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GLOBAL EQUITIES RESEARCH

U.S. equity markets declined for the second session in a row, after tumbling in the final hour of trading (S&P 500 -0.89 % at 1081.40). An earlier rally spurred by better-than-estimated results at Morgan Stanley and Yahoo! was erased after Wells Fargo (‑5.12 %) was downgraded by an analyst of Rochdale Securities cut the share to “sell” and said earnings were boosted by mortgage-servicing fees rather than improving business trends. The analyst said that loan losses seem to be accelerating. In the same time, Wal Mart (-2.07 %) said it expects a tough holiday shopping season. Boeing (-2.43 %) booked $3.5bn in charge for the delayed 787 Dreamliner and 747-8 jumbo jet programs. Its largest-ever net loss of $1.56bn, or $2.23 a share, exceeded the $2.10 a share average estimate of 18 analysts in a survey. Microsoft (+0.80 %, highest rise in the DJIA) launched Windows 7 in its most important release for more than a decade, aiming to win back customers after the disappointing Vista and strengthen its grip on the PC market.

The Beige Book did not bring the markets any support. Reports from the 12 Federal Reserve Districts indicated either stabilization or modest improvements in many sectors since the last report, albeit often from depressed levels. Leading the more positive sector reports among Districts were residential real estate and manufacturing, both of which continued a pattern of improvement that emerged over the summer. Reports on consumer spending and non-financial services were mixed. Commercial real estate was reported to be one of the weakest sectors, although reports of weakness or moderate decline were frequently noted in other sectors. The weakest sector was commercial real estate, with conditions described as either weak or deteriorating across all Districts. Banking also faltered in several Districts, with Kansas City and San Francisco noting continued erosion in credit quality (often with more expected in the future). One bright spot in the banking sector was lending to new homebuyers, in response to the first-time homebuyer tax credit. Finally, labor markets were typically characterized as weak or mixed, but with occasional pockets of improvement. Districts generally reported little or no increase to either price or wage pressures, but references to downward pressures were occasionally noted. While upward price pressures were generally subdued in most Districts, materials prices increased in Cleveland (mainly for steel) and Kansas City. Manufactured goods prices were flat to up slightly in Boston. Boston reported that in some market segments "product competition and customer clout are leading to downward pressure on prices."

China’s stimulus-induced lending binge propelled GDP growth in Q3 to 8.9 % (+7.7 % year-to-date), the fastest pace in a year. The country’s rebound has been powered by a $586bn of spending on railways, roads, power plants and public housing. The program ends next year, forcing the government to find new ways to sustain the expansion with increased consumer spending and the financing of small businesses. According to the World Bank state-directed support will make up more than 4/5 of growth in 2009. An exit from the stimulus won’t be easy: a plunge in July loan growth sent the Shanghai Composite Index down more than 20 % in August. Extending the stimulus for too long risks the diversion of funds into stocks and real estate, an erosion of bank asset quality and inflationary pressures. “The policy focus of the next few months is to balance the need to maintain stable and relatively fast growth, the need to adjust the economic structure and the need to better manage inflationary expectations” the State Council said. Retail sales were up 15.5 % YoY and industrial production rose 13.9 % YoY, above expectations.

Carry trade is still roaring: the EUR/USD climbed above 1.50, with an intraday high of 1.5046 this morning, while oil price settled above $80 /bbl and gold stayed well above $1,000 /oz (1058.95 this morning). With the exception of Shenzhen composite (+0.7 %), Asian markets were down this morning. At 06.30 BST, U.S. index futures were mixed: DJIA +0.05 %, S&P 500 +0.09 %, but Nasdaq -0.23 %, after eBay’s results disappointed investors. eBay was down 4.50 % after session. European markets should keep on consolidating this morning.


ECONOMIC DATA WITH IMPACT


US weekly jobless claims (10/17) expected to confirm their downward move towards 500k (515k expected) and continuous claims (10/10) that should stay well below 6000k (5990k expected) 13.30 BST / interesting despite weekly volatility.

US Conference Board Leading Indicators for September (15.00 BST) are expected to rise 0.9 % MoM vs. +0.6 % in August (+1.9 % YoY) / Minor, as many data are already known.

US FHFA House Price Index for August (15.00 BST) should confirm the upward move recorded since last May (+0.6 % MoM, +0.1 % in June, +0.3 % in July).+0.3 % expected / Major as houses prices are a key driver for consumer confidence.

