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31-Mar-09

G FORCES

Equity investors are still wondering whether the worst is behind us. Over the past couple of weeks the Dow Jones Industrial Average has rallied by more than 20%, which makes the pre G20 sharp consolidation one to be understood especially as "worst behind" doesn't mean "all clear", such as the GM fears are reminding us . After falling very sharply over the final few months of last year, retail sales rebounded by 1.8% m/m in January and held on to most of those gains in February. As a result, it now looks like real consumption will record a gain over the first quarter as a whole. Even if real spending falls by 0.2% m/m in March, first-quarter consumption will increase by 1.0% annualised. That gain would represent a massive turnaround from the second half of last year, when consumption fell at an average rate of 4%. With consumption accounting for 70% of all economic activity, it looks like the decline in first-quarter GDP will be more modest than the 6.3% annualised fall over the final three months of last year. Which, added to the huge stimuli reaching more and more the real economy, and looking at the improving housing data, might just say the economic downturn is behind us, better explaining the market rebound as equity indices took for granted a 29 Great Depression which wherever the economy will head seems avoided today. Admittedly, every recovery has to start somewhere. The rebounds in both retail sales and durable goods orders are miniscule compared with the massive declines suffered in the second half of last year. More generally, while consumption will probably now add to first-quarter GDP, investment and inventories are shaping up to be massive drags. In particular, the inventory cycle has turned sharply with business inventories contracting by more than 1% m/m now. To some extent, the stronger than expected pace of inventory liquidation is a consequence of the stronger than expected sales. The longawaited stabilisation in housing might finally be underway. Existing home sales did actually stabilise for much of last year before the Lehman failure in September prompted another downward leg. In the UK, February’s household borrowing figures suggest that housing market activity may finally have turned a corner. The rise in the number of mortgage approvals for new house purchase from 32,000 to 38,000 took them to their highest level since last May. This might suggest that the pick-up in new buyer enquiries is feeding through into actual activity. With new buyer enquiries still rising, this is clearly quite promising. In the Eurozone, March’s small fall in the EC’s Economic Sentiment Index (ESI) adds to the evidence that euro-zone business and consumer confidence is beginning to stabilise, albeit at very low levels. Admittedly, the fall in the ESI, from 65.3 to 64.6, was disappointing amid hopes of a slight pick-up (consensus 65.8). The decline was due to small falls in industrial, service sector and consumer confidence. But note that the economy-wide ESI still points to annual falls in euro-zone GDP of around 2%, which would be consistent with no change in activity in Q1 compared to Q4. Flows into emerging-market equity funds hit a year-to-date high last week, with investors showing a marked preference for commodity producers such as Brazil and Russia, according to data from fund tracker EPFR Global. Emerging Market Equity Funds tracked by EPFR Global took in the most money since mid-December during the week ended March 25. These funds absorbed $2.3 billion of inflows during the week, turning year-to-date flows positive by $2.03 billion. The surge was led by the $1.9 billion that flowed into diversified Global Emerging Markets Equity Funds, EPFR Global said. "The latest data certainly paints a picture of money leaving essentially passive vehicles such as money market funds and being put to work in funds offering more risk and higher rewards" said a senior analyst. Latin America Equity Funds had their best week since late in the second quarter of 2008, while EMEA [Europe, the Middle East and Africa] Equity Funds absorbed fresh money for only the second time in the past 37 weeks. "Renewed optimism about U.S. and Chinese demand for commodities underpinned flows into Latin America and EMEA Equity Funds, with funds geared to the biggest raw material producers in the respective regions getting the lion's share of the new money". Brazil Equity Funds took in a net $238 million, their best showing since the fourth week of May, while flows into Russia Equity Funds hit a 19-month high. The benchmark MSCI Emerging Markets Index is up 4% this year. In comparison, the MSCI Brazil index has gained 16% and the MSCI Russia index is up 12%. A 22% market rally had to reach a limit, which limit has been found in a tough GM situation, the same week of the feared G20 (which should not bring much new) and the awful employment report out on Friday (lagging indicator). In such conditions, a short was worth trying given the still weak macro landscape, but clearly things are improving and thanks to government intervention are certainly not as bad as most strategists were forecasting. Would not play short much longer, especially when looking at the extremely light and disappointing volume seen in yesterday's trading session. The G forces will fade soon (G20 and GM), while a new quarter starting will bring much more players into the "game"
WTI Last Perf 1d % 49,1 -4,32 €/$ 1,3237 0,29 $/¥ 98,16 -0,92 10 yr US 2,73 1,45 bp 10 yr Euro 3,03 -6 bp Basic -5,08 -5,12 Energy Financ Health -3,40 -3,94 -8,05 -5,61 -0,77 -1,87 Tech -2,88 -4,05 Tel -3,08 -3,58 Indus Utilities -4,46 -5,05 -1,93 -2,15 SOX -4,42 -4,52 S&P NAS DOW Close US Europe -3,48 -2,81 -3,27 -3,77 -3,76 -3,73

