NEUTRAL FROM UNDERPERFORM BY JP MORGAN
PEUGEOT RAISED TO BUY FROM HOLD BY RBS
PEUGEOT RAISED TO BUY FROM HOLD BY BERNSTEIN
CABLE & WIRELESS STARTED AT OVERWEIGHT BY BARLAYS CAPITAL
LAND SECURITIES RATED NEW BUY BY DEUTSCHE BAK
BRITISH LAND RATED NEW HOLD BY DEUTSCHE BANK
HAMMERSON RATED NEW BUY BY DEUTSCHE BANK
CREDIT AGRICOLE CUT TO HOLD FROM BUY BY CITIGROUP
NATIXIS CUT TO SELL FROM BUY BY CITIGROUP
BP CUT TO HOLD FROM BUY BY CITIGROUP
BP CUT TO HOLD FORM BUY BY GOLDMAN SACHS
AKZO NOBEL CUT TO HOLD FROM BUY BY ING
TELIASONERA RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
PORTUGAL TELECOM RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
SES CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS
VERBUND CUT TO REDUCE FROM NEUTRAL BY NOMURA
SCOR CUT TO NEUTRAL FROM BUY BY NOMURA
DATA
WTI : 79,3 (0,64 %)
Eur/$ : 1,4822 (0,12 %)
$ /Yen : 91,24 (0,49 )
10 Yr US : 3,46 ( 1,68 bp)
10 Yr Euro : 3,27 ( -8,5 bp)
Indices : US close ; Europe close
SOX : -2,52 %;-1,64%
S&P :-0,33 %; 0,02 %
DOW: 0,14%; 0,38 %
NAS :-1,20%; -0,61%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -1,09 %; 0,02 %
ENERGY : 0,92 %; 1,27 %
FINANCIAL : -0,63 %; 0,00 %
HEALTHCARE : 0,46 %; 0,68 %
TECHNO : -1,10 %; -0,62 %
TELECOM : 0,93 %; 0,87 %
INDUSTRIAL : -0,99 %; -0,36 %
UTILITIES : -0,34 %; 0,12 %
TO BE COMING
Today
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard / Symantec (AMC)
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events:
Thursday
Results : EU \\ Abb / Alstom / AstraZeneca / BASF final details (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive /Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) / Procter & Gamble / Sprint /
Dividend :
Events: BHP Billiton AGM / Nordea Bank
Friday
Results : EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal // Red Electrica / Sandvik / Sanofi-Aventis (BMO) / Shire / SSAB (BMO) / WPP trading statement
US \\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext /
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events : KBC Ancora AGM
Monday
Results : EU \\ Altran Technologies sales / Linde / Metro AG / TNT
US \\ Ford (BMO)
Dividend :
Events: Pernod Ricard AGM
Tuesday
Results :EU \\ Antofagasta production report / BMW / Endesa / Fresenius / Swiss Re / Telecom Italia Media / UBS
US \\ US car sales / Kraft Fodds (AMC) / MasterCard (BMO)
Dividend :
Events:
ECONOMIC DATA PREVIEW
Watch in the United-States the Durable goods orders for September (12.30 GMT). This very volatile index should increase in September by 1%. This improvement should be driven by the orders sub index of the ISM manufacturing indicator which reached 60.8 in September. Excluding transportation orders which dropped by 0.3% in August, ending three consecutive up months , should increase by 1% as well in September.
ECONOMY
United-States: Consumer confidence unexpectedly fell in October.
US consumer confidence surprisingly dropped for a second consecutive month from 53.4 in September (forecast 53.5) to 47.7 in October. Indeed rise will be led by the US recovery, the rebound in the stock markets, not to mentioned low interest rates and weak consumer prices the Conference Board consumer confidence was expected to slightly rise in October. Nevertheless these influences have been offset by rising unemployment as Americans are fretted about a lack of jobs. Looking at the breakdown the current conditions declined from 23.0 to 20.7 while expectations dropped from 73.7 to 65.7. Nevertheless it is important to bear in mind that unemployment is a lagging indicator of the economic activity and there is a gap of 6 to 9 months between the present recovery and a substantial improvement of the US employment. Till then the Consumer confidence should improve but will remained fragile.
France: New rise of the consumer confidence in October
After the rebound of household consumption in September and the rise of the French Business confidence indicator in the industry for a seven consecutive month this is now the turn of household confidence to rise. France household confidence is increasing slowly but surely from 1pt for a third consecutive month reaching -35 in October a highest since January 2008 meaning before the recession started in France. Looking at the breakdown all sub indexes are rising starting by the opportunity to make major spending rising by 3pts in October a higher since December 2007. The question mark being if France consumption and household are presently boosted by public spending what will happen when this booster will decline? On the other hand household are surprisingly less worried about unemployment rise and this for a fourth consecutive month. Nevertheless these encouraging data will not be able to support to many “bad news” as a lasting strong euro or a rise of the European Central Bank leading rate./
Nice and healthy consolidation from equity indices which at this stage is perfectly understandable. The earnings releases have been out and fully confirmed the reason why the equity indices were rallying : things are improving, the stimulus from the Fed has been efficient and reached the real economy, banks are back to business, credit conditions are good and enjoying by the way some low yield environment which is supporting the housing sector. So, same as in Q2, as time is passing by, the 29 crisis threat seems to be totally avoided, and we even attend an economic pace which surprised everyone, bull and bears together.
However some further upside should remain, whether it is next week, or in a longer time. Indeed, in order to head higher we need something new, which is to say some new data from a fresh period which the equity indices have not played already. And that is what we should get as soon as next week with the important ISM on Monday. A consolidation at this stage is very welcome, and the reasons for the rise remain intact. It might have been too prompt according to some strategist, but remember the drop and the 25% lost in just a week time last October. Same as the market, the economy needs to find its pace on its own, and it seems that things being happening so well, we and the Fed might have to deal with this easy quantitative policies unwinding earlier than initially imagined. And not everything will always be rosy, which doesn’t mean the equity indices should collapse, as we hardly believe the economy will stall given the current friendly yield environment, the risk appetite increase, the back to normal situation which overall is rather good news on all front. The Fed won’t drop it, and the challenge remains, which is precisely the reason why a bear view is developing and justifies a profit taking. The Fed task will be ended once the employment is back on its feet, which is Obama, (so Bernanke)’s mandate.
Also, The rally in emerging market equities has been impressive, but it probably has further to go – at least until next spring. For a start, the economic outlook is fairly bright. Most economists expect GDP growth in emerging markets in 2010-11 to follow a similar trajectory to that in the US. With a stronger acceleration over the next few quarters. The rally in risky assets is already well advanced and valuations are no longer cheap. But it is more likely that risk appetite will wane than collapse. Strong capital flows should continue into emerging markets as investors in high-income countries seek out better returns elsewhere. The price/earnings (P/E) ratio in emerging markets as a whole does not look particularly expensive compared to that in developed markets. Admittedly, compelling value is now hard to find in Asia where 12m trailing P/E ratios are generally around 20 or higher (and over 30 in China). Markets are less stretched in Latin America, but those that could potentially perform best are in Emerging Europe despite the less favourable economic backdrop. P/E ratios in the region are still generally below 10.
Consumer confidence from October was rather bad news, and reflecting what we just said above, not everything is rosy, and economic conditions will be challenging once they run on their own. Indeed, it is very sobering that the Conference Board measure of US consumer confidence has yet to recover to the levels seen before the collapse of Lehman Brothers a year ago and has started to fall again. Clearly, the consumer recovery is built on some very shaky foundations. The fall in the headline index in October, from 53.4 in September to 47.7, was the second in as many months. Confidence is still above February's trough of 25.3, but it is below the level of 61.4 seen when Lehmans hit the wall and the historical average of 94.7. The fall this month is perhaps surprising given the equity market rally and rebound in house prices. Instead, it appears that these influences are being more than offset by falling employment and declining incomes. The alternative University of Michigan measure of confidence also fell in October. The expectations index of the Conference Board measure is now consistent with annual consumption growth of just 1.0%.
The rebound of the bond and bund yesterday was welcome by the way. Indeed unlike the previous session on Monday, the bond markets were able to rebound. Monday’s sharp sell-off ahead of a very heavy auction week, $123 bn this week to be tapped in the US with 41 bn to go today on the 5 year Note and 31 bn tomorrow on the 7 year one, open the door to the polemic of the end of the Fed quantitative easing policy. The Fed has been a big player in buying Treasuries since April (300bn), and it raises the question of the outcome of long term yields with no longer the Fed as a buyer. Obviously from it, the risk to see the housing sector recovery stall. As such yesterday’s rebound was welcome and a relief.
The good point being that we already fear Q4, and October data to be released in November are part of the reason for the current consolidation, which should be more forgiving once out and the next boost to the equity indices in case they come out strong. Don’t forget to play long today ahead of the Q3 GDP out tomorrow which might bring some positive surprises, and worth playing now that we moved 5% off the tops. The Nikkei closed its gap from 2 weeks ago this morning.
ECONOMIC DATA WITH IMPACT
Mortgage Applications (11h UK time) / previous was down 13.7% / the highest the better / minor
Durable Orders (12h30 UK time) expected 1% from previous –2.6% // ex transport 0.7% from –0.3% /the recent rebound in durable orders has been fairly muted, it should increase its pace over the next few months / minor as September related data
New Home sales (14h UK time) expected 440k from previous 429k /the rebound in new home sales has not been as strong as the one in existing home sales, but the low mortgage rates level, the improvement in valuations and the tax credit for first time buyers may bring upside surprises / minor as already profited from nice Existing home sales last Friday
POSITIVE IMPACTS
MITTAL : Q3 Sales $16.2 Bn (15.9 to 17.2 est ) / Q3 EBITDA $1.6BN (1.67 est) / Q3 Net pft $903M (-14M to +58M est) / DIV $0.75 for 2010 (in line) / Sees gradual improvement through 2010, operating environment remains challenging /
HEINEKEN : Q3 Rev e 4.07Bn (4.12 est) / Raised its f’cast for organic net profit growth to low double digit for the full year 2009 (high single digit est. ) / UK continued to gain mkt share & further reduced costs in Q3
TELIASONERA : Q3 Sales SEK 27.1Bn (26.9 est) / Q3 EBITDA ex items SEK9.8Bn (9.3 est)/ Q3 Op pft SEK8.18Bn (7.52 est) / Q3 Net pft SEK5.04Bn (5.13 est) / 09 Outlook unch / Baltic situation remains challenging
HANDELSBANKEN : Q3 Total Income sek7.8bn (7.9bn exp) / NII sek5.6bn (5.5bn exp) / Net Comm sek1.8bn (1.72bn exp) / Loan losses sek866m (-1.27bn exp) / Tier1 ratio 13.5% / conf call at 8:00 UKT
NORDEA : Q3 NII €1.3bn (In line) / Operating profit €832m (557m exp) / Net Loan losses €358m (495m exp) / Tier1 12% / Says FY cost growth to be at the same level as in the first 9-Month / conf call at 9:00 UKT
PRUDENTIAL : Q3 Total group Insurance sales £700m (653m consensus reuters) / Says strong capital position & well positioned to benefit from the next stage of the eco cycle
BG Group : Q3 Rev £2.2Bn (2.03est) / Q3 Earning £474M ( 444 est) / Q3 Op pft £856M (in line) / Q3 PTP £838M (780 est)
NOVOZYMES : Q3 Sales DKK2.12Bn (2.14 est) / Q3 Op pft DKK428M (435.4) / Q3 PTP DKK428M (398 est) / Q3 net pft DKK316M( 307.1 est) / Sees FY net pft +8-10% (5-10% est) / FY 09 Free cashflow DKK400-500M (300-400 est) /
PEUGEOT / VOW / GM : Malaysia is scouting for a partner for national carmaker Proton as it faces mounting foreign competition. Recent newspaper reports have speculated that Proton could again try for a tie-up with VOW or seek out GM or Peugeot as a potential partner
NESTLE : ALCON reported Q3 Rev 1.6 Bn (1.54 est) / Q3 EPS 1.71 (1.45est) / Raised forecast $6.6-6.7 ( 6.43 est)
UCB it had closed its retail five-year bond issue after raising €750M .
EADS : UK agreed to take 19 A400M instead of 25 , while paying the same amount of money.
KLEPIERRE : 3M Rev €239.2M (239.6 est)
DB1 is emerging as the front-runner to bid for the Warsaw Stock Exchange, although analysts say that the Polish government might be expecting too high a price (Reuters)
EDP RENOVAVEIS : 9M net pft €70.10 (67M est)
STOREBRAND : Q3 Group profit nok908m (632m exp) / Helped by Life Insurance (nok893m vs 625m exp) / Says was in a good Fin position at end of Q3 / Conf call at 14:00 UKT
VISA : Q4 Revenue $1.9bn ($1.8bn exp) / EPS $0.74 ($0.72 exp) / said it plans to buy back as much as $1bn in shares and increased its quarterly dividend payment amount by 19%.
CEMEX Q3 sales $4.2 bn vs 4.29 expected / net profit 121 mn vs 128 exp / ebitda 806 vs 871 exp / lost 20% from its top in 8 sessions
NEGATIVE IMPACTS
SAP : Q3 Rev €2.51 Bn (2.63 est) / Q3 Op pft €606M (633 est) / Software sales €525M (570 est) / Net pft €487M ( 443 est) / 09 Software & software related svc cut to down 6-8% ( down 4-6% est)
SANOFI :The U.S. FDA has sent a warning letter to Sanofi accusing them of distributing misleading promotional material on its Uroxatral treatment for urinary problems caused by an enlarged prostate.
