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11-Jun-09

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Don’t really know what will be impacting the most, the tube strike in London, or the US Retail Sales data out today. Might be both with some possible over reaction due to a clear lack of trading activity. Most economists are sceptical about the Retail Sales possible rebound betting that the government stimulus has not been impacting anymore in May. Admittedly the latest sales figures from most US retailers last month were not strong, mostly suffering from a base effect with the long eastern weekend belonging to the previous month. It makes no doubt anymore that confidence is back, but we need to see it switched into higher spending. The suspense will remain especially now that Home Depot upgraded its guidance and GAP reaffirmed its forecast yesterday. On one hand the energy prices collapse combined to lower mortgage rates managed to keep the consumer spending steady during the deep part of the recession, which should remain strong when looking at the brighter confidence data, on the other hand the higher employment rates is challenging this positive factors. In between, the latest equity market rise is increasing households effects making the coming Retail sales data a pure bet in term of forecast. Whatever, it will be another indicator for players to try and make an opinion about the sustainability of the latest rally and if any of the coming economic recovery. Already after denying the slight economic improvement and non Great Depression, most players are looking at the bear view in the latest sharp rising 10 year yields, which reached 3.9% on the T notes yesterday, up 0.8% in a month as well as some rebounding oil prices. Once again, this is just a fair normalization of financial markets which have been artificially supported, and might still be if needed, by the Fed and other US officials, who managed to make the economy breathe again after its post Lehman 3 months heart attack. Yields are still on historically low levels or close to it, while oil prices rise should not impact households purchasing power as much as in the past because of the switch to renewable energies and a new mind developing of a green planet now that Bush has gone (being elected by oil lobby he could not let them down). The latest equity rally in addition to very low mortgage yields and banks slightly more keen on lending are much more important bullish supports, not even talking about the huge hedge fund deleverage selling pressure which sent equity indices in the abyss, which now short fund managers will send on highs Once more this morning good news came from China’s fixed-asset investment which came in above expectations for the first five months of the year, while exports and imports fell by a wider margin. Investment in urban factories, real estate and other fixed assets rose 32.9% in the January-May period compared to a year earlier. The result was above expectations for a 31% rise in fixed asset investments. Infrastructure investment showed the biggest gain, spurred by government's efforts to boost the economy by spending more on bridges, rail links and other mega-projects. Signs of reviving investment flows in areas beyond infrastructure were encouraging, analysts said. Investment in real estate was up 6.8% in the first five months of the year, accelerating from a 4.9% rise in the first four months of the year. "Investment growth is becoming more evident in other categories of FAI, real estate and manufacturing FAI have begun to show early signs of recovery. China is increasing its dependence on internal spending. Latest levels are spoiling the trading activity. Although positive in term of business for the coming months, trading has become difficult as the trend is a creeping up one, while fund managers can not really feel safe to reduce their underweight exposure at a time when now the equity indices are up for the year. Option quarterly expiry due next week is not providing the usual impact it used to in the past because of lower positions from option gamma players, and reduced need to cover their delta, playing on strikes which were not expected to be seen just a few weeks ago. The latest 2549 seen on the Eurostoxx cash index should gradually be broken, as we are heading into the end of Q2 with the possible window dressing or the anticipation from decent Q2 earnings and a need to refuel in equity from fundamental fund managers. Summer will be a welcome rendezvous between bear and bull guys finding hopefully an answer through the data and the H2 forecasts
WTI Last Perf 1d % 72,1 1,75 €/$ 1,4049 0,46 $/¥ 97,82 0,31 10 yr US 3,92 -2,97 bp 10 yr Euro 3,69 5,2 bp Basic -0,10 -0,71 Energy Financ Health 0,87 0,71 -1,31 -0,60 -0,43 -0,28 Tech -0,12 -0,82 Tel 0,30 0,37 Indus Utilities -0,42 -0,94 1,50 1,27 SOX 0,20 -1,20 S&P NAS DOW Close US Europe -0,35 -0,38 -0,27 -0,29 -0,98 -0,13

ECONOMIC DATA with impact
US Retail Sales (13h30 UK time) expected +0.5% from previous –0.4% / ex autos +0.2% from previous –0.5% / the focus this week in the US. Indeed latest Retailers sales report from May were gloomy, while economists expect the increasing confidence to switch into higher spending instead of higher savings which is a healthy move but not very economically supportive. But Home Depot’s guidance upgrade yesterday is making anticipation more complicated. Jobless Claims (13h30 gmt) expected 614k from previous 621k / interesting although weekly and volatile data which minor the impact Business Inventories (15h gmt) expected –1% from previous –1% / minor as story behind the figure hard to read