ECONOMIC DATA with impact
S&P/Case-Shiller Home Price Index (14.00 GMT) might confirm an upturn in the housing sector / seems unlikely to mirror the surprise rise in the FHFA index, not least because the former is not seasonally adjusted / interesting although focus still G20 and GM Chicago PMI ( 14.45GMT) / will provide some indications on tomorrow's ISM / interesting although focus still G20 and GM Consumer Confidence (15.00 GMT) / the recent equity rebound should not impact / still on low level / minor Minnesota Fed President Stern speaks on "Too Big to Fail" (14.00 GMT) Philadelphia Fed President Plosser speaks on financial regulatory reform (18.00 GMT)

POSITIVE IMPACTS
ALSTOM could announce a deal to take a 25% stake in Russian railway manufacturer Transmashholding worth €550-€600 m (Le Figaro) PORSCHE : H1 PTP €7.34bn (3.65bn exp) boosted by cash-settled stock options / Net €5.5bn / Said reliable forecasts not possible MARKS & SPENCER : Q4 UK like for like sales -4.2% (-6.8% exp) / In line with previous guidance for 2008/09, see UK retail gross margin to be around 175 bp lower than last year + operating cost growth of 4-5% and capital expenditure to be no more than £700m FORTIS : 2008 net loss €28bn including €27.4bn on discontinued Ops (As exp) / Solvency ratios remained strong / Core Equity €7.9bn / says EV of Insurance = €4.923bn at end 2008 FIAT would have agreed to scale its 35% planned stake in Chrysler down to 20% to meet the Treasury's bailout terms (WSJ) / If Fiat and Chrysler reach a deal within 30 days, the Treasury would be willing to invest $6 bn in Chrysler / Fiat wouldn't be allowed to raise its stake beyond 49% until after the $6 bn is repaid (Originally, Fiat had the option to increase its stake to as much as 55%) UK BANKS : Today is the deadline for banks to participate in the govt's asset protection scheme / BARCLAYS said yesterday it won't SANTANDER (expected) sold its stake in Cepsa to IPIC for €2.7bn (Finanza) UBS : A US judge dismissed putative action lawsuits seeking damages vs UBS over allegations of securities fraud in the ARS markets NOVARTIS : U.S. regulators approved Novartis' Afinitor for use in kidney cancer + Ixiaro vaccine VEOLIA & AIR FRANCE are close to taking final investment decision on setting up a joint passenger rail service (Les Echos) CAIRN ENERGY : Gross operated prod for 2008 = 76.298 BOE/D / PTP $440m ($434m exp) / Marked increase in group prod & cash flow expected in next 2 years, continuing to evaluate strat options TOMTOM and Microsoft have reached a settlement after more than a year of squabbling over software patents.

WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

31-Mar-09

G FORCES
NEGATIVE IMPACTS

CINTRA : Valiance Capital (unit of GENERALI) and Reef (Unit of DBK) have joined the bidding process for the parking assets of Cintra (Expansion) / Also interested in Cintra's parking assets are Emparque and PAI Partners / Cintra values its parking operations at €500m TELECOM : The EU reached a draft deal on a reform of the telecoms rules to increase competition and drive down prices for consumers DEUTSCHE BANK : The credit crisis is "far from over", Deutsche Bank's chief risk officer said. LAFARGE : Shareholders meet today to approve a €1.5 bn rights issue. DBK-BARCLAYS : JPM sees the highest need for further pretax writedowns in 1) DBK $4.9bn & 2) BARCLAYS $3.0bn / BNP & CSG are now looking relatively clean with estimated further markdowns of $1.1bn and $1.2bn in 2009 respectively. ROCHE : ASTRAZENECA's cancer pill Recentin (potential rival to Avastin) may help fight the brain tumors without shrinking them ASTRAZENECA : Crestor failed to significantly reduce heart problems and death among dialysis patients (Research) ITALIAN UTILITIES : Electricity prices will fall by 2% and gas prices by 7%, effective from April 1, Italy's energy authority said
Today RESULTS Porsche / Fortis / Marks & Spencer sales / Neopost / Maurel & Prom / Compass trading statement RIM / Monsanto / Micron Tech / Bombardier Givaudan sales DIVIDENDS EVENTS Salzgitter analyst meeting Adobe AGM / Volvo AGM / Stora Enso AGM / TeliaSonera AGM / FedEx investor meeting Volvo (SEK 2.00) / Telia Sonera (SEK 1.80) / Nordea Bank AGM / Acerinox ( €0.10) / Nordea Bank ( €0.20) / Svenska Neste Oil AGM / Merck KGaA AGM / TIM AGM / MAN Cellulosa AB (SEK 3.50) AG AGM Vallourec to discuss dividend / Telecom Italia EGM

