US, European equities decline

MARKET OUTLOOK

- US: US markets bounced Friday after two consecutive days of decline helped by lower oil prices. Yet there is concern that declining oil prices could be a sign of an expected slowdown of the economy in 2007. Oil has declined more than 16% from its last peak. Week on week, the Dow Jones was unchanged and the Nasdaq 100 and S&P500 moderately lower. Stocks from the automobiles and compo and food and staples retail rose, while stocks from the semiconductors and energy sectors declined. We are cautious for the week ahead, also, easing tensions with Iran could provide some support to the market. Technically, the indices tested their 20d moving averages, a break below would confirm a consolidation.

- EUROPE: European markets fell more than in the US, paced by sharp declines in the technology and basic resources. As a matter of fact, all DJ Stoxx sectors fell week on week. As regards economic data, investors will focus on August inflation data for signs of rising inflation as the ECB is preparing for another rate hike next month. Technically, the sharp drop experienced earlier in the week calls for a pause in the days to come, unless the September highs are quickly bypassed which would then reinstate the upside and open the way for a retest of the highs of the year.

COMPANY PREVIEW

Sanpaolo Imi (EUR 16.42 ; -2.85% ; SPI ; SPI.MI)

Sanpaolo Imi reports on Tuesday its 2Q results. EBIT is seen dropping 6% to E1.010bln, and the group's net profit may fall 5% to E535m. Banca Intesa and Sanpaolo IMI boards approved their merger.

Gaz de France (EUR 28.78 ; -1.17% ; GAZ ; GAZ.PA)

GDF announces on Tuesday its 1H results. Net income is expected to reach E1.382bln compared to E1.185bln in the same period last year, while revenue is seen at E15.233bln, against E11.08bln. Gaz de France and Suez will submit concessions to European regulators at the end of the month to address competition concerns raised on their planned merger. In other news, Suez delivered last week record 1H profit.

Goldman Sachs (USD 149.8 ; 0.77% ; GS ; GS.N)

Goldman Sachs Group delivers on Tuesday its 3Q/Aug results. The market expects EPS of $2.97 ($3.25 a year ago). The stock has been trading around $150 since mid-May. Only the rise above $156 will call for a retest of the year high at $169.31.

Lehman Brothers Holdings (USD 66.13 ; 3.64% ; LEH ; LEH.N)

Lehman Brothers delivers on Wednesday its 3Q results. The market sees EPS of $1.49 ($1.47 a year ago). The stock upgraded to 'buy' from 'neutral' by UBS on September 1, which cited a positive outlook for the industry and an 'attractive' share price. Lehman Brothers should have benefited from a better than expected third quarter, particularly in fixed income compared to competitors.

BAE Systems (GBp 380 ; 2.08% ; BA/ ; BA.L)

BAE Systems delivers on Wednesday its 1H results. The group's net income is seen increasing 12% to £354m, while revenue may reach a 13% growth to £7.668bln. The group's board said after the close last Wednesday that it believes it is in the best interests of the company and its shareholders to dispose its 20% Airbus stake. It considers that Airbus 'is facing a challenging short to medium-term outlook, in particular with respect to certain of its principal programmes'. Net proceeds to BAE Systems are estimated to be around E1.784bln and £500m will be returned to shareholders.