POSITIVE IMPACTS
EADS : Airbus denied a press report that it is considering grounding the fleet of almost 1K jets & order airlines to change speed sensor RIO TINTO offered a share in a planned iron ore alliance with BHP Billiton to Chinalco as a peace offering (Australian Financial Review) ASTRAZENECA : 3 widely used antipsychotic medications, including Seroquel, appear safe and effective overall in treating children and teenagers with schizophrenia or bipolar disorder (U.S. advisory panel) IBERDROLA will soon supply liquefied natural gas to the US market under a deal signed with Chevron (Waterborne Energy consultants) ITV offered holders of its €500 m fixed rate notes the chance to exchange them for a mix of 30% cash & 70%new €-denominated bonds HOME RETAIL : Argos and Homebase each enjoyed better than expected sales in the quarter and grew market share = Argos Q1 likefor-like change sales down 2.8% / Homebase Q1 like-for-like sales +3.8% BBVA : Mexico's biggest banks bolstered their balance sheets in April (Mexico’s bank regulator) / Bancomer had a capital adequacy ratio of 14.81% in April, up marginally from March. STM may reached its sales targets in 6 to 12 months (Le Figaro citing CEO) / STM sees “encouraging” signs in Asia, excluding Japan, and a “stabilization” in the US & Europe FORTIS (Minor) : According to Fortis's website, UBS took a 3.66% stake in early April & cut that back to zero by the middle of the month

NEGATIVE IMPACTS
ANHEUSER-BUSCH INBEV’s shareholder BRC is selling 11m shares between €24 1 €24.2, reducing its 23.5% stake (Bloomberg) SANOFI denied it presented a major US acquisition plan to its board / Les Echos said major shareholders rejected the planned acquisition, judging it too risky / AMGEN ($51bn capitalization) is cited as the main target / Separately, Sanofi is seen as possible suitor for Ratiopharm (world's 4th-largest generics supplier) / Total cut its stake to 9.99% from more 10% in May & 11.4% end of 2008 (AMF) BAE-FINMECCANICA-EADS : Britain is unlikely to buy all of the remaining 48 Eurofighter Typhoon jets it has signed up for (Reuters) RBS-LLOYDS : The company managing Britain's stakes in both Cos could sell an "exchangeable bond" in the 2 banks (Daily Telegraph) UKFI could raise £5bn or more through issuing the bonds. / However, a deal was unlikely before the end of the year STANDARD CHARTERED has hired 4 banks to lead manage the sale of dollar-denominated perpetual hybrid bonds (Reuters) GIVAUDAN announced a SFR420m rights issue to de-lever balance sheet + strengthen operational flexibility / It confirmed its fin. targets SOLVAY said generic producer Perrigo Israel Pharma had applied for approval from U.S. authorities to sell a generic version of Solvay's treatment for testosterone deficiency, Androgel

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

11-Jun-09

RETAIL
DIVIDENDS EVENTS Theolia AGM / OZ Minerals AGM / Iberdrola Renovables / Mastercard at UBS Secyrutues Electronic payments summit

EDF said that strikes by workers at nuclear installations could cost the company as much as €250m HSBC’s Mexican unit earned a failing grade in a recent study looking at credit card transparency (Consumer watchdog)
RESULTS Today Friday Monday Tuesday Wednesday National Semiconductor Bureau Veritas (€0.72) / Vallourec (€6.00) Club Med / Vtech Holdings Tesco / Adobe / Best Buy FedEx Arkema (€0.60) / Imperial Tobacco (GBp 23,33333) / Land Securities (GBp 7.00) / Raiffeisen internat Bk (€0.93) /

Thomson AGM

TRADING IDEAS
BUY MUNICH RE / ALLIANZ / GENERALI to play insurance sector higher beta BUY L OREAL / PERNOD / AHOLD / CARREFOUR to play Retail Sales data which might impact the sector BUY ALSTOM / BOUYGUES / FRANCE TEL / DEUTSCHE TEL on double bottom possibility BUY ALLIANZ & MUNICH RE / SELL AXA // BUY ROCHE / SELL SANOFI // BUY IBERDROLA / SELL VEOLIA // BUY BOUYGUES / SELL ST GOBAIN // BUY FTE / SELL DTE // BUY CAP / SELL SAP // BUY DAIMLER / SELL PEUGEOT

