1) The US economy added more jobs than expected in October and manufacturing activity increased, while the eurozone continues to struggle with weak manufacturing. 2) Markets showed little reaction to the positive US economic data and ended the month flat as investors await the outcome of the US presidential election. 3) The report provides recommendations on several stocks to watch that are reporting earnings or announcements, including Gemalto, Intercontinental Hotels, L'Oreal, and Sodexo.

1. 5 November 2012 M o n d ay Re p o r t
Economy Markets
The final week before the presidential elections brought relatively Trading was obviously disrupted last week by the closure of the US
good news for the Obama administration. October manufacturing market on Monday and Tuesday. In the end, markets showed little
ISM was surprisingly positive, climbing from 51.5% to 51.7%, while enthusiasm for the relatively strong US macroeconomic statistics,
it was expected to have fallen. Similarly, the employment report indi- ending the month unchanged in the US. China saw a much sharper
cated that the US economy had added 171,000 new jobs last month, rise (up 4%). Sovereign yields also reflected a wait-and-see attitude,
higher than the expected 125,000. The previous month’s figures were though spreads between Germany and the peripheral eurozone wide-
also revised upwards. In Europe, on the other hand, activity continues ned. This week will be dominated by the US presidential election (on
to languish, with eurozone manufacturing PMI stable at 45.4% (46% Tuesday), of which the outcome is particularly uncertain. We should
in Germany but only 43.7% in France and 45.5% in Italy). Finally, not, however, forget announcements by the French government fol-
the Chinese economy is showing welcome signs of stabilisation, with lowing the Gallois report on competitiveness in France, or the release
official PMI figures up from 49.8% to 50.2% and HSBC’s PMI up of the US services ISM report.
from 47.9% to 49.5%.
Swiss Market Recommended Stock Watch
To be monitored this week: OFS October CPI, Seco October unem- BG (SR) has surprised all its investors by cutting its 2012 and 2013
ployment figures and KOF October economic survey. In company production growth outlook to zero. The market was banking on
news, we are awaiting results from Adecco, Swissquote, Holcim, production really taking off in order to achieve the group’s 2015 tar-
LifeWatch, BC Vaudoise, Nobel Biocare, Kuoni, Swiss Re, Swiss- gets, with the share trading at a significant premium – in fact, it was
com, Barry Callebaut and Richemont. being valued as a growth share. The punishment was swift: the share
underwent a correction of around 18% last week. We are placing it
ROCHE (PLUS): the clinical news flow continues, with positive under review while we reassess the company.
phase II data on aleglitazar (for type II diabetes – a potential block- GEMALTO (PLUS) has reported a positive news flow for its NFC
buster). On releasing its Q3 sales, Roche announced an expansion in (mobile payment) products, including TSM services. The group has
its programme of phase III studies into the treatment, with a potential signed agreements with Vodafone (covering 400 million customers
launch slated for 2015. Richemont (NR) is expected to report strong in 30 countries), T-Mobile (a subsidiary of Deutsche Telekom) in Eu-
H1 results on Friday (consensus: sales up 20.5% to €5.08bn and rope and PCCW Mobile (HK), in partnership with Hang Seng bank.
EBIT up 22% to €1.305bn). We will be paying close attention to the INTERCONTINENTAL (PLUS) is due to announce its Q3 results
H2 trading update and the outlook in Asia. on Tuesday. The consensus is for sales of $480m (up 3%), EBIT
of $163m and EPS of $0.37. Watch out for US year-end RevPAR
Sentiment of traders trends and an update on the sale of the Barclay New York hotel
(shareholder returns).
Stock market
L’OREAL (PLUS) is due to release its Q3 sales midweek. Organic
On the eve of a high-risk week, stock markets have continued to
sales growth is expected to come in at 4.6%, representing a slowdown
consolidate amid thin trading. This week will be dominated by poli-
relative to H1 (up 6%) as a result of delayed launches, which will
tics rather than economics, with investors focusing on the US elec-
instead favour Q4 2012.
tions (Tuesday) and the opening of the 18th Congress of the Chinese
SAP (PLUS) is launching two new cloud-based social software offe-
Communist Party (Thursday). In this highly uncertain environment,
rings arising from its acquisition of SuccessFactors. These products
we are maintaining a cautious profile.
facilitate greater social collaboration (filtered data-sharing between
Currencies
employees) within a business or between businesses.
The US economy added 171,000 new jobs in October; this had a
SODEXO (PLUS) is set to release its 2012 results on Thursday:
positive effect on the dollar (USD/CHF: 0.9430; EUR/USD: 1.28,
organic sales growth is predicted to come in at 6.1% (2012 gui-
USD/JPY: 80.30) but was negative for gold, which fell 2% to $1,675/
dance of 6-7%) and EBIT is expected to have risen 11% to €945m.
oz. We expect the dollar to firm up, with targets of USD/CHF 0.96
Attention will be focused on the new 2013 guidance figures: the
and EUR/USD 1.25. There is still a danger that the EUR/CHF pair
market is expecting organic growth of 2-3% after the exceptional
could return to 1.2045 and gold could test major support at $1,646/oz.
events of 2012.
B OR DI E R & C IE
Today’s graph Performances
United States
S&P 500 vs ISM's
1600 65
since 01.01.2012 26.10.2012
60
1400
55
SUISSE SMI 12.89% 1.52%
1200 EUROPE DJ Stoxx 50 8.10% 1.13%
50
1000
45 EUROPE DJ Stoxx 600 12.39% 1.60%
40 USA S&P 500 12.45% 0.16%
800
35
EMERGENTS MSCI Emerging 9.64% 1.41%
600 30
00 02 04 06 08 10 12 JAPON Nikkei 225 7.05% 1.32%
S & P 500
ISM Manufacturing (RH Scale) Source: Thomson Reuters Datastream
ISM Non-Manufacturing (RH Scale) Source: Datastream
The information herein has been obtained from the best possible sources, however we cannot be held liable.
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