Eric Rosengren, Boston Fed’s president, speaks about Financial Stability (15.30 BST)

Bank of England releases trend in lending report (09.30 BST) / Important



POSITIVE IMPACTS


NESTLE : 9M sales SFR79.5bn (80.3bn exp) / Org. growth 3.8% (3.6% exp) / 9M RIG 1% (+0.9% exp) but 2% in Q3… / FY outlook unchanged / Increases share BB to SFR7bn from SFR4bn

UCB said that 9M financial performance is in line with expectations / Repeated 2009 guidance

EDF and its rivals would have agreed that as of 2010, EDF rivals can buy electricity derived from EDF's nuclear activities at about €34 per megawatt hour. The price would gradually increase until 2010 (Les Echos)

AVIVA will announce a restructuring of its European operations (CEO in the FT ) / Investor Day at 0830 UKT

SCHNEIDER : Q3 sales € 3.95 bn (-17%), in line / Raised 2009 EBITA margin target to 12.5% from 12%

RICARD : Q1 sales 1.65 bn (1.64bn est.) / Early signs of improvement appear in certain market / Will give annual guidance on Nov. 2

CREDIT SUISSE : Q3 rev. SFR8.92bn (8.5bn e) / NII SFR3.3bn / Trading Inc. SFR3.49bn / NN Assets SFR16.7bn (8.6bn e) / Net SFR2.4bn (1.7bn exp) / ROE 25.1% (17% exp) / Tier 1 at 16.4% / Accruing for more normalized div. in 2009 / Conf call at 0900 UKT

DNBNOR : Q3 NII NK5.74bn (5.67bn exp) / Loan losses NK2.28bn (2.44bn exp) / Sees positive underlying trend, especially in retail banking / Says can not rule out continued high writedowns in Baltic region / Analyst meeting 0830 UKT

STORA ENSO : Q3 sales €2.23bn, in line / Underlying Ebit €131.5m (70m exp) / Does not see immediate improvement in demand

ATLAS COPCO : Q3 sales SK15.1bn, in line / PTP SK2.21bn (1.83bn exp) / Order intake SK14.3bn (14.5bn e) / Sees stable demand

FORTUM : Q3 sales €1.05bn, in line / Operating €316m (313m exp) / Progress in Russia on track

ANGLO-AMERICAN : Copper production +13.4% / Iron ore production +15.7% / Platinum refined production +15.8%

THOMSON said it is still pursuing discussions for the disposal of grass valley / Screenvision US disposal is in final stages of discussions



NEGATIVE IMPACTS



ERICSSON : Q3 sales SK46.4bn (51.1bn exp) / GM 36.2% (36.1% exp) / Operating SK5.5bn (5.8bn exp) but margin better…

ESSILOR : Q3 Sales €805.1m (€1.1bn exp) / Cut debt by €87m to €125m / Expects to increase FY revenue, with around 0% LFL growth & expects improvement in 2009 contribution margin / Conf call at 0800 UKT

AIR LIQUIDE : Q3 sales €2.98bn (3.01bn est ) / Positive signs seen end H1 have been confirmed / Confirms 09 sales & EPS guidance

LLOYDS wants to start its rights offering & refinancing next week, providing the govt and regulators agree to the deal this weekend (FT)

NOVARTIS : Q3 total sales $11.09bn (11bn e) / Drug sales $7.22bn (7.1bn e) / Operating $2.63bn (2.64bn e) / Raised its FY sales outlook = Sees grp sales to grow at high single-digit rate (+5% before) + drug sales +10% (around 10% before) / EPS outlook unch.

LOGITECH : Q2 sales $498m (484m e) / Ebit $27.3m (12.4m e) / Sees Q3 sales $575-595m (620m e) & operating $45-$50 m (57m e)

OUTOKUMPU : Q3 sales €587m (702m exp) / Operating loss €65m (-50m exp) / Will not proceed with Avesta expansion plan





EBAY : Q3 revenue $2.24bn (2.14bn e) / EPS $0.38 (0.37 p) / Sees Q4 revenue $2.20-2.30bn (2.26bn e) + Q4 EPS $0.38-0.40 (0.40 e)



TRADING IDEAS


BUY ACCOR / ASML / on double bottom possibility

BUY E.ON / VEOLIA

BUY QUALCOMM / CARREFOUR on reversal Head &Shoulder possibility



BUY ANGLO GOLD / SELL BHP // BUY REED ELSEVIER / SELL PEARSON / BUY AVIVA / SELL LOYDS // 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


ANGLO AMERICAN RESTARTED AT BUY BY GOLDMAN SACHS

PEUGEOT RAISED TO BUY FROM NEUTRAL BUY UBS


ANGLO PLATINIUM RESTARTED AT SELL BY GOLDMAN SACHS

COMPASS GROUP CUT TO HOLD FROM BUY BY S&P RESEARCH

HAVAS CUT TO HOLD FROM BUY BY DEUTSCHE BANK

STMICROELECTRONICS CUT TO SELL FROM HOLD BY RBS

SAP CUT TO NEUTRAL FROM BUY BY BANK OF AMERICA - ML


DATA


WTI : 80,9 (2,78 %)

