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Macro Commodities Forex Rates Equity Credit Derivatives
Please see important disclaimer and disclosures at the end of the document
07 June 2010
Equity
Global Quantitative Research
www.sgresearch.com
Global Equity
Market Arithmetic
Global earnings momentum slumps
London
 Andrew Lapthorne
(44) 20 7762 5762andrew.lapthorne@sgcib.com
Rui Antunes
(44) 20 7762 5875rui.antunes
@sgcib
.com
John Carson
(44) 20 7762 4979 john.carson@sgcib.com
Georgios Oikonomou
 
( 
44) 20 7762 5261
 
georgios.oikonomou@sgcib.com
New-York
 Andy Kim
(1) 212 278 5455andy.kim@sgcib.com
Markets
 
Global equity markets continue to struggle with the MSCI World Index suffering a further1.9% decline last week, leaving it down 9.3% so far this year. Emerging Markets fared only alittle better, with a drop of 0.4%. China, however, fell almost 4% (CS 300) during the week andis now down over 20% this year.
 
Disappointing US jobs data on Friday saw the S&P 500 drop by 3.4% in one day, thesecond worst trading day in the past 12 month period. In fact, during the last year there havebeen only five occasions when the S&P has fallen by 3% or more, with three of these daysoccurring within the past month. The S&P 500 ended the week down 2.3% and the Dowfinished below 10,000 again.
 
Japan saw minor in a week that saw its Prime Minister stepped down. The Nikkei 225finished the week up 1.4%
although the market was closed by the time the US jobs news hitthe screens.
 
In Europe, the MSCI Eurozone index was off 1.7%, pushing the index into double-digit lossterritory for 2010. Greece and Spain continued fall, with losses of 6.2% and 5.3%,respectively. However, Austria saw the worst of the selling with a 6.7% decline. Austria
sfinancial sector is heavily exposed to Hungary and so was not helped when an official saidthat talk of a default was
not an exaggeration
.
Sectors
 
During the last month there has been a clear demarcation between relative sector winnersand losers. Whilst still in negative territory, defensive sectors such as Telecoms, Beverages,Tobacco and Food Producers, have lost
 just
4-6%. The losers include Oil Equipment,Services & Distribution (-14.8%), Industrial Metals & Mining (-12.1%), Construction & BuildingMaterials (-11.8%) and Financial Services (-11.6%).
Earnings
 
Global earnings momentum is now falling away sharply, with the ratio of upgrades to totalestimate changes now at 55%, down from 64% four weeks ago. This decline in analystoptimism is, in our view, probably the most dramatic in the US, though the percentage ofupgrades coming through is still relatively high in this region (though we suspect this will notlast for long). Pacific ex-Japan is now down at the 42% level, which, historically, has beenconsistent with negative profits growth.
 
