US & World News

The larger than expected decline in inflation in France in August underscores the persistent weakness of domestic demand despite economic indicators better oriented.

The price index (CPI) has certainly increased 0.2% from one month to another but its evolution is on an annual income +1.4% +1.7% against the previous month .

The HICP HICP, which allows a comparison at European level, also rose 0.2% to an annual change of 1.6% against 1.9% in July.

Economists polled by Reuters had expected an average increase of 0.4% of the HICP index, calculated for an annual rate of 1.7%.

"The rise in the price index in August was mainly due to higher prices of manufactured goods related to the end of summer sales and increasing prices is also seasonal services," explains INSEE said in a statement.

"These increases are offset by lower seasonal fresh produce," the statement said.

Seasonally adjusted, prices are also stable in August.

"Domestic demand is so depressed that it prevents distributors to raise prices," noted Alexander Law, chief economist at the institute Xerfi.

The decline in annual inflation is partly due to the blurring of the base effect on oil.Whereas the annual rate rising energy prices still amounted to 10.5% in July, she returned to 8.4% through August.

"It should be very attentive to the changing prices of major commodities, whether agricultural or industrial.Any increase too brutal automatically be reflected on the bill paid by consumers, which limits their ability to spend in store, "warned Alexander Law.

The strong growth recorded by the French economy in the second quarter led the government to raise slightly its growth forecast for the full year to 1.5% against 1.4% previously.

The dividend tax recovery also led the Minister of Budget, Baroin to announce that the deficit of France will be lower this year the target of 8% of GDP that the government had set.

The labor market also showed signs of stabilization with 60.000 new positions in the private sector in the first half and an early decline in unemployment.

However, a slowdown in growth is expected in the third quarter with a halving of the rate of GDP growth quarter on quarter, according to estimates by economists.

The market outlook remains bleak employment, job center anticipates virtually no net creation of employment in the second half of 2010 and only 76,000 on the whole of next year.

"Unable to increase their margins, retailers and manufacturers are obliged to put pressure on suppliers and especially on wages, which depresses slightly more consumption," noted Alexander Law.

"All the conditions are met for a vicious circle especially into place," said he pointing out that with an increase of only 0.6%, the underlying inflation (excluding volatile prices and rates administered) is close to its historic low of 0.5%.

For a chart on the evolution of the index of consumer prices and core inflation:

here

Press INSEE on the evolution of retail prices in August: here

Wall Street risk of experiencing a hectic week in the heart of the most volatile months of the year usually.

The options on the volatility index of CBOS, which is considered a standard of fear in the stock market, are very active traders are anticipating a strong fluctuation of the index.

That next week, "that really begins the month that makes everyone nervous," said Brian Overby (TradeKing)."Especially since the volatility has made it a lot so discreet relaxation on the market at the slightest bad news it will be entitled to leap."

September is traditionally a bad month for the stock and market volatility reached record highs for all the traders returned to their posts.

Given data on VIX options in September, some investors are betting on a doubling of the index by the end of next week, observes Ryan Detrick (Schaeffer's Investment Research).

"Given that there is less than a week, unless a tragic event, it is virtually unthinkable that the VIX is double but tellingly it is covered much in anticipation of large fluctuations."

The VIX closed down 4% to 21.99 Friday, below its moving average 200 days, but it has gained 3.2% on the week, after falling more than 12% the previous week .

The index usually evolves in reverse, Standard & Poor's 500 because it trace option prices that investors are willing to pay to protect themselves from changes in exchange cash loans.

THE "FOUR WITCHES"

The Dow and the S & P 500 ended the week on their seventh increase in eight sessions, taking advantage of easing investor concerns vis-à-vis the changing economic conditions.

But the low volume that has accompanied this increase demonstrates the prudence of these same investors.

"If all the data (next week) pointing in the same direction, which is unlikely, then we could have a more noticeable change of sentiment.But the most likely outcome will be something mixed, maintaining the inertia of the moment, "said Michael Shea (Direct Access Partners).