Eur/$ : 1,4990 (-0,18 %)

$ /Yen : 91,17 (-0,04 )

10 Yr US : 3,39 ( 0,36 bp)

10 Yr Euro : 3,32 ( 8,4 bp)


Indices : US close ; Europe close

SOX : -1,29 %;-0,20%

S&P :-0,89 %; 0,64 %

DOW: -0,92%; 0,44 %

NAS :-0,59%; 0,71%



DJ Stoxx US Sectoral Indices : US close ; Europe close

BASIC MATERIALS : -0,87 %; 0,98 %

ENERGY : -0,31 %; 1,12 %

FINANCIAL : -1,77 %; 0,90 %

HEALTHCARE : -1,35 %; -0,33 %

TECHNO : -0,34 %; 0,73 %

TELECOM : 0,01 %; 0,27 %

INDUSTRIAL : -0,85 %; 0,82 %

UTILITIES : 0,00 %; 0,90 %



TO BE COMING



Today

Results :Air Liquide (BMO) / Aker Solutions / Anglo American interim / Atlas Copco / Aviva trading update / Essilor / Banco Sabadell / Credit Suisse (BMO) / Ericsson (BMO) / Essilor / Fortum (BMO) / Gemalto / Ingenico / Logitech / Nestlé sales (BMO) / Nicox / Novartis / Pernod Ricard / Petrofac / Potash / Reed Elsevier / Saint-Gobain sales / Schneider sales / Stora Enso / Thomson sales / UCB \\ 3M / Amazon.com / American Express (AMC) / AT&T / Black & Decker / Bristol-Myers Squibb / Broadcom / Dow Chemical / Eastman Chemical / McDonald's / Merck & Co / Philip Morris (BMO) / Schering-Plough (BMO) / Union Pacific / Wyeth / Xerox \\ LG Electronic

Dividend :

Events :Microsoft Windows 7 goes on general release / Annual Retail Round Table at Deutsche Bank / Aviva Europe investor day



Friday

Results : B Sky B / Danone sales / Gazprom / Honeywell (BMO) / Ingenico / Saab (BMO) / Syngenta / Volvo / \\ Fortune Brands / Honeywell / Microsoft / Morgan Stanley / Schlumberger (BMO) / Verizon

Dividend :

Events: B Sky B (AGM)



Monday

Results : Banco Popular (BMO) / Boliden / Corning / Merck KGaA / Michelin sales / Scania \\ Verizon \\ Tata Motors

Dividend :

Events :



Tuesday

Results : Aegis / Akzo Nobel / Banco Bilbao Vizcaya Argentaria / Banco Espirito Santo / Bayer / BP / Daimler / Enagas / Klepierre sales / KPN / Norsk Hydro / Petroleum Geo-Services / Publicis / Reckitt Benckiser / Renewable Energy / Saipem / Svenska Cellulosa / Vestas Wind \\ Ernst & Young / United States Steel / Visa \\ Canon / Honda Motor / Tata Steel

Dividend :

Events: Pfizer analyst & investor / SAP TechEd Vienna event



Wednesday

Results :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 \\ ConocoPhillips / General Dynamics / Goodyear / International Paper / Lazard \\ Nomura / PetroChina

Dividend : Rolls-Royce (GBp 6)

Events:



ECONOMIC DATA PREVIEW



Watch in the United-States the Conference Board Leading indicators for September (15.00 GMT). The recession is over in the United-States an private motors like companies investments or household consumption are now taking over public motors. In such conditions, the Conference Board leading index, already up since last April, should confirm its progression by rising 0.7% in September.



ECONOMY



United-States: Fed Beige Book

“Reports from the 12 Federal Reserve Districts indicated either stabilization or modest improvements in many sectors since the last report, albeit often from depressed levels. Consumer spending remained weak in most Districts since the last report, although some improvements were noted. The "cash-for-clunkers" program ended in August, leaving depleted inventories and slower sales in its wake. Non-financial services firms had mixed reports in recent weeks. Transportation services activity generally declined. Most Districts reported that manufacturing activity was generally stronger since the last report. Most Districts reported that housing market conditions improved in recent weeks, primarily from a pickup in sales of low- to middle-priced houses. Contacts reported that sales were boosted by the government's tax credit for first-time homebuyers. Resale activity also edged up in parts of the New York District, although prices continued to be depressed due to a substantial volume of foreclosures and short sales. Residential construction activity remained weak in most Districts. Commercial real estate continued to weaken across the 12 Districts, although even this sector had scattered bright spots. Each District indicated that demand for private commercial real estate was weak. Many Districts continued to report weak or declining loan demand, and many noted further erosion of credit quality. Labor market conditions were generally reported as weak or mixed across Districts, but a few encouraging signs were noted. Wage and price pressures were generally described as subdued across most Districts.