BROKER METEOROLOGY
CAPITAL GOODS ..................................... RAISED TO ATTRACTIVE FROM NEUTRAL .................................. BY GOLDMAN SACHS BANK OF AMERICA-ML........................... RAISED TO OUTPERFORM .................................................................................... BY KBW SANDVIK................................................... ADDED TO CONVICTION BUY LIST................................................ BY GOLDMAN SACHS ELECTROLUX........................................... ADDED TO CONVICTION BUY LIST................................................ BY GOLDMAN SACHS TOMKINS .................................................. RAISED TO BUY FROM NEUTRAL ................................................. BY GOLDMAN SACHS SCHNEIDER.............................................. RAISED TO BUY FROM NEUTRAL ................................................. BY GOLDMAN SACHS GLAXO SMITH KLINE .............................. RAISED TO EQUALWEIGHT FROM UNDER................................. BY MORGAN STANLEY VALEO ...................................................... RAISED TO BUY FROM NEUTRAL .........................................BY BANK OF AMERICA-ML INVENSYS................................................. RAISED TO BUY FROM NEUTRAL ................................................. BY GOLDMAN SACHS NEXANS .................................................... RAISED TO NEUTRAL FROM SELL................................................ BY GOLDMAN SACHS EUROPEAN PHARMA SECTOR .............. RAISED TO ATTRACTIVE FROM IN LINE..................................... BY MORGAN STANLEY ALSTOM.................................................... CUT TO NEUTRAL FROM BUY.......................................................... BY GOLDMAN SACH INDITEX..................................................... CUT TO NEUTRAL FROM OVERWEIGHT............................................................. BY HSBC

PLEASE FIND BELOW ON THE NEXT PAGE OUR MORNING ECO

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

11-Jun-09

RETAIL
CHART OF THE DAY
France Industrial production and GDP % YoY Since 1990
a/a, % a/a, % 5 4 3 2 1 0 -1 -2 T1 09 Avril -3 -4

9 7 5 3 1 -1 -3 -5 -7 -9 -11 -13 -15 -17 -19 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

v

07 08

09

Production industrielle française- G -

PIB français- D Source : Bloomberg

Despite the encouraging release of the last INSEE survey, France’s industrial production after plunging during four consecutive quarters dropped by 1.4% in April and by 18.6% from a year ago a new historical high. As showed on the above graph French GDP should follow the same trend. Nevertheless its important to notice that French manufacturing production accounted only for 17% of the GDP.

Tim e

Country

Indicator

Period

GE forecasts

Consensus

Previous

0.50 GM T 0.50 GM T 13.30 GM T 13.30 GM T 13.30 GM T 15.00 GM T

Japan Japan China United-States United-States United-States United-States United-States

Gross Domestic Product (final) Gross Domestic Product annualized (final) Trade balance Advance retail sales Retail sales less autos Initial jobless claims Continuing claims Business inventories

First quarter First quarter M ay M ay M ay June 6 th M 30 th ay April

+ 0,3% + 0,4%

-4,0%QoQ -15,0% $ 14,9 bn + 0,5% + 0,2% 614 000 6 780 000 -1,0%

-4,0%QoQ -15,2% $ 13,14 bn -0,4% -0,5% 621 000 6 735 000 -1,0%

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)

P rice
8739,0 939,2 1853,1 3315,3 5051,2 2500,9 212,8 4436,8 9996,9 2808,2 15437,0 1133,7

% 5 D a ys
0,87% 0,85% 1,50% 0,23% - 0,07% 0,74% 1,37% 1,22% 2,56% 1,68% 4,15% 2,21% 2,54%

Ytd
- 0,43% 3,98% 17,50% 3,02% 5,01% 2,18% 7,27% 0,06% 12,84% 54,23% 60,01% 82,99% 42,24%

Forex
EUR/USD EUR/JPY USD/JPY

Price
1,4036 137,46 97,94

% 5 Days
-1,03% -0,36% -1,38%

Ytd
0,46% 7,82% 7,44%

Oil
Brent $/b

Price
71,0

% 5 Days
4,04%

Ytd
70,14%

Gold
Gold $/oz

Price
956,7

% 5 Days
-2,41%

Ytd
8,46%

Rates
Central Banks* Overnight 3 Months

USA
0,25 0,10

Euro
1,00 0,78

Japan
0,10 0,10

Bov es pa ( Bras il) 53410,9

0,17 0,83 0,20 10 Y ears** 3,92 3,69 1,57 *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

11-Jun-09

RETAIL
ECONOMIC DATA PREVIEW

Watch in the United-States the release of the Advance retail sales for May due at 13.30 GMT. Led by the rise of incomes (+0.5% in April) boosted by the checks distribution, by the rise of consumer confidence and by the drop of job destructions , American advanced retail sales are expected to rise by 0.5% in May after dropping by 0.4% in April. Less autos U.S. retails sales should rise by 0.4%. Keep an eye on the weekly release of initial jobless claims and continuing claims due at 13.30 GMT. Initial jobless claims are expected to decrease confirming the improvement of the labour market, but continuing claims should increase showing that companies are not ready to hire yet. Watch in China the release of the Trade balance for May. Chinese trade surplus is expected to increase despite the sharp drop of exportations as imports should fell sharply.

