Proactiveinvestors United Kingdom column

US EQUITIES OPENING HEADLINES INCLUDING: eBay's PayPal unit struck deals with 15 retailers that will allow consumers to pay for purchases with their cellphones

Fri, 25 May 2012 13:55:00 +0100

US equity futures indicate a relative flat open, with markets quiet ahead of the long US holiday weekend, in terms of economic data, however a recent headline that a Spanish region requires government help prompted some risk-averse flows. Investors will pay attention to the final reading of the University of Michigan confidence figure due at 1455BST.

• FTSE (-0.53%), CAC (-0.44%), DAX (-0.28%), SMI (-0.08%), IBEX (-0.75%), EURO STOXX (-0.52%) prices taken at 1343BST

DJIA

Earnings:

N/A

Other news:

JP Morgan – The co. unit responsible for bets on corporate credit that cost the bank over USD 2bln includes a group that separately invested in financially challenged companies such as LightSquared that filed for Chapter 11 bankruptcy protection this month. (WSJ)

Verizon - Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, a Democrat, indicated that he has serious concerns about Verizon's request to purchase more spectrum. (The Hill)

Bank of America – Co. has entered into an agreement to sell their remaining interest in Archstone for around USD 1.5bln, co. says Archstone has a net debt and third-party preferred securities of approximately USD 10.5bln. (Newswires)

Microsoft – Co. is mulling an increase to licensing fees for OEM versions of Windows 8 according to Taiwan-based supply chain makers. (DigiTimes)

Pfizer – Co. announced that the FDA committee has found the co.’s clinical data supports the effectiveness of their novel drug. (Newswires)

Companies paying dividend: Alcoa (USD 0.0300)

S&P 500

Earnings:

N/A

Other news:

Goldman Sachs – Co. are to set up a Japanese private REIT with an initial size of JPY 30-50bln this summer, according to source. The source said the trust will eye JPY 100bln in the longer-term. (Newswires)

Morgan Stanley/Facebook – Morgan Stanley has told brokers that Facebook trades from last Friday will be adjusted to ensure that no limit orders will be filled at more than USD 43.00 per share, according to a person familiar with the conference call. The adjustments will take place on a few thousand remaining shares. (Newswires)

Citigroup – Co. has completed the sale of 10.1% equity interest in Akbank, and expects USD 1.15bln in proceeds from the stake sale. (Newswires)

Wells Fargo – Co. gave the SEC hundreds of emails and other documents related to its mortgage-backed securities business after the bank was taken to court. (WSJ)

CME Group – Co. have declared a five-for-one stock split, in the form of a 400% stock dividend to be paid on July 20th to shareholders of record on July 10th. Co. believes the stock-split will appeal to a more diverse mix of investor portfolios. (Newswires)

Blackrock/Chesapeake Energy - Blackrock has dramatically increased its stake in Chesapeake Energy from around 1mln shares to between 4-5mln shares according to CNBC. (CNBC)

Express Scripts – Co. is seeing additional benefits from its merger with Medco besides increased size, including choosing to switch to Medco's information technology platform. (Newswires)

Comcast/Microsoft - NBCUniversal is in talks to buy out Microsoft from their jointly owned MSNBC.com website, according to NBC News. (WSJ)

Baxter International – Co. announced positive results from multi-centre trials on their low glucose PD solution which shows a favourable impact on metabolic measures in trials. (Newswires)

Sealed Air – Co. announced the appointment of Carol P. Lowe as Senior Vice President and Chief Financial Officer, effective on June 18, 2012. (theflyonthewall.com)

Nextera Energy- Co. reaffirmed their 2012 forecast of USD 4.35-4.65 vs. Exp. USD 4.52. (Newswires)

Companies going ex-dividend: Allegheny (USD 0.1800)

Companies paying dividend: Citigroup (USD 0.0100), Eaton (USD 0.3800), Consol Energy (USD 0.1250), Charles Schwab (USD 0.0600)

Nasdaq 100

Earnings:

N/A

Other news:

eBay – Co.’s PayPal unit struck deals with 15 retailers including Toys R Us, J C Penney and Barnes & Noble that will allow consumers to pay for purchases with their cellphones as they increase the online payment company's service into more physical stores. (Newswires)

Dell – Co. is reported to be in talks to buy Quest Software, despite the firm agreeing to be bought by Insight Venture Partners for around USD 2bln. (Newswires)

Yahoo - Alibaba.com's minority shareholders have voted in favour of a proposal to be taken private by Alibaba Group. (WSJ)

Dish Networks - Fox, NBC and CBS have sued satellite TV provider Dish Network over its "AutoHop" ad-skipping technology, a service that offers commercial free TV. (Associated Press)

Companies paying dividend: Starbucks (USD 0.1700)

Broker moves

Upgrades:

Salesforce.com – Co. upgraded to Outperform from Perform at Oppenheimer, Price target is USD 180

Illinois Tool Works – Co. upgraded to Overweight from Neutral at JPMorgan, Price target raised to USD 66 from USD 56

Eastman Chemical – Co. upgraded to Overweight from Neutral at JPMorgan, Price target raised to USD 58 from USD 57

Downgrades:

Lululemon – Co. downgraded to Hold from Buy at KeyBanc

Heinz – Co. downgraded to Neutral from Overweight at JPMorgan, Price target lowered to USD 56 from USD 59

Other News

Dendreon - After attending the American Urology Association meeting, Jefferies says physician sentiment towards Dendreon's prostate cancer drug Provenge remains lukewarm. (theflyonthewall.com)

US Banks - Lending declined in Q1 after about a year of growth, deepening questions about the recovery and confidence of borrowers and bankers. Loan balances dropped over USD 56bln, or 0.8%, in the quarter ended March 31, according to the Federal Deposit Insurance Corp. (WSJ)

US OPENING NEWS INCLUDING: The CME group have cut margins for Crude by 13%

Fri, 25 May 2012 13:08:00 +0100

ECB’s Weidmann says the ECB has reached the limit of the mandate with tools.

Spain may have to raise its 2011 deficit figure for the second time after the examination of accounts of regions and city halls is completed.

Lack of data in both the EU and US sessions keeps focus on speakers and macro concerns.

RANsquawk European Morning Briefing Video: http://youtu.be/yJohZrSsd5c

Market Re-Cap

European stock futures saw a jump higher at the cash equity open as the Eurostoxx broke through yesterday’s high of 2160. Comments from the Italian PM from late yesterday, who said that the majority of ministers are in favour of Euro bonds was noted but the move was largely technically driven with stops tripped on the ascent. In reaction to this the European bond yield spreads in the 10yr part of the curve tightened aggressively with OAT’s outperforming once again edging back toward the psychological 100bps level.

Meanwhile in the FX market the USD weakened in early trade on the renewed risk appetite which bolstered the gains in EUR/USD alongside touted option defence by a Swiss name at the 1.2500 level. Commodity linked currencies such as the AUD was the main benefactor of a moderate move higher in crude futures and precious metals but has been capped so far by offers at 0.9800.

Into the North American open prices have pared, with European equities in the cash and futures both slipping into the red, excepting the DAX. A distinctly light calendar from the US with only the May final Michigan report due, coupled with an early closure in the Treasury pit today, ahead of the Memorial day holiday, means that volumes will likely decline into the latter stages of the US session today.

Asian Headlines

According to a central bank-run paper, the possibility of cuts to China’s benchmark lending rates in the near term cannot be ruled out, although room for such cuts is ‘very limited’. (Financial News)

An ADB senior economist has said China’s economy will likely bounce back between July and September after reaching a low in the current quarter, as Beijing works to spur growth with infrastructure investments and monetary policy fine-tuning. The economist is sticking with his 8.5% forecast for Chinese growth in 2012. (Newswires)

JP Morgan now sees Chinese GDP growth of 8% in 2012. (Newswires)

EU and UK Headlines

With little data of note released today, the focus has remained on macro commentary; however, it is worth noting the German GfK Consumer Confidence Survey recording a slight beat on expectations coming in at 5.7 vs. Exp. 5.6 (Prev. 5.6, Rev. 5.7). Elsewhere, French Consumer Confidence came in higher: 90 vs. Exp. 88 (Prev. 88, Rev. 89). (Newswires)

ECB's Weidmann has said the ECB has reached the limit of mandate with tools, adding that the ECB has taken considerable risks with their measures. On the LTROs, Weidmann commented that they did not solve the structural causes of the financial crisis. (Newswires)

Spain may have to raise its 2011 deficit figure once again after the examination of accounts of regions and city halls is completed. (El Pais) The reports follow the Spanish government having previously revised higher their 2011 deficit figure to 8.9% from 8.5% of GDP.

Changes to inflation calculations that could save the Chancellor billions of pounds a year - while hurting gilts investors - are being considered. (Times) A committee that advises the UK Statistics Authority may recommend an overhaul that could permanently pare back gains in the retail prices index. If the changes are adopted, they could lead to a reduction in interest payments on government bonds that are linked to the RPI. This would help George Osborne to save as much as GBP 3bln a year in interest paid on index-linked gilts, according to calculations from Alan Clarke, an economist at Scotia Capital.

French OATs continue their outperformance from yesterday’s session with the French 2- and 5-year bonds touching record low yields in today’s session, with UK Gilts also touching record low yields in their 30-year lines. European bond yield spreads against the German 10yr were seen significantly tighter in the first half of the European morning, however they have come far off their tightest levels in recent trade, with the Spanish 10yr yield coming back above 6%, and holding there at the midpoint of the session.

EQUITIES

European equities in cash and futures have managed to slip into negative territory after a few hours of gains following the open, with comments from ECB’s Weidmann somewhat weighing on sentiment heading into the North American open. The health care sector is seen benefitting from its defensive status, as financials come off their highs and move to trade lower by around 0.5% in Europe. Looking at the weekly performance in equities, all major indices are looking to close higher since Monday, with the exception of the Spanish IBEX 35, faltering under the strain of selling in its financial sector throughout the last five days.

In individual stocks news, Siemens are performing particularly strongly ahead of the US open, currently trading higher by over 1.5%, following a broker upgrade at Deutsche Bank. Elsewhere, closely watched Spanish lender Bankia has had its share suspended as the bank intends to present their recapitalization plan. Source comments have said that Bankia will ask for over EUR 15bln when they do present the blueprints, so should the presentation go ahead, focus will be European peripheral financials, with UniCredit, Banca Monte dei Paschi and Banco Popular already in negative territory.

**Note: For US equity news in detail, refer to the RANsquawk Daily US Equity Opening News report.

EUR/USD was seen on an upwards trajectory in the early hours of the session, moving in line with the stock futures amid unconfirmed market talk of the BIS on the bid in the pair. EUR/USD moved above 1.2600 to print session highs of 1.2603, but did not last above this level, following the paring of gains in stock futures and the widening of European bond yield spreads. EUR/USD now trades comfortably below the 1.2600 handle, between two touted option expiries at 1.2550 and 1.2600 for the 10am NY cut (1500BST).

Commodity linked currencies NZD and AUD are seen higher against the USD moving into the US open, with AUD/USD stabilising in a tight range just below a touted option expiry at 0.9800 for the 10am NY cut and NZD/USD is seen higher by almost half a cent, in line with the moves in gold and commodities.

COMMODITIES

WTI and Brent crude futures are seen modestly higher, picking up from lows seen overnight in Asia and moving in line with European stock futures. Volumes remain thin ahead of the NYMEX pit open, but may pick as the session progresses. The next risk event will come from the US with the final reading of University of Michigan Confidence data due at 1455BST/0855CDT.

Oil & Gas News:

The CME group have cut margins for Crude by 13%.

China may consider cutting diesel and gasoline prices for a second time this year after a fall in a basket of crude oil costs passed a trigger point used by Beijing to set prices, according to a Chinese information provider. However, C1 Energy have forecast that such a move will not be considered until early June as it has been less than a month since the last cut.

A new draft of Nigeria's long delayed oil bill, whose passage is needed to unblock billions of dollars of stalled investment into exploration and production, will be finalised this week, sources close to the matter said on Thursday.

Asia is seen as replacing the US as Nigeria’s biggest crude customer, amid surging output and refinery closures in the US.

Geopolitical News:

EU's Ashton said that following the P5+1 talks, it is clear that both sides want progress to be made, but there are some significant obstacles to overcome. The next talks will be in Moscow between June 18-19th.

**Note: For commodities news in detail, refer to the RANsquawk Daily Energy Commentary report.

ENERGY MARKETS REPORT INCLUDING: Shell may join Russia's Arctic Shtokman gas project

Fri, 25 May 2012 11:28:00 +0100

Oil & Gas News:

The CME group have cut margins for Crude by 13%.

Asia is seen as replacing the US as Nigeria’s biggest crude customer, amid surging output and refinery closures in the US.

Geopolitical News:

Corporate News:

Shell may join Russia's Arctic Shtokman gas project, with Gazprom keeping its majority stake, according to reports.

Total and Inpex Corp are seeking USD 20bln in loans for the Ichthys LNG project in Australia, according to sources familiar with the talks.

Russian President Vladimir Putin has said that while non-state oil companies should be able to develop offshore resource assets, they should not be allowed to sell on their rights to foreign enterprises.

Gulf Keystone Petroleum has spudded the Sheikh Adi-2 exploration well on the Sheikh Adi Block in the Kurdistan Region of Iraq.

Glencore International bought 10,000 metric tons of naphtha from Bharat Petroleum Corp, according to three unidentified traders.

Weather News:

The latest Weather Derivatives update forecasts temperatures in the US for the next 6-10 days to be -0.2% cooler than normal for this time of year (using data accurate on the 24th May). Pacific Hurricane Bud has strengthened into a major Hurricane and is expected to cause flooding when it reaches the Southwest Mexican coast today, according to the NHC.

