Sub-prime mortgage crisis hits US shares

Technically, the outlook is bearish on both sides of the Atlantic even if a slight bounce can be expected in Europe.

MARKET OUTLOOK

- US: US markets dropped sharply at the end of the week, reversing Tuesday's and Wednesday's gains, on renewed concern about the effect of the sub-prime crisis on the economy.

Shares from real estate, automobile and components, household and personal production and banks managed to outperform the market, while commercial, telecom services, retailing and capital goods were among the worst performers last week.

From a technical point of view, the outlook is still bearish and some new lows are expected in the forthcoming days.

- EUROPE: European markets are expected to rise this week after central banks injected money to obviate a credit crunch. Shares from insurance, personal and household goods and financial services were among the best performers last week, while automobiles and parts, basic resources, construction and materials and travel and leisure lost ground week-on-week.

Even if a technical bounce cannot be ruled out, the room on the upside should remain limited. Consequently, major indexes should remain under pressure.

COMPANY PREVIEW

UBS (CHF 65.35 ; -0.46% ; UBSN ; UBSN.VX)

On Tuesday, UBS is scheduled to announce Q2 net income of SF3.13bn (SF3.14bn a year ago). Last week, the Co sold shares in Aegis Group for 8.2m UK pounds and a month earlier disposed of 4m shares in the Hellenic Telecommunications Organisation. Separately, UBS aims to manage a tenth of Taiwan's private wealth by 2015.

Wal-Mart (USD 46.07 ; 1.21% ; WMT ; WMT.N)

In the US, Wal-Mart intends to publish Q3 earnings on the same day. Q2 EPS seen at $0.77 ($0.72 a year ago) on sales of $92.79bn ($84.52bn). In July, the Co announced that it planned to more than double its stores in China in the next five years and expected to have a 20% share of the country's retail market with this expansion. In other news, Wal-Mart Stores and Bharti Group signed an agreement to set up wholesale stores in India.

Nestle (CHF 443.5 ; -2.74% ; NESN ; NESN.VX)

Nestle may post H1 results on Wednesday. H1 net income is expected to reach SF4.62bn (SF4.15bn a year ago) on revenues of SF50.39bn (SF47.13bn). At the beginning of July, Nestle completed the purchase of Novartis' Gerber baby foods division and medical nutrition business. The Co separately announced that it intends to spend $462m in Brazil by 2009 on new plants, acquisitions and expanding older facilities.

Deere and Co (USD 117.3 ; -0.14% ; DE ; DE.N)

Later, in the US, Deere and Co is seen reporting Q3 EPS of $1.98 ($1.85 a year ago) on sales of $6.19bn ($6.2bn). On July 8, Deere and Co agreed to acquire the Ningbo Benye Tractor and Automobile Manufacture Co in southern China to expand sales of small tractors.

Hewlett Packard (USD 47.21 ; -0.42% ; HPQ ; HPQ.N)

Finally, on Thursday, Hewlett-Packard will release Q3 EPS of $0.65 ($0.52 last year) on sales of $23.99bn ($21.89bn). At the beginning of the month the group finally resolved a patent infringement lawsuit against Pelikan Hardcopy Holding over printer cartridges. In July, the Co was holding negotiations with Bull over the takeover of the France's largest computer maker. Hewlett-Packard plans to offer E720m, or E7.5 a share for the Co.