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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