EUROPEAN EQUITY OPENING HEADLINES INCLUDING: Citigroup has completed the sale of 10.1% equity interest in Akbank

Fri, 25 May 2012 08:17:00 +0100

ASIA

Nikkei share average closed higher by 0.2%, but closed 0.4% lower on the week, marking the eighth straight week of losses. The close shows the worst losing streak for the index in 20 years as fears over Europe and the global economy continue to loom. (Newswires)

Top performing sectors in the Nikkei 225: Consumer Services (+1.70%), Health Care (+1.38%), Utilities (+1.11%)

Worst performing sectors in the Nikkei 225: Basic Materials (-1.45%), Technology (-0.93%), Oil & Gas (-0.58%)

Chinese banks - Chinese banks officials said that Chinese banks may fall short of their 2012 lending goals following a decline in April and May, noting the economic slowdown has curbed loan demand. (Newswires)

Morning trade in US equities was fairly volatile as market participants deliberated mixed top tier US macroeconomic data. In-line initial and continuing jobless data mixed with less than impressive durable and capital goods components, despite the headline figure also being in-line with analyst expectations, failed to spur a continuation rally from the European session. By early afternoon, news that Chinese banks may miss their 2012 loan targets was enough to send the three major indices firmly into negative territory. Heading into the final hour, however, comments from Italian PM Mario Monti that more EU member states had been in favour of Euro-bonds than against them lifted equity futures off their lowest levels, and the SPX and DJIA back into the green, albeit on thinning volumes. Finally, the DJIA finished at 12529.75, up 0.27%; the NDX finished at 2531.35, down 0.62%; and the SPX finished at 1320.73, up 0.14%. (RANsquawk)

Top Performing Sectors in S&P 500: Consumer Goods (+0.84%) Health Care (+0.81%) Telecommunications (+0.59%)

Worst Performing Sectors in S&P 500: Technology (-0.97%) Industrials (-0.11%) Oil & Gas (0.00%)

Morgan Stanley/Facebook – Morgan Stanley has told brokers that Facebook trades from last Friday will be adjusted to ensure that no limit orders will be filled at more than USD 43.00 per share, according to a person familiar with the conference call. The adjustments will take place on a few thousand remaining shares. (Newswires)

Citigroup – Co. has completed the sale of 10.1% equity interest in Akbank, and expects USD 1.15bln in proceeds from the stake sale. (Newswires)

CME Group – Co. have declared a five-for-one stock split, in the form of a 400% stock dividend to be paid on July 20th to shareholders of record on July 10th. Co. believes the stock-split will appeal to a more diverse mix of investor portfolios. (Newswires)

Royal Dutch Shell – Co. may replace Statoil ASA in Russia’s Arctic offshore Shtokman gas-extraction project, according to unidentified representatives of state gas producer OAO Gazprom. (Kommersant)

BG Group – Co.’s Brazilian Vice President said the co. plans to spend about USD 30bln on its Brazil oil and gas expansion by 2025. (Newswires)

InterContinental Hotels – Co. have announced their Chairman Webster will retire at the end of this calendar year to be replaced by former Unilever CEO Cescau. (Newswires)

Companies paying dividend: BG Group (GBP 0.09100) Inmarsat (USD 0.2773) RSA Insurance Group (GBP 0.06467)

OTHER UK

Gulf Keystone – Co. has drilled their Sheikh Adi-2 exploration well in Kurdistan, with estimated resources amounting to 1.8bln BBLs. (Newswires)

FRENCH

EADS – AirAsia is pondering the potential purchase of another 50 Airbus A320s, worth USD 4bln at current list prices. (Newswires)

EDF – Co. plans to merge its Polish assets and operate under the EDF brand within Poland, according to the Co. deputy chief officer. (Parkiet)

GERMAN

N/A

Companies paying dividend: Deutsche Telekom (EUR 0.7000)

Companies going ex-dividend: Deutsche Telekom (EUR 0.7000)

PAN EUROPEAN

Italian Banks – S&P said that Italian banks are bearing the brunt of the Euro-zone crisis, as fears over economic contagion may be causing investors to re-price risk, as the pricing of the bonds and CDSs of BMPS, Intesa Sanpaolo and UniCredit suggest that investors consider these banks to be riskier than S&P’s investment-grade ratings on them otherwise imply. (Newswires)

Spanish Banks – The auction of seized lenders CatalunyaCaixa, Banco de Valencia and Novagalicia Banco may be cancelled by the government as it considers merging them in a single state-controlled entity, according to unidentified sources in the financial sector. (El Pais)

Bankia – Co. will ask for over EUR 15bln when presenting restructuring plans today, according to people familiar with the situation. (Newswires)

Dexia Bank Belgium - Moody's downgraded the co. to Baa1; outlook stable. (Newswires)

Akzo Nobel – Co. has reached a deal with Swiss Re to cap the risk that 17,000 UK employees will live longer than expected when they retire. The deal covers EUR 1.75bln worth of liabilities. (FT-More)

SMI

Roche – Co.’s Pertuzumab cancer drug has received a priority review from the FDA for distribution in Japan. The drug’s 2012 revenue was CHF 82.3mln, with 2015 expected revenues of CHF 1.04bln. (Newswires)

Richemont – Co. has recently turned down a EUR 4bln acquisition proposition of a jewellery company, according to the CEO. The CEO said no acquisitions are planned at the moment. (Financial Mail)

BROKER MOVES

SABMILLER RAISED TO HOLD VS SELL AT INVESTEC

ARM RAISED TO BUY VS NEUTRAL AT UBS

AVIVA UPGRADED TO OUTPERFORM FROM UNDERPERFORM AT EXANE

U.K. OIL & GAS RAISED TO OVERWEIGHT VS NEUTRAL AT UBS

SIEMENS UPGRADED TO BUY FROM HOLD AT DEUTSCHE BANK

E.ON UPGRADED TO NEUTRAL FROM UNDERWEIGHT AT HSBC

SAP RAISED TO BUY VS HOLD AT COMMERZBANK

UK OPENING NEWS INCLUDING: Changes to inflation calculations could save the Chancellor billions of pounds a year

Fri, 25 May 2012 08:13:00 +0100

Former MPC member Julius has said that an IMF-recommended rate cut might have a short-lived announcement effect; it would be unlikely to make a difference to the rates that banks offer to borrowers. (FT-More) Julius adds that the most effective of the IMF’s proposals is a change in the type of quantitative easing and liquidity support offered by the BoE, adding that the suggestion that QE should be expanded to include private-sector bonds is the most sensible.

Changes to inflation calculations that could save the Chancellor billions of pounds a year — while hurting gilts investors — are being considered. (Times) A committee that advises the UK Statistics Authority may recommend an overhaul that could permanently pare back gains in the retail prices index. If the changes are adopted, they could lead to a reduction in interest payments on government bonds that are linked to the RPI. This would help George Osborne to save as much as GBP 3bln a year in interest paid on index-linked gilts, according to calculations from Alan Clarke, an economist at Scotia Capital.

London’s reputation as a global centre for capital markets suffered another blow yesterday when a third company pulled its planned London Stock Exchange listing in the space of a fortnight. (CityAM) Georgian Railway blamed market turmoil as it postponed plans to raise up to GBP160mln by selling as much as a quarter of its stock. Its decision represents a blow to the City, just 24 hours after bid vehicle Tungsten put off a GBP 200mln fundraising and two weeks after a similar move by Russian property investor O1 Properties.

EUROPEAN OPENING NEWS INCLUDING: JP Morgan now sees Chinese GDP growth of 8% in 2012

Fri, 25 May 2012 08:08:00 +0100

ASIA

JGBs were seen marginally lower, with 10-yr JGBs trading down 7 ticks at 143.09 heading into the EU session, dealers noted that pension funds are looking to sell short-end paper, and seems likely that they will soon start month-end buying. Last price taken at 0600BST. (Newswires)

Japanese National CPI (Apr) Y/Y 0.4% vs. Exp. 0.4% (Prev. 0.5%)

Japanese National CPI Ex Food, Energy (Apr) Y/Y -0.3% vs. Exp. -0.4% (Prev. -0.5%) (Newswires)

Chinese bank officials said that Chinese banks may fall short of their 2012 lending goals following a decline in April and May, noting the economic slowdown has curbed loan demand. (Newswires)

According to a central bank-run paper, the possibility of cuts to China‟s benchmark lending rates in the near term cannot be ruled out, although room for such cuts is „very limited‟. (Financial News)

An ADB senior economist has said China‟s economy will likely bounce back between July and September after reaching a low in the current quarter, as Beijing works to spur growth with infrastructure investments and monetary policy fine-tuning. The economist is sticking with his 8.5% forecast for Chinese growth in 2012. (Newswires)

JP Morgan now sees Chinese GDP growth of 8% in 2012. (Newswires)

T-notes settled in negative territory for the day as early selling pressure emerged on speculation of a potential liquidity scheme from the ECB grabbed attention. Additionally comments from Fed's Dudley on the end of operation twist prompted decent selling from dealers. The 7y note auction was about par, with the lowest yield on record at this maturity, buy-side demand was a little weak, however treasuries bounced slightly into the close with short-sets seen covering. At the pit close, t-notes settled at 133.17+, down 8 ticks. Finally, the DJIA finished at 12529.75, up 0.27%; the NDX finished at 2531.35, down 0.62%; and the SPX finished at 1320.73, up 0.14%. T-notes were seen trading down 1+ ticks at 133.16 following a relatively quiet overnight trading session. Last price taken at 0635BST. (RANsquawk)

The results of yesterday‟s USD 29bln 7y note auction heralded a record low yield of 1.203% vs. exp. 1.203%, with the WI stopping at 1.200%; indirects were 42.7% vs. avg. 39.31% (prev. 38.28%); and the allotted at high was 91.24%. (Newswires)

Fed's Dudley said he endorses the current Fed policy, including extraordinarily low rates until 2014, adding that the costs of further easing would likely exceed the benefits should economic growth cut into the Fed‟s unused resources. (Newswires) The Fed Vice Chairman added that he would consider tightening fiscal policy earlier if US growth strengthened enough to materially improve the medium-term outlook.

Foreign Central Bank holdings of US debt rose USD 16.84bln to USD 3.510trl as of May 23, Fed holdings of US Treasuries total USD 1.657trl as of May 23 vs. USD 1.657trl the prev. week, Fed holdings of agency debt total USD 93.25bln as of May 23 vs. USD 94.17bln the prev. week and Fed holdings of MBS totalled USD 864.99bln as of May 23 vs. USD 858.230bln the prev. week. (Newswires)

EUROPE

Italian PM Monti said the majority of the leaders at the EU summit backed Euro-bonds, and believes the Euro-area could have Euro-bonds “soon”. (Newswires)

A Greek Public Issue poll showed that the Greek far-left Syriza party now leads with 30% of the vote followed by the New Democracy party with 26% and PASOK with 15%. The poll also showed that 85% of Greeks are in favour of the EUR with 12% opposed. (Newswires) However, a Second Greek poll this from Pelop showed New Democracy leading with 23.5%, Syriza second with 23% and PASOK third with 10.6%.

ECB's Asmussen said the ECB‟s 3-year LTRO loans will not fuel inflation, but if inflation risks emerged, the ECB would act. (Newswires) The ECB official also said that EIB instruments could be used to enhance growth, but that the bulk of the responsibility lies with governments.

French President Hollande may levy part of this year‟s wealth tax as an exceptional payment, according to unsourced reports. (Les Echos)

Bankia will ask for over EUR 15bln when presenting their restructuring plan today, according to people familiar with the situation. (Newswires)

JP Morgan have cut their Australian 2012 GDP forecast to 2.7% from 3.0%, and their 2013 forecast to 3.0% from 3.3%. Core inflation forecast for the country in 2012 has been cut to 2.3% from 2.4% and 2013 forecast to 2.7% from 2.9%. JP Morgan expect the RBA to cut rates once more in 2012, likely in August. (Newswires)

NY Fed said the total dollar swap facility borrowings fell to USD 26.425bln in the week ending May 23rd, and that the ECB tapped USD 300mln from the dollar swap facility in the same week. (Newswires)

GEOPOLITICAL

EU's Ashton said that following the P5+1 talks, it is clear that both sides want progress to be made, but there are some significant obstacles to overcome. (Newswires) The next talks will be in Moscow between June 18-19th.

COMMODITIES

WTI crude futures were seen trading down USD 0.17 at USD 90.51, extending on its longest run of weekly declines since August, on concerns of an economic slowdown in China, following reports that Chinese banks may fall short of their 2012 lending goals. Last price taken at 0630BST. (RANsquawk)

The CME group have cut margins for Crude by 13% and Gold by 19%. (CME)

US EQUITIES OPENING HEADLINES INCLUDING: Sources are speculating that the Microsoft’s Xbox 720 will be released in 2013

Thu, 24 May 2012 14:02:00 +0100

US equity futures indicate a higher open as rumours swirl regarding the prospect of liquidity measures regarding coordinated action

boosted equity markets which have recovered well from disappointing EU PMI data.

• US Durables Goods Orders (Apr) M/M 0.2% vs. Exp. 0.2% (Prev. -4.2%, Rev. to -3.7%)

• US Durables Ex. Transportation (Apr) M/M -0.6% vs. Exp. 0.8% (Prev. -1.1%, Rev. to -0.8%)

• US Cap. Goods Orders Non-Def Ex. Air (Apr) M/M -1.9% vs. Exp. 0.8% (Prev. -0.8%, Rev. to -2.2%)

• US Continuing Claims (May 12) W/W 3260K vs. Exp. 3250K (Prev. 3265K, Rev. 3289K)

• US Initial Jobless Claims (May 19) W/W 370K vs. Exp. 370K (Prev. 370K, Rev. 372K)

• FTSE (+1.53%), CAC (+1.30%), DAX (+0.77%), SMI (+0.78%), IBEX (+1.89%), EURO STOXX (+1.28%) prices taken at 1343BST

DJIA

Earnings:

Hewlett-Packard – Q2 adjusted EPS USD 0.98 vs. exp USD 0.91; Q2 revenue USD 30.7bln vs. Exp. USD 29.95bln. (Newswires)

- Co. sees Q3 adjusted EPS USD 0.94-0.97 vs. Exp. USD 1.02

- Co. sees FY 2012 EPS USD 4.05-4.10, previously saw USD 4.00, vs. Exp. USD 4.02

- Q2 services revenue down 1% Y/Y

- Q2 Personal Systems Group revenue flat Y/Y

- Co. announced they are to layoff about 27,000 employees as part of their restructuring

Other news:

Microsoft – Sources are speculating that the co.’s Xbox 720 will be released in 2013, while the PlayStation 4 is set to arrive in 2014. (CNet)

Coca-Cola – According to Barron’s the co. could warrant a price/earnings ratio of 18x earnings, in line with historic averages and it could reach USD 80 a share. (Barron’s)

Johnson & Johnson - An FDA panel has voted 6-4 against a new use for the co.’s blood thinner Xarelto to reduce life-threatening blood clots, saying too much information was missing from company studies to accurately gauge the drug's benefit. (Associated Press)

Hewlett-Packard – Co. CEO Meg Whitman told analysts on its earnings conference call that Autonomy suffered "very disappointing" licensing revenues in Q2. Lynch will be replaced by software head Bill Veghte. (theflyonthewall.com)

Companies going ex-dividend: Johnson & Johnson (USD 0.6100)

S&P 500

Earnings:

HJ Heinz - Q4 adjusted EPS USD 0.81 vs. Exp. USD 0.79; Q3 revenue USD 3.05bln vs. Exp. USD 3.07bln. (Newswires)

- Co. sees FY 2013 organic sales growth at least 4%

- Co. sees FY 2013 EPS USD 3.52-3.62 vs. Exp. USD 3.60

Fred's - Q1 EPS USD 0.28 vs. Exp. USD 0.27, Q1 revenue USD 500.5mln vs. Exp. USD 501.1mln. (Newswires)

- Co. sees Q2 EPS USD 0.15-0.17

Patterson Cos - Q4 adjusted EPS USD 0.61 vs. Exp. USD 0.57, Q4 revenue USD 936.30mln vs. Exp. USD 915.67mln. (Newswires)

- Co. sees FY 2013 EPS USD 2.10-2.16

Tiffany - Q1 EPS USD 0.64 vs. Exp. USD 0.69; cuts forecast for year sales, Q1 revenue USD 819.21mln vs. Exp. USD 819.06mln. (Newswires)

- Q1 comp sales up 4%

- Co. cuts FY12 EPS view to USD 3.70-3.80 from USD 3.95-4.05 vs. Exp. USD 3.97

Costco - Q3 EPS USD 0.88 vs. Exp. USD 0.87, Q3 total revenue USD 22.32bln vs. Exp. USD 22.21bln. (Newswires)

- Q3 same store sales were up 5%

Other news:

Goldman Sachs – Co. is to announce a USD 40bln clean energy investment target for the next decade, with the plan covering investment and financing in several sectors. (Newswires)

News Corp/Time Warner - According to sources close to the process, News Corp is out of the race to buy Turkey's ATV television from Calik Holding. Time Warner and Dubai-based Abraaj Capital remain interested in bidding. (Newswires)

NYSE Euronext – Co. announced there have been no discussions with Facebook on a listing switch. (Newswires)

Chesapeake Energy – Co. have identified for sale during 2012 non-core assets with an expected value of USD 9.5-11bln. (Newswires)

Newell Rubbermaid – Co. reaffirmed their FY12 EPS guidance of USD 1.63-1.69 vs. Exp. USD 1.68 and FY12 core sales growth of 2%-3%. (Newswires)

MasterCard - The Luxembourg-based General Court threw out the co.’s challenge against an EU ban on its cross-border credit card fees. (Newswires)

Dow Chemical – Co. announces USD 2.16bln award in K-Dow arbitration, and says ICC awards hold that PIC was liable. (Newswires)

Conagra – Co. are to affirm previously announced guidance of modest diluted EPS growth in Q4 of fiscal 2012. (Newswires)

Alexion to be added to S&P 500; Motorola Mobility deleted as of 5/24 close

Kinder Morgan to be added to S&P 500; El Paso deleted as of 5/24

Companies going ex-dividend: Keycorp (USD 0.0500), Mcgraw-Hill (USD 0.2550), Abercrombie & Fitch (USD 0.1750)

Companies paying dividend: Harman International (USD 0.0750), Vornado (USD 0.6900)

Nasdaq 100

Earnings:

NetApp - Q4 adjusted EPS USD 0.66 vs. Exp. USD 0.63, Q4 revenue USD 1.70bln vs. Exp. USD 1.68bln. (Newswires)

- Co. sees Q1 EPS between USD 0.10-0.15

Other news:

Apple – A General Electric-owned company is squaring up to the Co. in court over whether its patents were infringed when the Co. launched its iTunes platform. In other news, the Co. have said the US government’s lawsuit against the Co. concerning e-book pricing is fundamentally flawed, adding that the Co.’s actions were classic precompetitive conduct. (Newswires)

Google – Co. will make an initial shipment of around 600,000 units of its 7-inch tablet in June, with its official release set for July, according to upstream sources. (Digitimes) Smartphones powered by the Android mobile operating systems accounted for 59.0% of smartphones shipped in the first quarter of 2012, according to the International Data Corporation. (Newswires)

Teva – Co. CEO says taking a hard look at assets strategy, expecting a strategic update by year-end; sees 2012 non-GAAP EPS USD 5.30-5.40 and 2012 non-GAAP sales USD 10.5bln. (Newswires)

Yahoo - China Investment Corp is in advanced talks to buy a USD 2bln stake in Alibaba from Yahoo. (Newswires) In other news Yahoo unveiled its own Internet browser, called “Axis,” which it promoted as a way to instantly peek into different websites on a mobile device or computer without having to leave a primary search bar. (WSJ)

Research In Motion – According to reports the co.’s head of global sales, Patrick Spence is leaving the firm. (WSJ) In other news while the co.’s instant messaging service remains popular, sources report this could weaken as global sales of BlackBerrys falter and RIM softens efforts to leverage the messaging tool. (WSJ)

Hasbro – Co. and Paramount Pictures announced that the G.I. JOE sequel will now be delayed from June 2012 to March 29, 2013. (theflyonthewall.com)

Viacom to replace Teva in NASDAQ-100 Index

Broker moves

Upgrades:

Duke Energy – Co. upgraded to Buy from Neutral at UBS, Price target raised to USD 24 from USD 22

Westlake Chemical – Co. upgraded to Neutral from Sell at UBS, Price target is USD 54

National Oilwell – Co. upgraded to Buy from Hold at Societe Generale, Price target is USD 85

Arch Coal – Co. upgraded to Neutral from Sell at Goldman, Price target is USD 8

Watson Pharmaceuticals – Co. upgraded to Outperform from Market Perform at Wells Fargo, firm raised its price target range for shares to USD 84- 90 from USD 75-79

Downgrades:

Baker Hughes – Co. downgraded to Hold from Buy at Societe Generale, Price target lowered to USD 47 from USD 53

NetApp – Co. downgraded to Sector Perform from Outperform at RBC Capital, Price target cut to USD 30 from USD 52

RailAmerica – Co. downgraded to Neutral from Overweight at JPMorgan, Price target remains USD 26

Human Genome – Co. downgraded to Market Perform from Outperform at BMO, Price target lowered to USD 13 from USD 17

CNBC’s Jim Cramer on US corporate earnings

THURSDAY earnings: Costco and Tiffany report their earnings. Cramer said that Tiffany remains in the penalty box after last quarter's debacle, but Costco remains a favourite.

Other News

US Banks – Ohio Senator Brown is trying to push a law through the Congress to put an end to the ‘too big to fail’ problem, forcing a break-up of America’s six biggest banks. The proposal may come under heavy opposition as a previous proposal failed to be passed. (Newswires)

General Motors - The NHTSA has expanded its investigation into fires in General Motors' Chevy Cruze to 2012 model year as well as the 2011 model year with the probe now covering about 370,000 vehicles. (Newswires)

Pandora - Q1 loss per share USD 0.09 vs. Exp. loss per share USD 0.18, Q1 revenue USD 80.8mln vs. Exp. USD 74.34mln. (Newswires)

- Co. says active users reached 51.9mln growing 53% Y/Y

- Co. sees Q2 loss per share USD 0.03-0.05 vs. Exp. loss per share 0.03

- Co. sees Q2 revenue USD 99-101mln vs. Exp. USD 99.9mln

US OPENING NEWS INCLUDING: Tensions have begun to emerge among EU leaders

Thu, 24 May 2012 13:12:00 +0100

European data remains weak throughout the morning, with European PMIs as well as the German IFO disappointing to the downside.

Recovery of equity markets follows unconfirmed market talk of asset reallocation from fixed-income into stocks.

UK recession deepens as Q1 GDP is revised lower to -0.3% from -0.2%.

ECB's Nowotny says the full ECB arsenal has not yet been utilised.

French 10yr OATs outperform amid unconfirmed market talk of domestic and Asian names buying.

RANsquawk European Morning Briefing Video: http://youtu.be/ewP5KI0JaO0

Market Re-Cap

Peripheral stock indices underperformed in early trade, with banks under considerable selling pressure amid renewed tensions in credit markets. Wave after wave of poor data from the European PMIs and the German IFOs placed shares under further pressure and talk of macro names selling EUR/USD weighed on the pair. As a result, in the fixed income space, the German 2/5 spread traded at levels not seen since December 2008. However as the session progressed, stocks staged a decent recovery, which coincided with unconfirmed market talk of an asset reallocation trade, together with talk of Asian real money accounts buying French OATs, which in turn prompted sharp tightening in FR/GE 10y bond yield spread.

This also supported EUR/USD, which after coming close to making a test on the 1.2500 barrier is now trading little changed. In other news, the ONS reported that the UK economy shrank by 0.3% in the first three months of the year, more than previously thought. The downward revision was due to a bigger contraction in construction output than previously estimated. Despite this, FTSE in the cash has persisted, and is the strongest performing index in Europe today.

Going forward, the second half of the session sees the release of the latest weekly jobs data from the US, as well as Durable report for the month of April. Also, the US Treasury will conduct a sale of USD 29bln in 7y notes.

Asian Headlines

Japan’s corporate mood picked up over the last month and is seen as improving in the coming months as the economy continues its recovery from last year’s earthquake. Concerns continue to remain from the European crisis and a Chinese slowdown, according to the Tankan survey. (Newswires)

Chinese HSBC Flash Manufacturing PMI (May) M/M 48.7 (Prev. 49.3) (Newswires)

The PBOC should continue to cut their RRR and take other measures to increase the country’s money supply, according to an influential Chinese paper. (China Securities Journal) In other Asian press, Xinhua have reported that China may ease property development credit controls. (Xinhua)

EU and UK Headlines

Italian PM Monti has said there has been no conclusion on growth boosting measures or Eurozone bonds at their informal summit. Italian PM Monti and French President Hollande said that they both favour Euro-zone bonds as a possible solution, with Monti commenting that a majority are in favour of the bonds according to a source. (Newswires)

Tensions have begun to emerge among EU leaders over how hard a line to take with Greece as the prospect looms of victory in next month’s elections for parties opposed to the country’s bailout terms. (FT-More) There have been signals from both Paris and Rome that some concessions may be required to strengthen the position of pro-bailout parties in Greece. Further from the meeting, ECB’s Draghi has said ECB independence was held up by most leaders at the informal EU summit. (Newswires)

Markets have moved through a slew of poor European and UK data this morning, with European services and manufacturing PMIs disappointing to the downside on most readings, as well as UK GDP data showing country is deeper in recession than originally thought. The ONS have placed the sharp decline of the UK’s construction data as the main drag on growth in the first quarter.

French Manufacturing PMI (May P) M/M 44.4 vs. Exp. 47.0 (Prev. 46.9)

French Services PMI (May P) M/M 45.2 vs. Exp. 45.7 (Prev. 45.2)

German Manufacturing PMI (May A) M/M 45.0 vs. Exp. 47.0 (Prev. 46.2)

German Services PMI (May A) M/M 52.2 vs. Exp. 52.0 (Prev. 52.2)

Eurozone Manufacturing PMI (May A) M/M 45.0 vs. Exp. 47.0 (Prev. 45.9), lowest since June 2009

Eurozone Services PMI (May A) M/M 46.5 vs. Exp. 46.0 (Prev. 46.9)

German IFO - Business Climate (May) M/M 106.9 vs. Exp. 109.4 (Prev. 109.9)

German IFO - Current Assessment (May) M/M 113.3 vs. Exp. 117.1 (Prev. 117.5)

German IFO - Expectations (May) M/M 100.9 vs. Exp. 102.0 (Prev. 102.7)

UK GDP (Q1 P) Q/Q -0.3% vs. Exp. -0.2% (Prev. -0.2%)

UK GDP (Q1 P) Y/Y -0.1% vs. Exp. 0.0% (Prev. 0.0%) (Newswires)

The pessimistic data pushed Bund futures to record highs, printing 144.55 earlier in the session, coinciding with session lows in EUR/USD.

EQUITIES

European stocks in both the futures and the cash were taking heavy hits early in the session, with informal EU summit failing to come to an agreement weighing on sentiment early on. Progressing through the session, risk-aversion was noted with number-after-number of disappointing data from Europe, Germany and the UK coming in below expectations. Despite this, stocks have managed to stage somewhat of a recovery and now trade in the green in all sectors halfway through the European session. The moves follow some unconfirmed market talk of an asset reallocation from the fixed-income markets and into equities.

In individual stock news, Repsol shares are performing particularly strongly following confirmation from the company that their Brazilian pre-salt block holds significant potential, with resources amounting to 700mln BBLs of light crude and 3TCF of gas. After reporting the major discovery, Repsol shares now trade higher by 2.2%.

Major Basic Materials companies are seen trading lower with the larger cap names Glencore and Xstrata making the largest losses. This follows overnight manufacturing data from China disappointing to the downside, dampening expectations for future commodities demand. Glencore and Xstrata shares trade lower by roughly 1.2% apiece.

**Note: For US equity news in detail, refer to the RANsquawk Daily US Equity Opening News report.

EUR/USD came under renewed selling pressure early in the European session, pressing the pair down to lows of 1.2516, amid market talk of macro names selling in the pair. The weaker European data has placed the single currency under continued downward pressure, however; the pair has seen somewhat of a recovery, moving in line with the European stocks, coming off the lows and back up through 1.2550. The pair now trades between two touted option expiries at the 1.2550 and 1.2600 level for the 10am NY cut (1500BST).

GBP/USD has been echoing the moves in its European counterpart and came under particular pressure following the downward revision to UK GDP, moving lower by just under 20pips following the release. A strong performance in the Business Investment component of growth has been noticed, and the pair, similarly to the EUR, has seen a spell of strength alongside equities. GBP/USD currently sits just below a touted option expiry at the 1.5700 level for the 10am NY cut (1500BST).

COMMODITIES

WTI crude futures traded near a 7-month low as risk-averse trade became the main theme in the early part of the European session, following weaker data points out of Europe. Progression on the Iranian nuclear talks has eased concerns somewhat in the oil markets, with talks resuming today.

Oil & Gas News:

Three Nebraska landowners on Wednesday challenged a state law aimed at speeding up approval of a new route for TransCanada's proposed Keystone XL oil pipeline from Canada to Texas around environmentally sensitive areas of the state.

India oil ministry official says there is no possibility of fuel retailers rolling back gasoline price hike.

Geopolitical News:

The P5+1 group will today make a last-ditch attempt today to persuade Iran to accept immediate restrictions on its nuclear programme, hoping that such concessions will begin to defuse fears that Tehran wants an atomic bomb.

World powers are hindering talks in Baghdad with Iran over its nuclear programme, creating a "difficult atmosphere", an Iranian delegation official said on Thursday.

A U.N. watchdog report is expected to show that Iran has installed more uranium enrichment centrifuges at an underground site, potentially boosting output capacity of nuclear work major powers want it to stop, Western diplomatic sources say.

**Note: For commodities news in detail, refer to the RANsquawk Daily Energy Commentary report.

ENERGY MARKETS REPORT INCLUDING: ENI makes significant new oil discovery in Egypt

Thu, 24 May 2012 10:34:00 +0100

WTI crude futures traded near a 7-month low as risk-averse trade became the main theme in the early part of the European session, following weaker data points out of Europe. Progression on the Iranian nuclear talks has eased concerns some what in the oil markets, with talks resuming today.

Oil & Gas News:

• Three Nebraska landowners on Wednesday challenged a state law aimed at speeding up approval of a new route for TransCanada's proposed Keystone XL oil pipeline from Canada to Texas around environmentally sensitive areas of the state.

• India oil ministry official says there is no possibility of fuel retailers rolling back gasoline price hike.

Geopolitical News:

• The P5+1 group will today make a last-ditch attempt today to persuade Iran to accept immediate restrictions on its nuclear programme, hoping that such concessions will begin to defuse fears that Tehran wants an atomic bomb.

• World powers are hindering talks in Baghdad with Iran over its nuclear programme, creating a "difficult atmosphere", an Iranian delegation official said on Thursday.

• A U.N. watchdog report is expected to show that Iran has installed more uranium enrichment centrifuges at an underground site, potentially boosting output capacity of nuclear work major powers want it to stop, Western diplomatic sources say.

Corporate News:

• BP is awaiting approval from Indonesia’s upstream regulator BP Migas for the planned expansion of its Tangguh liquefied natural gas project in West Papua. In other news, BP agreed to add over USD 400mln in pollution controls at its Indiana refinery, expecting to cut air pollution by more than 4000 tonnes per year, and to pay USD 8mln clean air act penalty.

• ENI makes significant new oil discovery in Egypt, estimates 150-250mln barrels of oil.

• Royal Dutch Shell have noted yesterday’s announcement from PTTEP concerning the takeover of Cove Energy. Co. reports that it will consider its options and make a further announcement if appropriate.