Wednesday US car sales Thursday Friday Monday

TRADING IDEAS
Buy the dollar to play US recovery Buy a house to take opportunity if artificially low long term yields and lowering mortgage rates Buy equity indices, with a strong confirmation whenever the gap on the Eurostoxx is closed and passed (2176/2193 on the cash index) BUY BAYER / ROCHE / MUNICH RE / L OREAL / EON / LAFARGE on reversal Head & Shoulder BUY FTE / PHILIPS / ACCOR / AIR FRANCE / PERNOD on double bottom possibility BUY BBVA / SANTANDER / BNP / AXA to play gap closure above soon BUY FTE / SELL DTE // BUY RIMM / SELL APPLE // BUY PFIZER / SELL SCHERING // BUY BNP / SELL DBK // BUY MUV2 / SELL ALLIANZ

BROKER METEOROLOGY
DEUTSCHE TELEKOM.......... RAISED TO MARKET PERFORM................................................................................... BY BERNSTEIN DEUTSCHE BOERSE ............ RAISED TO BUY FROM NEUTRAL................................................................... BY BANK OF AMERICA ARCELOR MITTAL ................ RESUMED AT BUY ............................................................................................ BY BANK OF AMERICA SEVERSTAL & EVRAZ ...............CUT TO SELL FROM HOLD ....................................................................................................BY ING WOLSELEY..................................CUT TO HOLD FROM BUY ........................................................................................ BY CITIGROPU GIVAUDAN...................................CUT TO NEUTRAL FROM BUY ............................................................................................. BY UBS

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

31-Mar-09

G FORCES
CHART OF THE DAY
Euro-zone economic confidence since 1985

120 110 100 90 80 70 60 85 87 89 91 93 95 97 99 01 03 05 07 09

Source: European Comission

European confidence fell to another record low in March and declined from 65.3 to 64.6. Meanwhile European consumer confidence dropped from -33 to -34, Euro zone industrial confidence fell from -36 to -38 and finally service confidence fell from-23 to -25. If we expect the United-States to show significant signs of improvement this summer, Euro-zone will have to wait the end of 2009 to start to recover and it’s why the ECB must go deeper in interest rate cut and why its is necessary to coordonate the European revival plans. .

Time

Country

Indicator

ECONOMIC DATA

Period

GE forecasts

Consensus

Previous

0.01 GMT United Kingdom 0.15 GMT Japan 0.30 GMT Japan 0.30 GMT Japan 8.55 GMT Germany 9.00 GMT Italy 10.00 GMT Italy 10.00 GMT Euro zone 14.45 GMT United-States 15.00 GMT United-States 15.00 GMT United-States 18.00 GMT United-States 22.00 GMT United-States
Inde x e s
DJIA S&P 500 Nas daq CA C 40 DA X Eur os tox x 50 DJ 600 FTSE 100 Nikkei Shanghai Comp Sens ex ( India) MICEX ( Rus s ia)

Gfk consumer confidence Nomura / JMMA Manufacturing PMI Jobless rate Household spending Unemployment rate Retail sales Consumer price index (incl tobacco) Preliminary Consumer price index Chicago purchasing manager Consumer confidence NAPM - Milwaukee Fed's Plosser Speacks on financial regulatory ABC consumer confidence
% 5 D a ys
- 3,26% - 4,28% - 3,46% - 5,24% - 4,48% - 5,18% - 4,02% - 4,72% 1,11% 1,40% 1,55% - 10,17% - 4,21%

March February February March March January March March March March March March 29

