Downtrend in car sales in Europe at a slower pace

STOCK MARKETS: all technical indicators point to oversold markets et a technical. No need to cudgel one’s brain to find a economic explanation to this. We are in a trading range situation and right investment choices will make the difference.

CAR INDUSTRY: car sales in Europe are still in a negative trend but at a slower pace. The situation in very contrasted amongst countries (UK and Spain in a very bad shape) and car makers: VW and FIAT are benefiting from incentives and the low segment. The French and American cars are not fashionable right now but the luxury segment is also suffering (BMW and DAIMLER)

VIX is back above the 30 level at 30.8. Gold is stable at 934 USD per oz as the oil price (BRENT CRUDE SPOT) at 69.5 USD. The USD is remains weak against the EUR at 1.39. 10-2 years spread is at 1.77. The 5y CMS stands at 3.0 and the 3y at 2.4.

 

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UBS has taken a 3.7% share in FORTIS HOLDING capital

STOCKS : the threat might finally come from the interest rate side. If rates keep on rising in the future, this is likely to damage both bonds and stock markets and jeopardize the economic recovery. The restoration of the profitability amongst companies should occur at a pace that surpasses the rise of interest rates in order to avoid a correction on the markets.

BANKS : UBS has taken a 3.7% share in FORTIS HOLDING capital. The Belgian government has designated one of its two delegates at BNPPARIBAS board. Modrikamen intends to appeal the last GM.

CHINA : the investment by the Chinese authorities in production facilities, infrastructure and real estate have been quite impressive in the first 5 months and compensate for the retreat of exports. The Chinese stocks are still in a good shape.

VIX is stable at 28.4. Gold is down at 954 USD per oz and the oil price (BRENT CRUDE SPOT) at 71 USD. The USD is remains weak against the EUR at 1.40. 10-2 years spread is at 1.75. The 5y CMS stands at 3.08 and the 3y at 2.5.

 

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BLACKROCK: 13 bn USD for an acquisition?

BANKS : JP MORGAN would be one of 10 banks to reimburse the US state TARP allocations, in order to “restore” confidence.

M&A : BLACKROCK, already y nr 1 in the AM in the US, is willing to pay some 13 bns USD to buy BARCLAYS’ funds business, the biggest acquisition ever in the asset management.

BONDS : rates unexpectedly rallied over the past 2 days. One has to be careful with both govies and corporate after their nice performance, respectively. In 2008 and 2009.

VIX remains under the 30 level at 29.8. Gold is at 954 USD per oz while the oil price (BRENT CRUDE SPOT) at 68.9 USD. The USD is remains weak against the EUR at 1.39. 10-2 years spread is at 1.71. The 5y CMS stands at 3.09 and the 3y at 2.5.

 

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No expectation of interest rate changes as ECB meets

·       Markets concerned about further job losses (employment report will be released on Friday) and rising stock valuations.

·       ISM index of service industries improved less than expected.

·       VIX index back up to 31….volatilty returns!?

·       Gold recovers slightly following a steep drop from a high of $980. Currently trading at $967.

·       Crude oil also stable after a drop from $68.50. Supplies in the US unexpectedly increased which has pushed the price lower: now @ $66.80.

·       $ remains weak vs € : 1.4233. Some speculation that central banks and sovereign wealth funds may start to diversify away from the US dollar on concern over widening deficits.

·       ECB and Bank of England hold policy meetings today. Surveys show no expectation of interest rate changes.

 

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Dow Jones Industrials reshuffling: TRAVELER'S replaces CITIGROUP; CISCO replaces GM

BANKING SECTOR : RABOBANK, a member of the closed club of AAA banks and went through the crisis unaffected is launching a perpetual in USD with a 11% coupon until June 2019 and LIBOR 3 m +1087 Bips afterwards. Is it incredibly hot or are they hiding anything? Why such a high coupon for a AAA rated bank? Careful!