• A bid contest has been launched by Tullow Oil for a major subsea production system on a new field development off Ghana as the UK independent aims to follow up the success of its Jubilee project in the West African country.

Weather News:

The latest Weather Derivatives update forecasts temperatures in the US for the next 6-10 days to be 2.0% warmer than normal for this time of year (using data accurate on the 23rd May). The first eastern Pacific hurricane of the 2012 season, named Bud, has formed off the south-western coast of Mexico. The US National Hurricane Centre said the storm is packing sustained winds of 75mph and is located in the Pacific Ocean about 385miles southwest of Manzanillo, Mexico.

EUROPEAN EQUITY OPENING HEADLINES INCLUDING: Siemens is planning to expand its presence in Brazil

Thu, 24 May 2012 08:15:00 +0100

ASIA

Nikkei share average closed modestly higher by 0.1%, aided by a rapid rally going into the close, triggered by short-covering in low volume markets. (Newswires)

Top performing sectors in the Nikkei 225: Financials (+1.11%), Consumer Services (+0.44%), Industrials (+0.38%)

Worst performing sectors in the Nikkei 225: Technology (-1.05%), Health Care (-0.38%), Basic Materials (-0.29%)

US equities traded in negative territory for the majority of the session, the sell off a continuation from the European session, investors nervous after yesterday's comments from the former Greek PM about a potential Greek exit ahead of the EU summit today. Positive US macroeconomic data in the form of new home sales did not spur any enthusiasm for a rally either. At the half way mark all three of the major indices were seen down around 1.5%,the SPX back below the 1300 level; the DJIA matching the lows seen on January 13th 2012. The last hour and a half of trade, however, saw an unexpected turn in stocks, lifting the the SPX, NDX and the DJIA back into the green, though only the former two managed to hold into the cash close. Finally, the DJIA finished at 12496.15, down 0.05%; the NDX finished at 2547.08, up 0.31%; the SPX finished at 1318.85, up 0.17%. (RANsquawk)

Top Performing Sectors in S&P 500: Basic Materials (+1.16%) Industrials (+0.60%) Consumer Services (+0.52%)

Worst Performing Sectors in S&P 500: Utilities (-0.65%) Health Care (-0.64%) Telecommunications (-0.23%)

Goldman Sachs – Co. is to announce a USD 40bln clean energy investment target for the next decade, with the plan covering investment and financing in several sectors. (Newswires)

Apple – A General Electric-owned company is squaring up to the Co. in court over whether its patents were infringed when the Co. launched its iTunes platform. In other news, the Co. have said the US government’s lawsuit against the Co. concerning e-book pricing is fundamentally flawed, adding that the Co.’s actions were classic precompetitive conduct. (FT-More/Newswires)

Hewlett-Packard – Co. reported Q2 adjusted EPS USD 0.98 vs. exp USD 0.91; Q2 revenue USD 30.7bln vs. Exp. USD 29.95bln; co. sees Q3 adjusted EPS USD 0.94-0.97 vs. Exp. USD 1.02, and sees FY 2012 EPS USD 4.05-4.10, previously saw USD 4.00, vs. Exp. USD 4.02. (Newswires)

BP – Co. agreed to add over USD 400mln in pollution controls at its Indiana refinery, expecting to cut air pollution by more than 4000 tonnes per year, and to pay USD 8mln clean air act penalty. (Newswires)

Royal Dutch Shell – Co. have noted yesterday’s announcement from PTTEP concerning the takeover of Cove Energy. Co. reports that it will consider its options and make a further announcement if appropriate. (Newswires)

Rio Tinto – Co. CEO has said he expects the iron ore market to improve over the next couple of months, and sees strong demand for iron ore in the long-term. (Newswires)

Xstrata – Co.’s copper unit has reported that ongoing protests aimed at its Tintaya mine in Peru have not affected output. (Newswires)

British American Tobacco – EU judges have ruled that the UK Treasury breached EU law in the 2007 Finance Act by retrospectively blocking tax refund claims. The ruling reinstates claims dating back to 1973 from six multinationals, led by the Co. The potential refund is estimated at GBP 1.2bln. (FT-More)

SABMiller – Co. FY EBITDA USD 5.63bln vs. Exp. USD 5.7bln and FY group revenue USD 31.4bln, previously USD 28.3bln. Co. propose a final dividend of USD 0.695 per share. (Newswires)

United Utilities – Co. reports FY revenue GBP 1.565bln, with profit before tax of GBP 280mln. Co. reports that it has continued progress on its capital expenditure programme and has invested GBP 680mln, an increase of 12% from the prior year. Co. proposes a final dividend of GBP 0.2134 per share, an increase of 6.7% in line with policy. (Newswires)

Companies paying dividend: Prudential (GBP 0.1916) Tullow Oil (GBP 0.0889)

OTHER UK

Cove Energy – Royal Dutch Shell have noted yesterday’s PTTEP offer for the Co. Royal Dutch Shell will consider their options and make a further announcement if appropriate. (Newswires)

FRENCH

Renault – Co. is seeking a partner in order to assist in relaunching the Co.’s Alpine sports car, according to the COO. (Les Echos)

Companies paying dividend: GDF Suez (EUR 0.6700) Vinci (EUR 1.2200)

Companies going ex-dividend: Essilor International (EUR 0.8500)

GERMAN

Siemens – Co. is planning to expand its presence in Brazil by investing up to USD 1bln over the next five years. (Newswires)

Bayer – Co. submitted a new drug application for Regorafenib for the treatment of metastatic colorectal cancer. In other news, the US FDA voted 6-4-1 against the Co.’s and Johnson & Johnson’s Xarelto pill for the treatment of acute coronary syndrome. In other news, the Co. have confirmed Xarelto’s peak revenue forecast above EUR 2bln. (Newswires)

Companies paying dividend: Metro (EUR 1.3500) SAP (EUR 0.7500)

Companies going ex-dividend: Metro (EUR 1.3500) SAP (EUR 0.7500)

PAN EUROPEAN

Spanish Banks – The Spanish Economy Minister de Guindos said 70% of the Spanish banking system would survive their stress scenario. De Guindos has also said he is considering postponing the auctions of the bailed-out banks Catalunya Caixa and Banco de Valencia. Concerning the audit of Spanish banks, Eurozone central banks, the IMF and the EBA will supervise the proceedings, according to sources close to the process. (El Pais/Newswires/Cinco Dias)

Bankia - The Spanish government will inject at least EUR 9bln into the co., which will cover capital needs of EUR 7.1bln to comply with two banking reforms, as well as EUR 1.9bln of capital buffers to comply with European capital rules according to the Spanish Economy Minister de Guindos. (Newswires)

BBVA – Co. is studying the sale of its pension operations in Latin America. (Newswires)

Companies paying dividend: ENI (EUR 0.5200) Generali (EUR 0.2000) Telecom Italia (EUR 0.0430)

SMI

Swiss Watchmakers – Swiss watch exports have risen by a real rate of 9% Y/Y across April, with a nominal rate of 7.9%. (Newswires)

Companies paying dividend: Swatch Group (CHF 5.7500)

BROKER MOVES

GDF SUEZ RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE

FRANCE TELECOM ADDED AS LEAST PREFERRED AT UBS

EON RAISED TO 'BUY' AT COMMERZBANK

UK OPENING NEWS INCLUDING: Severe delays at UK airports are placing the UK’s trade with China at risk

Thu, 24 May 2012 08:13:00 +0100

UK Business Secretary Cable has published a bill to help make Britain one of the most enterprise-friendly countries in the world. Cable has said fostering growth in an acute crisis was the government’s most pressing priority, and his bill would reform employment tribunals, beef up competition rules, cut red tape and give shareholders binding votes on executive pay. (FT-More)

BoE’s Bailey has said UK banks need clearer targets after the IMF’s warning over the pace of Britain’s economy. (Newswires)

UK PM Cameron has reiterated his stance that his government will fight any proposals of a financial transaction tax all the way. (Newswires)

IAG’s CEO Walsh has said the severe delays at the UK’s airports are placing the UK’s trade with China at risk, adding that the Government had failed to do two simple things within its control: make it easy for foreign businessmen to obtain visas and ensure smooth entry into the UK. (Telegraph)

UK participants now look forward to the second reading of Q1 GDP from the UK, due at 0930BST.

EUROPEAN OPENING NEWS INCLUDING: The Spanish government will inject at least EUR 9bln into Bankia

Thu, 24 May 2012 08:08:00 +0100

ASIA

JGB prices were seen marginally higher, 10-yr was up 4 ticks at 143.29. Price action overnight was limited, with the 10-yr JGBs trading range bound through the bulk of the session. Last price taken at 0605BST. (RANsquawk)

Japanese Tankan Survey: Manufacturers sentiment index +2 in May

Japanese Tankan Survey: Non-manufacturers index +11 in May (Newswires)

Chinese HSBC Flash Manufacturing PMI (May) M/M 48.7 (Prev. 49.3) (Newswires)

T-notes settled in positive territory yesterday, with the 10y yield dropping 5bps to hit a session low of 1.72%. The flight to quality bid was driven by continued speculation on whether Greece will remain in the Euro-zone, firstly on overnight comments from the former Greek PM and additionally on comments from EU officials that Euro-zone governments were preparing contingency plans for a Greek exit. CTA's were observed on the bid from the CBOT open, with a particularly large 10y September curve flattening trade noted later in the session. The 5y note auction witnessed a record low yield at this maturity, however the buy-side demand was a little light compared to the 5 auction average which saw some post-event profit taking in 2s and 5s. At the pit close, t-notes settled at 133.25+, up 15+ ticks. Finally, the DJIA finished at 12496.15, down 0.05%; the NDX finished at 2547.08, up 0.31%; the SPX finished at 1318.85, up 0.17%. T-notes were seen trading down 4 ticks at 133.21+ heading into the European open, price action was capped somewhat overnight with the US 10-yr trading sideways. Last price taken at 0635BST. (RANsquawk)

Yesterday’s results of USD 35bln 5y note auction gave a record low yield of 0.748% vs. exp. 0.748%, with the WI stopping at 0.745%; B/C 2.99 vs. avg. 2.97 (Prev. 3.09; Indirects 42.6% vs. avg. 45.03% (Prev. 47.43%); and allotted at high 95.77%. (Newswires)

Fed's Kocherlakota said the rise in inflation signals the US is nearing the maximum employment that is achievable by monetary policy, which should be responsive to signs of rising inflation. (Newswires)

Fed's Bullard said the Fed's already very easy policy is appropriate right now and that the Fed has probably done as much as can be expected. (Newswires) He added that he believes the ECB is committed to backing the European banking system and therefore the risks to the US are a slightly lower than market perceptions.

EUROPE

The Bundesbank have reported that a significant dilution of existing fiscal agreements would damage confidence across the Euroarea and strongly weaken incentives for national reform. (FT-More) On a Greek exit, the central bank has also said that the challenges this would create for the Euroarea and for Germany would be considerable but manageable, given prudent crisis management.

A Euro-zone Working Group source said that contingency plans in case of a Greek exit had been discussed, adding that most Euro-zone countries are already working on Greek exit “assessments”. (Newswires) Separately, a Euro-zone draft statement affirmed EU commitment to safeguarding financial stability in the Euro-zone, adding that this programme was the best guarantee for a more prosperous future of Greece in the EMU.

In a report by the Center for Economic Policy Studies, the institute has said that Greece’s economy could rebound from a default more smoothly than many expect if its official creditors are willing to cut the interest rate on the country’s debt. (Newswires)

The Spanish government will inject at least EUR 9bln into Bankia which will cover capital needs of EUR 7.1bln to comply with two banking reforms, as well as EUR 1.9bln of capital buffers to comply with European capital rules according to the Spanish Economy Minister de Guindos. (Newswires)

German Chancellor Merkel has said Germany will propose a deeper internal market and greater labour market mobility in the EU, as well as better and stronger use of the EIB. (Newswires) German finance minister Schaeuble has signalled that he is willing to compromise on the question of project bonds, promising that Germany would study the matter, according to an interview. (Mannheimer Morgen)

German economic growth will be slower in Q2 than previously expected, according to the German finance ministry. The ministry further reports that it expects a notable global economic recovery this year, though Eurozone weakness will continue to weigh on the country’s exports. (Newswires)

New Zealand Trade Balance (Apr) M/M 355mln vs. Exp. 400mln (Prev. 134mln, Rev. 186mln)

New Zealand Trade Balance 12M YTD (Apr) M/M -541mln vs. Exp. -651mln (Prev. 207mln, Rev. 262mln) (Newswires)

GEOPOLITICAL

COMMODITIES

WTI crude futures were trading up USD 0.45 at USD 90.35 heading into the EU session, dealer noted that traders covered their short positions after prices hit their lowest levels in more than five months in yesterday's session, on continued EU concerns and signs of progress in talks with Iran on its nuclear programme. Last price taken at 0630BST. (RANsquawk)

Global iron ore markets will remain firm and prices could rise in the second half of this year as markets anticipate Indian exports to fall and China to use incentives to boost steel demand, according to participants in this weeks’ Rio Investors’ Day conference. (Newswires)

US EQUITIES OPENING HEADLINES INCLUDING: Due to delays in Facebook's IPO, an investor has launched a suit against NASDAQ OMX

Wed, 23 May 2012 14:05:00 +0100

US equity futures indicate a lower open lower as momentum continued from comments stemming from the former Greek PM that

preparations for a Greek Euro exit are being considered. Investors will look to New Home sales data at 1500 BST.

