Market Preview - 17 May 2012; Focus on Spanish GDP

Forex Overnight: USD trading weak
The USD has declined against the majors this morning after minutes of the Federal Reserve’s (Fed) latest policy meeting indicated prospects of further easing if the US economic recovery slows. Meanwhile, markets await the release of Spanish Gross Domestic Product (GDP) data slated later in the day which is expected to indicate a contraction in the first quarter. At 5 am GMT, the EUR has climbed 0.2 percent against the USD to trade at $1.2741, while the GBP has advanced marginally against the USD to trade at $1.5915.

The JPY is trading 0.1 percent higher against the USD after data indicated that the Japanese economy expanded more than expected in the first quarter.

The AUD has climbed 0.4 percent against the USD. Data revealed that consumer price inflation expectation in Australia dropped in May.

UK Stocks: Likely to open higher
The FTSE 100 is expected to open 2 to 3 points in positive territory.
No major economic releases are scheduled for today.

National Grid, Vedanta Resources, Investec, Grainger, 3i Group and Invensys are scheduled to announce their results today.
According to the Financial Times, Royal Dutch Shell expects US natural gas prices to double by 2015 amid rising demand in the nation.

BHP Billiton has decided to withdraw from the Altia joint-venture project with Breakaway Resources in north Queensland amid doubts over its potential.

A combination of two experimental drugs, Dabrafenib and Trametinib, developed by GlaxoSmithKline has shown positive results against melanoma, a form of skin cancer, in early clinical trials.

The Financial Times has reported that ICAP is in talks to acquire Plus Markets Group, the UK exchange for small and fledgling companies.

Asia: Trading higher
Asian markets are trading in the green this morning after data revealed a better-than-expected expansion in the Japanese economy for the first quarter.
In Japan, Melco Holdings has rallied after it forecast a substantial rise in its full year profit. Toshiba Corporation has risen after it stated that it will stop domestic production of LCD television sets. Credit Saison has advanced after it projected a sharp increase in its full year net income. On the other hand, Kansai Electric Power, Chubu Electric Power and Electric Power Development have recorded losses after Rating and Investment Information lowered its credit ratings on 7 utility sector stocks, citing delays in resuming operations at nuclear plants. At 5 am GMT, the Nikkei 225 index has added 0.5 percent to trade at 8,842.5.

In South Korea, Korea Gas Corporation has surged after it discovered a large natural gas deposit off the coast of Mozambique for the fourth time. In Hong Kong, Tencent Holdings has edged higher after it reported a rise in its first quarter net profit. China Mobile has registered gains after it indicated that it is in talks with Apple Inc. to offer iPhone to its subscribers. In China, Suning Appliance and GD Midea Holding have gained value after the Chinese government stated that it will provide subsidies to promote the use of energy-saving appliances.

US Stocks: Futures trading firmer
At 5 am GMT, S&P 500 futures are trading 5.8 points in the green.
Initial & Continuing Jobless Claims, Leading Indicators and Philadelphia Fed Manufacturing Survey are the key economic indicators scheduled for release today.
Precision Castparts Corporation, Salesforce.com, Intuit, Ross Stores, Applied Materials, Gap Inc., and Autodesk are scheduled to release their results today.
Limited Brands lost 3.6 percent in after hours trading session yesterday following a decline in its first quarter profit and weaker-than-expected forecast for its second quarter earnings. Red Robin Gourmet Burgers plunged 7.3 percent after its first quarter revenue trailed market expectations. Dendreon Corporation slumped 6.0 percent after the company stated that the US Securities and Exchange Commission has begun a formal probe against it for allegedly misleading investors about its prostate cancer drug, Provenge. On the contrary, Boyd Gaming Corporation climbed 5.2 percent after it agreed to acquire Peninsula Gaming for about $1.45 billion. Robust second quarter results and buoyant full year earnings forecast led Jack in the Box to advance 3.5 percent.
The S&P 500 index lost 0.4 percent in the regular trading session yesterday as escalating Greek woes and weak corporate earnings outweighed upbeat US housing starts and industrial production data. J.C. Penney Company plummeted 19.7 percent following dismal first quarter results. Abercrombie & Fitch Company and Staples tumbled 13.0 percent and 5.7 percent, respectively, tracking weaker-than-estimated first quarter revenue. Financial sector stocks Genworth Financial, MetLife and Morgan Stanley retreated 7.1 percent, 4.8 percent and 4.2 percent, respectively, amid waning risk appetite. On the upside, Legg Mason surged 7.5 percent after it announced that it would buy back around $1.25 billion in convertible senior notes held by a fund managed by KKR & Company. General Electric Company jumped 3.3 percent after it stated that its finance unit, GE Capital Corporation, would resume dividend payouts to it. Target Corporation added 0.4 percent after it raised its full year profit guidance following better-than-expected first quarter results.

European Stocks: Expected to open mixed
The DAX is likely to open 2 to 5 points higher while the CAC is expected to open 6 points lower.
Spanish GDP is the key economic indicator scheduled for release today.
X5 Retail Group NV and Portugal Telecom SGPS SA are scheduled to report their results today.
E.ON AG has stated that it has sold its Open Grid Europe gas distribution network to a group led by Australian bank, Macquarie, for a consideration of €3.2 billion.
Snam SpA and Fluxys have stated that they have reached an agreement to acquire E.ON AG’s 15.1 percent stake in Interconnector (UK) in a deal worth around €127.0 million.
Reuters has reported that Royal Bank of Canada and Credit Suisse Group AG are among the companies seeking to bid for the non-US wealth management businesses of Bank of America Merrill Lynch.
ABB Limited has completed the previously announced $3.9 billion acquisition of the US electrical components maker, Thomas & Betts Corporation.
The Supervisory Board members of Deutsche Boerse AG have elected Joachim Faber as the Chairman and Gerhard Roggemann as the deputy Chairman. The company has decided to distribute dividend of €3.30 per share.

Macro Update
Fed wary on economy, indicate minutes
The minutes of the latest Federal Open Market Committee’s monetary policy meeting have indicated that “several” Fed officials are open to further efforts to boost the US economy, if momentum falters.
Japanese economy expands more than expected
On a sequential basis, the Japanese economy has expanded 1.0 percent in the first quarter of 2012, beating market estimates and compared to a revised flat reading posted in the fourth quarter of 2011.
Australian consumer price inflation expectation falls
The annual consumer price inflation expectation in Australia has declined to 3.1 percent in May compared to a 3.3 percent rate projected in April.
New Zealand’s output producer price index declines
On a quarter-on-quarter basis, the output producer price index in New Zealand has declined 0.1 percent in the first quarter of 2012 following a 0.1 percent rise recorded in the earlier quarter.
New Zealand’s consumer confidence index drops
On a monthly basis, the ANZ consumer confidence index in New Zealand has retreated 0.1 percent in May compared to a 3.4 percent rise posted in April.

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