In the Euro area, the EU Commission index of confidence and the sentiment of Italian and Belgian firms, plus the consumer confidence indicators in the three major economies.… .…
The Chicago PMI is expected to make up ground in July.
– The BNB (Belgian manufacturing business confidence) index, considered a leading indicator of industrial activity in the Euro area, might be down for the fourth straight month in July (our estimate: -2.5 vs. -1.1). The index would still be above the long-term average (-7.5). In recent months the index has shown a close correlation with the trend in the Euro area manufacturing PMI (probably at this time the two confidence indices with the highest forward-looking weighting).
– Household confidence as measured by the Conference Board should rise to 60 in July from 8.5 in June. The Univ. of Michigan index plunged in the July preliminary reading, in both the view of the present situation and in expectations; however, the Bloomberg Comfort weekly index showed two consecutive gains. The rally in equities and the fall in the price of petrol should at least stabilise sentiment.
– Italy. The index of manufacturing business confidence might fall for the fourth straight month in July (our estimate: 100 vs. 100.5 before). In June, for the first time in almost two years, firms reported that inventories were higher than was desirable (given the current pace of sales), which is not reassuring for industry looking ahead; in addition, in recent months export orders have also fallen back.
– The Beige Book prepared for the August FOMC meeting might cast light on the transitory nature of the recent slowdown. In the previous report, the Beige Book signalled ongoing activity growth in all areas, with less negative indications than were seen in the actual data.
– Italy. Contractual pay growth should be steady at 1.8% yoy in June. The figure would be consistent with month-on-month growth in pay of one-tenth. According to ISTAT projections, barring renewals, the sector pay dynamic might slow by several tenths in the coming months, likely remaining below inflation for the whole year.
– The EU Commission index of economic confidence is expected to fall for the fifth straight month in July, slipping to 104.5 from 105.1 in June. Household confidence, according to the preliminary estimate, fell to -11.4 from -10.3 and manufacturing business confidence might (according to the national surveys) fall to 2 from 3.2. The other sub-indices (services, trade and construction) should be steady or down. The level of the composite index still remains above the long-term mean (100.8) and is still consistent with GDP growth roughly in line with the 2.5% yoy recorded in 1Q11, i.e. not signalling a sharp cycle reversal, at least for now.
– France. Consumer spending is expected to bounce to at least 0.5% mom in May after three months of falls. Year-on-year, sales might turn positive at 1.3% yoy, whilst still showing a very sharp contraction in 2Q11 (-4.2% qoq), which increases the risk of a marked slowdown in GDP in 2Q11.
– Euro area inflation might stick at 2.7% yoy in June (with some upside risks). The figure would be consistent with a fall in prices of four-tenths in the month, mainly due to the seasonality of July. Looking ahead, we expect inflation to remain broadly steady through to November, with substantially falls only coming between year-end 2011 and start-2012.
– Italy. Consumer prices might be up 0.4% mom (with some downside risks) in July, leaving year-on-year inflation up one-tenth at 2.8%. The harmonised index should see prices fall by – 0.8% mom while the year-on-year IACP should be steady at 3%. As with the entire Euro area, we expect inflation to remain broadly steady through to the end of autumn.
Consumption should slow sharply (+0.8% qoq ann.), although business fixed investments should be up (+8% qoq ann.), while inventories should make a positive contribution of around 0.5 pp. Public spending should be up slightly, while international trade should make a positive contribution to overall demand. The positive contribution from inventories and the foreign channel should be magnified by the effects of the Japanese earthquake and should fall back in the following quarters, by which time we should see a pick-up in consumption.
– Household confidence as measured by the Univ. of Michigan should rise to 68 in July, after the steep fall seen in the preliminary reading. In the first reading the index was down sharply on June, falling to 63.8 from 71.5. The weekly confidence index rose in the last two weeks and confidence should respond positively to the fall in the price of petrol and the rally in equities.
– The Chicago PMI should rise to 63 in July from 61.1 in June, confirming the reversal from the May low of 56.6, but remaining a long way off the April level (67.6) and the February high (71.2). Production should be up in July (it fell to 56 in May and rose to 66.9 in June), nearing the April level (70). The survey should confirm the assumption that most of the spring slowdown was transitory.