SALZGITTER : CEO warned against over-optimism, recovery in steel-sector demand in recent weeks is not likely to be sustained.The market remains unstable and at best will be flat.
HSBC : The biggest foreign issuer of credit cards in the U.S. said defaults surged 48% in Sept as most of its largest competitors posted declines (Bloom)
LLOYS , RBS, NRK will be broken up and parts of their businesses sold off to create 3 new banks.
EDF - VEOLIA : Henri Proglio is not planning a full merger between EDF and VEOLIA, politicians who questioned Proglio .
CENTRICA to invest £725M to biuld 270MW offshore wind farm / announces equity partner & refinancing of existing wind portfolio
TRADING IDEAS
BUY ACCOR to play buying opportunity after five sessions down, off 5% from the top levels, ahead of GDP tomorrow which should be strong
BUYRENAULT (-16% from its top) / PEUGEOT (-10%) & BUY LAFARGE (-10% /Home sales today)
BUY E.ON / FRANCE TELECOM to play reversal Head & Shoulder possibility
BUY ALLIANZ / AEGON / QUALCOMM on double bottom possibility
BUY CARREFOUR which close its gap / Take a look on BNP and SOC GEN gaps which will be closed soon (51.12/51.74 & 44.64/44.68 respectively)
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY GSZ / SELL EDF // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
ERICSSON RAISED TO NEUTRAL FROM SELL BY UBS
ING RAISED TO BUY BY BANK OF AMERICA – ML
BBVA RAISED TO NEUTRAL FROM UNDERPERFORM BY BANK OF AMERICA - ML
VOLVO RAISED TO HOLD FROM SELL BY DEUTSCHE BANK
SWISS RE RAISED TO BUY FROM NEUTRAL BY NOMURA
HANNOVER RE RAISED TO NEUTRAL FROM REDUCE BY NOMURA
ACCIONA RATED NEW OVERWEIGHT BY HSBC
GAS NATURAL RAISED TO BUY FROM NEUTRAL BY UBS
DASSAULT SYSTEMES RAISED TO HOLD FROM SELL BY CITIGROUP
HELLENIC TELECOM ITALIA RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
BT RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
DEUTSCHE TELECOM RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
TELEFONICA RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
KPN RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
NOBEL BIOCARE RAISED TO BUY FROM HOLD BY CITIGROUP
BP RAISED TO EQUALWEIGHT FROM NEUTRAL BY BARCALYS CAPITAL
BP RAISED TO NEUTRAL FROM SELL BY GOLDMAN SACHS
BP REMOVED FROM PAN EUROP SELL LIST BY GOLDMAN SACHS
ADP RAISED TO NEUTRAL FROM UNDERPERFORM BY JP MORGAN
PEUGEOT RAISED TO BUY FROM HOLD BY RBS
PEUGEOT RAISED TO BUY FROM HOLD BY BERNSTEIN
CABLE & WIRELESS STARTED AT OVERWEIGHT BY BARLAYS CAPITAL
LAND SECURITIES RATED NEW BUY BY DEUTSCHE BAK
BRITISH LAND RATED NEW HOLD BY DEUTSCHE BANK
HAMMERSON RATED NEW BUY BY DEUTSCHE BANK
CREDIT AGRICOLE CUT TO HOLD FROM BUY BY CITIGROUP
NATIXIS CUT TO SELL FROM BUY BY CITIGROUP
BP CUT TO HOLD FROM BUY BY CITIGROUP
BP CUT TO HOLD FORM BUY BY GOLDMAN SACHS
AKZO NOBEL CUT TO HOLD FROM BUY BY ING
TELIASONERA RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
PORTUGAL TELECOM RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
SES CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS
VERBUND CUT TO REDUCE FROM NEUTRAL BY NOMURA
SCOR CUT TO NEUTRAL FROM BUY BY NOMURA
DATA
WTI : 79,3 (0,64 %)
Eur/$ : 1,4822 (0,12 %)
$ /Yen : 91,24 (0,49 )
10 Yr US : 3,46 ( 1,68 bp)
10 Yr Euro : 3,27 ( -8,5 bp)
Indices : US close ; Europe close
SOX : -2,52 %;-1,64%
S&P :-0,33 %; 0,02 %
DOW: 0,14%; 0,38 %
NAS :-1,20%; -0,61%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -1,09 %; 0,02 %
ENERGY : 0,92 %; 1,27 %
FINANCIAL : -0,63 %; 0,00 %
HEALTHCARE : 0,46 %; 0,68 %
TECHNO : -1,10 %; -0,62 %
TELECOM : 0,93 %; 0,87 %
INDUSTRIAL : -0,99 %; -0,36 %
UTILITIES : -0,34 %; 0,12 %
TO BE COMING
Today
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard / Symantec (AMC)
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events:
Thursday
Results : EU \\ Abb / Alstom / AstraZeneca / BASF final details (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive /Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) / Procter & Gamble / Sprint /
Dividend :
Events: BHP Billiton AGM / Nordea Bank
Friday
Results : EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal // Red Electrica / Sandvik / Sanofi-Aventis (BMO) / Shire / SSAB (BMO) / WPP trading statement
US \\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext /
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events : KBC Ancora AGM
Monday
Results : EU \\ Altran Technologies sales / Linde / Metro AG / TNT
US \\ Ford (BMO)
Dividend :
Events: Pernod Ricard AGM
Tuesday
Results :EU \\ Antofagasta production report / BMW / Endesa / Fresenius / Swiss Re / Telecom Italia Media / UBS
US \\ US car sales / Kraft Fodds (AMC) / MasterCard (BMO)
Dividend :
Events:
ECONOMIC DATA PREVIEW
Watch in the United-States the Durable goods orders for September (12.30 GMT). This very volatile index should increase in September by 1%. This improvement should be driven by the orders sub index of the ISM manufacturing indicator which reached 60.8 in September. Excluding transportation orders which dropped by 0.3% in August, ending three consecutive up months , should increase by 1% as well in September.
ECONOMY
United-States: Consumer confidence unexpectedly fell in October.
US consumer confidence surprisingly dropped for a second consecutive month from 53.4 in September (forecast 53.5) to 47.7 in October. Indeed rise will be led by the US recovery, the rebound in the stock markets, not to mentioned low interest rates and weak consumer prices the Conference Board consumer confidence was expected to slightly rise in October. Nevertheless these influences have been offset by rising unemployment as Americans are fretted about a lack of jobs. Looking at the breakdown the current conditions declined from 23.0 to 20.7 while expectations dropped from 73.7 to 65.7. Nevertheless it is important to bear in mind that unemployment is a lagging indicator of the economic activity and there is a gap of 6 to 9 months between the present recovery and a substantial improvement of the US employment. Till then the Consumer confidence should improve but will remained fragile.
France: New rise of the consumer confidence in October
After the rebound of household consumption in September and the rise of the French Business confidence indicator in the industry for a seven consecutive month this is now the turn of household confidence to rise. France household confidence is increasing slowly but surely from 1pt for a third consecutive month reaching -35 in October a highest since January 2008 meaning before the recession started in France. Looking at the breakdown all sub indexes are rising starting by the opportunity to make major spending rising by 3pts in October a higher since December 2007. The question mark being if France consumption and household are presently boosted by public spending what will happen when this booster will decline? On the other hand household are surprisingly less worried about unemployment rise and this for a fourth consecutive month. Nevertheless these encouraging data will not be able to support to many “bad news” as a lasting strong euro or a rise of the European Central Bank leading rate./
Tuesday, October 27, 2009
This is Not It
GLOBAL EQUITIES RESEARCH
This might be it for the Michael Jackson new album, and for the equity indices this week, but things should be different next week as we will enter a new and fresh period which will tell more about the economy pace and its
sustainability. Yesterday's drop was a bit of everything, but mostly some doubts that the rally could further resume, taking any excuse of any rumours (conflict about the end of the tax credit period in the Senate, bank of America housing
exposures requiring more capital before giving government's money back, higher yields levels, etc...) in an empty trading activity to initiate some short positions or cash some profits. Understandable, and why not.
How could we move on the upside or on the downside for now ? The latest huge rally, which no longer seems to be a
bear market one given the percentage of the run, found an explanation through an increase of liquidity, or at least a no longer credit crisis and a 29 crisis so granted avoided. For that, Fed and worldwide officials did a good job and seem to
have won the battle in avoiding the worse. As such, equity indices not only reversed their non stop deleveraging downside spiral, but also anticipated some recovery which seems now granted. This is what the earnings releases have been
reflecting, or should we say confirming after the macro data provided some clues all Q3 long, such as in Q2. So, any reason for a further rise at this stage would be difficult to find, as we should now head higher for further brightening
fundamental facts and no longer propelled by some rebound from a too sharp drop such as the one we attended when cash was supposed to be king and the end of the world soon coming.
Why would we collapse now ? Most players find the market is losing speed, which we agree, and would be very sensitive
in case some disillusion was to happen, which is not happening yet, and even the other way around. Indeed the Existing home sales last Friday reminded that few September weaker macro data were more of a pause before resuming their recovery trend more than a reversal, which obviously the equity indices would play with a higher beta given the current "high" levels. After some weaker news on the housing market in recent days, September's US existing home sales figures show that the recovery is still in place. The 9.4% jump in sales to 5.57m in September, from 5.09m the previous month, more than reversed the surprise fall in August and leaves sales at a 26-month high. The pending home sales index suggests that sales may soon increase to around 5.80m. Economists estimate that around 30% of the increase in sales since January is due to the tax credit for first-time buyers, which may yet be extended beyond November (or not). Even if the credit isn't extended, low mortgage rates and much improved valuations should mean that any post-credit fallback is temporary. The recent increase in sales is reducing the inventory overhang - the months supply of homes for sale fell from 9.3 to 7.8, which is very important as we soon approach the usual common 5/6 months levels which, when playing on the 11 months levels, were to be not seen before years ... This, obviously, is supporting prices. Overall, the housing recovery is well on track, with or without the tax credit facilities.
Another reason for collapsing would be that the Fed and worldwide officials did create a new bubble ready to blow anytime. The steep rebound in stock markets and currencies of emerging markets, particularly those that export commodities used by industrial China, has raised fears some of the same drivers of the most recent crisis are again developing. Many economists say a prolonged period of low interest rates in the US, combined with huge savings in China and elsewhere, helped create a sea of liquidity that led to an unsustainable run-up in real-estate prices and ultra-low yields on credit. This is sure, and this is part of the winning plan from the Fed, which used any possible tools with an unlimited budget to avoid a 29 crisis revival after the Lehman mistake to make liquidity conditions flow back to normal. However we find too soon to sell the market for such a reason, as it seems that the celebration time is far from over in term of newsflow. Selling to play a bubble would be equivalent as when most players were selling because the upside rally was too much for what we were getting from the real economy. So far, things are going the right way, until they are not, but the real economy is gradually coming back on its feet. And we think too many people are looking for the coming failure that would send us to the floor before the economy is able to really run on its own. The unwinding is clearly the risk, but we should cross that bridge when we come to it, and it may well be in another 10% rise target, and it also may well happen to occur fine for months or years ...
It will soon be one month over of the important new Q4, and still no thunder storms or earthquakes from the economical side which would trigger a prompt equity sell-off. September was announced as the worst month ever for equity indices, statistic played with the sharp first Sept day drop, October was supposed to be the one of crashes (29 /87 / 98 / last year), but during that time one has to admit that both micro and macro fundamentals proved to be better, while the banking and housing sectors, both reasons for the crisis, are getting cured. Today's consumer confidence will be interesting, but not as much as the ISMs data with the manufacturing one on Monday telling more about October activity, providing clues about Q4, especially after the previous September month data weakness which followed the sharp rebound from August and brought a lot of hope that the rally is soon ending. It will keep on moving as soon as next week, and we believe it could bring some further upside surprises which this time the market will listen to since we will be talking about a new and fresh period of economical time. In the meantime, the current consolidation should be seen as welcome and the beginning of a passing through from a sponsored financial market and economical activity to a self running one.
ECONOMIC DATA WITH IMPACT
US markets will open at 13.30 BST this week.