• US MBA Mortgage Applications (May 18) W/W 3.8% vs. Prev. 9.2%

• FTSE (-1.97%), CAC (-2.26%), DAX (-1.86%), SMI (-1.04%), IBEX (-1.19%), EURO STOXX (-2.28%) prices taken at 1343BST

DJIA

Earnings:

N/A

Other news:

ExxonMobil – Co. is to farm out several oil and gas blocks in Indonesia as their output at the sites is not satisfactory, according to a Co. official. (Newswires)

JP Morgan – US regulators have received their preliminary briefing on the Co.’s trading losses. The FSOC are to discuss the Co. review at their June meeting, according to the Treasury. (Newswires) In other news the new head of the co.’s chief investment office is in a "strong position" to eventually succeed Jamie Dimon as CEO according to senior insiders. (Newswires)

Bank of America – Co. has agreed to repurchase USD 330mln of home loans from Freddie Mac after flaws were found in the way the securities were created, according to a Co. spokesman. (Newswires)

S&P 500

Earnings:

Guess - Q1 EPS USD 0.30 vs. Exp. USD 0.26, Q1 revenue USD 579.3mln vs. Exp. USD 569.85mln. (Newswires)

- Co. sees Q2 EPS USD 0.48-0.52 vs. Exp. USD 0.62

PetSmart - Q1 EPS USD 0.85 vs. Exp. USD 0.73, Q1 revenue USD 1.6bln vs. Exp. USD 1.6bln. (Newswires)

- Co. raises 2012 EPS outlook to USD 3.19-3.31 from USD 3.02-3.16 vs. Exp. USD 3.14

Collective Brands - Q1 adjusted EPS USD 0.68 vs. Exp. USD 0.44, Q1 revenue USD 912mln vs. Exp. USD 878.62mln. (Newswires)

Toll Brothers - Q2 EPS USD 0.10 vs. Exp. USD 0.04, Q2 revenue USD 373.7mln vs. Exp. USD 381.69mln. (Newswires)

- Q2 deliveries 671 units, up 14%

- Q2-end backlog USD 1.5bln, 2,403 units

Big Lots - Q1 EPS USD 0.68 vs. Exp. USD 0.69, Q1 revenue USD 1.29bln vs. Exp. USD 1.30bln. (Newswires)

- Co. cuts FY adjusted EPS view to USD 3.25-3.40 from USD 3.40-3.50 vs. Exp. USD 3.33

- Co. sees Q2 cont ops EPS USD 0.37-0.42 vs. Exp. USD 0.54

Hormel Foods - Q2 EPS USD 0.48 vs. Exp. USD 0.42, Q2 revenue USD 2.01bln vs. Exp. USD 2.05bln. (Newswires)

Other news:

Morgan Stanley – The top securities regulator in Massachusetts has issued a subpoena to the Co. as part of an investigation into whether the Co.’s analysts communicated revisions of Facebook’s revenue forecasts broadly to all clients ahead of the IPO last week. (FT- More)

Metlife – Co. CEO Kandarian and members of senior management of the co. are expected to outline the company’s plans to increase shareholder value at an investor conference today. (Newswires)

Altria – Co. reaffirmed their forecast for their year adjusted EPS at USD 2.17-2.32 vs. Exp. USD 2.21. (Newswires)

NASDAQ OMX - Due to delays in Facebook's IPO, an investor has launched a suit against NASDAQ OMX. (Newswires)

Companies going ex-dividend: Northrop Grumman (USD 0.5500), Carnival (USD 0.2500), Costco (USD 0.2750)

Nasdaq 100

Earnings:

Dell –Q1 adjusted EPS USD 0.43 vs. Exp. USD 0.46, Q1 revenue USD 14.42bln vs. Exp. USD 14.91bln. (Newswires)

- Co. sees Q2 revenue up 2-4% vs. Q1, in-line with historical trends

- Q1 enterprise solutions and services revenue USD 4.5bln, up 2% Y/Y

- Q1 ESS revenue up 5%, excluding third-party storage

- Q1 Services revenue was USD 2.1bln, up 4%.

- Co. ends Q1 with USD 17.2bln in cash, investments

Other news:

Facebook – Analysts for at least two of the Co.’s underwriters revised their financial forecasts for the company while it was holding its IPO roadshow, according to people close to the deal. (Newswires)

Yahoo – Co. hopes that interim CEO Ross Levinsohn can build the company's video programming and syndication deals as it evolves into a media company rather than a technology company. (Newswires) Alibaba Group wants to increase to USD 4bln a USD 3bln loan it has taken out to finance the privatization of its Hong Kong listed unit, so it can partly fund its planned acquisition of a USD 7.1bln stake in itself from Yahoo. (WSJ)

Broker moves

Upgrades:

Starbucks – Co. upgraded to Buy from Neutral at BofA/Merrill, Price target raised to USD 68 from USD 65

Warnaco – Co. upgraded to Buy from Hold at Brean Murray, Price target is USD 55

Blackstone – Co. upgraded to Buy from Neutral at Sterne Agee, Price target is USD 18

Bunge – Co. upgraded to Outperform from Market Perform at BMO Capital, Price target raised to USD 75 from USD 63

Teradyne – Co. upgraded to Buy from Neutral at Goldman, Price target is USD 18

Applied Materials – Co. upgraded to Neutral from Sell at Goldman, Price target is USD 11.50

IntercontinentalExchange – Co. upgraded to Buy from Hold at Deutsche Bank

Downgrades:

NASDAQ OMX – Co. downgraded to Hold from Buy at Deutsche Bank

Patriot Coal – Co. downgraded to Hold from Buy at Deutsche Bank

Dell – Co. price target lowered to USD 17 from USD 20 at Deutsche Bank, firm maintains a Buy rating on the name

CNBC’s Jim Cramer on US corporate earnings

WEDNESDAY earnings: Toll Brothers, Hewlett-Packard, Pandora and Phillips Van-Heusen taking the stage. Cramer remained bearish on Pandora and Hewlett, but was bullish on Toll Brothers, which has no exposure to Europe, and Van-Heusen, a well-run retailer.

THURSDAY earnings: Costco and Tiffany report their earnings. Cramer said that Tiffany remains in the penalty box after last quarter's debacle, but Costco remains a favourite.

Other News

Qihoo 360 - Q1 EPS USD 0.21 vs. Exp. USD 0.17, Q1 revenue USD 69.3mln vs. Exp. USD 60.47mln. (Newswires)

- Co. sees Q2 revenue USD 72-73mln vs. Exp. USD 67.28mln

RailAmerica – Co. has stated that its board is considering strategic alternatives, which may include a sale of the company. (Newswires)

US OPENING NEWS INCLUDING: Iran's foreign minister says more Iranian sanctions would be a strategic mistake

Wed, 23 May 2012 13:07:00 +0100

BoE minutes show the MPC voted 8-1 to keep their Asset Purchase Facility on hold at GBP 325bln.

Markets await any commentary from the informal EU leaders summit after the European close.

USD index touches 20-month highs, pressing EUR/USD, GBP/USD lower.

RANsquawk European Morning Briefing Video: http://youtu.be/_KtIaxNObIc

Market Re-Cap

Following the morning in Europe, a generally risk-off tone is observed, with stock futures sitting just above session lows and the German Schatz auction resulting in record low yields. Some of the risk-averse moves were noted following unconfirmed market talk that a troubled Dutch housing association may be pressed towards bankruptcy, however this seems to be linked towards an article concerning the Dutch central bank probing into the sale of derivatives to the housing group Vestia. Nonetheless, the long end of the Dutch curve remains well-bid and European 10-yr government bond yield spreads are seen generally wider across the board.

Releases from the UK have come under particular focus; the BoE minutes showed an alongside-expectations vote of 8-1 to keep QE on hold. With some analysts estimating more of a lean towards further asset purchases, the initial reaction was strength in the GBP currency, but countering this effect was the parallel release of UK retail sales, with the monthly reading showing the sharpest decline since January 2010. Additionally, it was noted that several members of the board saw further QE as a finely balanced decision, placing GBP/USD back on a downward trajectory and briefly below 1.5700. Elsewhere in foreign exchange, current sentiment is reflected in EUR/USD, printing multi-month lows earlier in the session of 1.2615, with the USD index at 20-month highs which in turn has weighed on commodities.

Looking ahead in the session, markets will be awaiting any commentary from the extraordinary EU leaders summit. Also, New Home Sales data is expected from the US and the latest DOE crude inventory figures due at 1530BST/0930CDT.

Asian Headlines

BoJ Target Rate (May) M/M 0.00-0.10% (Prev. 0.00-0.10%)

The BoJ have kept the size of their Asset Purchase Program at JPY 70trl. (Newswires)

The BoJ unanimously voted to keep their policy rate unchanged and have said the Japanese economy is more or less flat, and will keep conducting policy in an appropriate manner. The BoJ have vowed to keep watching long-term inflation expectations and commodity prices.

Following yesterday’s Fitch downgrade of Japan, Moody’s have said their view on the country has not changed, but have said that the concerns cited in their downgrade last August still remain, with the tax debate being a key factor to assess policy response effectiveness. (Newswires)

US Headlines

US President Obama and Presidential candidate Romney are locked in a tight race for the White House amid deep pessimism about the nation’s future and unease with the President’s stewardship of a still-troubled economy, according to a WSJ/NBC News poll. (WSJ)

US MBA Mortgage Applications (May 18) W/W 3.8% vs. Prev. 9.2% (Newswires)

EU and UK Headlines

Much of the focus remains on Greece as overnight, the former Greek PM Papademos clarified that there are currently no preparations in Greece for the country to leave the Eurozone. (CNBC) This has failed to reassure sentiment as a flight to quality is observed in the European markets at the midway point of the session.

The release of the BoE’s May minutes has shown the board to have voted unanimously to keep benchmark borrowing rates unchanged at 0.5%, and has shown that the board voted 8-1 to keep the Asset Purchase Facility on hold at GBP 325bln. David Miles, a known dove, voted for GBP 25bln in further asset purchases. Since the release, BoE’s Bean has said that if conditions deteriorate significantly, the bank may need to resume asset buying. (Newswires)

Following the minutes, comments from the meeting arose that struck a modestly dovish tone, with the bank saying the decision not to expand QE was finely balanced for several members, but the longer-term CPI outlook suggests there is no need for more QE currently. (Newswires)

Coinciding with the minutes release was Retail Sales data from the UK. The figures were far below expectations, with the ONS commenting that poor weather dampened consumer demand across the month.

UK Retail Sales w/ Auto Fuel (Apr) M/M -2.3% vs. Exp. -0.8% (Prev. 1.8%) - Sharpest monthly drop since January 2010

UK Retail Sales w/ Auto Fuel (Apr) Y/Y -1.1% vs. Exp. 1.0% (Prev. 3.3%) (Newswires)

Attention has been paid to unconfirmed market talk that an ailing Dutch housing association is close to declaring bankruptcy. The comments follow the posting of an article in the Dutch press concerning housing group Vestia, in which the Dutch central bank are said to be investigating the sale of derivatives to the company. (De Telegraaf)

According to German press, the ECB has a working group that has been established to look towards the Greek situation. Additionally, the Bundesbank has set up a crisis committee, with ECB’s Asmussen in place as the chair, according to the report. Following this, the ECB had no comment. (Die Zeit)

EQUITIES

European equities are seen lower in the cash and futures as the US comes to market, with basic materials leading the decline, closely followed by oil & gas and financials. The moves lower follow the sentiment of the market, as any Greek commentary steers market direction ahead of the EU leaders meeting later today.

In individual stocks news, UK-listed Cove Energy have removed their recommendation for Royal Dutch Shell’s cash offer for the company and agreed upon the terms of a higher offer from Thailand’s PTTEP. Participants now look ahead to any response from Royal Dutch Shell towards the new offer. As such, Cove Energy shares and Royal Dutch Shell shares trade 11% higher and 1.8% lower respectively.

Basic materials companies are overrepresented in the top losers of the day, with Vedanta Resources, Xstrata, Glencore and Kazakhmys all seen markedly lower ahead of the US open. The downward pressure on basic materials firms follows USD strength throughout the morning weighing on commodities prices as well as the World Bank reporting that China requires further policy tweaking to work against the headwinds of the Chinese economy.

**Note: For US equity news in detail, refer to the RANsquawk Daily US Equity Opening News report.

The current risk sentiment is reflected across all asset classes as the USD index touches 20-month highs, pressing EUR/USD and GBP/USD lower throughout the morning. EUR/USD broke through Asian session lows relatively early in the European morning, printing multi-month lows at 1.2615. The pair has recovered somewhat since then and now trades in close proximity to a touted option expiry at 1.2650 for the 10am NY cut. (1500BST).

The JPY currency has carried across strength observed in the Asian session following the BoJ keeping rates on hold. USD/JPY now sits comfortably below the 80.00 level as markets await any commentary from Japanese officials who remain concerned about their currency’s strength on the nation’s exporters. USD/JPY now trades in close proximity to a touted option expiry at the 79.75 level for the 10am NY cut (1500BST)

COMMODITIES

Heading into the North American open, WTI crude futures are trading lower on the back of a firmer USD, as well as reports that Western powers are prepared to offer Iran an “oil carrot” that would allow it to continue supplying crude to Asian customers in exchange for guarantees it is not building an atomic bomb.

Oil & Gas News:

China signalled on Wednesday it wanted to ramp up private investment in its energy sector, in line with recently unveiled government plans to fast-track infrastructure investment to help combat a protracted economic slowdown.

Geopolitical News:

Western powers are prepared to offer Iran an ‘oil carrot’ that would allow it to continue supplying Asian customers in exchange for guarantees that it is not building an atomic bomb. Diplomats and oil executives said Washington and Brussels were likely to hold out the prospect of a possible suspension of an EU insurance ban on ships carrying Iranian oil, adding that a deal is unlikely today.

Iran's foreign minister says more Iranian sanctions would be a strategic mistake.

Senior ministers are discussing how Britain would respond in the event of a military confrontation between Israel and Iran later this year.

Israel's defense minister says Iran's preliminary agreement to open its nuclear facilities to U.N. inspectors doesn't rule out a possible Israeli military strike. Ehud Barak said on Wednesday that he's skeptical about the deal, which he calls an Iranian ploy to fend off international pressure to curb Tehran's nuclear ambitions.

North Korea has undertaken a major upgrade of a launch pad that could pave the way for longer-range missiles, according to satellite images taken by a research group. The group suspects that North Korea are looking at rockets larger than its Unha-3, which failed at the test stage on April 13th.

**Note: For commodities news in detail, refer to the RANsquawk Daily Energy Commentary report.

ENERGY MARKETS REPORT INCLUDING: ExxonMobil is to farm out several oil and gas blocks in Indonesia

Wed, 23 May 2012 11:10:00 +0100

Oil & Gas News:

• China signalled on Wednesday it wanted to ramp up private investment in its energy sector, in line with recently unveiled government plans to fast-track infrastructure investment to help combat a protracted economic slowdown.

Geopolitical News:

• Western powers are prepared to offer Iran an ‘oil carrot’ that would allow it to continue supplying Asian customers in exchange for guarantees that it is not building an atomic bomb. Diplomats and oil executives said Washington and Brussels were likely to hold out the prospect of a possible suspension of an EU insurance ban on ships carrying Iranian oil, adding that a deal is unlikely today.

• Iran's foreign minister says more Iranian sanctions would be a strategic mistake.

• Senior ministers are discussing how Britain would respond in the event of a military confrontation between Israel and Iran later this year.

• Israel's defense minister says Iran's preliminary agreement to open its nuclear facilities to U.N. inspectors doesn't rule out a possible Israeli military strike. Ehud Barak said on Wednesday that he's skeptical about the deal, which he calls an Iranian ploy to fend off international pressure to curb Tehran's nuclear ambitions.

• North Korea has undertaken a major upgrade of a launch pad that could pave the way for longer-range missiles, according to satellite images taken by a research group. The group suspects that North Korea are looking at rockets larger than its Unha-3, which failed at the test stage on April 13th.

Corporate News:

• The Cove board has recommended a new cash takeover offer from Thailand’s PTTEP, which has surpassed the previously recommended Shell bid by 9.1% or GBP 0.20 per share.

• ExxonMobil is to farm out several oil and gas blocks in Indonesia as their output at the sites is not satisfactory, according to a co. official.

• Over 400 blocks have received bids from unidentified players in the UK’s latest North Sea licensing round. A total of 224 applications were submitted to the government for consideration for offshore blocks in the country’s 27th round of licensing.

Weather News:

The latest Weather Derivatives update forecasts temperatures in the US for the next 6-10 days to be 4.5% warmer than normal for this time of year with the region experiencing the most unseasonably warm weather. Using data accurate on the 22nd May.