Global Equity Market Arithmetic
07 June 20102
Market performances
Absolute performance* (%) Relative performance* (%)Regional Summary Close Net change 1W 1M 3M 12M YTD 1W 1M 3M 12M YTD
World ($) U$ 1060.3-20.0 -1.9 -9.5 -8.27.5-9.3na na na na na US U$ 1064.9-24.5 -2.3 -9.3 -5.213.0-4.5 -0.40.3 3.4 5.1 5.2 Europe ($) U$ 1163.1-26.0 -2.2 -10.7 -14.5 -1.5 -19.3 -0.3 -1.3 -6.9 -8.4 -11.1Eurozone ($) U$ 135.3-5.7 -4.0 -12.6 -18.3 -9.7 -25.0 -2.2 -3.4 -11.0 -16.1 -17.4Europe ex UK ($) U$ 1292.3-40.3 -3.0 -11.6 -16.5 -4.5 -21.5 -1.2 -2.3 -9.0 -11.2 -13.5UK £ 2644.6-28.6 -1.1 -5.3 -6.417.9-4.20.8 4.6 2.0 9.7 5.6 Japan Y 890.2 11.6 1.3-9.8 -0.8 -2.3 -1.93.2-0.48.1-9.18.1 Pacific ex-Japan ($) U$ 1025.1-14.8 -1.4 -11.8 -11.114.4-13.00.4-2.6 -3.16.4-4.1 Emerging Markets ($) U$ 913.5-3.6 -0.4 -7.8 -5.016.9-7.71.5 1.9 3.6 8.7 1.7
North America
DJ Industrials U$ 9932.0-204.7 -2.0 -9.1 -4.913.5-4.8 -0.20.4 3.7 5.6 5.0 S&P 500 U$ 1064.9-24.5 -2.3 -9.3 -5.213.0-4.5 -0.40.3 3.4 5.1 5.2 RUSSELL 2000 U$ 634.0-27.6 -4.2 -10.7 -2.819.2 1.4-2.4 -1.35.9 10.9 11.7 NASDAQ Composite U$ 2219.2-37.9 -1.7 -8.5 -3.220.0-2.20.2 1.1 5.5 11.6 7.8 Canada (S&P/TSX Composite) C$ 11569.6-101.8 -0.9 -3.8 -2.210.4-1.51.0 6.2 6.6 2.7 8.6
Japan
Nikkei 225 Y 9901.2 138.2 1.4-10.5 -2.42.4-6.13.3-1.16.4-4.83.5 Topix 500 Y 890.2 11.6 1.3-9.8 -0.8 -2.3 -1.93.2-0.48.1-9.18.1 Mothers Y 424.9 22.8 5.7-15.83.0 6.7 2.1 7.7-7.012.2-0.812.5
Pacific ex Japan
 Australia (S&P/All Ordinaries) A$ 4472.4-6.6 -0.2 -5.9 -6.013.7-8.41.7 4.0 2.5 5.7 0.9 Hong Kong (Hang Seng) HK$ 19780.1 13.4 0.1-4.7 -3.96.9-9.62.0 5.3 4.8-0.6 -0.3 Hong Kong (China Affiliated) HK$ 3683.2-28.7 -0.8 -5.5 -7.9 -6.5 -9.31.1 4.4 0.4-13.10.0 Hong Kong (China Enterprises) HK$ 11375.5-133.0 -1.2 -4.1 -3.46.3-11.10.7 5.9 5.3-1.2 -2.0 New Zealand (NZSX 50) NZ$ 1965.3-12.1 -0.6 -8.6 -7.32.3-8.21.3 1.0 1.0-4.91.2 Singapore (Strait Times) S$ 2806.5 66.8 2.4-3.31.4 18.8-3.14.4 6.9 10.5 10.5 6.7
Europe
MSCI Europe (euros) E 84.9 0.2 0.2-3.3 -3.416.1-3.92.1 6.9 5.3 7.9 6.0 MSCI Europe ex UK (euros) E 90.5-0.6 -0.6 -4.3 -5.612.6-6.41.2 5.8 2.9 4.7 3.1 MSCI Eurozone (euros) E 80.2-1.4 -1.7 -5.3 -7.66.4-10.60.2 4.6 0.7-1.1 -1.5 FTSE Eurofirst 300 (euros) E 998.6 0.9 0.1-3.4 -3.715.2-4.52.0 6.8 5.0 7.2 5.2 DJ Stoxx 50 E 2375.6-13.8 -0.6 -3.7 -6.211.5-8.11.3 6.4 2.2 3.7 1.3 DJ Euro Stoxx 50 E 2553.6-60.5 -2.3 -5.7 -9.32.7-13.9 -0.54.2-1.2 -4.5 -5.1
UK
FTSE All Share £ 2644.6-28.6 -1.1 -5.3 -6.417.9-4.20.8 4.6 2.0 9.7 5.6 FTSE100 £ 5126.0-62.4 -1.2 -5.3 -7.316.9-5.30.7 4.7 1.1 8.7 4.4 FTSE250 £ 9599.9-37.3 -0.4 -5.4 -0.725.3 3.2 1.5 4.5 8.2 16.5 13.7FTSE Smallcap £ 2753.1 4.1 0.2-5.6 -2.819.6-0.92.0 4.3 5.9 11.2 9.3
France
CAC 40 E 3455.6-59.4 -1.7 -6.3 -9.74.3-12.20.2 3.5-1.6 -3.0 -3.3 SBF 120 E 2567.7-37.3 -1.4 -6.0 -8.67.0-10.20.4 3.8-0.4 -0.5 -1.0 SBF 250 E 2511.9-35.6 -1.4 -6.0 -8.47.1-10.00.5 3.9-0.2 -0.4 -0.8
Germany
DAX E 5938.9-7.3 -0.1 -1.12.5 17.3-0.31.8 9.2 11.7 9.0 9.9 M-DAX E 7943.5-16.3 -0.2 -2.52.6 34.7 5.8 1.7 7.7 11.9 25.3 16.6
Other Developed Europe
 Austria (ATX) E 2267.4-162.9 -6.7 -11.4 -5.96.8-9.1 -4.9 -2.12.6-0.70.1 Belgium (Bel 20) E 2429.7-30.9 -1.3 -3.0 -5.917.8-3.30.6 7.2 2.5 9.5 6.6 Denmark (OMX Copenhagen 20) DK 347.1 6.9 2.0-2.26.1 31.4 15.2 4.0 8.0 15.7 22.2 27.0Finland (OMX Helsinki General) E 6470.5-16.9 -0.3 -4.5 -6.211.6 0.2 1.6 5.5 2.3 3.8 10.4Greece (FTSE/ASE 20) E 709.2-47.2 -6.2 -16.0 -30.3 -40.8 -37.0 -4.5 -7.2 -24.1 -45.0 -30.5Ireland (ISEQ Overall) E 2983.4 44.6 1.5-8.30.6 3.5 0.3 3.4 1.3 9.7-3.710.5 Italy (S&P MIB) E 193.5-6.6 -3.3 -8.3 -13.2 -7.0 -17.9 -1.41.3-5.4 -13.5 -9.5 Netherlands (AEX) E 321.2 0.6 0.2-4.4 -3.421.8-4.22.1 5.7 5.3 13.2 5.6 Norway (Oslo All Share) NK 401.4 0.0 0.0-5.7 -2.115.2-4.51.9 4.2 6.8 7.1 5.3 Portugal (PSI) E 6974.4-93.6 -1.3 -1.7 -10.5 -2.9 -17.60.5 8.6-2.5 -9.7 -9.2 Spain (IBEX 35) E 8923.4-502.1 -5.3 -9.5 -17.0 -5.6 -25.3 -3.50.0-9.5 -12.2 -17.6 Sweden (OMX Stockholm 30) SK 988.5 9.3 1.0-3.80.4 28.6 3.9 2.9 6.3 9.4 19.6 14.5Switzerland (SMI Index) SF 6299.0-22.9 -0.4 -2.9 -7.416.2-3.81.5 7.3 0.9 8.0 6.1
Source: Datastream, FTSE, MSCI,
SG Quantitative Research
(*in local currency unless otherwise stated)
 
