Flat consolidation continues

MARKET OUTLOOK:

- US : Last week, US markets continued their pause as the Fed raised its benchmark rate by 25bps for the 11th consecutive time to 3.75%. The press release pointed at further increases which disappointed investors. Company profit warnings were numerous.

The Rita hurricane pushed oil prices higher. Technically, the SP500 and Nasdaq 100 look set for further flat consolidation in the short term. In the medium term, above respectively 1200 and 1550 the uptrend remains intact. Below those levels, the risk will be initially for a 2 to 4% short term decline.

- EUROPE: European markets consolidated inline with Wall Street. Higher energy prices remain a threat to the global economy. The IFO business climate on Tuesday and German unemployment rate on Thursday will be the key economic data to watch. Technically, European indices call for a continuation of the ST pause but remain well oriented in the MT.


COMPANY PREVIEW:

Paychex (USD 32.98 ; -1.85% ; PAYX ; PAYX.O)

Paychex reports on Tuesday its 1Q/Aug EPS after market. The market expects EPS of the provider of payroll and human resources outsourcing solutions to be $0.28 compared to $0.23 in the same period last year. Sales should rise 12.7% to $389m.

Hennes and Mauritz (B) (SEK 269.5 ; 2.67% ; HMB ; HMb.ST)

On Wednesday, clothing chain Hennes and Mauritz will report its 3Q results. Last week, competitor Inditex said 2Q profit climbed 40% to 121.4m euros on sales up 21% to 1.41bln euros. H&M canceled an advertising campaign with Kate Moss due in November.

Kesa Electricals (GBp 266.5 ; -3.79% ; KESA ; KESA.L)

The same day, Kesa Electricals will report its 1H results. The stock bounced off a 252 earlier this month on market speculation it could the target of a possible takeover. 1H sales declined as consumers are reluctant to spend more.

Pepsico (USD 54.51 ; -2.66% ; PEP ; PEP.N)

Generali will report Thursday its 1H results. Last week, WestLB Equity Markets cut the stock to "underperform" from "neutral". Comments on impact from Katrina and Rita will be monitored.

Generali (EUR 25.81 ; -1.53% ; G ; GASI.MI)

Wendel Investissement reports on Thursday its 1H results. In July the holding company reported sales up 10.6% to E1.448bln. All units contributed to revenue growth. Last week it said it cut its Valeo stake by 23.5%, below the 5% threshold (4.08%).