Market Preview - 14 May 2012; Eurozone industrial output in focus

Forex Overnight: EUR trading under pressure
The EUR has declined against the majors this morning after Greek President, Karolos Papoulias, failed to secure an agreement on the formation of a coalition government over the weekend. Meanwhile, markets expect Eurozone industrial output data scheduled later today to indicate that growth eased in March. At 5 am GMT, the EUR is trading 0.2 percent lower each against the USD and the GBP at $1.2890 and £0.8024, respectively.
The JPY has dropped 0.1 percent against the USD, while it has climbed 0.1 percent against the EUR.
The AUD is trading flat against the USD. The People’s Bank of China lowered the reserve requirement ratio for Chinese lenders by 50 basis points with effect from 18 May 2012 in a move to bolster the economy.

UK Stocks: Expected to open in negative territory
The FTSE 100 is likely to open 39 to 43 points in the red.
No major economic indicators are scheduled for release today.
Lonmin and Diploma are scheduled to report their results today.
Ann Pickard, the Chairman of Royal Dutch Shell Australia, has confirmed that the company’s plan to build a liquefied natural gas plant at the eastern Australian port of Gladstone is still on track.
The Sunday Times has reported that 3i Group will appoint Simon Borrows as the CEO this week.
According to the Sunday Times, Invensys is the target for potential bids from Siemens AG, ABB Limited, Emerson Electric and General Electric.
Rank Group has agreed to acquire Gala Casinos from Gala Coral Group Limited for a consideration of about £205.0 million in cash.

Asia: Trading in the green
Asian markets are trading higher this morning after China lowered its reserve requirement ratio for banks by 50 basis points with effect from 18 May 2012.
In Japan, Panasonic has risen despite providing a lower-than-expected full year profit forecast. NGK Insulators, Chiyoda Corporation and Kansai Electric Power have registered gains. On the flip side, Takeda Pharmaceutical has declined after it issued a downbeat operating profit forecast for the full year. Nissan Motor has lost value even after it posted a significant rise in its fourth quarter profit. At 5 am GMT, the Nikkei 225 index has gained 0.3 percent to trade at 8,982.5.
In Hong Kong, Henderson Land Development, Agile Property Holdings, China Merchants Bank and Agricultural Bank of China have advanced. United Co Rusal has edged lower after its first quarter net profit declined sharply. In China, Poly Real Estate Group and Gemdale Corporation have gained value amid market speculation that the cut in reserve ratio requirement will spur loan growth in China. In South Korea, SK Securities has lost value after reports indicated that SK Networks was considering selling its stake in the company.

US Stocks: Futures trading weak
At 5 am GMT, S&P futures are trading 3.0 points lower.
No major economic indicators are scheduled for release today.
Agilent Technologies, Groupon, American Science & Engineering, Photronics, Verso Paper Corporation, Solar Power and FriendFinder Networks are scheduled to announce their results today.
JPMorgan Chase & Company edged 0.8 percent lower, in the after hours trading session on Friday, after Fitch Ratings lowered its long-term issuer default rating on the company to “A+” from “AA-”. American Capital Mortgage Investment dropped 2.7 percent after it announced that it plans to offer 10 million shares of its stock. MagicJack VocalTec lost 1.8 percent following the announcement of the cancellation of its scheduled rights offering to shareholders as on record date 18 May 2012. On the contrary, Leap Wireless International climbed 2.4 percent amid earlier reports that the company has been in merger talks with AT&T Inc. over the past few months. Amongst other gainers, Hackett Group, Brocade Communications Systems and Chesapeake Energy surged 9.0 percent, 4.5 percent and 3.7 percent, respectively.
The S&P 500 index fell 0.3 percent in the regular trading session on Friday as losses in financial sector stocks outweighed data indicating a better-than-expected rise in the Reuters/Michigan consumer confidence index for May. JPMorgan Chase & Company plunged 9.3 percent after it admitted that it has made mistakes leading to a $2.0 billion trading loss in the past six weeks and could face an additional $1.0 billion loss in the second quarter due to market volatility. Citigroup and Morgan Stanley retreated 4.2 percent each, while Goldman Sachs Group declined 3.9 percent. Chesapeake Energy Corporation plummeted 13.8 percent after it indicated that it might delay some of the $14.0 billion planned asset sales this year in a move to preserve cash flows required to comply with loan agreements. Nordstrom dropped 4.8 percent after its first quarter earnings trailed market consensus. On the upside, NVIDIA Corporation soared 6.4 percent on the back of a better-than-expected forecast for second quarter sales. Bed Bath & Beyond jumped 4.1 percent after a broker upgraded its rating on the stock to “Out-perform” from “Neutral”.

European Stocks: Likely to open in the red
The DAX and the CAC are expected to open 65 to 67 points and 30 to 31 points in negative territory, respectively.
German Wholesale Price Index, French Current Account Balance, Italian Consumer Price Index & General Government Debt, Eurozone’s Industrial Production and Swiss Producer & Import Price Index are the key economic indicators scheduled for release today.
Ageas SA, Unione di Banche Italiane ScpA, Aurubis AG, Television Francaise 1 SA, Promotora de Informaciones SA and Buongiorno SpA are scheduled to announce their results today.
ING Groep NV’s bailout plan by the Dutch government would be re-examined by the European Union (EU) competition regulators after its General Court reversed some of the EU’s conditions for approval of the aid.
Het Financieele Dagblad has reported that Royal KPN NV’s largest shareholder, Capital, has expressed its discontent with the company since November 2011 and has called for the sale of the former’s German unit, E-Plus.
Infineon Technologies AG has announced that Peter Bauer, its CEO, would step down on health issues and would be replaced by Reinhard Ploss on 1 October 2012.
Nestle SA has voluntarily recalled one lot of its canned cat food amid indication of low Thiamine levels by the US Food and Drug Administration.
Banco Espirito Santo SA has indicated that it has completed the purchase of 50.0 percent of the BES Vida insurance unit for €225.0 million.

Macro Update
Chinese central bank lowers reserve requirement ratio
The People’s Bank of China has stated that it will lower the reserve requirement ratio for banks by 50 basis points with effect from 18 May 2012.
Top Greek parties ignore President’s appeal
Greek political leaders have rejected Karolos Papoulias, the Greek President’s appeal to form a coalition government to avert a repeat election.
Japanese DCGPI falls
The annual Domestic Corporate Goods Price Index (DCGPI) in Japan has dropped 0.2 percent in April, less than the market estimate and compared to a 0.5 percent rise posted in March.
Home loans in Australia increase
On a month-on-month basis, home loans in Australia have climbed 0.3 percent in March compared to a 2.5 percent drop recorded in February.
New Zealand’s services sector expands
The Performance of Services Index in New Zealand has risen to a reading of 56.7 in April, the highest reading since November 2011, and compared to a revised reading of 54.2 recorded in March.
Retail sales in New Zealand decline
On a sequential basis, retail sales in New Zealand have dropped 1.5 percent in the first quarter of 2012 compared to a revised 1.8 percent gain recorded in the fourth quarter of 2011.

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