 
Global Equity Market Arithmetic
07 June 20103
Market performances (page2)
Absolute performance* (%) Relative performance* (%)Regional Summary Close Net change 1W 1M 3M 12M YTD 1W 1M 3M 12M YTD
Emerging Markets (in dollars)
EM (EMERGING MARKETS) U$ 913.5-3.6 -0.4 -7.8 -5.016.9-7.71.5 1.9 3.6 8.7 1.7 EM ASIA U$ 377.1 2.6 0.7-7.5 -2.116.8-6.12.6 2.1 6.7 8.6 3.5 EM EASTERN EUROPE U$ 185.1-4.6 -2.4 -11.9 -12.010.2-11.4 -0.6 -2.7 -4.12.5-2.3 EM EUROPE & MIDDLE EAST, AFRICA U$ 352.5-9.1 -2.5 -10.5 -10.015.7-9.3 -0.7 -1.2 -1.97.6 0.0 EM LATIN AMERICA U$ 3649.0-31.2 -0.8 -7.2 -8.818.4-11.41.0 2.5-0.610.1-2.3 BRIC U$ 298.0-1.6 -0.5 -7.2 -7.111.5-10.31.3 2.6 1.2 3.7-1.2
Selected Emerging Market Indices
China (Shanghai A) CH 2677.6-107.5 -3.9 -9.9 -15.5 -7.8 -22.1 -2.0 -0.5 -7.9 -14.3 -14.2China (Shanghai B) ($) U$ 210.3-2.0 -0.9 -14.1 -15.716.6-16.70.9-5.1 -8.18.4-8.2 China (CS 300) CH 2744.4-105.9 -3.7 -9.1 -15.6 -7.1 -23.3 -1.90.4-8.0 -13.6 -15.4 South Korea (KOPSI) KW 1664.1 41.4 2.6-3.22.8 20.8-1.14.5 7.0 12.1 12.3 9.0 Brazil (Bovespa) C 61675.8-271.2 -0.4 -4.9 -9.115.4-10.11.4 5.0-0.97.3-0.9 Russia (RTS) ($) U$ 1360.7-6.2 -0.5 -10.4 -7.522.7-5.81.4-1.00.9 14.1 3.8 India (S&P CNX 500) IR 9129.1 149.8 1.7-0.40.8 17.3-1.13.6 10.1 9.9 9.1 9.0 South Africa (FTSE/JSE All Share) R 26558.1-644.6 -2.4 -4.9 -4.416.2-4.0 -0.55.0 4.2 8.0 5.8 Mexico (IPC) MP 30992.7-554.9 -1.8 -3.5 -3.825.2-3.50.1 6.6 4.9 16.5 6.3 MSCI GCC (Gulf Cooperation Council) ($) U$ 406.4 4.3 1.1-12.0 -6.0 -2.9 -0.23.0-2.82.4-9.710.0
Source: Datastream, FTSE, MSCI,
SG Quantitative Research
(*in local currency unless otherwise stated)
 
