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The Round Up is a comprehensive daily note produced by the RBS Warrants team providing an overview of market movements along with quality ideas for warrant traders and investors. This material has not been reviewed by Egoli.

United States Commentary

The US indices still struggling for clear direction with little economic data or results to lead. Softer commodities and crude as consumers opted to keep their hard earned in the bank, while Financials and Industrials did better. Dow closed off 34 pts, while S&P 500 down just 1.4 pts.

Eco - University of Michigan Confidence numbers were the only piece of economic news, coming in slightly above expectations at 70.8 vs 69.0 forecast and previous.

Energy - Chevron lost 1.4% and ExxonMobil down 1.2% as crude slipped after the US government said the US savings rate climbed to the highest level in more than 15 years, indicating that the economic recovery will be slow to gather strength.

Homebuilders - KB Homes finished down 9.3% on Friday, the worst of the S&P 500, after the homebuilder missed the mark on the earnings front. The builder is slashing prices and reducing the size of its houses to compete with foreclosed houses for sale.

Financials – Morgan Stanley added 2.7% after they received Federal approval to increase its stake in Chinatrust Financial Holing to 9.9 percent and become the largest shareholder in the Taipei company.

United Kingdom & Europe Commentary

The FTSE fell 0.3% or 12 pts on Friday despite positive news out of the US as negative comments from China hurt the miners. The FTSE Eurofirst 300 dropped 0.1%, the DAX sank 0.5% and the CAC was 1.1% lower.

UK Banks - Banks were mixed, with Barclays and Standard Chartered down 0.6% and 0.7%, respectively, dented by comments from Swiss lender UBS that it expected to post a second-quarter net loss and would raise more capital.

Euro Banks - UBS fell 5.4% after a surprise announcement to raise SFr 3.8bn at a 7% discount. Expectations were for an expensive settlement with the US over demands for information about offshore accounts, or a divestment by the Swiss government of the SFr 6bn ($5.5bn) special securities bought in a bail-out of the bank last October.

Financials - Weakness was also seen among life insurers. Friends Provident fell 0.8%, while Standard Life and Prudential both shed 1.7%.

Retail - Retailers enjoyed a rally as John Lewis, seen as a barometer of British retail spending, said its 27 UK department stores recorded their best week of the first half so far, partly helped by significant purchases for Father's Day. Marks & Spencer was among the top blue-chip risers, up 3.7%, while Next added 1%.

Resources Commentary

Miners – UK mining stocks were big fallers, hurt by comments from the People's Bank of China that the financial crisis might slow China's drive to expand consumption. Rio fell 1%, with BHP off 0.7%, Vedanta also down 0.7% and Anglo American was 1.5% lower.

Energy – Oil stocks were also big fallers, reversing gains made earlier in the session, as crude slipped below $70 a barrel. BP, Shell, Cairn Energy and Tullow Oil fell 0.3% – 0.8%.

SPI Commentary

The SPI traded up 49pts or 1.23% to 3879. Overnight the SPI trading up 1pt to 3880

Upcoming Economic Events 

*Dates are indicative only and may change

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MINI Trading Buy:

Telstra Corporation (TLSKZD) – RBS Short term trading buy

RBS currently have a short term trading buy on Telstra for the period through to Telstra's FY09 result due on 13 August. We consider the high-water mark of regulatory risk has been reached, and the trading case now rests on the relative reliability of FY09F earnings and dividend of 14cps, which offers a 9% yield. The recent pullback provides a good entry opportunity with the stock having made a higher low in May/June. Indicative close range is $3.55-3.62. Buy TLSKZD

Relative reliability of FY09 earnings and dividend
RBS Research expect Telstra’s 2H09 to show good wireless broadband growth and erosion to ULL to have slowed in 2H09, although the recessionary impact on revenue has probably increased in 2H09 on 1H09. Some incremental positive surprise may be in Next IP data product revenue, which appears to have held up well in the business and enterprise segment. We estimate 2H09 revenue growth is running below 3%, which would bring in annual growth at the low end of the 3-4% guidance range. Expect costs to remain relatively high in 2H09 due partly to transformation issues, but sufficiently under control to allow the company to deliver the low end of its target EBIT growth of 3- 5%. The cost issues are already expected by the market and so delivery of EBIT within guidance would be a net positive.