Tuesday retail sales, industrial production Wednesday, producer prices and jobless claims Thursday, and retail confidence index from the University of Michigan are on the menu next week.

One factor that may significantly increase market volatility will occur Friday, with the "four witches", or the expiration of four different types of futures and options, which most often leads also swelling volumes .

This event occurs four times a year in March, June, September and December.It can cause wide swings as traders or buckle their hedge positions, either refer to the next due to the very last moment.

Falling into a near-coma in August, the European market of corporate bonds (corporate credit) woke up with great fanfare in early September, issuers taking advantage of historically low interest rates on loans up State reference.

The absence of a minimum consensus on the evolution of the global economy, central banks have undertaken to support the business by all means and interest rates at historically low levels are factors favorable to the credit market , risk aversion especially penalizing actions.

Low flows on the action clearly indicates a lack of conviction of investors who, incidentally, are desperately in search of yield.A performance that does not give them money or products or government bonds.

The German Bund yields to 10 years, which had fallen to a record low of 2.2% in late August, remains extremely low at 2.35%.

Aversion to risk is changing but very real and the need to boost portfolio performance have greatly benefited this year said credit to "high efficiency" (high yield, HY) as opposed to credit safest investment grade ( Investment grade).

According to data compiled by Thomson Reuters, HY bond issues in the world amounted to September 6 $ 177 billion, an increase of 96% over the same period of 2009 and already more than for the whole of last year (176.6 billion dollars).

However, this figure is less than 10 billion record set in 2006.

Since late August, the market sentiment has fluctuated, particularly on the strength of U.S. growth. Pessimistic late August, he has improved this week with the monthly employment figures better than expected, published on September 3.

BANKS READY TO FINANCE COMPANIES

But professionals are cautious about the interpretation of these statistics."A report (on the job) better than expected is not necessarily a good report," said Joost van Leenders, strategist at BNP Paribas Investment Managers.

If a relapse of the U.S. economy appears set aside, the marked slowdown in the second quarter and the slowdown wins Asia.

Joop van Leenders remains underweight on equities and neutral on bonds, is the weighting of bonds and overweight high-yield credit.

The 'hot shot' on the strength of European banks, raised earlier this week by a Wall Street Journal, was to temporarily increase the premiums (spreads) on financials.But on Thursday the premiums have tightened by about 9 basis points.

"The week was good for the credit market", wrote in a note Suki Mann, strategist at Societe Generale credit, who notes that the primary market issuances have exceeded expectations.

He stressed that the premiums were low and that non-financial issuers of which is seen more rarely appeared on the market.

"At current rates, and taking into account seasonality, non-financial issues of this year could reach 110 billion euros, representing a decrease of 55% over 2009 and a record of thumbing its nose at those who believed that disintermediation has become the new means of financing "(businesses), he adds.

He said the European banking sector, which has the refinancing ultra-accommodative, is ready to finance companies with very small margins.

Number of French issuers have requested the market this week. Societe Generale Friday lifted 1.0 billion euros of senior notes maturing in 2017 to 93 basis points over the swap curve.The day before, BNP Paribas had issued 1.0 billion of bonds maturing three-year floating rate (3 month Euribor +40 bp) and 500 million 2.625% 2016 (104.8 basis points above Bund 2016).

Among non-financial, PSA has raised 600 million euros of bonds 3.50% 2014 (193 basis points over the swap curve). Areva has put 750 million euros to 11 years at a price yielding 100 basis points over swaps.

Wall Street closed higher Thursday, supported by statistics better than expected, a plus for investors who have the gravest doubts about the extent of economic recovery.

Entries weekly unemployment declined in the United States during the week to Sept. 4, at 451 000 478 000 cons last week. Economists had expected jobless claims averaged 470,000.

The trade deficit the U.S. has declined more than expected in July due to lower imports and a sharp rise in exports.