US Case Shiller index (13h UK time) / the higher the better / minor
US Consumer Confidence (14h UK time) expected 54 from previous 53.1 / little drop in gasoline prices and equity indices rebound might have boost confidence / minor
POSITIVE IMPACTS
MICHELIN : Q3 sales €3.75bn (3.72bn exp) thank to better price mix & better volume / Kept its target of positive FCF in the H2
CAP GEMINI : Wipro, India's No. 3 software services exporter, reported better-than-estimates, as it won new outsourcing contracts and pressure on fees eased…
KPN : Q3 revenue €3.33 bn (3.41bn exp) / EBITDA €1.33 bn (1.32bn exp) / Confirms outlook for 2009, 2010 with 2010 div. of €0.80
AKZO NOBEL : Q3 revenue €3.64 bn (3.68 bn exp.) / EBIT continuing operations, excluding incidentals €391 m (363 m exp) but Ebitda margin 10.7% (14% exp) / Interim dividend €0.30 (0.40 exp) / Does not forsee quick recovery / Kept mid-term targets
THYSSENKRUPP will present a proposal on Nov. 26 to the supervisory board on the payment of a dividend for fiscal 2009 / According to “Die Welt” it will pay a dividend of at least €0.30 a share for fiscal 2009 despite steep losses and extensive job cuts
BP : Q3 replacement cost profit $4,98bn (5.43bn exp) / Production 3,917 mboe/d (3.867 mboe/d exp) / Quarterly dividend, to be paid in December, is 14 cents per share ($0.84 per ads) / Refining margins look set to remain weak
FIAT : Chrysler is about to unveil a product roadmap that relies heavily on vehicles from Fiat, while abandoning many of its own models / The plan, due to be revealed Nov. 4, involves the reintroduction of Alfa Romeo & the 500…
ALSTOM is expected to sign a contract for French rail operator to buy 100 trains, in a deal that could eventually lead to the purchase of up to 1,000 regional trains / The deal for 100 trains would be worth just under €1 bn…
ENAGAS : 9M EBITDA €515.5m (€515m exp) / Net €217.4m (216.5m exp) / Conf. call at 0900 UKT
DASSAULT SYSTEMES & IBM signed an agreement under which Dassault plans to acquire IBM's sales and client support operations for its product lifecycle management software application portfolio for $600 m in cash
NOKIA unveiled its 1st cell phone developed with China's 3G techno, saying it would aim to sell lower-priced handsets at higher volumes
FRENCH BANKS : As expected, France's lower house of parliament rejected a plan to impose a 10% tax on bank profits in 2010 after deputies accidentally approved the measure during a first round of voting last week and a second round was staged
NEGATIVE IMPACTS
RENEWABLE ENERGY : Q3 sales NK2.16bn (2.02bn exp) / Ebitda NK429m (492m exp) / Net loss NK1bn (83m exp) / Sees further contractual adjustments for wafers in 2010 if the present weak market continues / Sees same price decline from Q3 to Q4…
NORSK HYDRO : Q3 rev. NK13.3bn (15.8bn exp) but operating loss NK793m (-351m exp) / Considers further restructuring measures
PUBLICIS : Q3 revenues €1.05 bn, in line but organic growth down 7.4% (-6.9% exp) / Said that revenue will decline less in Q4 than in Q3 + confident FY margin will not drop more than 2% / Hopes for slight organic growth next year…
BAYER : Q3 sales €7.39 bn (7.58bn exp) / EBITDA before special items €1.5bn (1.47bn exp) / Net €249m (308m exp) due to restructuring charges / Sees special charges for restructuring at around €350 m vs €250 m before / FY forecast confirmed
BBVA : 9M NII €10.22bn (10.26bn exp) / Net Profit €4.18bn, in line / Net Income €1.38bn (1.32bn exp) / Bad Loan ratio 3.4% vs 3.2% in June / Core Capital ratio 8% vs 6.9% in June / Conf call at 0830 UKT
VERBUND : 9M sales €2.45bn / Q3 Ebit €269m (289m exp) / Says FY result to be slightly lower than previous year
SIEMENS : Talks between Areva & Siemens over their JV Areva NP have stalled over price & contractual terms (Les Echos) / SIE wants to sell its 34% stake in the JV back to Areva so it can ally with Rosatom in the nuclear field / The stake is worth about €2 bn
LUFTHANSA is alarmed over Air Berlin's domestic expansion plans in Germany / Air Barlin’s competition on the key Hamburg-Frankfurt route could eat into Lufthansa's core business and could negatively affect its returns on this high-volume route (FTD)
TELECOM ITALIA is planning a bond issue of up to €2 bn (Corriere della Sera)
TRADING IDEAS
BUY E.ON / QUALCOMM / CARREFOUR
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY ENI or BP / SELL ROYAL DUTCH // BUY GSZ / SELL EDF // BUY PUBLICIS / SELL LAGARDERE // BUY BAYER / SELL AKZO // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
NESTLE RAISED TO BUY FROM HOLD BY DEUTSCHE BANK
PERNOD RICARD RAISED TO BUY FROM NEUTRAL BY NOMURA
HOME RETAIL RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
SCHNEIDER ELECTRIC RAISED TO OUTPERFORM FROM UNDERPERFORM BY BERNSTEIN
THOMAS COOK RATED NEW OVERWEIGHT BY HSBC
BANCO POPULAR RAISED TO MARKETPERFORM BY KBW
RENAULT CUT TO UNDERWEIGHT FROM OVERWEIGHT BY MORGAN STANLEY
INBEV CUT TO NEUTRAL FORM BUY BY NOMURA
GAZPROM NEFT CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS
MERCK KgaA CUT TO HOLD FROM BUY BY RBS
MARKS & SPENCER RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
NEXT RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
ERAMET CUT TO NEUTRAL FROM BUY....................... BY NOMURA
DATA
WTI : 78,8 (-1,24 %)
Eur/$ : 1,4891 (0,10 %)
$ /Yen : 92,12 (-0,06 )
10 Yr US : 3,54 ( -1,33 bp)
10 Yr Euro : 3,35 ( 0,6 bp)
Indices : US close ; Europe close
SOX : 0,33 %;0,16%
S&P :-1,17 %; -0,95 %
DOW: -1,05%; -0,93 %
NAS :-0,59%; -0,49%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -2,00 %; -1,62 %
ENERGY : -1,58 %; -0,93 %
FINANCIAL : -2,27 %; -1,58 %
HEALTHCARE : -1,12 %; -1,08 %
TECHNO : -0,31 %; -0,28 %
TELECOM : -1,39 %; -1,22 %
INDUSTRIAL : -1,11 %; -1,11 %
UTILITIES : -1,31 %; -0,62 %
TO BE COMING
Today
Results : EU \\ Aegis / Akzo Nobel / Banco Bilbao Vizcaya Argentaria / Banco Espirito Santo / Bayer / BP / Daimler (3Q final details) / Enagas / Klepierre sales / KPN / Norsk Hydro / Petroleum Geo-Services / Publicis / Reckitt Benckiser / Renewable Energy / Saipem / Svenska Cellulosa / Vestas Wind
US \\ Ernst & Young / United States Steel / Visa
Asia \\ Canon / Honda Motor / Tata Steel
Dividend :
Events: Pfizer analyst & investor / SAP TechEd Vienna event
Wednesday
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken /Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard / Symantec (AMC)
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events:
Thursday
Results : EU \\ Abb / Alstom / AstraZeneca / BASF final details (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive / Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) / Procter & Gamble / Sprint /
Dividend :
Events : BHP Billiton AGM / Nordea Bank
Friday
Results : EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal // Red Electrica / Sandvik / Sanofi-Aventis (BMO) / Shire / SSAB (BMO) / WPP trading statement
US \\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext /
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events: KBC Ancora AGM
Monday
Results :EU \\ Altran Technologies sales / Linde / Metro AG / TNT
US \\ Ford (BMO)
Dividend :
Events :Pernod Ricard AGM
ECONOMIC DATA PREVIEW
Watch in the United-States the Conference Board Consumer confidence for October (14.00 GMT) Despite the rise in unemployment in the United States, this advanced indicator of household consumption should progress in October to reach 54.5. This rise will be led by the US recovery, the rebound in the stock markets, not to mentioned low interest rates and weak consumer prices.
ECONOMY
United-States: The Dallas Fed manufacturing activity index is declined at a slower pace in October
The Texas factory activity declined at a slower pace in October according to the business executives responding to the Texas Manufacturing survey. Indeed the Dallas Fed manufacturing activity dropped by 3.3% in October (forecast -0.5%) after declining by 6.4% in September. This is the smallest drop since October 2007 confirming the national rebound of the US industry as shown by the ISM manufacturing index and more globally the rebound of the US economy.
This might be it for the Michael Jackson new album, and for the equity indices this week, but things should be different next week as we will enter a new and fresh period which will tell more about the economy pace and its
sustainability. Yesterday's drop was a bit of everything, but mostly some doubts that the rally could further resume, taking any excuse of any rumours (conflict about the end of the tax credit period in the Senate, bank of America housing
exposures requiring more capital before giving government's money back, higher yields levels, etc...) in an empty trading activity to initiate some short positions or cash some profits. Understandable, and why not.
How could we move on the upside or on the downside for now ? The latest huge rally, which no longer seems to be a
bear market one given the percentage of the run, found an explanation through an increase of liquidity, or at least a no longer credit crisis and a 29 crisis so granted avoided. For that, Fed and worldwide officials did a good job and seem to
have won the battle in avoiding the worse. As such, equity indices not only reversed their non stop deleveraging downside spiral, but also anticipated some recovery which seems now granted. This is what the earnings releases have been
reflecting, or should we say confirming after the macro data provided some clues all Q3 long, such as in Q2. So, any reason for a further rise at this stage would be difficult to find, as we should now head higher for further brightening
fundamental facts and no longer propelled by some rebound from a too sharp drop such as the one we attended when cash was supposed to be king and the end of the world soon coming.
Why would we collapse now ? Most players find the market is losing speed, which we agree, and would be very sensitive
in case some disillusion was to happen, which is not happening yet, and even the other way around. Indeed the Existing home sales last Friday reminded that few September weaker macro data were more of a pause before resuming their recovery trend more than a reversal, which obviously the equity indices would play with a higher beta given the current "high" levels. After some weaker news on the housing market in recent days, September's US existing home sales figures show that the recovery is still in place. The 9.4% jump in sales to 5.57m in September, from 5.09m the previous month, more than reversed the surprise fall in August and leaves sales at a 26-month high. The pending home sales index suggests that sales may soon increase to around 5.80m. Economists estimate that around 30% of the increase in sales since January is due to the tax credit for first-time buyers, which may yet be extended beyond November (or not). Even if the credit isn't extended, low mortgage rates and much improved valuations should mean that any post-credit fallback is temporary. The recent increase in sales is reducing the inventory overhang - the months supply of homes for sale fell from 9.3 to 7.8, which is very important as we soon approach the usual common 5/6 months levels which, when playing on the 11 months levels, were to be not seen before years ... This, obviously, is supporting prices. Overall, the housing recovery is well on track, with or without the tax credit facilities.
Another reason for collapsing would be that the Fed and worldwide officials did create a new bubble ready to blow anytime. The steep rebound in stock markets and currencies of emerging markets, particularly those that export commodities used by industrial China, has raised fears some of the same drivers of the most recent crisis are again developing. Many economists say a prolonged period of low interest rates in the US, combined with huge savings in China and elsewhere, helped create a sea of liquidity that led to an unsustainable run-up in real-estate prices and ultra-low yields on credit. This is sure, and this is part of the winning plan from the Fed, which used any possible tools with an unlimited budget to avoid a 29 crisis revival after the Lehman mistake to make liquidity conditions flow back to normal. However we find too soon to sell the market for such a reason, as it seems that the celebration time is far from over in term of newsflow. Selling to play a bubble would be equivalent as when most players were selling because the upside rally was too much for what we were getting from the real economy. So far, things are going the right way, until they are not, but the real economy is gradually coming back on its feet. And we think too many people are looking for the coming failure that would send us to the floor before the economy is able to really run on its own. The unwinding is clearly the risk, but we should cross that bridge when we come to it, and it may well be in another 10% rise target, and it also may well happen to occur fine for months or years ...
It will soon be one month over of the important new Q4, and still no thunder storms or earthquakes from the economical side which would trigger a prompt equity sell-off. September was announced as the worst month ever for equity indices, statistic played with the sharp first Sept day drop, October was supposed to be the one of crashes (29 /87 / 98 / last year), but during that time one has to admit that both micro and macro fundamentals proved to be better, while the banking and housing sectors, both reasons for the crisis, are getting cured. Today's consumer confidence will be interesting, but not as much as the ISMs data with the manufacturing one on Monday telling more about October activity, providing clues about Q4, especially after the previous September month data weakness which followed the sharp rebound from August and brought a lot of hope that the rally is soon ending. It will keep on moving as soon as next week, and we believe it could bring some further upside surprises which this time the market will listen to since we will be talking about a new and fresh period of economical time. In the meantime, the current consolidation should be seen as welcome and the beginning of a passing through from a sponsored financial market and economical activity to a self running one.
ECONOMIC DATA WITH IMPACT
US markets will open at 13.30 BST this week.