Appendix
Analyst Certification
The financial analysts who prepared this report, and whose names and roles appear on the first page, certify that: (1) The views expressed on companies mentioned herein accurately reflect independent, fair and balanced personal views; (2) No direct or indirect compensation has been or will be received in exchange for any views expressed. Specific disclosures: The analysts who prepared this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.
Important Disclosures
This research has been prepared by Intesa Sanpaolo S.p.A. and distributed by Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for the contents of this report. Please also note that Intesa Sanpaolo S.p.A. reserves the right to issue this document to its own clients. Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both authorised by the Banca d’Italia, are both regulated by the Financial Services Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.
Opinions and estimates in this research are as at the date of this material and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this research may not be suitable for all investors. If you are in any doubt you should consult your investment advisor.
This report has been prepared solely for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient’s own judgement.
No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities accept any liability whatsoever for any direct, consequential or indirect loss arising from any use of material contained in this report.
This document may only be reproduced or published together with the name of Intesa Sanpaolo S.p.A. and Banca IMI S.p.A.. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. have in place a Joint Conflicts Management Policy for managing effectively the conflicts of interest which might affect the impartiality of all investment research which is held out, or where it is reasonable for the user to rely on the research, as being an impartial assessment of the value or prospects of its subject matter. A copy of this Policy is available to the recipient of this research upon making a written request to the Compliance Officer, Intesa Sanpaolo S.p.A., 90 Queen Street, London EC4N 1SA.
Intesa Sanpaolo S.p.A. has formalised a set of principles and procedures for dealing with conflicts of interest (“Research Policy”). The Research Policy is clearly explained in the relevant section of Banca IMI’s web site (www.bancaimi.com).
Member companies of the Intesa Sanpaolo Group, or their directors and/or representatives and/or employees and/or members of their households, may have a long or short position in any securities mentioned at any time, and may make a purchase and/or sale, or offer to make a purchase and/or sale, of any of the securities from time to time in the open market or otherwise. Intesa Sanpaolo S.p.A. issues and circulates research to Qualified Institutional Investors in the USA only through Banca IMI Securities Corp., 245 Park Avenue, 35th floor, 10167 New York, NY,USA, Tel: (1) 212 326 1230. Residents in Italy: This document is intended for distribution only to professional investors as defined in art.31, Consob Regulation no. 11522 of 1.07.1998 either as a printed document and/or in electronic form. Person and residents in the UK: This document is not for distribution in the United Kingdom to persons who would be defined as private customers under rules of the FSA.
US persons: This document is intended for distribution in the United States only to Qualified Institutional Investors as defined in Rule 144a of the Securities Act of 1933. US Customers wishing to effect a transaction should do so only by contacting a representative at Banca IMI Securities Corp. in the US (see contact details above).
Valuation Methodology
Trading Ideas are based on the market’s expectations, investors’ positioning and technical, quantitative or qualitative aspects. They take into account the key macro and market events and to what extent they have already been discounted in yields and/or market spreads. They are also based on events which are expected to affect the market trend in terms of yields and/or spreads in the short-medium term. The Trading Ideas may refer to both cash and derivative instruments and indicate a precise target or yield range or a yield spread between different market curves or different maturities on the same curve. The relative valuations may be in terms of yield, asset swap spreads or benchmark spreads.
Coverage Policy And Frequency Of Research Reports
Intesa Sanpaolo S.p.A. trading ideas are made in both a very short time horizon (the current day or subsequent days) or in a horizon ranging from one week to three months, in conjunction with any exceptional event that affects the issuer’s operations. In the case of a short note, we advise investors to refer to the most recent report published by Intesa Sanpaolo S.p.A’s Research Department for a full analysis of valuation methodology, earnings assumptions and risks. Research is available on IMI’s web site (www.bancaimi.com) or by contacting your sales representative.
Source: BONDWorld – Intesa Sanpaolo – Research Department
Newsletter