ECONOMY
UNITED-STATES : FED’S BEIGE BOOK Reports from the twelve Federal Reserve District Banks indicate that economic conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the Districts noted that the downward trend is showing signs of moderating. Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year. The Manufacturing activity declined or remained at a low level but the outlook by manufacturers has improved. Demand for nonfinancial services contracted. Retail spending remained soft as consumers focused on purchasing less expensive necessities and shied away from buying luxury goods. Consumer spending remained soft as households focused on purchasing less expensive necessities. New car purchases remained depressed indicating that tight credit conditions were hampering auto sales. Labor market conditions continued to be weak across the country. The notable exception to the downward pressure on prices was the widely-reported increase in oil prices. UNITED-STATES : THE TRADE DEFICIT WIDENED IN APRIL After dropping for seven consecutive months and after reaching a lowest since November 1999 at $26 billions the U.S. trade deficit widened in March to reach $28.5 billions. April trade balance revealed another increase of the trade deficit reaching the level of $29.2 billions. Despite the drop of the dollar, the global economic downturn is cutting demand for American’s goods abroad. Consequently exports fell by 2.3% in April. Looking to the breakdown industry capital goods fell by 3.4%, supplies fell by 5.6 (prior +0.8%), consumer goods fell by 3.9% (prior -3.2%) and automotive fell by 2.7% (prior +0.5%). Meanwhile imports dropped by 2.3% and the slight rise of the barrel in April(+3%) increased the U.S. energetic bill, widening the trade deficit. Nevertheless the recent rebound of the ISM new order balance suggest that exports will drop at a slower pace in the coming months. More generally the U.S. trade deficit seems to have passed the worst. GERMANY : CONSUMER PRICE INDEX REMAINED VERY CLOSE TO A DEFLATION SITUATION IN MAY German’s consumer price index final confirm the previous release (-0.1%,0.0%YoY). If we look to the inflation breakdown from a year ago we see a drop of 3.7% in transports prices (prior -2.7%), a drop of 1.3% in consumer goods prices (prior -0.6%) and a drop of 2.4% of non durable goods (prior -1.2%). With a 0.0% YoY inflation in may we have the confirmation that German’s inflation will shortly reached negative territory confirming the upcoming deflation situation. Deflation is the worst economic scenario as it reflected a sharp spread between global demand and global offer and adjustments will be made by a rise of unemployment and of bankruptcies increasing the weak demand and the deflation. This risk is increasing the pressure on the European Central Bank to cut its refi rate as the strong euro currency is penalizing exports. FRANCE : INDUSTRIAL PRODUCTION PLUNGED IN APRIL Despite the encouraging release of the last INSEE survey, France’s industrial production after plunging during four consecutive quarters dropped 1.4% in April and by 18.6% from a year ago a new historical high. Manufacturing production by itself dropped by 19.5% in April an historical low as well. Looking at the breakdown all sectors are hit starting by the leaders of French industry : capital goods and transport goods respectively dropping by 23.1% and by 29.3% from a year ago during the three last months. Even if French industrial production rebounded in May and June, a fifth quarterly drop seems unavoidable. As showed on the above graph French GDP should follow the same trend. Nevertheless its important to notice that French manufacturing production accounted only for 17% of the GDP./JB

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11-Jun-09

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$ Libor - 3-M onth (Interbank Rate)

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 11/06/2007

6 5,5 5 4,5 4 3,5 3 2,5 2 1,5 1 0,5

11/12/2007

11/06/2008

11/12/2008

11/06/2009

11/06/2007

11/12/2007

11/06/2008

11/12/2008

11/06/2009

Source : Bloomberg

Source : Bloomberg
1,2 1 0,8 0,6 0,4 0,2 0 -0,2 -0,4 -0,6 -0,8 -1 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009

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
11/06/2007

United States : 10-year Treasury yield

10-year Treasury spread USA-Euro zone

11/12/2007

11/06/2008

11/12/2008

11/06/2009

Source : Bloomberg
150 140 130 120 110 100 90 80 70 60 50 40 30 11/06/2007 11/12/2007 11/06/2008 11/12/2008 11/06/2009

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
11/06/2007

Forex : Euro vs Dollar (EUR/USD)

11/12/2007

11/06/2008

11/12/2008

11/06/2009

Source : Bloomberg

Source : Bloomberg