DOW JONES: reshuffling (pretty scarce) : TRAVELER’S is replacing CITIGROUP and CISCO taking over from GM

ECONOMY: oil price at 68, ISM and PMI bouncing back, higher construction spending in the US. Even consumers are in a better mood despite the jobless figure surging. Stock markets are cynical and know that in the short term all these redundancies are meant to save or get the margins back. The rise in unemployment and its impact on consumption and consequently on the stock markets will strike later (end of 2009, begin of 2010?)

VIX is down at 30. Gold is surging at 970 USD per oz and the oil price (BRENT CRUDE SPOT) as well at 67.2 USD. The USD is somewhat weaker against the EUR at 1.41. 10-2 years spread is at 2.00. The 5y CMS stands at 2.87 and the 3y at 2.18.

 

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DEXIA is likely to get rid of some 900 employees worldwide

So much cash to be invested: DJ +1.25%, S&P500 +1.5%, NASDAQ +1.2%, NIKKEI +0.8% and EUROSTOXX -1.1%, and up 1.2% now.

INFLATION : prices in Germany were stable in May y-o-y and down some 0.4% in Belgium, mainly due to the drop in oil prices. Nonetheless, the latter have surged since last February, what should contribute to reflation if this trend goes on. Conversely, price awareness is king amongst cies (BELGACOM asked its suppliers to reduce their prices by up to 20%) and consumers (DELHAIZE left the price of rice unchanged for the 365 products range but raised it by 30% for DELHAIZE products range). Difficult in such a situation to make forecasts for inflation. In the end, the main source might once again be oil  and raw materials, but we’ll have to see.

INDIA : GDP growth higher than expected in 1Q at 5.8% (5% forecast), thanks to construction and government spending (in period of national election)

BANKING SECTOR : DEXIA is likely to get rid of some 900 employees worldwide, of wich some 270 in Belgium and hire 200 top commercials for its home market at the same time. Rumouirs has it that it might also sell DEXIAM and the insurance business, reaffirming at the same time that it still believe in the bancassurance model. Can someone explain this to me?

VIX is down at 31.7. Gold is surging at 967 USD per oz and the oil price (BRENT CRUDE SPOT) as well at 63.8 USD. The USD is somewhat weaker against the EUR at 1.40. 10-2 years spread is at 1.97. The 5y CMS stands at 2.87 and the 3y at 2.18.

 

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UK: the amount of millionaires in GBP has shrunk by half, due to bad financial markets and the collapse of the real estate

Trend reversal at the end of the session in Europe after the release of a better than expected consumer confidence figure.

US ECONOMY: end of recession in the US is expected for end 3Q but a V-shaped recovery is unlikely, according to many economists. Europe should follow with a lag of one quarter. US consumer confidence bounced back in May at 54.9 from 39.2 and 42.6 forecast, mainly thanks to the anticipations.

UK: the amount of millionaires in GBP has shrunk by half from 489,000 down to 242,000. This is due to bad financial markets and the collapse of the real estate. This is going to have an impact of the AM business.

VIX is down at 30.6. Gold is down too at 949 USD per oz and the oil price (BRENT CRUDE SPOT) is slightly up at 60.6 USD. The USD is stable against the EUR at 1.40. 10-2 years spread is at 1.92. The 5y CMS stands at 2.84 and the 3y at 2.21.

 

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Oil Consumption lower in 2009, but reduced exploration explains increase in price

Weakness before the closing last Friday in NY despite the support by export oriented cies which should benefit from the weaker USD. Stock exchanges are closed in the UK and the US today.

IFO : the German business confidence index is expected to have risen for the second month in a row, in reaction to the stimulus package and the lower interest rates. INFINEON stated that its turnover is likely to bottom out from the March’s lows.

OIL : relief amongst the oil producing countries since the brent rose above the 50 USD level. Consumption is expected to drop this year but exploration is also down by 20%. This explains why the price has bounced back.