35,0

-35 32,0 4,3% -4,7% YoY 8,0% -0,2%,-2,0% YoY 0,1%,+1,2% YoY 0,7% YoY 34,4 28,0

-35 31,6 4,1% -5,9% YoY 7,9% 0,0%,-1,9% YoY 0,2%,+1,6% YoY 1,2% YoY 34,2 25,0 29,0 -49

- 49
Forex
EUR/USD EUR/JPY USD/JPY

P rice
7522,0 787,5 1501,8 2719,3 3989,2 2010,6 170,5 3762,9 8196,5 2370,5 9588,2 763,4

Ytd
- 14,29% - 12,81% - 4,77% - 15,50% - 17,07% - 17,85% - 14,07% - 15,14% - 7,48% 30,19% - 0,61% 23,22% 8,26%

Price
1,3237 129,84 98,09

% 5 Days
-1,65% 1,45% -0,24%

Ytd
-5,20% 2,48% 7,60%

Oil
Brent $/b

Price
47,6

% 5 Days
-8,00%

Ytd
14,08%

Gold
Gold $/oz

Price
917,9

% 5 Days
-0,86%

Ytd
4,07%

Rates
Central Banks* Overnight 3 Months

USA
0,25 0,10

Euro
1,50 0,80

Japan
0,08 0,08

Bov es pa ( Bras il) 40653,1

0,18 0,70 0,25 10 Y ears** 2,73 3,03 1,35 *US: Fed Funds; Jap: Overnight; Euro: Ref i ** Euro: German Bund rate
So urc e : B lo o m berg

WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

31-Mar-09

G FORCES
ECONOMIC DATA PREVIEW

Watch in the United-States the the ABC consumer confidence due 15.00 GMT expected to increase due to the drop of interest rate, and to the upcoming budgetary plan. Keep an eye in the euro area on the final of the consumer price index (estinated) due at 10.00 GMT expected to decrease from a year ago led by the drop of energy prices even in the barrel is rising since the beginning of the year, watch as well in Germany on the unemployment rate due 8.55 GMT expected to increase as companies are cutting jobs due to the fall of foreign demand humping exportation, and as domestic demand is not taking over ./JB

ECONOMY
EURO AREA : EUROPEAN CONFIDENCE DECLINE TO LOW RECORD IN MARCH If we can see the first signs of recovery in the United-States as showed by the last encouraging economic data (retail sales, housing starts, durable goods) this is not the case in the Euro area were recession is still deepening. As a consequence European confidence fell to record low in March and decline from 65.3 to 64.6. Meanwhile European consumer confidence dropped from -33 to -34, Euro zone industrial confidence fell from -36 to -38 and finally service confidence fell from-23 to -25. If we expect the United-States to show significant signs of improvement this summer,the Euro are will have to wait the end of 2009 to start to recover. This is why the ECB must go deeper in interest rate cut and why its is necessary to coordonate the European revival plans./JB

WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

31-Mar-09
VIX index : im plied volatility on the S&P 500
85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 02/04/2007

G FORCES
6 5,5 5 4,5 4 3,5 3 2,5 2 1,5 1

$Lib -3 o (Interbank R or -M nth ate)

02/10/2007

02/04/2008

02/10/2008

02/04/2009

02/04/2007

02/10/2007

02/04/2008

02/10/2008

02/04/2009

Source : Bloomberg

Source : Bloomberg
1,2 1 0,8 0,6 0,4 0,2 0 -0,2 -0,4 -0,6 -0,8

5,5 5,25 5 4,75 4,5 4,25 4 3,75 3,5 3,25 3 2,75 2,5 2,25 2
02/04/2007

United States : 10-year Treasury yield

10-year Treasury spread USA-Euro zone

02/10/2007

02/04/2008

02/10/2008

02/04/2009

-1 02/04/2007

02/10/2007

02/04/2008

02/10/2008

02/04/2009

Source : Bloomberg
150 140 130 120 110 100 90 80 70 60 50 40 30 02/04/2007 02/10/2007 02/04/2008 02/10/2008 02/04/2009

Source : Bloomberg

O : Brent ($/b) il

1,65 1,6 1,55 1,5 1,45 1,4 1,35 1,3 1,25 1,2
02/04/2007

Forex : Euro vs D ollar (EUR/USD )

02/10/2007

02/04/2008

02/10/2008

02/04/2009

Source : Bloomberg

Source : Bloomberg

WWW.GLOBAL-EQUITIES.COM / DEL SARTE / + 33 (0) 1 44 43 33 24

31-Mar-09

G FORCES