API Crude Oil Inventories (May 18) W/W 1482K vs. Prev. 6571K

-API Gasoline Inventories (May 18) W/W -4519K vs. Prev. -2637K

-API Distillate Inventory (May 18) W/W -235K vs. Prev. -1570K

-API Cushing Crude OK Inventory (May 18) W/W 491K vs. Prev. 2799K

US DOE Crude Oil Inventories (May 18) W/W Exp. 1650K, Low -1500K, High 2000K (Prev. 2128K)

-DOE Gasoline Inventories (May 18) W/W Exp. -650K, Low -2300K, High 2000K (Prev. -2797K)

-DOE Distillate Inventory (May 18) W/W Exp. -500K, Low -1800K, High 1000K (Prev. -969K)

-DOE Cushing, OK Crude Inventory (May 18) W/W (Prev. 1000K)

-DOE Refinery Utilization (May 18) W/W Exp. 0.30%, Low 0.00%, High 1.50% (Prev. 1.90%)

EUROPEAN EQUITY OPENING HEADLINES INCLUDING: BSkyB no longer holds market control over pay-TV film rights

Wed, 23 May 2012 08:16:00 +0100

ASIA

Nikkei share average closed lower by 2% to a four-month low as exporters took the brunt of losses on a firmer JPY after the BoJ kept rate policy on hold overnight. (Newswires)

Top performing sectors in the Nikkei 225: Utilities (-0.08%), Telecommunications (-0.89%), Health Care (-1.11%)

Worst performing sectors in the Nikkei 225: Technology (-2.87%), Financials (-2.55%), Industrials (-2.35%)

US equities looked to continue Monday’s advance in morning trade; a continuation from their European counterparts, risk appetite increased as the OECD upwardly revised the US growth forecast for 2012. The first increase in US existing home sales in three months aided the rally, with the SPX gaining close to 1.0%, and the DJIA around 0.75%. However, the two indices as well as the day’s under-performing NDX came under heavy selling pressure into the cash close following comments from the former Greek Prime Minister Papademos that a Greek exit from the Euro-zone is a real possibility, and preparations for such an event are being considered. Investor caution became apparent ahead of the extraordinary EU summit of Heads of State tomorrow. Finally, the DJIA finished at 12502.81, down 0.01%; the SPX finished at 1316.67, up 0.05%; and the NDX finished at 2539.20, down 0.24%. (RANsquawk)

Top Performing Sectors in S&P 500: Financials (+0.73%), Utilities (+0.61%), Consumer Services (+0.24%)

Worst Performing Sectors in S&P 500: Basic Materials (-0.68%), Technology (-0.41%), Oil & Gas (-0.30%)

ExxonMobil – Co. is to farm out several oil and gas blocks in Indonesia as their output at the sites is not satisfactory, according to a Co. official. (Newswires)

Bank of America – Co. has agreed to repurchase USD 330mln of home loans from Freddie Mac after flaws were found in the way the securities were created, according to a Co. spokesman. (Newswires)

Dell – Co. reported a Q1 adjusted EPS USD 0.43 vs. Exp. USD 0.46, Q1 revenue USD 14.42bln vs. Exp. USD 14.91bln, co. sees Q2 revenue up 2-4% vs. Q1, in-line with historical trends. (Newswires)

Altria – Co. reaffirmed their forecast for their year adjusted EPS. (Newswires)

UK Companies – The FSA has stepped up an investigation into the sale of complex derivatives to small UK firms amid concerns that some of the products may have breached regulations designed to protect customers, according to lawmakers. (Newswires)

Royal Dutch Shell – Cove Energy have withdrawn their recommendation for the Co.’s offer for Cove Energy and have reached an agreement on the terms of a recommended cash offer from PTTEP. (Newswires)

BSkyB – Co. no longer holds market control over pay-TV film rights following competition from online services such as Netflix and Lovefilm, according to the UK Competition Commission. (Newswires)

Hammerson – Co. is rumoured to be eyed by a sovereign wealth fund from Abu Dhabi, according to trader sources. (Daily Express)

Burberry – Co. reports a FY adjusted pretax of GBP 376mln vs. Exp. GBP 375mln and says FY revenue of GBP 1.86bln vs. Exp. 1.86bln. Co. says it is targeting ‘modest’ growth in operating margins this year. Co. proposes a final dividend of GBP 0.18 vs. Exp. GBP 0.178. (Newswires)

Companies going ex-dividend: Carnival (USD 0.2777), International Power (EUR 0.0733)

Companies paying dividend: Xstrata (USD 0.2700), Fresnillo (USD 0.4444), Legal & General (GBP 0.05266)

OTHER UK

LSE – Italian banks UniCredit and Intesa Sanpaolo said they are selling an 11.5% combined shareholding in the London Stock Exchange to institutional investors through a bookbuilding process. (Newswires)

Cove Energy – Co. have withdrawn their recommendation for Royal Dutch Shell’s offer for the Co., and have instead reached an agreement with PTTEP on the terms of a recommended cash offer. PTTEP’s cash offer stands at GBP 2.40 per share, valuing the Co. at GBP 1.22bln. (Newswires)

FRENCH

SocGen – Co.’s CEO said it is aiming to resume paying a dividend in 2012. (Newswires)

Air Liquide – Co. are to allocate one free share for ten existing shares according to a source. (Newswires)

Peugeot – Co. has received interest from at least six potential bidders for its Gefco trucking unit, according to people familiar with the matter. (Newswires)

GERMAN

Bayer – The UK’s healthcare authority NICE has issued its final recommendation for the Co.’s Xarelto as an option for the prevention of stroke and systemic embolism in people with atrial fibrillation. (Newswires)

SAP – Co. announced it is to buy Ariba for USD 45 per share at a deal valued at USD 4.3bln, which is a 20% premium. (Newswires)

Deutsche Bank – Co. has said it does not rule out buys despite focusing on organic growth, according to the future co-chairman of the Co. (Frankfurter Allgemeine Zeitung)

PAN EUROPEAN

European Banks – Sweeping bank reform was not initially on the agenda for today’s informal summit of EU leaders, however senior officials have said it was a big feature of preparations and is likely to be addressed. (FT-More)

Bankia – The Spanish government is to outline today its plan to restructure the Co. and announce how much money it will pump into the lender, according to government sources. (Newswires)

Dexia – France and Belgium requested that the EU Commission extend the EUR 45bln of guarantees to the Co. on Monday, according to unidentified sources. (Les Echos)

Companies going ex-dividend: Arcelormittal (EUR 0.1875)

Companies paying dividend: Nokia (EUR 0.2000)

SMI

ABB – Co. CEO said there will be no more big deals in the near term following their USD 3.9bln acquisition of Thomas & Betts. (Newswires)

Companies paying dividend: Credit Suisse (CHF 0.7500)

BROKER MOVES

MICHELIN CUT TO SELL FROM NEUTRAL AT GOLDMAN SACHS

CARREFOUR UPPED TO OUTPERFORM VS UNDERPERFORM AT CREDIT SUISSE

PPR NAMED A MOST PREFERRED STOCK AT CITI

VOLKSWAGEN NAMED A MOST PREFERRED STOCK AT CITI

UK OPENING NEWS INCLUDING: the UK Coalition is preparing a massive increase in state-backed investment

Wed, 23 May 2012 08:14:00 +0100

Deputy PM Clegg has said the UK Coalition is preparing a massive increase in state-backed investment in housing and infrastructure, signalling a shift from stark warnings by ministers about the debt crisis to a fresh emphasis on growth. (FT-More) Clegg continued by saying that it is the government’s absolute priority to use its balance sheet to inject credit into the economy. Clegg said that the Coalition is looking at massively amplifying the principle of what they did on credit easing – a reference to the Treasury’s GBP 20bln scheme to support lending to SMEs.

UK participants look forward to the release of the BoE’s minutes as well as the latest Retails Sales report, both due at 0930BST.

EUROPEAN OPENING NEWS INCLUDING: European leaders will today explore ways of boosting the stricken European economy

Wed, 23 May 2012 08:05:00 +0100

ASIA

JGB prices were marginally lower following the BoJ announcing no new monetary easing steps overnight at the BoJ's monthly target rate announcement. 10-yr JGBs were seen down 4 ticks at 143.21 heading into the European session. Last price taken at 0630BST. (RANsquawk)

BoJ Target Rate (May) M/M 0.00-0.10% (Prev. 0.00-0.10%)

The BoJ have kept the size of their Asset Purchase Program at JPY 70trl. (Newswires)

Japanese PM Noda has said he expects decisive steps from the BoJ and will stay in close cooperation with the bank in order to combat deflation.

The World Bank has said high-income economies and a domestic property market correction pose external downside risks to China. The World Bank have recommended that fiscal stimulus for more consumption would be the most appropriate strategy to boost growth. The institution also said the Chinese RRR could be tweaked further. (Newswires)

China’s four biggest banks issued CNY 34bln in new loans in the first three weeks of May, and their deposits declined by CNY 270bln over the same period, according to unnamed banking sources. (Newswires)

Treasuries fell during the early part of trade in Tuesday's session, as renewed optimism gripped markets head of the EU summit tomorrow, and amid pre-auction shorts into the 2yr auction, although the results of today's first auction in this week’s series showed the second highest demand on record and the yield stopping through the WI by 0.5bps. Today sees two Fed outright buys along with the 5yr note auction from the Treasury, which could be more of a challenge than the 2s today as 5s remain elevated and yields sit close to historical lows. The 10yr yield fell 0.05 percentage points to finish at 1.79%, but notably the weekly survey by JP Morgan showed treasury investors cut bets the securities will advance, raising neutral and short positions. The 17th May low at 133.05 provided some support at mid-point of today's session, although stability here did prevent a rally and a pare back of earlier moves lower. T-notes settled at 133.10+ today, down 9+ ticks. Finally, the DJIA finished at 12502.81, down 0.01%; the SPX finished at 1316.67, up 0.05%; and the NDX finished at 2539.20, down 0.24%. T-notes were seen up 6 ticks at 133.16 heading into the European open, as concerns surrounding Greece continue to force investors/market participants to the safe-haven products. Last price taken at 0635BST. (RANsquawk)

Yesterday’s USD 35bln 2y note auction drew a yield of 0.300% vs. exp. 0.300%, WI stopping at 0.305%, the b/c was 3.95 vs. avg. 3.64 (prev. 3.76), Indirect bidding was 33.5% vs. avg. 32.18% (prev. 31.32%) and the allotted at high was 24.43%. (Newswires)

Fed officials left the discount rate unchanged at 0.75%, 10 out of 12 Fed officials recommend keeping discount rate unchanged. (Newswires) Officials expect growth to continue at a moderate pace, and cite risks from global financial markets and US fiscal uncertainty.

EUROPE

Former Greek PM Papademos said the risk of Greece leaving the EMU is real, with preparations for a Greek exit being considered as scope to renegotiate the Greek loan programme is very limited. (Newswires) Papademos has since said that there are no preparations in Greece for the country to leave the Eurozone. The former Greek PM estimated a Greek exit would cost between EUR 500bln-EUR 1trln.

European leaders will today explore ways of boosting the stricken European economy, but the issue of Eurobonds and whether they can help alleviate two years of debt turmoil will dominate the meeting. (Newswires) In a break from tradition, Spanish PM Rajoy is due to meet with French President Hollande ahead of the summit, with previous summits seeing pre-meetings between the ex-French President Sarkozy and his German counterpart Merkel.

EU's Rehn said an EIB capital hike is a quick way to channel stimulus into the economy, as promoting investments is the cornerstone of a growth strategy. (Newswires/Handelsblatt) EU's Oettinger said Euro-bonds are a question of timing, and warned German Chancellor Merkel against rejecting the instruments.

ECB's Nowotny said an economic upturn cannot come at the push of button, however, the ECB can contribute by ensuring price stability. He added that increasing capital at the EIB would be a good investment. (Newswires)

The German debt agency announced it does not plan to set negative coupons on bonds, having set a 0.0% coupon on the 2-year Schatz bond being auctioned today. (Newswires) In other news, PIMCO's Mather said PIMCO will not buy the 0% coupon Schatz today, and they have cut exposure to Bunds because they favour MBSs.

Australian Conference Board Leading Index (Mar) M/M 0.2% (Prev. 0.0%)

Australian Westpac Leading Index (Mar) M/M 0.4% (Prev. 0.2%, Rev. 0.0%) (Newswires)

The New Zealand finance minister has said he expects ratings agencies to respond positively to the country’s budget, as it shows a credible path to surplus. (Newswires)

GEOPOLITICAL

North Korea has undertaken a major upgrade of a launch pad that could pave the way for longer-range missiles, according to satellite images taken by a research group. (Newswires) The group suspects that North Korea are looking at rockets larger than its Unha-3, which failed at the test stage on April 13th.

COMMODITIES

WTI crude futures were seen down USD 0.85 at USD 91.00 heading into the European session, as a potential deal between Iran and the U.N. nuclear watchdog eased fears of oil supply disruptions. Last price taken at 0635BST. (RANsquawk)

API Crude Oil Inventories (May 18) W/W 1482K vs. Prev. 6571K

API Gasoline Inventories (May 18) W/W -4519K vs. Prev. -2637K

API Distillate Inventory (May 18) W/W -235K vs. Prev. -1570K

API Cushing Crude OK Inventory (May 18) W/W 491K vs. Prev. 2799K. (Newswires)

US EQUITIES OPENING HEADLINES INCLUDING: Bank of America CEO has said the bank is very comfortable with its investments

Tue, 22 May 2012 13:55:00 +0100

US equity futures indicate a slightly higher open as bargain hunters continue to move into stocks, sentiment improved on headlines that

Greece’s banks would receive a EUR 18bln recapitalisation down payment, any concern on the Fitch downgrade of Japan was quickly

shrugged off as US participants entered the market. Investors will look to US existing home sales data at 1000ET.

• US ICSC Chain Store Sales (May 18) W/W -1.7% vs. Prev. -0.8%; US ICSC Chain Store Sales (May 18) Y/Y 3.8% vs. Prev. 4.5%

• FTSE (+1.33%), CAC (+1.30%), DAX (+1.20%), SMI (+0.48%), IBEX (-1.19%), EURO STOXX (+0.02%) prices taken at 1343BST

DJIA

Earnings:

N/A

Other news:

JP Morgan – Co.’s trading losses could rise to around USD 7bln from the initial USD 2bln revealed, according to unsourced reports. (Independent)

Bank of America – Co.’s CEO has said the bank is very comfortable with its investments, which are mostly in US Treasury bonds and governmentbacked mortgage bonds. The Co. CEO said the bank’s approximately USD 3bln quarterly loss on mortgage payments is peaking, although the costs will not see a significant drop until 2013 and 2014. (Newswires)

Wal-Mart - Proxy adviser firms ISS and Glass Lewis are both urging Wal-Mart shareholders to vote next week against CEO Mike Duke and former CEO Lee Scott, among others, for seats on the board. (Associated Press) In other news the lack of cooperation that US lawmakers are getting from Wal-Mart in their investigation of the Mexican bribery probe is proving to be frustrating according to sources. (Newswires)

S&P 500

Earnings:

Best Buy - Q1 adjusted EPS USD 0.72 vs. Exp. USD 0.60, Q1 revenue USD 11.61bln vs. Exp. USD 11.49bln. (Newswires)

- Co. continues to expect repurchases of USD 750mln-1.0bln in FY13

- Q1 Same Store Sales fell 5.3%

- Co. sees FY13 pre-tax restructuring charges USD 300-350mln

- Co. maintains FY13 adjusted EPS view of USD 3.50-3.80 vs. Exp. USD 3.59

- Q1 domestic segment online revenue growth was 20%

Medtronic - Q4 adjusted EPS USD 0.99 vs. Exp. USD 0.98, Q4 revenue USD 4.30bln vs. Exp. USD 4.23bln. (Newswires)

- Co. sees year adjusted EPS USD 3.62-3.70 vs. Exp. USD 3.66

- Co. sees FY13 revenue growth 2%-4% on constant currency basis

- Q4 Cardiac and Vascular Group revenue USD 2.25bln.