US Case Shiller index (13h UK time) / the higher the better / minor
US Consumer Confidence (14h UK time) expected 54 from previous 53.1 / little drop in gasoline prices and equity indices rebound might have boost confidence / minor
POSITIVE IMPACTS
MICHELIN : Q3 sales €3.75bn (3.72bn exp) thank to better price mix & better volume / Kept its target of positive FCF in the H2
CAP GEMINI : Wipro, India's No. 3 software services exporter, reported better-than-estimates, as it won new outsourcing contracts and pressure on fees eased…
KPN : Q3 revenue €3.33 bn (3.41bn exp) / EBITDA €1.33 bn (1.32bn exp) / Confirms outlook for 2009, 2010 with 2010 div. of €0.80
AKZO NOBEL : Q3 revenue €3.64 bn (3.68 bn exp.) / EBIT continuing operations, excluding incidentals €391 m (363 m exp) but Ebitda margin 10.7% (14% exp) / Interim dividend €0.30 (0.40 exp) / Does not forsee quick recovery / Kept mid-term targets
THYSSENKRUPP will present a proposal on Nov. 26 to the supervisory board on the payment of a dividend for fiscal 2009 / According to “Die Welt” it will pay a dividend of at least €0.30 a share for fiscal 2009 despite steep losses and extensive job cuts
BP : Q3 replacement cost profit $4,98bn (5.43bn exp) / Production 3,917 mboe/d (3.867 mboe/d exp) / Quarterly dividend, to be paid in December, is 14 cents per share ($0.84 per ads) / Refining margins look set to remain weak
FIAT : Chrysler is about to unveil a product roadmap that relies heavily on vehicles from Fiat, while abandoning many of its own models / The plan, due to be revealed Nov. 4, involves the reintroduction of Alfa Romeo & the 500…
ALSTOM is expected to sign a contract for French rail operator to buy 100 trains, in a deal that could eventually lead to the purchase of up to 1,000 regional trains / The deal for 100 trains would be worth just under €1 bn…
ENAGAS : 9M EBITDA €515.5m (€515m exp) / Net €217.4m (216.5m exp) / Conf. call at 0900 UKT
DASSAULT SYSTEMES & IBM signed an agreement under which Dassault plans to acquire IBM's sales and client support operations for its product lifecycle management software application portfolio for $600 m in cash
NOKIA unveiled its 1st cell phone developed with China's 3G techno, saying it would aim to sell lower-priced handsets at higher volumes
FRENCH BANKS : As expected, France's lower house of parliament rejected a plan to impose a 10% tax on bank profits in 2010 after deputies accidentally approved the measure during a first round of voting last week and a second round was staged
NEGATIVE IMPACTS
RENEWABLE ENERGY : Q3 sales NK2.16bn (2.02bn exp) / Ebitda NK429m (492m exp) / Net loss NK1bn (83m exp) / Sees further contractual adjustments for wafers in 2010 if the present weak market continues / Sees same price decline from Q3 to Q4…
NORSK HYDRO : Q3 rev. NK13.3bn (15.8bn exp) but operating loss NK793m (-351m exp) / Considers further restructuring measures
PUBLICIS : Q3 revenues €1.05 bn, in line but organic growth down 7.4% (-6.9% exp) / Said that revenue will decline less in Q4 than in Q3 + confident FY margin will not drop more than 2% / Hopes for slight organic growth next year…
BAYER : Q3 sales €7.39 bn (7.58bn exp) / EBITDA before special items €1.5bn (1.47bn exp) / Net €249m (308m exp) due to restructuring charges / Sees special charges for restructuring at around €350 m vs €250 m before / FY forecast confirmed
BBVA : 9M NII €10.22bn (10.26bn exp) / Net Profit €4.18bn, in line / Net Income €1.38bn (1.32bn exp) / Bad Loan ratio 3.4% vs 3.2% in June / Core Capital ratio 8% vs 6.9% in June / Conf call at 0830 UKT
VERBUND : 9M sales €2.45bn / Q3 Ebit €269m (289m exp) / Says FY result to be slightly lower than previous year
SIEMENS : Talks between Areva & Siemens over their JV Areva NP have stalled over price & contractual terms (Les Echos) / SIE wants to sell its 34% stake in the JV back to Areva so it can ally with Rosatom in the nuclear field / The stake is worth about €2 bn
LUFTHANSA is alarmed over Air Berlin's domestic expansion plans in Germany / Air Barlin’s competition on the key Hamburg-Frankfurt route could eat into Lufthansa's core business and could negatively affect its returns on this high-volume route (FTD)
TELECOM ITALIA is planning a bond issue of up to €2 bn (Corriere della Sera)
TRADING IDEAS
BUY E.ON / QUALCOMM / CARREFOUR
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY ENI or BP / SELL ROYAL DUTCH // BUY GSZ / SELL EDF // BUY PUBLICIS / SELL LAGARDERE // BUY BAYER / SELL AKZO // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
NESTLE RAISED TO BUY FROM HOLD BY DEUTSCHE BANK
PERNOD RICARD RAISED TO BUY FROM NEUTRAL BY NOMURA
HOME RETAIL RATED NEW OVERWEIGHT BY BARCLAYS CAPITAL
SCHNEIDER ELECTRIC RAISED TO OUTPERFORM FROM UNDERPERFORM BY BERNSTEIN
THOMAS COOK RATED NEW OVERWEIGHT BY HSBC
BANCO POPULAR RAISED TO MARKETPERFORM BY KBW
RENAULT CUT TO UNDERWEIGHT FROM OVERWEIGHT BY MORGAN STANLEY
INBEV CUT TO NEUTRAL FORM BUY BY NOMURA
GAZPROM NEFT CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS
MERCK KgaA CUT TO HOLD FROM BUY BY RBS
MARKS & SPENCER RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
NEXT RATED NEW UNDERWEIGHT BY BARCLAYS CAPITAL
ERAMET CUT TO NEUTRAL FROM BUY....................... BY NOMURA
DATA
WTI : 78,8 (-1,24 %)
Eur/$ : 1,4891 (0,10 %)
$ /Yen : 92,12 (-0,06 )
10 Yr US : 3,54 ( -1,33 bp)
10 Yr Euro : 3,35 ( 0,6 bp)
Indices : US close ; Europe close
SOX : 0,33 %;0,16%
S&P :-1,17 %; -0,95 %
DOW: -1,05%; -0,93 %
NAS :-0,59%; -0,49%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -2,00 %; -1,62 %
ENERGY : -1,58 %; -0,93 %
FINANCIAL : -2,27 %; -1,58 %
HEALTHCARE : -1,12 %; -1,08 %
TECHNO : -0,31 %; -0,28 %
TELECOM : -1,39 %; -1,22 %
INDUSTRIAL : -1,11 %; -1,11 %
UTILITIES : -1,31 %; -0,62 %
TO BE COMING
Today
Results : EU \\ Aegis / Akzo Nobel / Banco Bilbao Vizcaya Argentaria / Banco Espirito Santo / Bayer / BP / Daimler (3Q final details) / Enagas / Klepierre sales / KPN / Norsk Hydro / Petroleum Geo-Services / Publicis / Reckitt Benckiser / Renewable Energy / Saipem / Svenska Cellulosa / Vestas Wind
US \\ Ernst & Young / United States Steel / Visa
Asia \\ Canon / Honda Motor / Tata Steel
Dividend :
Events: Pfizer analyst & investor / SAP TechEd Vienna event
Wednesday
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken /Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard / Symantec (AMC)
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events:
Thursday
Results : EU \\ Abb / Alstom / AstraZeneca / BASF final details (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive / Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) / Procter & Gamble / Sprint /
Dividend :
Events : BHP Billiton AGM / Nordea Bank
Friday
Results : EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal // Red Electrica / Sandvik / Sanofi-Aventis (BMO) / Shire / SSAB (BMO) / WPP trading statement
US \\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext /
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events: KBC Ancora AGM
Monday
Results :EU \\ Altran Technologies sales / Linde / Metro AG / TNT
US \\ Ford (BMO)
Dividend :
Events :Pernod Ricard AGM
ECONOMIC DATA PREVIEW
Watch in the United-States the Conference Board Consumer confidence for October (14.00 GMT) Despite the rise in unemployment in the United States, this advanced indicator of household consumption should progress in October to reach 54.5. This rise will be led by the US recovery, the rebound in the stock markets, not to mentioned low interest rates and weak consumer prices.
ECONOMY
United-States: The Dallas Fed manufacturing activity index is declined at a slower pace in October
The Texas factory activity declined at a slower pace in October according to the business executives responding to the Texas Manufacturing survey. Indeed the Dallas Fed manufacturing activity dropped by 3.3% in October (forecast -0.5%) after declining by 6.4% in September. This is the smallest drop since October 2007 confirming the national rebound of the US industry as shown by the ISM manufacturing index and more globally the rebound of the US economy.
Monday, October 26, 2009
The Days Before GDP
GLOBAL EQUITIES RESEARCH
U.S. equities eased on Friday, with the DJIA (-1.08 %) retreating back under 10,000 pts. This correction was due to a drop in the oil sector after oil price retreated roughly 1 % (U.S. commercial crude oil inventories appear to be at very high levels by historical standards) and in the semiconductor sector after Broadcom (-7.26 %) released disappointing earnings. This overshadowed the good results of Microsoft (+5.38 %, highest rise in the DJIA) and its good prospects for Windows 7. Anyway, this slight pull back of the market is far from the double dip some investors expected. What happened to the October crash? As the summer ended, investors heard many voices warning that the market’s gains weren’t sustainable and that we could be headed for another October crash. Instead, the Dow hit 10,000 pts on October 14th. Of course, the month isn’t over yet and another selloff is always a possibility, but if the gains hold, they’ll debunk a lot of naysayers. One reason is a surprisingly rosy start to the third-quarter earnings season. Historically, October is a month for losses, but many companies are reporting better-than-expected results, lifting broad market sentiment. As of October 23rd, 196 companies out of 500 in the S&P index released their Q3 quarterly earnings, with a record 80.1 % well above analysts’ estimates. Momentum is another factor. Many investors are scrambling to get in the rally and giving the market an added boost.
The key event this week is the release of the U.S. Q3 GDP data on Thursday, with a consensus of 3.0 % QoQ annualized for the real GDP. Data may have topped analysts’ estimates and reached 4.0 %. Most of the rebound can be traced back to the now over “Cash for Clunkers” scheme which boosted consumption in the first couple of months in the quarter. Consumption may have boosted by as much as 3.5 % (with a contribution of 2.4 % in the GDP data), which would be the strongest growth in two-and-a-half year. Anyway, apart of durable goods, the latest Beige Book warned that consumer spending remained weak. The spike in Q3 vehicle sales was met primarily from existing stocks, but a slower pace of inventory liquidation in other sectors probably added almost 1.0 % to GDP growth. The news on Q3 investment should be mixed, with a rebound in spending on equipment and software (that may have rebounded at an annual pace of about 8.0 %) and residential investment (but only 2.5 % of GDP today) being partially offset by a sharp decline in spending on commercial real estate. This was confirmed by the latest Beige Book. The monthly construction data suggest that investment in residential real estate recorded its first quarterly increase in almost four years. Given the massive drop in business investment during the recession, there is a good chance of an even stronger rebound in the coming quarters. Exports and imports recorded a strong rebound in Q3, reflecting the jump back in global trade volumes. Exports probably increased at a slightly faster pace than imports but, since the latter is still bigger in dollar terms, the contribution of net external trade to GDP growth would have been broadly neutral. Looking ahead, a sharp slowdown in the rate of inventory liquidation alongside acceleration in the growth rate of business investment should ensure that GDP growth remains strong into the first half of next year.
Elsewhere, it seems possible that the further upward progress in the equity markets and the modest dip in gasoline prices may push the Conference Board consumer confidence indicator up (Tuesday, from 53.1 vs. 54.0). But with employment still falling, confidence is likely to remain at historically low levels. Durable goods orders (Wednesday) may have expanded in September (+1.0 % expected for overall and core index). This move could be confirmed in the next few months, as the major vehicle manufacturers start to ramp up production again. In September, a likely increase of 2.0% should help to offset a further dip in orders for commercial aircraft. New homes sales are released on Wednesday. Despite the modest fall in October, the NAHB home-building index is still consistent with new home sales increasing to around 500,000. Meanwhile, the end of the cash for clunkers scheme in August means that personal spending (Friday) is likely to have fallen by around 0.4% m/m in September. The combination of a modest 0.1% m/m increase in average hourly earnings and a fall in the number of hours worked in September means that personal income may have been flat.
At 06.00 BST, Asian markets were mixed this morning, with the Nikkei slightly up (+0.59 %) and the Shanghai composite slightly down (-0.50 %). The Kospi was up roughly 1 %. South Korea’s GDP rose 2.9 % QoQ in Q3, well above analysts’ estimates (+1.9 %) and the highest since Q1 2002. Hong Kong was closed for Chung Yeung Festival. U.S. index futures were slightly up: DJIA +0.08 %, S&P 500 +0.07 %, Nasdaq 100 +0.11 %. European markets should edge down at the opening. No major data is released today.
ECONOMIC DATA WITH IMPACT
US markets will open at 13.30 BST this week.
Chicago Fed national activity index (12.30 BST) for September and the Dallas Fed manufacturing activity index (14.30 BST)
POSITIVE IMPACTS
ELECTROLUX : Q3 sales SK27.6bn (27.1bn exp) / Ebit SK2.23bn (1.4bn exp) /Results improved in all regions… but said that thedemand continues to be weak,although rate of decline has slowed / Said that Europe has not yet hit a bottom
SACYR : A consortium led by Sacyr signed a €2.3bn contract to build and operate a toll highway in Italy (Expansion)
DBK is about to buy 75% stake of Sal Oppenheim forless than €1bn (Handelsblatt) / A deal could be announced this week (FT)
RBS plans to reduce reliance on the govt’s asset-protection program (FT) & may receive billions of pounds from the U.K. government to make up for a cut in the level of potentially toxic assets (the Times) / RBS is actively speaking to shareholders who would be willing to back a modest equity raising, which could be made up of a rights issue and a share placement, in the area of £3 bn to £5 bn (FT)
STANDARD LIFE is considering selling its Canadian insurance business (The Independent)
L&G plans to sell forensic science group LGC for £200m (Sunday Telegraph)
BANCA POPOLARE DI MILANO could dissolve its partnership in banking and insurance with Fondiaria-SAI buying back half of BPM Vita for about €110 m(Il Sole 24 Ore)
WACKER CHEMIE expects sales & profit to decline "significantly" on a yoy basis in the H2, but sees a notable recovery in the Q3
CENTRICA plans to sell its stake in the world’s biggest wind farm for about £400m (the Sunday Times)
PEUGEOT could see an operating loss of between €1-1.5 bn this year, narrowing earlier forecast of €1-€2bn (CEO in Il Sole 24 Ore) / Is open to a reduction of its stake in car parts manufacturer FAURECIA (Les Echos)
FRENCH BANKS : The approval by the France's lower house of parliament on Friday of a plan to impose a 10% tax on bank profits in 2010 was cancelled due to a “technical” problem (Let’s say that…) / A new vote is expected to restart today
LAGARDERE (minor) is considering selling its remaining stake in French local newspaper La Depeche du Midi (La Lettre de l'Exp.)