RBS Minis over TLS

RBS Warrants over TLS

MINI Trading Buy:

Origin Energy (ORGKZC) – Long term value

We believe the long-term story for owning ORG remains intact and the recent pullback is an opportunity to buy. The key value drivers are ORG's ability to reinvest its under-geared balance sheet and monetise its vast gas reserves. RBS has a buy recommendation on ORG with a $17.50 target price. Buy ORGKZC

Contact downgrade already factored into FY09F earnings
On the back of heavy rainfall filling South Island hydro lakes, wholesale electricity prices in NZ have been at record lows, which has prompted CEN to downgrade its FY09 NPAT guidance to 30-33% lower than FY08 vs previous guidance of 20- 23% lower. RBS research are currently factoring in a 30% decline in NPAT. Post this, ORG has lowered its guidance as a result of its CEN stake.

Long-term story is still all about ORG’s undergearded b/s and vast gas supplies
ORG’s share price is off about 15% from its May highs on fears over LNG project delays and now further CEN downgrades. While we believe that CSG/LNG news will drive the share price in the near term, we still see ORG as a stand-out on a long term view. The key drivers going forward are ORG's ability to reinvest its under-geared balance sheet into new growth opportunities and to monetise its vast gas reserves via LNG, power generation and/or retail.

RBS MINI’s over ORG

The Bear Cage:

Boral Limited (BLDKZQ) – FY10 numbers too high?

The FHFA reported Fannie Mae and Freddie Mac modification of existing mortgage terms and conditions are up +43% QoQ to 31 March 2009 and that amongst these modifications, reductions in mortgage payments of >20% accounted for some 52% of volume (2% in pcp) in an attempt to dampen the impact of further foreclosures that are expected through the balance of CY09 and into CY10. Fannie Mae and Freddie Mac own or guarantee 56% of all mortgages outstanding but only 22% of all seriously delinquent loans.

Despite this, a recovery in new housing activity still seems a long way off and RBS continue to expect house price stability to be the meaningful catalyst for a national recovery in housing and note that whilst existing housing inventories are off their peak of nearly 11 months, at 9 months, they are still 33% above the long term average and average house prices are still continuing to fall. Go short BLD on a breakdown of $3.90 support through BLDKZQ

There is at least one quarter lead time between leading indicator improvement and a volume impact for each of the building materials plays (JHX, BLD) which should emphasise how difficult FY10 is likely to be for both companies and why consensus expectations for BLD in particular to achieve a flat yoy FY10 NPAT result look particularly at odds with construction fundamentals both in the US and in Australia

RBS MINI’s over BLD

The information contained in this report has been taken from sources believed to be reliable. RBS Equities Australia Limited (ABN 84 002 768 701, AFS Licence No. 240530) ('RBS Equities') does not represent that the information is accurate or complete and it should not be relied on as such. Any opinions expressed reflect RBS Equities' judgment at this date and are subject to change. RBS Equities and/or its affiliated companies may make markets in the securities discussed. Further RBS Equities and/or its affiliated companies and/or their employees from time to time may hold shares, options, rights and/or warrants on any issue included in this report and may, as principal or agent, sell such securities. RBS Equities may have acted as manager or co-manager of a public offering of any such securities in the past three years. RBS Equities' affiliates may provide or have provided banking services or corporate finance to the companies referred to in the report. The knowledge of affiliates concerning such services may not be reflected in this report. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment whatsoever. RBS, in preparing this report, has not taken into account an individual client's investment objectives, financial situation or particular needs. Before a client makes an investment decision, a client should, with or without RBS's assistance, consider whether any advice contained in the report is appropriate in light of their particular investment needs, objectives and financial circumstances. It is unreasonable to rely on any recommendation without first having spoken to your adviser for a personal securities recommendation. For clients in the USA, RBS Incorporated does not accept responsibility for the contents of this report. This report is distributed in the U.S. solely to 'major institutional investors' as defined in Rule 15a-6 (US Securities Exchange Act 1934). Each US recipient by its acceptance hereof warrants that it: is a 'major institutional investor', as defined; understands the risks involved in dealing in the Securities or any related investments or instruments; and shall not distribute nor provide this report, or any part thereof, to any other person. Any US recipient wishing to effect a transaction in any security mentioned herein, or any related investment or instrument, should do so by contacting RBS Incorporated and not RBS Equities Australia Limited. For clients in the UK, RBS Equities (UK) Limited accepts responsibility for the contents of this research material. The warrants mentioned in this report are issued by RBS Australia Limited (ABN 78 000 862 797, AFS Licence No.247013).

The Product Disclosure Statement ("PDS") relating to these warrants is available upon request from RBS (1800 450 005) or on our website www.abnamro.com.au/warrants/circulars.asp. 2004 RBS Equities Australia Limited (ABN 84 002 768 701) A Participant of the ASX Group.

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