Ralph Lauren - Q4 EPS USD 0.99 vs. Exp. USD 0.85, Q4 revenue USD 1.60bln vs. Exp. USD 1.60bln. (Newswires)

- Co. declared USD 0.40 quarterly dividend per share vs. Exp. USD 0.20

AutoZone - Q3 EPS USD 6.28 vs. Exp. USD 6.25, Q3 revenue USD 2.11bln vs. Ex. USD 2.13bln. (Newswires)

- Q3 domestic comparable sales up 3%

Other news:

Wells Fargo – Co. said that it is targeting a return on equity of 12-15% according to investor day slides. (Newswires)

Eli Lilly – Co. presented phase II blood pressure and heart rate data on investigational GLP-1 analogue candidate in patients with type 2 diabetes. (Newswires)

BlackRock – Co. and a consortium of other companies are to combine to buy a USD 1.6bln stake in Formula One. (Newswires)

EMC – Co. has acquired Syncplicity, without disclosing the details the deal. (Newswires)

AMD – Co. is set to release its Hondo processors in Q4 to compete against Intel's Clover Trail-W processors, with both intended for use on Windows 8 based tablets. (Digitimes)

Alexion to be added to S&P 500; Motorola Mobility deleted as of 5/24 close

Companies going ex-dividend: Wyndham (USD 0.2300), Allergan (USD 0.0500), Applied Materials (USD 0.0900)

Companies paying dividend: Apache (USD 0.1700), Dr Horton (USD 0.0375)

Nasdaq 100

Earnings:

Urban Outfitters – Q1 EPS USD 0.23 vs. Exp. USD 0.20; Q1 revenue USD 568.9mln vs. Exp. USD 578.31mln. (Newswires)

- Q1 comparable store net sales decreased 1%

- Q1 comparable retail segment net sales up 2%

- Co. says warm weather in Q1 may take away from Q2 sales

Other news:

Apple - The US District Court of Delaware has ordered Apple and HTC into face-to-face mediation talks to settle their legal differences over their recent patent dispute. (All Things Digital) At least one of the next generation iPhones that Apple is currently testing appears to have a 3.9-inch display and 1136 x 640 resolution. (9to5 Mac) Finally, Apple remained the world's most valuable brand over the past year according to the annual BrandZ study by Millward Brown. (Newswires)

Google - European antitrust regulators identified four areas of concern about the co.’s business practices, but gave the Internet giant the opportunity to offer concessions to settle the case. (WSJ)

Facebook - Just before the co.’s USD 16bln IPO, Morgan Stanley, the deal's lead underwriter, unexpectedly told major clients that the bank's consumer Internet analyst was reducing his revenue forecasts for the company. (Newswires)

Salesforce.com – Co. announced they have seen tremendous growth in Europe and plans to add more than 750 new jobs over the next couple of years to meet the growing demand for the social enterprise in the region. (theflyonthewall.com)

Zynga – Co. announced a partnership with American Express for the launch of a new serve rewards digital wallet program. (Newswires)

Broker moves

Upgrades:

Gap – Co. upgraded to Buy from Neutral at Lazard Capital, Price target is USD 35

Humana – Co. upgraded to Outperform from Market Perform at Wells Fargo, firm has an USD 87-96 price target range for shares

EOG Resources – Co. upgraded to Outperform from Market Perform at Wells Fargo, firm raised its price target range for shares to USD 130-140 from USD 110-115

IntercontinentalExchange – Co. upgraded to Overweight from Neutral at JPMorgan, Price target raised to USD 144 from USD 130

Downgrades:

Baker Hughes – Co. downgraded to Underperform from Outperform at CLSA, Price target cut to USD 44 from USD 58

Devon Energy – Co. downgraded to Market Perform from Outperform at Wells Fargo, firm lowered its price target range for shares to USD 65-71 from USD 74-80

Lowe's – Co. downgraded to Neutral from Overweight at Piper Jaffray, firm dropped its price target for shares to USD 28 from USD 41

Charles Schwab – Co. downgraded to Underperform from Market Perform at Raymond James

CNBC’s Jim Cramer on US corporate earnings

TUESDAY earnings: AutoZone, Best Buy, Ralph Lauren and Dell. Cramer remained a fan of AutoZone's stock buyback program, but was a seller of Best Buy and Dell, a stock he called "too risky." Ralph Lauren remains a battleground stock.

THURSDAY earnings: Costco and Tiffany report their earnings. Cramer said that Tiffany remains in the penalty box after last quarter's debacle, but Costco remains a favourite.

Other News

US Credit Card Companies – Moody’s have said US credit card charge-off rates rose 27bps to 5.21% in April, but delinquencies continue to fall, with the delinquency rate index declining by 14bps to 2.59% across the same period. (Newswires)

US Banks - The types of derivative swaps said to have led to a loss of at least USD 2bln at JP Morgan may be the first for which the US CFTC would require guarantees by clearinghouses under the Dodd-Frank Act, according to the CFTC chairman Gary Gensler. (Newswires)

US OPENING NEWS INCLUDING: Fitch downgrades Japan to 'A+’ from ‘AA’

Tue, 22 May 2012 13:31:00 +0100

OECD cuts Euro-area GDP forecast to -0.1% from 0.2%.

Fitch downgrades Japan to 'A+’ from ‘AA’; outlook negative.

Greek banks to get EUR 18bln recapitalisation down-payments Friday, according to a source.

RANsquawk European Morning Briefing Video: www.youtube.com/watch?v=1EVQ_JIr27I

Market Re-Cap

UK CPI this morning came in weaker than expected at 3.0% Y/Y in April, weighed by a fall in air fares, alcohol, clothes and sea transport, according to the ONS. The release saw aggressive selling of GBP in the currency market and has underpinned the rise in gilt futures. Alongside the 26th month low in UK CPI the IMF also issued their latest assessment on the UK economy and said further policy easing is required and that the Bank could cut its interest rate from the current 0.5% level.

In other market moving news a Greek government source said that Greek banks are to receive a EUR 18bln recapitalisation down payment this Friday which initially saw the EUR and stock futures rally, however, the move was short lived as it became clear that the payment is scheduled as part of the bailout programme for Greece. Elsewhere, Fitch made a surprise announcement and downgraded the Japanese sovereign rating by two notches to A+, outlook negative. The move means Fitch has the lowest rating for Japan of the three main rating agencies so we remain vigilant for any comments from S&P and Moody’s today.

Looking ahead the main data from the US comes in the form of existing home sales for April and Richmond Fed manufacturing, both of which are scheduled for release at 1500BST. In terms of fixed income, the US Treasury will be kick start its issuance for the week offering a 2yr note for USD 35bln at 1800BST.

Global Headlines

The OECD have released their latest forecasts for global economy:

-cuts 2012 China growth forecast to 8.2% from 8.5%

-raises 2012 US growth forecast to 2.4% from 2.0%

-sees UK GDP +0.5% on year in 2012, +1.9% in 2013

-cuts Euro-area GDP forecast to -0.1% from 0.2%. (Newswires)

Asian Headlines

Fitch have downgraded Japan to ‘A+’ from ‘AA’; Outlook negative. The downgrades and negative outlooks reflect growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios. (Newswires)

A top Chinese think-tank has said the country should continue its tight controls over the property market, as a further correction in housing prices is necessary before the Chinese economy can return to sustainable growth. (Newswires)

China are to fast track approvals for infrastructure investment within the economy in order to combat a slowdown, according to a state-backed newspaper. (China Securities Journal)

US Headlines

The US Treasury has no immediate plans to alter the size of their 2012 debt issuance which will be close to its full-year plan, according to a senior official from the US Treasury Department. However the official did say that T-Bill issuance volume can still be altered should the economic recovery change the department’s views. (Newswires)

US ICSC Chain Store Sales (May 18) W/W -1.7% vs. Prev. -0.8%

-The ICSC expects May comparable store sales to rise by about 3% (Newswires)

EU and UK Headlines

UK CPI came in below expectations at 3.0%, indicating a slowdown back towards the BoE’s 2.0% mandate target. As the rate was within one percentage point of the target, the BoE’s King will not be required to send a letter to the Chancellor. The downside pressures to the rate came from declines in air fares, alcohol, clothes and sea transport.

-UK CPI (Apr) Y/Y 3.0% vs Exp. 3.1% (Prev. 3.5%)

-UK CPI Core (Apr) Y/Y 2.1% vs. Exp. 2.0% (Prev. 2.5%)

-UK CPI (Apr) M/M 0.6% vs Exp. 0.6% (Prev. 0.3%) (Newswires)

Elsewhere from the UK, the government posted the largest public sector net repayment on record over April, as well as Public Sector Net Borrowing data being boosted by Royal Mail asset transfers and the BoE’s special liquidity scheme.

The OECD have said the ECB has room for further monetary easing, and could move toward common Eurobonds. On bond-buying, the OECD commented that the ECB should resume purchases if volatility increases in the European market. On the ESM, the OECD have suggested the facility could be used to directly recapitalize banks. (Newswires)

On the topic of Eurobonds, a senior German official has reiterated that they are not one of the instruments that have a chance to resolve the crisis, adding that Berlin’s stance on the bonds is set and will not change in the run-up to the June summit. (Newswires)

Spain is pushing for a big ECB role in the new EU strategy to boost growth and wants the ECB to support the volatile debt markets, according to a Spanish government official. (Newswires)

Taking guidelines from how badly Ireland's banks were hit in its financial crisis, economists at the IIF institute said they expect the losses to be in the range of between EUR 216bln and EUR 260bln. (Telegraph)

EQUITIES

European equities are trending higher in both the cash and the futures markets, with tighter European bond yield spreads observed against the German 10-year Bund, indicating some modest risk appetite present in participants today. In terms of sectors, Industrials are seen as the outperformer heading into the US session, closely followed by Basic Materials.

European Financials are seen in minor positive territory as the US comes to market, with some relief coming from reports that Greece are to receive EUR 18bln in recapitalization funds this Friday, according to source comments. Heading into the US session, JP Morgan may continue to garner focus as unsourced reports comment that the company’s recent trading losses could rise to USD 7bln from the initial USD 2bln revealed. (Independent)

In individual stocks news, the largest cap stock on the FTSE-100, Vodafone, has reported a very modest beat in FY revenues, with the figure standing at GBP 46.4bln vs. Exp. GBP 46.3bln. However, Vodafone’s CFO has commented that the company are to miss their 2013 service sales medium-term target, but have reported that their margin decline is to continue to improve. As such, Vodafone shares are currently seen higher by 3.7%.

In other news, Bankia are seen markedly lower and are one of the worst performers today following reports from the IIF that Spanish banking losses could total between EUR 216-260bln. Bankia have been seen trading lower throughout the day, and are now seen down 3.7%.

**Note: For US equity news in detail, refer to the RANsquawk Daily US Equity Opening News report.

Following the Fitch downgrade of Japan, most volatility was noted in USD/JPY, which spiked higher by around 25pips. The pair did retrace the initial spike, but continues on an upward trend at the midpoint of the European session. Market talk of offers in the pair may cap further gains at the 80.00 level, however this remains unconfirmed.

Elsewhere, GBP/USD saw rapid weakness following the lower-than-expected CPI report from the UK, moving lower by 25pips in the minutes following the release. The pair saw further downside moves following IMF comments that the UK requires further monetary easing. The IMF commented that the BoE has room to conduct more QE, and could even cut the benchmark interest rate. The pair now trends at around the 1.5775 level, failing to recoup losses experienced earlier in the session.

COMMODITIES

Heading into the North American open, WTI crude futures are trading lower after OECD cut growth forecasts for Europe, while Iran reached an agreement that will allow the IAEA to investigate alleged nuclear-weapons work in the Persian Gulf nation.

Oil & Gas News:

Qatari oil minister says he sees no shortage of crude supplies.

TransCanada Pipelines on Monday began a non-binding open season to gauge shipper interest in proposed changes to its ANR system that are designed to move natural gas production from the Marcellus and Utica shales to premium markets.

Oil storage capacity in the UAE's port of Fujairah is expected to rise to around 7.8 million cubic meters by 2014 from its current capacity of 5.8 million cubic meters, the harbour master at the Fujairah port said on Tuesday.

Geopolitical News:

The US Senate unanimously approved a package of further economic sanctions on Iran’s oil sector days ahead of a meeting in Baghdad between major world powers and Tehran.

Iranian Foreign Minister Ali Akbar Salehi in a meeting with Director-General of the IAEA Amano called on the IAEA to adopt a balanced attitude towards member states and defend their rights to access nuclear energy.

United Nations atomic inspectors and Iran reached an agreement that will allow the IAEA to investigate alleged nuclear-weapons work in the Persian Gulf nation.

Japanese importers are searching for new ways to pay for Iranian oil imports worth close to USD 3bln per month after a US district court froze bank accounts held by Tehran. Failure to resolve the payments issues could not only threaten Iranian oil imports, which account for 6.2% of Japan’s oil, but also further squeeze the Iranian economy, ultimately endangering its repayment of nearly USD 4bln in loans to Japan.

Baghdad has hit back at plans for a big oil pipeline between Turkey and Iran’s Kurdish region, in the latest sign of tension between the two countries and deepening strains within Iraq itself. The 1MBPD pipeline could give Turkey direct access to oil from the semi-autonomous Kurdish region rather than funnelling crude through Baghdad-controlled territory.

**Note: WTI crude June futures expiry (1930BST/1330CDT)

**Note: For commodities news in detail, refer to the RANsquawk Daily Energy Commentary report.

ENERGY MARKETS REPORT INCLUDING: Qatari oil minister says he sees no shortage of crude supplies

Tue, 22 May 2012 10:54:00 +0100

Heading into the North American open, WTI crude futures are trading lower after OECD cut growth forecasts for Europe, while Iran reached an agreement that will allow the IAEA to investigate alleged nuclear-weapons work in the Persian Gulf nation.

Oil & Gas News:

• Qatari oil minister says he sees no shortage of crude supplies.

• TransCanada Pipelines on Monday began a non-binding open season to gauge shipper interest in proposed changes to its ANR system that are designed to move natural gas production from the Marcellus and Utica shales to premium markets.

• Oil storage capacity in the UAE's port of Fujairah is expected to rise to around 7.8 million cubic meters by 2014 from its current capacity of 5.8 million cubic meters, the harbour master at the Fujairah port said on Tuesday.

Geopolitical News:

• The US Senate unanimously approved a package of further economic sanctions on Iran’s oil sector days ahead of a meeting in Baghdad between major world powers and Tehran.

• Iranian Foreign Minister Ali Akbar Salehi in a meeting with Director-General of the IAEA Amano called on the IAEA to adopt a balanced attitude towards members states and defend their rights to access nuclear energy.

• United Nations atomic inspectors and Iran reached an agreement that will allow the IAEA to investigate alleged nuclear-weapons work in the Persian Gulf nation.