BARRON’s European Trader this week suggests that the animal spirits of M&A are slowly but steadily reawakening…
NEGATIVE IMPACTS
LLOYDS is set to announce a £23bn fundraising that will free the bank from having to take part in the government's asset protection scheme / Details of the plans should be announced this week by the Treasury in a statement (Sunday Times)
ING : As part of a final restructuring plan filed with the EC, ING will separate its banking and insurance activities / ING will conduct a €7.5bn rights issue for early repayment of the Core Tier 1 securities to the Dutch state / Will take one-off pre-tax charge of €1.3bn in Q4 / Reported 3Q u/l net result of €750m (bank €250m and insurance €500m), in line
MERCK : Q3 sales €1.94bn (1.95bn exp) / Ebit €222m, in line / Cut slightly its FY sales guidance to a growth of 2% from “up to 5%” before / Sees core return on sales of 17% (15-20% before)
DEUTSCHE POST : Germany's new ruling coalition agreed to abolish DHL’s exemption from paying VAT on certain types of mail
BRITISH AIRWAYS : European regulators have told British Airways, American Airlines and Iberia that they could be forced to give up valuable take-off and landing slots if they want their planned transatlantic tie-up to go ahead (FT)
SCHNEIDER-ALSTOM : M. Immelt, the CEO of GE, is expected to meet with French President to protect GE’s interests in the T&D’s dossier / Separately, French press reports that ALSTOM has doubts on informations provide by AREVA on its T&D unit… (Les Echos)
BBVA-SANTANDER-BANCO POPULAR : The Bank of Spain has decided to oblige banks to double their provisions against possible repossesions of houses used as collateral against debts (El Pais)
TRADING IDEAS
BUY E.ON / VEOLIA / QUALCOMM / CARREFOUR
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY ENI or BP / SELL ROYAL DUTCH // BUY GSZ / SELL EDF // BUY PUBLICIS / SELL LAGARDERE // BUY BAYER / SELL AKZO // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
GAZPROM RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
NEXANS RAISED TO NEUTRAL FROM SELL BY GOLDMAN SACHS
SCHNEIDER ELECTRIC REMOVED FROM PAN EUROPE SELL LIST BY GOLDMAN SACHS
STANDARD CHARTERED RAISED TO NEUTRAL FROM UNDERWEIGHT BY MORGAN STANLEY
SVENSKA CELLULOSA RAISED TO NEUTRAL FROM SELL BY BANK OF AMERICA – ML
SVENSKA CELLULOSA RAISED TO NEUTRAL FROM SELL BY BANK OF AMERICA – ML
HSBC / SANTANDER / SWEDBANK ADDED TO MOST PREFERRED LIST BY BANK OF AMERICA - ML
HSBC CUT TO HOLD FROM BUY BY CITIGROUP
DANONE CUT TO HOLD FROM BUY BY ING
SCHNEIDER ELECTRIC CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS
SCHNEIDER ELECTRIC REMOVED FROM PAN EUROPE BUY LIST BY GOLDMAN SACHS
TECHNIP CUT TO NEUTRAL FROM BUY BY UBS
TECHNIP CUT TO SELL FROM HOLD BY CITIGROUP
LUKOIL CUT TO NEUTRAL FROM OVERWEIGHT BUY JP MORGAN
BCP /DBK ADDED TI LEAST PREFERRED LIST BY BANK OF AMERICA - ML
RHODIA CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
BASF CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
LANXESS CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
DATA
WTI : 79,8 (-2,31 %)
Eur/$ : 1,5030 (0,14 %)
$ /Yen : 91,88 (0,04 )
10 Yr US : 3,49 ( 0,18 bp)
10 Yr Euro : 3,35 ( 4,3 bp)
Indices : US close ; Europe close
SOX : -3,19 %;-2,92%
S&P :-1,22 %; -1,07 %
DOW: -1,08%; -0,98 %
NAS :-0,50%; -0,21%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -2,28 %; -1,62 %
ENERGY : -2,14 %; -2,13 %
FINANCIAL : -1,49 %; -1,10 %
HEALTHCARE : -1,05 %; -1,02 %
TECHNO : -0,37 %; -0,06 %
TELECOM : -1,31 %; -1,11 %
INDUSTRIAL : -1,60 %; -1,51 %
UTILITIES : -1,64 %; -1,49 %
TO BE COMING
Tuesday
Results : EU \\ Aegis / Akzo Nobel / Banco Bilbao Vizcaya Argentaria / Banco Espirito Santo / Bayer / BP / Daimler (3Q final details) / Enagas / Klepierre sales / KPN / Norsk Hydro / Petroleum Geo-Services / Publicis / Reckitt Benckiser / Renewable Energy / Saipem / Svenska Cellulosa / Vestas Wind
US\\ Ernst & Young / United States Steel / Visa
Asia \\ Canon / Honda Motor / Tata Steel
Dividend :
Events: Pfizer analyst & investor / SAP TechEd Vienna event
Wednesday
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US\\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events :
Thursday
Results : EU \\ Abb / AstraZeneca / BASF final details (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive / Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) / Procter & Gamble / Sprint /
Dividend :
Events: BHP Billiton AGM / Nordea Bank
Friday
Results :EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal / Red Electrica / Sandvik /
Sanofi-Aventis / Shire / SSAB (BMO) / WPP trading statement
US\\\\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events:
ECONOMIC DATA PREVIEW
Watch in the United-States the Chicago Fed National activity index for October (14.30 GMT) expected to improve led by the economic recovery in the United-States as showed by the rebound of investment and household spending at the third quarter.
ECONOMY
United-States: Existing home sales jumped in September
Existing home sales surge from 5.09 million in August to 5.57 million or 9.4% in September reaching a 26-month rise. This jumped confirmed that the recovery is in place on the real estate market. This rise has been boosted by the tax credit for first time buyers which may be extended beyond November. Furthermore the drop in prices and low mortgage rates will boost sales in the coming months.
Euro area: PMI manufactring and services rose again in October
The PMI manufacturing index rose for an eight consecutive month to reach the level of 50.7. This index over crossed the boarder of 50 marking the limit between and contraction and an expand of the activity for the first time since May 2008 confirming that investment is back in the Euro area. Meanwhile the PMI services index rose for a fourth consecutive month to reach the level of 52.3 the highest level since December 2007 confirming the lasting rebound of investment in the services. If investment is back in the euro area the economy will not support to many bad news as a rise of crude oil, a new rise of the euro currency or an increase of the ECB leading rate.
Germany: New rise of the ifo business climate in October
After five consecutive up months , especially the three last ones, the IFO index increased again in September to reach 91.3. After destocking and over cutting investment, German industries are now matching economic fundamentals. In such conditions, the IFO index rose again to reach 91.9 in October. Nevertheless, German economic recovery remains weak and fragile and the end of the cash for clunkers program, as well as post-electoral uncertainties could weaken the present rebound.
France: Consumer spending surge in September
+1.4% in June,-2.1% in July-August, +2.3% in September. France household consumption remained very volatile. This volatility is not new and confirm that despite the rise of unemployment French consumer spending are still rising . This rise was mainly led by the effects of the deflation and the cash for clunkers program, without forgetting the back to school allowances. The key factor remained the car sector in which household spending surge by 10.2% in September. Nevertheless this dependence will shrink when the cash for clunkers program effects will decrease.
U.S. equities eased on Friday, with the DJIA (-1.08 %) retreating back under 10,000 pts. This correction was due to a drop in the oil sector after oil price retreated roughly 1 % (U.S. commercial crude oil inventories appear to be at very high levels by historical standards) and in the semiconductor sector after Broadcom (-7.26 %) released disappointing earnings. This overshadowed the good results of Microsoft (+5.38 %, highest rise in the DJIA) and its good prospects for Windows 7. Anyway, this slight pull back of the market is far from the double dip some investors expected. What happened to the October crash? As the summer ended, investors heard many voices warning that the market’s gains weren’t sustainable and that we could be headed for another October crash. Instead, the Dow hit 10,000 pts on October 14th. Of course, the month isn’t over yet and another selloff is always a possibility, but if the gains hold, they’ll debunk a lot of naysayers. One reason is a surprisingly rosy start to the third-quarter earnings season. Historically, October is a month for losses, but many companies are reporting better-than-expected results, lifting broad market sentiment. As of October 23rd, 196 companies out of 500 in the S&P index released their Q3 quarterly earnings, with a record 80.1 % well above analysts’ estimates. Momentum is another factor. Many investors are scrambling to get in the rally and giving the market an added boost.
The key event this week is the release of the U.S. Q3 GDP data on Thursday, with a consensus of 3.0 % QoQ annualized for the real GDP. Data may have topped analysts’ estimates and reached 4.0 %. Most of the rebound can be traced back to the now over “Cash for Clunkers” scheme which boosted consumption in the first couple of months in the quarter. Consumption may have boosted by as much as 3.5 % (with a contribution of 2.4 % in the GDP data), which would be the strongest growth in two-and-a-half year. Anyway, apart of durable goods, the latest Beige Book warned that consumer spending remained weak. The spike in Q3 vehicle sales was met primarily from existing stocks, but a slower pace of inventory liquidation in other sectors probably added almost 1.0 % to GDP growth. The news on Q3 investment should be mixed, with a rebound in spending on equipment and software (that may have rebounded at an annual pace of about 8.0 %) and residential investment (but only 2.5 % of GDP today) being partially offset by a sharp decline in spending on commercial real estate. This was confirmed by the latest Beige Book. The monthly construction data suggest that investment in residential real estate recorded its first quarterly increase in almost four years. Given the massive drop in business investment during the recession, there is a good chance of an even stronger rebound in the coming quarters. Exports and imports recorded a strong rebound in Q3, reflecting the jump back in global trade volumes. Exports probably increased at a slightly faster pace than imports but, since the latter is still bigger in dollar terms, the contribution of net external trade to GDP growth would have been broadly neutral. Looking ahead, a sharp slowdown in the rate of inventory liquidation alongside acceleration in the growth rate of business investment should ensure that GDP growth remains strong into the first half of next year.
Elsewhere, it seems possible that the further upward progress in the equity markets and the modest dip in gasoline prices may push the Conference Board consumer confidence indicator up (Tuesday, from 53.1 vs. 54.0). But with employment still falling, confidence is likely to remain at historically low levels. Durable goods orders (Wednesday) may have expanded in September (+1.0 % expected for overall and core index). This move could be confirmed in the next few months, as the major vehicle manufacturers start to ramp up production again. In September, a likely increase of 2.0% should help to offset a further dip in orders for commercial aircraft. New homes sales are released on Wednesday. Despite the modest fall in October, the NAHB home-building index is still consistent with new home sales increasing to around 500,000. Meanwhile, the end of the cash for clunkers scheme in August means that personal spending (Friday) is likely to have fallen by around 0.4% m/m in September. The combination of a modest 0.1% m/m increase in average hourly earnings and a fall in the number of hours worked in September means that personal income may have been flat.
At 06.00 BST, Asian markets were mixed this morning, with the Nikkei slightly up (+0.59 %) and the Shanghai composite slightly down (-0.50 %). The Kospi was up roughly 1 %. South Korea’s GDP rose 2.9 % QoQ in Q3, well above analysts’ estimates (+1.9 %) and the highest since Q1 2002. Hong Kong was closed for Chung Yeung Festival. U.S. index futures were slightly up: DJIA +0.08 %, S&P 500 +0.07 %, Nasdaq 100 +0.11 %. European markets should edge down at the opening. No major data is released today.
ECONOMIC DATA WITH IMPACT
US markets will open at 13.30 BST this week.
Chicago Fed national activity index (12.30 BST) for September and the Dallas Fed manufacturing activity index (14.30 BST)
POSITIVE IMPACTS
ELECTROLUX : Q3 sales SK27.6bn (27.1bn exp) / Ebit SK2.23bn (1.4bn exp) /Results improved in all regions… but said that thedemand continues to be weak,although rate of decline has slowed / Said that Europe has not yet hit a bottom
SACYR : A consortium led by Sacyr signed a €2.3bn contract to build and operate a toll highway in Italy (Expansion)
DBK is about to buy 75% stake of Sal Oppenheim forless than €1bn (Handelsblatt) / A deal could be announced this week (FT)
RBS plans to reduce reliance on the govt’s asset-protection program (FT) & may receive billions of pounds from the U.K. government to make up for a cut in the level of potentially toxic assets (the Times) / RBS is actively speaking to shareholders who would be willing to back a modest equity raising, which could be made up of a rights issue and a share placement, in the area of £3 bn to £5 bn (FT)
STANDARD LIFE is considering selling its Canadian insurance business (The Independent)
L&G plans to sell forensic science group LGC for £200m (Sunday Telegraph)
BANCA POPOLARE DI MILANO could dissolve its partnership in banking and insurance with Fondiaria-SAI buying back half of BPM Vita for about €110 m(Il Sole 24 Ore)
WACKER CHEMIE expects sales & profit to decline "significantly" on a yoy basis in the H2, but sees a notable recovery in the Q3
CENTRICA plans to sell its stake in the world’s biggest wind farm for about £400m (the Sunday Times)
PEUGEOT could see an operating loss of between €1-1.5 bn this year, narrowing earlier forecast of €1-€2bn (CEO in Il Sole 24 Ore) / Is open to a reduction of its stake in car parts manufacturer FAURECIA (Les Echos)
FRENCH BANKS : The approval by the France's lower house of parliament on Friday of a plan to impose a 10% tax on bank profits in 2010 was cancelled due to a “technical” problem (Let’s say that…) / A new vote is expected to restart today
LAGARDERE (minor) is considering selling its remaining stake in French local newspaper La Depeche du Midi (La Lettre de l'Exp.)