VIX is bouncing back to 32.6. Gold is jumping at 954 USD per oz and the oil price (BRENT CRUDE SPOT) is stable at 60 USD. The USD is stable against the EUR at 1.40. 10-2 years spread is at 1.95. The 5y CMS stands at 2.85 and the 3y at 2.17.

 

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The Fed revised recently its growth forecasts for the US

Not very clear so far: markets are bouncing back and the VIX is down significantly but at the same time gold is in great shape despite the disinflation. Oil price is up and the dollar is down.

UK: S&P might downgrade UK’s credit rating, which is AAA currently. We could see a lot of such reappraisal of States’ credit note in the near future.

US economy: The Fed revised recently its growth forecasts for the US, which is likely to shrink by between -1.3 and -2% in 2009 (previous forecasts dated from February and were between -05 and -1.3%)

VIX is bouncing back to 31.4. Gold is jumping at 951 USD per oz and the oil price (BRENT CRUDE SPOT) is up at 60 USD. The USD is down against the EUR at 1.394. 10-2 years spread is at 1.90. The 5y CMS stands at 2.74 and the 3y at 2.10.

 

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Consumer confidence in Belgium at a highest point since last October

CONSUMPTION : consumer confidence in Belgium at a highest point since last October (looks like jobless people do not count) and the sentiment about future evolution has improved significantly too. This has to be put in parallel with what is happening to stock markets.

VIX : now under the 30 level. Another piece of good news!
BANKS : ABN-FORTIS might reduce staff count by 4000 to 5000. No big surprise !

VIX is now under the 30 level at 28.8. Gold is up at 927.6 USD per oz and the oil price (BRENT CRUDE SPOT) stable at 58.6 USD. The USD is unchanged against the EUR at 1.36. 10-2 years spread is at 1.87. The 5y CMS stands at 2.70 and the 3y at 2.07.

 

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Possible stabilisation of the British housing market

GBP : the Sterling is in a better shape in the context of a possible stabilisation of the British housing market, qualified by some foreign investors as a ”screaming buy”. Even institutional investors are very much tempted to make a come-back as the pound is still far below its LT historical average value.

BANKS : Lloyds has made a 4 bn GBP placement in order to buy back some pref shares detained by the State; Lloyds’ boss Mr Blank has resigned. Soc Gen new boss, Mr Oudéa, is not excluding new depreciations.

VIX is stable at 33. Gold is up at 931 USD per oz and the oil price (BRENT CRUDE SPOT) is stable at 55.7 USD. The USD is stable against the EUR at 1.347. 10-2 years spread is at 1.87. The 5y CMS stands at 2.66 and the 3y at 2.02.

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Les chiffres du chômage aux USA empirent

·       Le chiffre sur les « jobless claims » aux USA était plus mauvais que prévu, une augmentation de 32k pour un total de 637k.

·       Les bons résultats de la société CA Inc a boosté le secteur Tech. Les actions financières dans le S&P500 ont repris 4%.

·       Le taux d'emprunt en $ (càd le 3 mois LIBOR) est au plus bas depuis 8 semaines > on peut dire que les actions prises par le gouvernement pour libérer le marché de crédit commence à apporter ses fruits.

·       VIX plus bas @ 31.37. Pour rappel, son niveau le plus haut était 80.86 en Novembre et sa moyenne sur 19 ans est 20.11.

·       L'or reste collé à $926. ur 2 semaines le prix est monté de 4.5%.

·       Le prix du baril un peu plus haut @ $58.70. Sur 2 semaines, on a gagné +10%.

·       € un peu à la baisse vs $ : 1.3580. Aujourd'hui on aura les chiffres sur le CPI et le GDP pour la zone €. On pourrait avoir la confirmation que l'économie de la zone € a rétrécit le plus en 13 ans !

