Another US rate rise expected

MARKET OUTLOOK

- US: after a weak start, indices bounced thanks to a better than expected 3Q GDP first estimate. The US economy grew 3.8% compared to 3.6% anticipated by the market. Personal consumption was 3.9% compared to 3.3% expected.

On Tuesday the Fed is expected to raise its benchmark rate to 4% from 3.75%. The October ISM Services and Manufacturing will be the other key data to watch this week.

Technically, on the major US indices the bounce started Friday should continue initially, the key support for the Dow Jones is at 10155 and 1535 for the Nasdaq 100.


- EUROPE: European indices fell more than in the US after a series of profit warnings, including France Telecom, Peugeot, Alcatel and Ahold. Yet on Friday they managed to bounce off their lows which could lead to further upside early in the week.

The first down gap to fill on the Cac 40 is at 4392 (+1.52%). On the economic front, the German unemployment rate on Wednesday will be watched while the ECB is seen keeping its benchmark rate unchanged at 2% on Thursday. The market is starting to bet for a rate hike in the coming months.

COMPANY PREVIEW


Kellogg (USD 46.46 ; 0.8% ; K ; K.N)

Kellogg, the world's leading producer of cereal and convenience foods, reports its 3Q EPS today. The market is looking for $0.64 compared to $0.59 in the same period last year last on sales up 5.3% to $2.57bln.


UBS (CHF 105.8 ; -0.66% ; UBSN ; UBSN.VX)

Tomorrow UBS, Europe's biggest bank by assets, should announce its 3Q results (EPS seen around SF2.00-2.20). Last week Deutsche Bank said 3Q profit rose to a record E991m (+46% and better than expected) driven by higher revenue from trading and underwriting.


Procter & Gamble (USD 55.92 ; 2.03% ; PG ; PG.N)

The same day, Procter & Gamble will report its fiscal 1Q results, a few weeks after receiving antitrust approval for its Gillette acquisition. The market is looking for EPS of $0.76. The year to date return on the stock (+2.4%) is similar to competitor Colgate Palmolive (+4.7%) but far better than Avon Products (-28%) and Estee Lauder (-31%).


Credit Suisse Group (CHF 55.45 ; 1.65% ; CSGN ; CSGN.VX)

After UBS, on Wednesday Credit Suisse will report its 3Q results. Earnings from US and European banks have been better than expected in the 3Q. The stock is trading at 10.7 times its estimated 2005 earnings compared to 12.1 times for UBS. Credit Suisse has gained 16% YTD.


Volkswagen (EUR 44.58 ; -2.34% ; VOW ; VOWG.DE)

Thursday, Volkswagen will announce its 3Q results. Last Friday, the stock fell as Peugeot cut its 2005 targets following production cuts to reduce inventories. According to the FT Deutschland, it has narrowed the list of potential buyers for its Gedas automotive-consulting unit. Volkswagen stock has dropped more than 17% since its 52w high at E54.18.