BARRON’s European Trader this week suggests that the animal spirits of M&A are slowly but steadily reawakening…
NEGATIVE IMPACTS
LLOYDS is set to announce a £23bn fundraising that will free the bank from having to take part in the government's asset protection scheme / Details of the plans should be announced this week by the Treasury in a statement (Sunday Times)
ING : As part of a final restructuring plan filed with the EC, ING will separate its banking and insurance activities / ING will conduct a €7.5bn rights issue for early repayment of the Core Tier 1 securities to the Dutch state / Will take one-off pre-tax charge of €1.3bn in Q4 / Reported 3Q u/l net result of €750m (bank €250m and insurance €500m), in line
MERCK : Q3 sales €1.94bn (1.95bn exp) / Ebit €222m, in line / Cut slightly its FY sales guidance to a growth of 2% from “up to 5%” before / Sees core return on sales of 17% (15-20% before)
DEUTSCHE POST : Germany's new ruling coalition agreed to abolish DHL’s exemption from paying VAT on certain types of mail
BRITISH AIRWAYS : European regulators have told British Airways, American Airlines and Iberia that they could be forced to give up valuable take-off and landing slots if they want their planned transatlantic tie-up to go ahead (FT)
SCHNEIDER-ALSTOM : M. Immelt, the CEO of GE, is expected to meet with French President to protect GE’s interests in the T&D’s dossier / Separately, French press reports that ALSTOM has doubts on informations provide by AREVA on its T&D unit… (Les Echos)
BBVA-SANTANDER-BANCO POPULAR : The Bank of Spain has decided to oblige banks to double their provisions against possible repossesions of houses used as collateral against debts (El Pais)
TRADING IDEAS
BUY E.ON / VEOLIA / QUALCOMM / CARREFOUR
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY ENI or BP / SELL ROYAL DUTCH // BUY GSZ / SELL EDF // BUY PUBLICIS / SELL LAGARDERE // BUY BAYER / SELL AKZO // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
GAZPROM RAISED TO OVERWEIGHT FROM NEUTRAL BY JP MORGAN
NEXANS RAISED TO NEUTRAL FROM SELL BY GOLDMAN SACHS
SCHNEIDER ELECTRIC REMOVED FROM PAN EUROPE SELL LIST BY GOLDMAN SACHS
STANDARD CHARTERED RAISED TO NEUTRAL FROM UNDERWEIGHT BY MORGAN STANLEY
SVENSKA CELLULOSA RAISED TO NEUTRAL FROM SELL BY BANK OF AMERICA – ML
SVENSKA CELLULOSA RAISED TO NEUTRAL FROM SELL BY BANK OF AMERICA – ML
HSBC / SANTANDER / SWEDBANK ADDED TO MOST PREFERRED LIST BY BANK OF AMERICA - ML
HSBC CUT TO HOLD FROM BUY BY CITIGROUP
DANONE CUT TO HOLD FROM BUY BY ING
SCHNEIDER ELECTRIC CUT TO NEUTRAL FROM BUY BY GOLDMAN SACHS
SCHNEIDER ELECTRIC REMOVED FROM PAN EUROPE BUY LIST BY GOLDMAN SACHS
TECHNIP CUT TO NEUTRAL FROM BUY BY UBS
TECHNIP CUT TO SELL FROM HOLD BY CITIGROUP
LUKOIL CUT TO NEUTRAL FROM OVERWEIGHT BUY JP MORGAN
BCP /DBK ADDED TI LEAST PREFERRED LIST BY BANK OF AMERICA - ML
RHODIA CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
BASF CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
LANXESS CUT TO NEUTRAL FROM OVERWEIGHT BY JP MORGAN
DATA
WTI : 79,8 (-2,31 %)
Eur/$ : 1,5030 (0,14 %)
$ /Yen : 91,88 (0,04 )
10 Yr US : 3,49 ( 0,18 bp)
10 Yr Euro : 3,35 ( 4,3 bp)
Indices : US close ; Europe close
SOX : -3,19 %;-2,92%
S&P :-1,22 %; -1,07 %
DOW: -1,08%; -0,98 %
NAS :-0,50%; -0,21%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : -2,28 %; -1,62 %
ENERGY : -2,14 %; -2,13 %
FINANCIAL : -1,49 %; -1,10 %
HEALTHCARE : -1,05 %; -1,02 %
TECHNO : -0,37 %; -0,06 %
TELECOM : -1,31 %; -1,11 %
INDUSTRIAL : -1,60 %; -1,51 %
UTILITIES : -1,64 %; -1,49 %
TO BE COMING
Tuesday
Results : EU \\ Aegis / Akzo Nobel / Banco Bilbao Vizcaya Argentaria / Banco Espirito Santo / Bayer / BP / Daimler (3Q final details) / Enagas / Klepierre sales / KPN / Norsk Hydro / Petroleum Geo-Services / Publicis / Reckitt Benckiser / Renewable Energy / Saipem / Svenska Cellulosa / Vestas Wind
US\\ Ernst & Young / United States Steel / Visa
Asia \\ Canon / Honda Motor / Tata Steel
Dividend :
Events: Pfizer analyst & investor / SAP TechEd Vienna event
Wednesday
Results : EU \\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US\\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard
Asia \\ Nomura / PetroChina
Dividend : Rolls-Royce (GBp 6)
Events :
Thursday
Results : EU \\ Abb / AstraZeneca / BASF final details (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive / Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) / Procter & Gamble / Sprint /
Dividend :
Events: BHP Billiton AGM / Nordea Bank
Friday
Results :EU \\ Agfa-Gevaert / Alcatel-Lucent / Belgacom (BMO) / Edison / Energias de Portugal / Red Electrica / Sandvik /
Sanofi-Aventis / Shire / SSAB (BMO) / WPP trading statement
US\\\\ Chevron / Constellation Energy / Duke Energy / Electronic Artes / Ford / NYSE Euronext
Asia \\ Hitachi / Samsung Electronics / Sony
Dividend :
Events:
ECONOMIC DATA PREVIEW
Watch in the United-States the Chicago Fed National activity index for October (14.30 GMT) expected to improve led by the economic recovery in the United-States as showed by the rebound of investment and household spending at the third quarter.
ECONOMY
United-States: Existing home sales jumped in September
Existing home sales surge from 5.09 million in August to 5.57 million or 9.4% in September reaching a 26-month rise. This jumped confirmed that the recovery is in place on the real estate market. This rise has been boosted by the tax credit for first time buyers which may be extended beyond November. Furthermore the drop in prices and low mortgage rates will boost sales in the coming months.
Euro area: PMI manufactring and services rose again in October
The PMI manufacturing index rose for an eight consecutive month to reach the level of 50.7. This index over crossed the boarder of 50 marking the limit between and contraction and an expand of the activity for the first time since May 2008 confirming that investment is back in the Euro area. Meanwhile the PMI services index rose for a fourth consecutive month to reach the level of 52.3 the highest level since December 2007 confirming the lasting rebound of investment in the services. If investment is back in the euro area the economy will not support to many bad news as a rise of crude oil, a new rise of the euro currency or an increase of the ECB leading rate.
Germany: New rise of the ifo business climate in October
After five consecutive up months , especially the three last ones, the IFO index increased again in September to reach 91.3. After destocking and over cutting investment, German industries are now matching economic fundamentals. In such conditions, the IFO index rose again to reach 91.9 in October. Nevertheless, German economic recovery remains weak and fragile and the end of the cash for clunkers program, as well as post-electoral uncertainties could weaken the present rebound.
France: Consumer spending surge in September
+1.4% in June,-2.1% in July-August, +2.3% in September. France household consumption remained very volatile. This volatility is not new and confirm that despite the rise of unemployment French consumer spending are still rising . This rise was mainly led by the effects of the deflation and the cash for clunkers program, without forgetting the back to school allowances. The key factor remained the car sector in which household spending surge by 10.2% in September. Nevertheless this dependence will shrink when the cash for clunkers program effects will decrease.
Friday, October 23, 2009
Cash & Carry
GLOBAL EQUITIES RESEARCH
Come to where the “carry trade” is! Yesterday and this morning the dollar’s slide widened and the EUR/USD is now standing firmly above 1.50 EUR/USD (1.5034 at 06.00 BST after an intraday high of 1.5060). Meanwhile other assets such as equities, gold and raw materials rose or remained at very high levels. As for U.S. equities, they strongly reversed a two-day losing streak as better-than-expected earnings overshadowed some disappointment about the rise in the initial weekly jobless claims (up to 531k on Oct. 17th and revised up to 520k from 514 k on Oct. 10th) and the fall of the FHFA house price index in August (-0.3 %). However, leading indicators were up 1.0 % in September vs. +0.8 % expected. Among a very long list, Travelers, Mc Donald’s, New York Time, PNC Financial rallied after stronger than expected results. American Express rose to a one-year high after Moody’s said credit-card defaults declined. After session, Broadcom (-8.30 %) disappointed investors, but Amazon.com (+14.48 %!) soared after the company’s result largely topped analysts’ estimates and gave positive guidance, due to the Kindle. On October 22nd, 188 companies of the S&P 500 released their earnings an a record of 80 % were above analyst’s estimates. Despite a P/E back up above historical levels (19 x 2009 operational earnings), the S&P 500 index has still an upside potential.
The latest rally in gold prices ($1061.90 /oz this morning, record high of $1070.80 /oz on October 14th) largely reflects a lack of confidence in the dollar. Gold is also being widely touted as a hedge against inflation. As it happens, gold’s track record as a store of value is far from perfect. However, during times of rapid inflation it has proved its worth, notably after the oil price shocks in the mid- to late-1970s. As some analysts like to stress, gold is still trading well below the all-time high of around $2,300 in real (inflation-adjusted) terms, which was seen briefly in 1980. Gold is also a hedge against deflation. So, there are many reasons why gold price is soaring. Nonetheless, current gold prices are not yet a bubble: gold is close to its long-run averages relative to oil and to equity prices.
The recent slide in the dollar’s share of global foreign exchange reserves greatly exaggerates the extent to which reserve managers are losing faith in the US$. The dollar is still entrenched as the world’s dominant reserve currency. The IMF published its latest foreign exchange on September 30th. The figures provide the underlying currency composition of about 2/3 of global reserves. The share of the dollar in the global total fell from 65.0 % in Q1 2009 to 62.8 % in Q2 – the lowest since 1995. At face value, this might suggest that central bank reserve managers are beginning to turn away from the dollar. But there are at least three reasons why fears over the impact of reserve diversification on the US$ are probably exaggerated. 1) A large portion of the recent shift in the dollar’s share of global reserves can be explained by the weakening US$, rather than by the changes in the behavior of reserve managers. A weaker dollar automatically boosts the US$ value of those reserves held in other currencies. This factor probably accounts for more than half of the decline in the dollar’s share of reserves in Q2. 2) Although China has voiced its concerns about the status of the dollar as the world’s reserve currency, there is no sign that the world’s largest holder of reserves is turning its back on the US$ yet. The underlying currency composition of China’s $2trn stock of reserves is not publicly known. However, official U.S. data shows that China increased its holdings of U.S. Treasuries to $800bn in July compared with $780bn at the end of Q2 and $767bn in Q1. 3) The dollar has already depreciated significantly since 2001, and yet this has not caused large scale diversification of reserves among reserve managers. Now, with the trade-weighted dollar index not far from all-time lows, there is little incentive for reserve managers to begin selling their dollars. In fact, the dollar should strengthen over the next six months. However, the dollar’s position as the world’s dominant currency will stay under the spotlight. And over the very long term it is possible that wider use of other currencies such as the euro, yen, renminbi (not yet convertible!) or even the IMF’s special drawing rights could be warranted. But this will take a very long time…
This morning, Japanese stocks didn’t profit by U.S. equities’ surge and were quite flat. Other Asian markets were on the upside (Shanghai composite +2.15 % at 06.40 BST). U.S. index futures were up DJIA +0.06 %, S&P 500 +0.16 %, Nasdaq 100 +0.18 %. European markets should recoup yesterday’s correction…
ECONOMIC DATA WITH IMPACT
US Existing home sales for September (15.00 BST). The dip in August data from 5.24 million (annualized) to 5.10 million was certainly temporary. Data for September could be above the consensus of 5.35 million and reach a 2-year high of 5.50 million. / Major
Ben Bernanke speaks on regulation at Boston Fed Conference (13.30 BST)./ Interesting
Euro-zone, watch for the composite PMI for October (09.00 BST) expected to rise to 51.6 from 51.1. In September, the index remained above 50 for the second month in a row, suggesting that the economy may have expanded modestly in Q3. The destocking process may be coming to an end, prompting the manufacturing PMI to tick up / Interesting
German IFO business sentiment (09.00 BST) is expected to be up to a 11-month high of 93 vs. 91.3, suggesting the economy is experiencing a sustained pick-up in activity / Major
UK provisional estimate of Q3 GDP (09.30 BST) which is expected to rise (0.1 % to 0.2 % QoQ) / Major
POSITIVE IMPACTS
SAINT GOBAIN : Q3 sales €9.72bn (9.6bn exp) / Confirmed H2 operating & net profit to outperform H1 with management adding that it will reach analysts estimates of €2.1bn for the FY operating / Sees more momentum in Q4
DANONE : Q3 sales €3.78bn (3.82bn exp) / Organic gwth 4.1% (3.2% exp) / Dairy volumes +7% (+5% exp) / FY09 targets confirmed
BNPweight in the CAC40 will increase to 8.14% from 7.4% tonight at the close / BNP said that investor demand for its €4.3bn share sale was 2.5 times more than the number of shares on offer / Will reimburse €5.1bn to the govt on Oct. 28
CADBURY : One of Cadbury's 10 biggest investors said a raised bid of 820 p (£11.3 bn) from Kraft would be examined very closely…
VOLKSWAGEN : Audi sees a "very good operating results" for the Q3 (Audi CFO)
VOLVO : Q3 sales SK48.5bn (49.4bn exp) / Operating loss SK3.29bn (-3.75bn exp) / Orders stable from prev. year (+20% from Q2)
PEUGEOT is in discussions with Mitsubishi Motors over a potential JV for a new 4X4 vehicle (La Tribune)
VINCI won a €370 m contract for the construction of Monaco's highest tower
CBK is making preparations to enter Russian retail banking, possibly with a direct bank model, next year (Handelsblatt)
BSKYB : Q1 rev. £1,38bn (1.36bn e) / Adj. operating £198 m (£192m e) / Q1 churn 11.3% (11% e) / 94K new clients in Q1 (87K e)
MEDIASET : Prisa has been in informal talks with Mediaset over the future of the TV biz in Spain, but there is nothing concrete yet (CEO)
REPSOL : PETROBRAS & YPF have been awarded a contract to explore for natural gas and oil off Uruguay's coast
BRIT INSURANCE: 9M Gross Premium £1.33bn (1.2bn e) / No significant catastrophes in Q3 / Returns are likely to be muted in 2010
AMAZON : Q3 rev. $5.45bn (5.04bn e) / EPS $0.45 (0.33 e) / Sees Q4 rev. $8.12-9.13bn (8.19bn e) + operating $300-425m (376m e)
AMEX : Q3 revenue $6.02bn (5.98bn exp) / EPS $0.44 (0.38 exp) / Card spending down 11% from Q308 (-16% in Q209)
NEGATIVE IMPACTS
FRANCE TEL. - VIVENDI : Orange and SFR could each face fines of €600 m to €700 m because the companies allegedly failed to meet their obligations in covering France's population with their 3G networks (Les Echos)
SYNGENTA : Q3 sales $2bn ($2.06 bn exp) / Confirmed FY outlook for EPS to be close to the 2008 level.