The Dow Jones gained 28.23 points (0.27%) to 10,415.24.The S & P 500 is 5.32 points (0.48%) to 1,104.19 while the Nasdaq Composite gained 7.33 points (0.33%) to 2236.20.

Gains were limited however, because questions remain about the recovery, especially as a senior Labor Department said some states were unable to submit their data on jobless claims due to Labor Day, day public holiday in the U.S. fell last Monday.

Besides the announcement of a possible placement of securities from Deutsche Bank has also helped reduce earnings.

The volumes are also restricted because of the Jewish New Year celebrations.

Fears of a new recession in the U.S. are the key investors in recent months but the statistics of the past week have exceeded expectations, some were taken aback and hurriedly returned to stock.

"Basically, they liquidated the shares; it is underweight in equities, as was feared in September, traditionally one of the worst months of the year," said Nick Kalivas (MF Global).

"The numbers last week or so are better than expected, it is hoped that this will in the third quarter to end on a good note."

The Dow Jones returned to positive territory, if there are performance since the beginning of the year.The S & P is at its highest in almost a month.

McDonald's against the trend yield 2.25% to 74.37 dollars. Fast-food chain has yet announced an increase in comparable store sales August. However, its sales in Europe declined, particularly in France, where the channel had its biggest sales in the region.

Texas Instruments closed up 0.68% to 23.84 dollars. The semiconductor manufacturer has to make his point after my usual quarterly closing.

Scor Wednesday unveiled the broad outlines of his new three-year strategic plan, setting a target of a rating level "AA", organic growth of around 5% per annum and a return on equity of 10% above the risk free rate.

The fifth global reinsurer said in a statement that his plan 2010-2013 called "Strong momentum" is intended to optimize the risk profile of the group.

Over the past three years, growth was driven in Scor averaging 4.4% and its credit rating dropped from "A-" to "A".The group had set a target return on equity of 900 points above the risk free rate.

During the period, its equity increased from 3.6 to 4.2 billion euros and its debt ratio was reduced from 18% to 11%.

The reinsurer said it wanted to continue its growth in the markets where it already operates and increase the contribution of asset management to its outcome.

He said wanted to "maintain strict" four pillars of its business model, namely the development of its business, a moderate risk appetite, to diversify its activities and rigorous management of capital.

The stock closed at 17.05 euros on the Paris Stock Exchange Tuesday, signing up 6.9% since the beginning of the year.

Boiron action has been suspended from trading Monday at the opening of the Bourse de Paris at the request of laboratory specializing in homeopathy, and professionals do not exclude the announcement of a capital transaction can go up at delisting.

A spokesman for NYSE Euronext Paris announced that Boiron had requested the suspension pending the publication of a statement.

In Boiron, it was confirmed, without giving further details, a release would be issued shortly.

"An operation on capital does not really surprise me. It is even possible that the Boiron family, which controls, decides a delisting," said one analyst who requested anonymity."They do not communicate," he adds.

After the publication of its interim results and announcement of investments that have surprised analysts, the stock dropped from 7.59% last week and closed Friday at 25.35 euros.

At December 31, 2009, the family group Boiron held 49.75% and 57.47% of the capital of voting rights.

The Pierre Fabre group held 16.32% of capital, 29.65% were in the audience.

The Nikkei closed up 0.57% on Friday, supported by recent U.S. macroeconomic statistics found promising, although its gains have been limited by investor caution before the announcement of monthly figures of employment in the States USA.

The Nikkei index closed at 9,114.13 points and the broader TOPIX, took 0.52% to 823.70 points.

The unexpected recovery of promises in real estate sales and falling jobless claims in the United States has reassured investors about the state of the global economic recovery and leveraged buyouts of overdrafts.

The higher growth forecast of the European Central Bank has also supported the upward movement of the market.

Groups exporters have particularly benefited from this situation. Canon and Sony have taken and 1.28% respectively and 2.39%.

However, the distributor Fast Retailing has lost 1.2% after announcing a decline in August from 9.3% of sales on a comparable basis of its Uniqlo brand.