US S&P Quarterly EPS growth profile (YOY % change)
Q2-2009 Q3-2009 Q4-2009 Q1-2010 Q2-2010e Q3-2010e Q4-2010e Q1-2011e
Energy-66.3 -62.1 -23.561.9 67.3 41.8 34.8 26.6Materials-66.6 -47.2198.7 209.8 104.2 48.8 44.3 33.1Capital Goods-35.3 -43.61.1 8.9 9.1 42.6 11.2 20.3Commercial & Professional Services-25.2 -18.9 -11.18.5 3.8 5.6 13.4 14.8Transportation-37.1 -36.2 -19.345.7 53.4 42.1 23.7 22.7 Automobiles & Components nm nm nm nm nm-6.1 -15.2 -5.8Consumer Durables & Apparel-31.227.6 nm nm 215.8 134.5-1.6 -11.6 Consumer Services-7.6 -4.312.8 20.5 9.2 11.9 13.5 12.0Media-19.3 -10.715.4 46.0 10.5 9.4 12.5 12.5Retailing-12.93.3 40.8 36.0 21.7 23.3 13.9 15.0Food & Staples Retailing 0.7 4.0 8.4 8.4 6.1 8.2 8.8 10.7Food, Beverage & Tobacco-0.71.4 9.4 19.7 7.0 7.5 7.6 7.6Household & Personal Products-10.98.6 0.8 6.3-0.20.4-15.914.1 Health Care Equipment & Services 7.4 8.7 10.0 14.7 0.3 1.9 7.3 1.6Pharmaceuticals, Biotechnology & Life Sciences 0.8 2.9-5.410.5 6.3 3.1 9.8 5.1Banks-20.5 -57.0nm nm 42.4 106.3 nm 84.7Diversified Financials 795.4 nm nm 541.8-29.6nm nm 5.0Insurance-4.2nm nm 774.5 1.4-14.2nm 22.1 Real Estate-78.0 -63.5nm-60.5 -14.52.6 617.4 74.1 Software & Services-1.91.8 21.6 16.4 16.3 18.6 7.8 15.0Technology Hardware & Equipment-9.70.7 58.7 83.5 44.1 30.9 12.7 5.6Semiconductors & Semiconductor Equipment nm-21.2nm nm nm 89.7 15.2 8.4Telecommunication Services-27.6 -21.4 -32.6 -1.0 -1.50.3 22.5 12.1Utilities-1.3 -5.4 -3.93.2-5.33.4 3.8-3.3
S&P 500 index-17.4 -11.0nm 65.2 18.1 31.0 35.3 13.4S&P 500 exc. Financials-28.7 -20.815.6 39.8 27.3 20.3 12.9 12.5S&P 500 exc. Financials & Energy-17.4 -6.424.4 36.6 22.4 17.2 9.9 10.1
Source: Datastream, SG Quantitative Research, FactSet, Thomson IBES
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