MOBISTAR (51% owned by FTE) : Q3 revenue €386m (392m exp) / Ebitda €142m (146m exp) / Confirmed FY guidance
AIR FRANCE KLM's job cutting plan will cost between €150-160 m (La Tribune)
HAVAS : Q3 revenue €318m (344m exp) with organic sales down 9.3% (-6.6% exp) / No FY outlook
TF1 : Axel Duroux, CEO representative would be about to leave the group, confirming the actual coolness with actual CEO M. Paolini…
AREVA : Q3 revenue €3.16bn (3.25bn e) / Order backlog €47.5bn / Confirms outlook / Began talks with potential capital hike partners
TOTAL (Minor) : CEO warned of an oil supply crunch if environmental policies deter investment in oil & gas before sufficient alternatives are in place… (FT)
UK BANKS : FSA said globally important banks should be required to hold additional capital and perhaps extra liquidity in recognition of their “too big to fail” status within the international financial system (FT)
TRADING IDEAS
BUY ASML / on double bottom possibility
BUY E.ON / VEOLIA / BUY QUALCOMM / CARREFOUR
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY ENI or BP / SELL ROYAL DUTCH // BUY GSZ / SELL EDF // BUY PUBLICIS / SELL LAGARDERE // BUY BAYER / SELL AKZO // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
ZURICH FINANCIAL RATED NEW BUY BY RBS
BNP-PARIBAS RAISED TO BUY FROM NEUTRAL BY UBS
ALCATEL – LUCENT RAISED TO BUY FROM NEUTRAL BY GOLDMAN SACHS
ERICSSON ADDED TO CONVICTION BUY LIST BY GOLDMAN SACHS
ERICSSON RAISED TO BUY FROM NEUTRAL BY GOLDMAN SACHS
TELIASONERA RAISED TO BUY FROM NEUTRAL BY UBS
LOGITECH RAISED TO BUY FROM NEUTRAL BY UBS
MINING STOCKS RAISED TO BENCHMARK BY CREDIT SUISSE
VODAFONE RATED NEW BUY BY ING
VERBUND ADDED TO MOST PREFERRED LIST BY UBS
VINCI STARTED AT OVERWEIGHT BY MORGAN STANLEY
KPN RAISED TO BUY BY ING
PORTUGAL TELECOM RAISED TO BUY BY ING
TELEKOM AUSTRIA RAISED TO BUY BY ING
ENI CUT TO NEUTRAL FROM BUY BY UBS
ROYAL DUTCH SHELL CUT TO NEUTRAL FROM BUY BY UBS
GALP CUT TO NEUTRAL FROM BUY BY UBS
IBERDROLA REMOVED FROM PREFERRED LIST BY UBS
GLAXO CUT TO HOLD FROM BUY BY JEFFERIES
STANDARD BANK CUT TO NEUTRAL FROM BUY BY UBS
GDF-SUEZ ADDED TO LEAST PREFERRED LIST BY UBS
ENDESA ADDED TO LEAST PREFERRED LIST BY UBS
REPSOL REMOVED FROM KEY CALL LIST BY UBS
DATA
WTI : 81,6 (0,85 %)
Eur/$ : 1,5025 (-0,05 %)
$ /Yen : 91,66 (-0,35 )
10 Yr US : 3,45 ( 3,54 bp)
10 Yr Euro : 3,31 ( -1,4 bp)
Indices : US close ; Europe close
SOX : 1,29 %;-0,53%
S&P :1,06 %; -0,02 %
DOW: 81,6%; 0,85 %
NAS :0,68%; -0,48%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 1,15 %; 0,02 %
ENERGY : 0,82 %; -0,49 %
FINANCIAL : 2,66 %; 0,69 %
HEALTHCARE : 0,85 %; 0,21 %
TECHNO : 0,65 %; -0,38 %
TELECOM : 0,56 %; 1,30 %
INDUSTRIAL : 0,76 %; -0,30 %
UTILITIES : 0,27 %; -0,62 %
TO BE COMING
Today
Results : EU\\ B Sky B / Danone sales / Gazprom / Honeywell (BMO) / Ingenico / Saab (BMO) / Syngenta / Volvo /
US \\ Fortune Brands / Honeywell / Microsoft / Morgan Stanley / Schlumberger (BMO) / Verizon
Dividend :
Events :B Sky B (AGM)
Monday
Results : EU\\ Banco Popular (BMO) / Boliden / Corning / Merck KGaA / Michelin sales / Scania
US \\ VerizonAsia
Asia\\ Tata Motors
Dividend :
Events:
Tuesday
Results : EU\\ Aegis / Akzo Nobel / Banco Bilbao Vizcaya Argentaria / Banco Espirito Santo / Bayer / BP / Daimler (3Q final details) / Enagas / Klepierre sales / KPN / Norsk Hydro / Petroleum Geo-Services / Publicis / Reckitt Benckiser / Renewable Energy / Saipem / Svenska Cellulosa / Vestas Wind
US \\ Ernst & Young / United States Steel / Visa
Asia \\ Canon / Honda Motor / Tata Steel
Dividend :
Events : Pfizer analyst & investor / SAP TechEd Vienna event
Wednesday
Results : EU\\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard
Asia \\ Nomura / PetroChina
Dividend :Rolls-Royce (GBp 6)
Events:
Thursday
Results :EU\\ Abb / AstraZeneca / BASF (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive / Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) /Procter & Gamble / Sprint /
Dividend :
Events:BHP Billiton AGM / Nordea Bank
ECONOMIC DATA PREVIEW
Watch in the United-States the Existing home sales for September (15.00 GMT). Existing home sales are expected to rise from 5.10 million in August to 5.40 million in September as the real estate market is progressively recovering. Moreover low prices and mortgage rates should boost house purchases.
Watch in the Euro area the advanced release of the PMI manufacturing and services for October (15.00 GMT). PMI manufacturing and services are both expected to progress in October above the level of 50, confirming that companies are back to investment. Nevertheless we are still far from the virtuous circle Investment-employment -consumption.
Watch in France the consumer spending for September (7.45 GMT). The effects of the deflation and the cash for clunkers program, without forgetting the back to school allowances, should boost French private consumption by 1% in September. Moreover, with substantial savings, (precisely 16.7%), they can dig in. Consequently, household consumption should increase by 1% in 2009 despite the rise in unemployment.
ECONOMY
United-States: New rise of the Conference Board leading indicators in September
The economic recession is over in the United-States as showed by the ISM manufacturing and services index reaching respectively 52.6 and 50.9 in September, and by the rebound in household consumption, confirmed by the increase of retail sales. Not to mention the US manufacturing companies investing again. In such conditions, the Conference Board leading index, already up since last April, confirmed logically its progression by rising 1% in September
United-States: Weekly Initial jobless claims slightly rose and continuing claims declined
Initial jobless claims rose from 520 000 to 531 000 last week ending two consecutive week of decline. Nevertheless the employment market is slowly but surely recovering and after over laying off companies are now matching closer economic fundamentals. Meanwhile continuing claims dropped for a fifth consecutive week from 6 021 000 to 5 923 000 a lowest since the last week of march 2009 confirming that the hiring market is progressively recovering led by the economic rebound in the United-States. Nevertheless unemployment remained a lagging indicator of the economic activity as there is a gap of six month between the economic recovery and a significant improvement of labor market
France: Sharp rise of the business confidence indicator
After sixth consecutives months of rise the French business confidence indicator rose sharply in October. Increasing by
3 pts since September this advance indicator of industrial activity and GDP reached 89 the highest level since September 2008 and a global progression of 20 pts since the ground floor in March 2009. This indicator is progressively getting closer to the level of 100, meaning its long run average. This mean that French economy and industry are now out of the recession and the GDP should reach 1.3% in 2010.
Come to where the “carry trade” is! Yesterday and this morning the dollar’s slide widened and the EUR/USD is now standing firmly above 1.50 EUR/USD (1.5034 at 06.00 BST after an intraday high of 1.5060). Meanwhile other assets such as equities, gold and raw materials rose or remained at very high levels. As for U.S. equities, they strongly reversed a two-day losing streak as better-than-expected earnings overshadowed some disappointment about the rise in the initial weekly jobless claims (up to 531k on Oct. 17th and revised up to 520k from 514 k on Oct. 10th) and the fall of the FHFA house price index in August (-0.3 %). However, leading indicators were up 1.0 % in September vs. +0.8 % expected. Among a very long list, Travelers, Mc Donald’s, New York Time, PNC Financial rallied after stronger than expected results. American Express rose to a one-year high after Moody’s said credit-card defaults declined. After session, Broadcom (-8.30 %) disappointed investors, but Amazon.com (+14.48 %!) soared after the company’s result largely topped analysts’ estimates and gave positive guidance, due to the Kindle. On October 22nd, 188 companies of the S&P 500 released their earnings an a record of 80 % were above analyst’s estimates. Despite a P/E back up above historical levels (19 x 2009 operational earnings), the S&P 500 index has still an upside potential.
The latest rally in gold prices ($1061.90 /oz this morning, record high of $1070.80 /oz on October 14th) largely reflects a lack of confidence in the dollar. Gold is also being widely touted as a hedge against inflation. As it happens, gold’s track record as a store of value is far from perfect. However, during times of rapid inflation it has proved its worth, notably after the oil price shocks in the mid- to late-1970s. As some analysts like to stress, gold is still trading well below the all-time high of around $2,300 in real (inflation-adjusted) terms, which was seen briefly in 1980. Gold is also a hedge against deflation. So, there are many reasons why gold price is soaring. Nonetheless, current gold prices are not yet a bubble: gold is close to its long-run averages relative to oil and to equity prices.