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Rumours are flooding the market on KBC

EUROPEAN BANKS : KBC asked the suspension of its on quotation today as rumours are flooding the market. DEXIA ‘s staff members who are also shareholders (via the PEA) are likely to vote against Mariani’s and Dehaene’s nomination due to their “very interesting” salary package. Results at Dexia were better than in the previous quarter. Financials might be under pressure as results are getting published and after such a rebound. The IMF asked European banks to run a stress-test too.

CHINA : industrial production is somewhat lower than expected in April (+7.3%) due to disappointing electricity production and exports but consumption is taking over with a +14.5% rise in April y-o-y.

VIX is down further at 32. Gold is up at 928 USD per oz and the oil price (BRENT CRUDE SPOT) is up at 58.3 USD. The USD is stable against the EUR at 1.37. 10-2 years spread is at 1.76. The 5y CMS stands at 2.71 and the 3y at 2.12.

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Volatility at its lowest since Lehman collapsed

·       US stocks end the week on a high note : DJIA +1.96%, S&P+2.41%, NSDQ +1.33%. Jobs data was quite bad but not as bad as expected (539k jobs lost in April). Housing data was also better than expected. Results of govt stress tests reassured investors: financials in the S&P rally 23% over the week.

·       Some speculation that this rally might take a breather soon and let some of the fundamentals catch up.

·       General Motors losses 11% (over the week) as the company moves closer to bankruptcy.

·       VIX now down at 32.05, lowest level since Lehman collapsed.

·       Crude oil drops back from a 6 month high. Speculation that last week's 10% gain will not be sustained as global output increases. Barrel now @ $57.78

·       Gold still stable @ $914. Technical signals suggest the price may rise. Hedge fund managers have increased their net long positions.

·       Investors seeking higher risk, higher return products are putting pressure on $ "safe haven" status: €/$ @ 1.3618

 

 

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TOYOTA : still a myth you can't undo?

STRESS TEST : 10 US banks amongst the 19 checked are to find some 75 bn USD extra to improve their solvency. Despite yesterday’s correction, futures are in positive territory, a sign that this serious challenge is behind us.

VIX : indicates that markets might go through a correction in the near future, at least some fear so.

OIL : in great shape. At this tempo, inflation might become a serious concern again for Mr Trichet and Bernanke. Both will certainly have to fulfil a nice task in the coming months (year?)

TOYOTA : still a myth you can’t undo? The Japanese car maker anticipates a second annual loss as sales are falling off a cliff. Small cars suffer as much as other segments

VIX is down further at 33.4. Gold is up at 916.4 USD per oz and the oil price (BRENT CRUDE SPOT) is up at 57.3 USD. The USD is down against the EUR at 1.34. 10-2 years spread is at 1.83. The 5y CMS stands at 2.77 and the 3y at 2.16.

 

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GOLD : Central banks have significantly contributed to the price appreciation

• First resistance line broken : DJ +2.6%, S&P500 +3.4%, NASDAQ +2.6%, NIKKEI +1.7% (closed till Thursday) et EUROSTOXX +1.8%and up 0.6% at the opening.
  
  

• GOLD : Central banks have significantly contributed to the price appreciation and as quotas are still in place, the precious metal is likely not to suffer too much if bourses keep on rising.
  
  

• ECONOMY : Europe has revised growth forecast downwards for 2009 at -4%. This corresponds to the worst crisis since World war II. Unemployment and public deficit are likely to top out in 2010. Nonetheless, signs of inflexion are popping up : improvement in the US construction sector or in the semiconductor industry.
  
  

• BANKING SECTOR : BOA has denied any need for a capital increase. UBS +Q net loss amounts 2 bn CHF. The Swiss bank is as expensive as CREDIT SUISSSE but with much risk and worse prospects.
  
  

• VIX is down further at 34.5. Gold is up at 902.5 USD per oz and the oil price (BRENT CRUDE SPOT) is up at 53.6 USD. The USD is stable against the EUR at 1.33. 10-2 years spread is at 1.65. The 5y CMS stands at 2.74 and the 3y at 2.17.

 

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