The recent slide in the dollar’s share of global foreign exchange reserves greatly exaggerates the extent to which reserve managers are losing faith in the US$. The dollar is still entrenched as the world’s dominant reserve currency. The IMF published its latest foreign exchange on September 30th. The figures provide the underlying currency composition of about 2/3 of global reserves. The share of the dollar in the global total fell from 65.0 % in Q1 2009 to 62.8 % in Q2 – the lowest since 1995. At face value, this might suggest that central bank reserve managers are beginning to turn away from the dollar. But there are at least three reasons why fears over the impact of reserve diversification on the US$ are probably exaggerated. 1) A large portion of the recent shift in the dollar’s share of global reserves can be explained by the weakening US$, rather than by the changes in the behavior of reserve managers. A weaker dollar automatically boosts the US$ value of those reserves held in other currencies. This factor probably accounts for more than half of the decline in the dollar’s share of reserves in Q2. 2) Although China has voiced its concerns about the status of the dollar as the world’s reserve currency, there is no sign that the world’s largest holder of reserves is turning its back on the US$ yet. The underlying currency composition of China’s $2trn stock of reserves is not publicly known. However, official U.S. data shows that China increased its holdings of U.S. Treasuries to $800bn in July compared with $780bn at the end of Q2 and $767bn in Q1. 3) The dollar has already depreciated significantly since 2001, and yet this has not caused large scale diversification of reserves among reserve managers. Now, with the trade-weighted dollar index not far from all-time lows, there is little incentive for reserve managers to begin selling their dollars. In fact, the dollar should strengthen over the next six months. However, the dollar’s position as the world’s dominant currency will stay under the spotlight. And over the very long term it is possible that wider use of other currencies such as the euro, yen, renminbi (not yet convertible!) or even the IMF’s special drawing rights could be warranted. But this will take a very long time…
This morning, Japanese stocks didn’t profit by U.S. equities’ surge and were quite flat. Other Asian markets were on the upside (Shanghai composite +2.15 % at 06.40 BST). U.S. index futures were up DJIA +0.06 %, S&P 500 +0.16 %, Nasdaq 100 +0.18 %. European markets should recoup yesterday’s correction…
ECONOMIC DATA WITH IMPACT
US Existing home sales for September (15.00 BST). The dip in August data from 5.24 million (annualized) to 5.10 million was certainly temporary. Data for September could be above the consensus of 5.35 million and reach a 2-year high of 5.50 million. / Major
Ben Bernanke speaks on regulation at Boston Fed Conference (13.30 BST)./ Interesting
Euro-zone, watch for the composite PMI for October (09.00 BST) expected to rise to 51.6 from 51.1. In September, the index remained above 50 for the second month in a row, suggesting that the economy may have expanded modestly in Q3. The destocking process may be coming to an end, prompting the manufacturing PMI to tick up / Interesting
German IFO business sentiment (09.00 BST) is expected to be up to a 11-month high of 93 vs. 91.3, suggesting the economy is experiencing a sustained pick-up in activity / Major
UK provisional estimate of Q3 GDP (09.30 BST) which is expected to rise (0.1 % to 0.2 % QoQ) / Major
POSITIVE IMPACTS
SAINT GOBAIN : Q3 sales €9.72bn (9.6bn exp) / Confirmed H2 operating & net profit to outperform H1 with management adding that it will reach analysts estimates of €2.1bn for the FY operating / Sees more momentum in Q4
DANONE : Q3 sales €3.78bn (3.82bn exp) / Organic gwth 4.1% (3.2% exp) / Dairy volumes +7% (+5% exp) / FY09 targets confirmed
BNPweight in the CAC40 will increase to 8.14% from 7.4% tonight at the close / BNP said that investor demand for its €4.3bn share sale was 2.5 times more than the number of shares on offer / Will reimburse €5.1bn to the govt on Oct. 28
CADBURY : One of Cadbury's 10 biggest investors said a raised bid of 820 p (£11.3 bn) from Kraft would be examined very closely…
VOLKSWAGEN : Audi sees a "very good operating results" for the Q3 (Audi CFO)
VOLVO : Q3 sales SK48.5bn (49.4bn exp) / Operating loss SK3.29bn (-3.75bn exp) / Orders stable from prev. year (+20% from Q2)
PEUGEOT is in discussions with Mitsubishi Motors over a potential JV for a new 4X4 vehicle (La Tribune)
VINCI won a €370 m contract for the construction of Monaco's highest tower
CBK is making preparations to enter Russian retail banking, possibly with a direct bank model, next year (Handelsblatt)
BSKYB : Q1 rev. £1,38bn (1.36bn e) / Adj. operating £198 m (£192m e) / Q1 churn 11.3% (11% e) / 94K new clients in Q1 (87K e)
MEDIASET : Prisa has been in informal talks with Mediaset over the future of the TV biz in Spain, but there is nothing concrete yet (CEO)
REPSOL : PETROBRAS & YPF have been awarded a contract to explore for natural gas and oil off Uruguay's coast
BRIT INSURANCE: 9M Gross Premium £1.33bn (1.2bn e) / No significant catastrophes in Q3 / Returns are likely to be muted in 2010
AMAZON : Q3 rev. $5.45bn (5.04bn e) / EPS $0.45 (0.33 e) / Sees Q4 rev. $8.12-9.13bn (8.19bn e) + operating $300-425m (376m e)
AMEX : Q3 revenue $6.02bn (5.98bn exp) / EPS $0.44 (0.38 exp) / Card spending down 11% from Q308 (-16% in Q209)
NEGATIVE IMPACTS
FRANCE TEL. - VIVENDI : Orange and SFR could each face fines of €600 m to €700 m because the companies allegedly failed to meet their obligations in covering France's population with their 3G networks (Les Echos)
SYNGENTA : Q3 sales $2bn ($2.06 bn exp) / Confirmed FY outlook for EPS to be close to the 2008 level.
MOBISTAR (51% owned by FTE) : Q3 revenue €386m (392m exp) / Ebitda €142m (146m exp) / Confirmed FY guidance
AIR FRANCE KLM's job cutting plan will cost between €150-160 m (La Tribune)
HAVAS : Q3 revenue €318m (344m exp) with organic sales down 9.3% (-6.6% exp) / No FY outlook
TF1 : Axel Duroux, CEO representative would be about to leave the group, confirming the actual coolness with actual CEO M. Paolini…
AREVA : Q3 revenue €3.16bn (3.25bn e) / Order backlog €47.5bn / Confirms outlook / Began talks with potential capital hike partners
TOTAL (Minor) : CEO warned of an oil supply crunch if environmental policies deter investment in oil & gas before sufficient alternatives are in place… (FT)
UK BANKS : FSA said globally important banks should be required to hold additional capital and perhaps extra liquidity in recognition of their “too big to fail” status within the international financial system (FT)
TRADING IDEAS
BUY ASML / on double bottom possibility
BUY E.ON / VEOLIA / BUY QUALCOMM / CARREFOUR
BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON // BUY ENI or BP / SELL ROYAL DUTCH // BUY GSZ / SELL EDF // BUY PUBLICIS / SELL LAGARDERE // BUY BAYER / SELL AKZO // BUY VISA / SELL MASTERCARD
BROKER METEOROLOGY
ZURICH FINANCIAL RATED NEW BUY BY RBS
BNP-PARIBAS RAISED TO BUY FROM NEUTRAL BY UBS
ALCATEL – LUCENT RAISED TO BUY FROM NEUTRAL BY GOLDMAN SACHS
ERICSSON ADDED TO CONVICTION BUY LIST BY GOLDMAN SACHS
ERICSSON RAISED TO BUY FROM NEUTRAL BY GOLDMAN SACHS
TELIASONERA RAISED TO BUY FROM NEUTRAL BY UBS
LOGITECH RAISED TO BUY FROM NEUTRAL BY UBS
MINING STOCKS RAISED TO BENCHMARK BY CREDIT SUISSE
VODAFONE RATED NEW BUY BY ING
VERBUND ADDED TO MOST PREFERRED LIST BY UBS
VINCI STARTED AT OVERWEIGHT BY MORGAN STANLEY
KPN RAISED TO BUY BY ING
PORTUGAL TELECOM RAISED TO BUY BY ING
TELEKOM AUSTRIA RAISED TO BUY BY ING
ENI CUT TO NEUTRAL FROM BUY BY UBS
ROYAL DUTCH SHELL CUT TO NEUTRAL FROM BUY BY UBS
GALP CUT TO NEUTRAL FROM BUY BY UBS
IBERDROLA REMOVED FROM PREFERRED LIST BY UBS
GLAXO CUT TO HOLD FROM BUY BY JEFFERIES
STANDARD BANK CUT TO NEUTRAL FROM BUY BY UBS
GDF-SUEZ ADDED TO LEAST PREFERRED LIST BY UBS
ENDESA ADDED TO LEAST PREFERRED LIST BY UBS
REPSOL REMOVED FROM KEY CALL LIST BY UBS
DATA
WTI : 81,6 (0,85 %)
Eur/$ : 1,5025 (-0,05 %)
$ /Yen : 91,66 (-0,35 )
10 Yr US : 3,45 ( 3,54 bp)
10 Yr Euro : 3,31 ( -1,4 bp)
Indices : US close ; Europe close
SOX : 1,29 %;-0,53%
S&P :1,06 %; -0,02 %
DOW: 81,6%; 0,85 %
NAS :0,68%; -0,48%
DJ Stoxx US Sectoral Indices : US close ; Europe close
BASIC MATERIALS : 1,15 %; 0,02 %
ENERGY : 0,82 %; -0,49 %
FINANCIAL : 2,66 %; 0,69 %
HEALTHCARE : 0,85 %; 0,21 %
TECHNO : 0,65 %; -0,38 %
TELECOM : 0,56 %; 1,30 %
INDUSTRIAL : 0,76 %; -0,30 %
UTILITIES : 0,27 %; -0,62 %
TO BE COMING
Today
Results : EU\\ B Sky B / Danone sales / Gazprom / Honeywell (BMO) / Ingenico / Saab (BMO) / Syngenta / Volvo /
US \\ Fortune Brands / Honeywell / Microsoft / Morgan Stanley / Schlumberger (BMO) / Verizon
Dividend :
Events :B Sky B (AGM)
Monday
Results : EU\\ Banco Popular (BMO) / Boliden / Corning / Merck KGaA / Michelin sales / Scania
US \\ VerizonAsia
Asia\\ Tata Motors
Dividend :
Events:
Tuesday
Results : EU\\ Aegis / Akzo Nobel / Banco Bilbao Vizcaya Argentaria / Banco Espirito Santo / Bayer / BP / Daimler (3Q final details) / Enagas / Klepierre sales / KPN / Norsk Hydro / Petroleum Geo-Services / Publicis / Reckitt Benckiser / Renewable Energy / Saipem / Svenska Cellulosa / Vestas Wind
US \\ Ernst & Young / United States Steel / Visa
Asia \\ Canon / Honda Motor / Tata Steel
Dividend :
Events : Pfizer analyst & investor / SAP TechEd Vienna event
Wednesday
Results : EU\\ Acerinox / Anglo Pacific / Arcelor Mittal / Banco Santander / BG Group (BMO) / British American Tobacco interim / Broadvision / EDP Renovaveis / ENI / GlaxoSmithKline / Heineken trading statement / Mediobanca / NH Hoteles / Nordea Bank / Prudential / SAP / Seche Environnement / Svenska Handelsbanken / Symantec / TeliaSonera (BMO) / TomTom / Umicore
US \\ ConocoPhillips (BMO) / General Dynamics / Goodyear / International Paper (BMO) / Lazard
Asia \\ Nomura / PetroChina
Dividend :Rolls-Royce (GBp 6)
Events:
Thursday
Results :EU\\ Abb / AstraZeneca / BASF (BMO) / Continenta / Dassault Systemes / Deutsche Bank (BMO) / Deutsche Lufthansa (BMO) / Geberit / Lonza / Man AG / Neste Oil (BMO) / Renault sales / Standard Chartered / Telenor / Volkswagen
US \\ American Electric Power / Colgate-Palmolive / Eastman Kodak / Electronic Arts / ExxonMobil / Kellogg (BMO) /Procter & Gamble / Sprint /
Dividend :
Events:BHP Billiton AGM / Nordea Bank
ECONOMIC DATA PREVIEW
Watch in the United-States the Existing home sales for September (15.00 GMT). Existing home sales are expected to rise from 5.10 million in August to 5.40 million in September as the real estate market is progressively recovering. Moreover low prices and mortgage rates should boost house purchases.
Watch in the Euro area the advanced release of the PMI manufacturing and services for October (15.00 GMT). PMI manufacturing and services are both expected to progress in October above the level of 50, confirming that companies are back to investment. Nevertheless we are still far from the virtuous circle Investment-employment -consumption.
Watch in France the consumer spending for September (7.45 GMT). The effects of the deflation and the cash for clunkers program, without forgetting the back to school allowances, should boost French private consumption by 1% in September. Moreover, with substantial savings, (precisely 16.7%), they can dig in. Consequently, household consumption should increase by 1% in 2009 despite the rise in unemployment.
ECONOMY
United-States: New rise of the Conference Board leading indicators in September
The economic recession is over in the United-States as showed by the ISM manufacturing and services index reaching respectively 52.6 and 50.9 in September, and by the rebound in household consumption, confirmed by the increase of retail sales. Not to mention the US manufacturing companies investing again. In such conditions, the Conference Board leading index, already up since last April, confirmed logically its progression by rising 1% in September
United-States: Weekly Initial jobless claims slightly rose and continuing claims declined
Initial jobless claims rose from 520 000 to 531 000 last week ending two consecutive week of decline. Nevertheless the employment market is slowly but surely recovering and after over laying off companies are now matching closer economic fundamentals. Meanwhile continuing claims dropped for a fifth consecutive week from 6 021 000 to 5 923 000 a lowest since the last week of march 2009 confirming that the hiring market is progressively recovering led by the economic rebound in the United-States. Nevertheless unemployment remained a lagging indicator of the economic activity as there is a gap of six month between the economic recovery and a significant improvement of labor market
France: Sharp rise of the business confidence indicator
After sixth consecutives months of rise the French business confidence indicator rose sharply in October. Increasing by
3 pts since September this advance indicator of industrial activity and GDP reached 89 the highest level since September 2008 and a global progression of 20 pts since the ground floor in March 2009. This indicator is progressively getting closer to the level of 100, meaning its long run average. This mean that French economy and industry are now out of the recession and the GDP should reach 1.3% in 2010.
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