• Japanese importers are searching for new ways to pay for Iranian oil imports worth close to USD 3bln per month after a US district court froze bank accounts held by Tehran. Failure to resolve the payments issues could not only threaten Iranian oil imports, which account for 6.2% of Japan’s oil, but also further squeeze the Iranian economy, ultimately endangering its repayment of nearly USD 4bln in loans to Japan.

• Baghdad has hit back at plans for a big oil pipeline between Turkey and Iran’s Kurdish region, in the latest sign of tension between the two countries and deepening strains within Iraq itself. The 1MBPD pipeline could give Turkey direct access to oil from the semi-autonomous Kurdish region rather than funnelling crude through Baghdad-controlled territory.

Corporate News:

• Technip said it was acquiring Stone & Webster Process Technologies and the associated oil and gas engineering capabilities from Shaw, and will take on the divisions 1200 engineers, researchers and project teams.

• State-controlled Abu Dhabi National Energy Co. (TAQA) and the Turkish energy ministry have formed a joint committee to discuss investment opportunities for the oil and gas utility in Turkey.

• Norwegian oil firm Statoil awarded USD 5.04bln drilling services contracts for 18 fixed installations on the Norwegian continental shelf.

Weather News:

The latest Weather Derivatives update forecasts temperatures in the US for the next 6-10 days to be 3.6% warmer than normal for this time of year with the region experiencing the most unseasonably warm weather. Using data accurate on the 21st May. Finally, NHC reports that a tropical storm Alberto is located about 245mln E.SE. of Charleston South Carolina, maximum sustained winds at 35mph.

EUROPEAN EQUITY OPENING HEADLINES INCLUDING: ENRC plans to boost iron ore sales to China by 20% this year

Tue, 22 May 2012 08:15:00 +0100

ASIA

The Nikkei share average closed higher by 1.1%, extending the index’s rebound as investors picked up cheap stocks following last week’s sell-off. (Sources)

Top performing sectors in the Nikkei 225: Industrials (+2.16%), Basic Materials (+1.76%), Oil & Gas (+1.61%)

Worst performing sectors in the Nikkei 225: Utilities (-1.34%), Telecommunications (-0.41%), Health Care (-0.27%)

US equity futures rebounded from their four month lows, grinding higher into the close, with nine out of the ten SPX sectors closing in the green: the first ‘up’ day in seven on no macroeconomic data. The easing of selling pressure in oversold stocks accredited to weekend commentary from the G8, who promised to pursue growth in Europe and not just harsh austerity. Confidence was also increased following Chinese Premier Wen’s weekend ‘promise’ to boost the country’s consumption rather than focusing primarily on curbing inflation. As such, industrials and basic materials outperformed. Finally, the DJIA finished at 12504.48, up 1.09%; the SPX finished at 1315.99, up 1.60%; the NDX finished at 2545.43, up 2.7%. (RANsquawk)

Top Performing Sectors in S&P 500: Basic Materials (3.09%) Technology (+2.83%) Industrials (2.21%)

Worst Performing Sectors in S&P 500: Telecommunications (-0.05%) Utilities (+0.27%) Consumer Goods (+0.70%)

JP Morgan – Co.’s trading losses could rise to around USD 7bln from the initial USD 2bln revealed, according to unsourced reports. (Independent)

Bank of America – Co.’s CEO has said the bank is very comfortable with its investments, which are mostly in US Treasury bonds and government-backed mortgage bonds. The Co. CEO said the bank’s approximately USD 3bln quarterly loss on mortgage payments is peaking, although the costs will not see a significant drop until 2013 and 2014. (Sources)

BlackRock – Co. and a consortium of other companies are to combine to buy a USD 1.6bln stake in Formula One. (Sources)

EMC – Co. has acquired Syncplicity, without disclosing the details the deal. (Sources)

Urban Outfitters – Co. reported Q1 EPS USD 0.23 vs. Exp. USD 0.20; Q1 revenue USD 568.9mln vs. Exp. USD 578.31mln; Q1 comparable store net sales decreased 1%; Q1 comparable retail segment net sales up 2%. (Sources)

Vodafone – Co. reports a FY EBITDA of GBP 14.5bln vs. Exp. GBP 14.5bln. Co. FY revenue GBP 46.4bln vs. Exp. GBP 46.3bln. Co. proposes a final dividend of GBP 0.0647 per share. Co. sees the group’s EBITDA margin decline to continue to improve and sees 2013 free cash flow in a range between GBP 5.3-5.8bln. Co. sees adjusted operating profit in a range of GBP 11.1-11.9bln over the same period. Co. CFO says the 2013 service sales are to miss their medium-term target. (Sources)

BHP Billiton – Co. is to restart operations at its TEMCO facility and aims to have all 4 TEMCO furnaces operating by the end of August. (Sources)

Xstrata – Co. CEO has said the Co.’s copper output is to rise to 1.5mln tonnes, a boost of over 60% by 2015. The CEO added that he expects a stronger Chinese demand during the second half of the year, but expects the market to stay tight this decade. (Sources)

Marks & Spencer – Co. FY pretax profit GBP 705.9mln vs. Exp. GBP 693mln. Co. reports FY sales of GBP 9.9bln vs. Exp. GBP 9.96bln and proposes a final dividend of GBP 0.108. Co. cuts its 3-year revenue growth target to GBP 1.1-1.7bln. (Sources)

ENRC – Co. plans to boost iron ore sales to China by 20% this year, according to one of the Co.’s founders. (Sources)

ARM Holdings – Co. is to maintain a very high market share in chips for mobile devices even as rivals such as Intel try to develop new products, according to the Co. CEO. (Sources)

Companies paying dividend: Aggreko (GBP 0.1510) Serco Group (GBP 0.0656)

OTHER UK

Thomas Cook – Co. has agreed to sell a 77% interest in their Indian unit to TCIL Fairbridge Capital for INR 8.2bln. (Sources)

FRENCH

GDF Suez – Co. announced 77% of shareholders are to take a dividend payment in shares. (Sources)

Credit Agricole – Co. have said they can deal with any situation in Greece and nothing is being ruled out on the Emporiki unit. (Sources)

ArcelorMittal – Co. is adjusting its Brazilian operations in line with demand and has suspended two expansion projects in the country worth USD 1.5bln until further notice. (Valor Economico)

Accor – Co. has sold its Motel 6 unit for USD 1.9bln to Blackstone Real Estate. (Sources)

Companies going ex-dividend: Veolia Environnement (EUR 0.7000)

GERMAN

Bayer – Co. says the phase III study of Nexavar to treat lung cancer has missed the primary endpoint. (Sources)

PAN EUROPEAN

Spanish Banks – The IIF said Spanish banks' loan losses may range between EUR 218-260bln and Spanish bank provisioning is unlikely to be sufficient to cover the losses incurred. (Sources)

Spanish Industrials – The Spanish government are planning to alter electricity rates or taxes for a second time this year in a package of reforms to be completed in the second half of June, according to the Spanish Industry Minister. (Expansion)

ING Groep – AIA Group, a Hong-Kong listed insurer has also made a bid for the Co.’s Asian insurance unit, according to undisclosed market sources. (Hong Kong Economic Times)

Cypriot Banks - Fitch took negative rating actions on Cypriot banks to reflect the fact that the banks remain highly sensitive to heightened risks in Greece, in particular if Greece was unable to sustain its membership of EMU. (Sources)

SMI

Credit Suisse – Co. has said its investors chose to receive 48% of their 2011 dividend payments in shares instead of cash. The Co. are to issue 24.2mln new shares, representing 1.9% of the current share capital at CHF 18.75 per new share, according to an emailed statement by the Co. (Sources)

BROKER MOVES

BRITISH LAND RAISED TO BUY FROM HOLD AT SOCGEN

SAINSBURY RAISED TO HOLD FROM SELL AT ING

CRH RAISED TO NEUTRAL FROM UNDERPERFORM AT CREDIT SUISSE

LAFARGE RAISED TO NEUTRAL FROM UNDERPERFORM AT CREDIT SUISSE

UK OPENING NEWS INCLUDING: Homeowners and buyers can expect big rises in their mortgage rates

Tue, 22 May 2012 08:12:00 +0100

The Bank of England has bowed to pressure, launching three independent reviews to learn lessons from the financial and economic crisis, but it immediately ran into criticism that their scope was too limited and technical. (FT-More) The court of directors’ surprise decision came after a sustained criticism of the way the bank is governed, with particular criticism on the legislative powers giving the bank unprecedented access through parliament.

UK PM Cameron is preparing to drop proposals to make it easier for bosses to fire unproductive staff, amid warnings from the UK Business Secretary Vince Cable. (FT-More) The PM has recognized that it would split the coalition and fuel claims from the Labour party that life is becoming harder for working families.

Homeowners and buyers can expect big rises in their mortgage rates sparked by the Eurozone crisis, experts warned last night. (Daily Express) Richard Sexton, director of e.surv chartered surveyors, said: “The mortgage market has gone into reverse. Borrowers are already bearing the brunt of the political dithering in Europe.”

UK Participants look forward to CPI, RPI and Public Finance data due for release at 0930BST, followed by a meeting between the UK Chancellor Osborne and IMF’s Lagarde at 1030BST.

EUROPEAN OPENING NEWS INCLUDING: US President Obama has urged Eurozone governments to act forcefully to resolve their debt crisis

Tue, 22 May 2012 08:09:00 +0100

ASIA

JGBs prices were marginally mixed across the curve, 10-yr JGBs were seen up modestly around 5 ticks at 142.25, dealers noted that a few megabanks bought 5-yr JGBs on dips in mid-afternoon trading. Last price taken at 0635BST. (RANsquawk)

BoJ will probably maintain its view that the economy is showing signs of recovery during the meeting today, and policy expected to be unchanged with no additional easing measures, according to Nikkei. (Nikkei)

Japanese Finance Minister Azumi has said his country’s economic fundamentals are not bad at all, and there is no domestic reason for Japanese stocks to fall. On the subject of a sales tax, Azumi said that there is no difference between the views of the DPJ party and the LDP party. Azumi reiterated that he expects the BoJ to act appropriately and at an appropriate time. (Sources)

China are to fast track approvals for infrastructure investment within the economy in order to combat a slowdown, according to a state-backed newspaper. (China Securities Journal) According to government sources, the government has sought project proposals by the end of June, even for those initially earmarked for the end of the year. The sources said Beijing did not rule out bringing forward next year’s projects, if it thought more investment was needed in the Chinese economy.

US T-notes saw mixed trading in Monday’s session, with record-low yields cited as limiting demand ahead of this week’s auctions, which sees a hefty supply this week: USD 35bln in 2s, USD 35bln in 5s and USD 29bln in 7s. The best flows were seen in early trade, with real money accounts buying in the 5s, although decent demand still in the long-end as the 30-yr yield sits at the lowest since December. On a technical note T-notes saw a slight rebound after falling below the 8-day moving average in early trade, the third time in four sessions which could see focus on further upside and continuation of the upside trend. At the pit close, t-notes settled at 133.19+, 6+ ticks. Finally, the DJIA finished at 12504.48, up 1.09%; the SPX finished at 1315.99, up 1.60%; the NDX finished at 2545.43, up 2.7%.

T-notes were seen trading down 6+ ticks at 133.13+ heading into the EU session. Last price taken at 0635BST. (RANsquawk)

China can now bypass Wall Street when buying US government debt and go straight to the US Treasury according to reports. This is the US Treasury's first-ever direct relationship with a foreign government, and in-effect means that the PBOC can buy US debt using a different method than any other central bank in the world by participating in auctions without placing bids through primary dealers. However if the PBOC wants to sell it still has to go through the market. (Sources)

EUROPE

Spain is pushing for a big ECB role in the new EU strategy to boost growth and wants the ECB to support the volatile debt markets, according to a Spanish government official. (Sources) The Spanish PM Rajoy also commented that financial stability is more urgent than Eurozone bonds, adding that growth and austerity are compatible. However, the French President Hollande said that he will not discuss Eurobonds at the upcoming EU summit in order to avoid conflict with EU partners.

The IIF said the current Euro-zone deterioration requires a short-term policy response, which could include the ECB lowering rates, new ECB loans and ECB bond intervention. (Sources)

IIF say that Spain's bank losses could hit EUR 260bln. (Telegraph) Taking guidelines from how badly Ireland's banks were hit in its financial crisis, economists at the global banking institute said they expect the losses to be in the range of between EUR 216bln and EUR 260bln.

French President Hollande said all EU leaders will sit at the EU summit table with their own ideas on growth, adding that he won’t talk about Euro-bonds to avoid "irking" partners. (Sources)

The French finance minister has said France will work to avoid an unpredictable spread of the debt crisis should Greece leave the Eurozone at all costs. Moscovici said everything must be done to help pro-European and pro-Euro forces within Greece. (Sources)

US President Obama has urged Eurozone governments to act forcefully to resolve their debt crisis rather than in smaller bite-sized pieces and increments. (WSJ) On the topic of this week’s European summit, Obama said the US had offered to provide any technical assistance and work through some of the ideas in terms of how we can stabilize the European market.

A recent series of wage agreements in Germany, including a crucial one this weekend with union IG Metall, show that employers in the country are acceding to worker demands for higher pay after more than a decade of only modest increases. (WSJ) Rising German wages coupled with wage cuts in countries such as Spain would make the periphery more competitive and would give German households a greater propensity to spend.

Should Greece leave the Eurozone, the ECB may immediately withdraw its ECB-backed emergency liquidity to Greece’s banking system which analysts estimate reaches up to EUR 96bln. (FT-More)

New Zealand RBNZ 2yr Inflation Expectation (Q2) Q/Q 2.4% (Prev. 2.5%) (Sources)

GEOPOLITICAL

The US Senate unanimously approved a package of further economic sanctions on Iran’s oil sector days ahead of a meeting in Baghdad between major world powers and Tehran. (Sources)

COMMODITIES

WTI crude futures were trading up USD 0.25 at USD 93.12 heading into the European session, as participants expect a reduction in crude oil stockpiles, ahead of the key DoE data on Wednesday. Last price taken at 0635BST. (RANsquawk)

Baghdad has hit back at plans for a big oil pipeline between Turkey and Iran’s Kurdish region, in the latest sign of tension between the two countries and deepening strains within Iraq itself. (FT-More) The 1MBPD pipeline could give Turkey direct access to oil from the semi-autonomous Kurdish region rather than funnelling crude through Baghdad-controlled territory.

US EQUITIES OPENING HEADLINES INCLUDING: Barclays Bank announced that it intends to undertake a disposal of its entire holding in BlackRock

Mon, 21 May 2012 13:53:00 +0100

US equity futures indicate a higher open, as the commitment of G8 leaders for Greece to remain in the Euro-zone has eased exit fears,

comments on further easing from Fed’s Lockhart also boosted sentiment, alongside Chinese Premier Wen’s commitment to making

Chinese growth a bigger priority.

• FTSE (+0.67%), CAC (+0.44%), DAX (+0.89%), SMI (+0.48%), IBEX (-1.19%), EURO STOXX (+0.02%) prices taken at 1343BST

DJIA

Earnings:

N/A

Other news:

Johnson & Johnson – Co. and Bayer's Xarelto has been proven to reduce heart attack and strokes. (Sources)

Microsoft - Co. scored a win over Motorola Mobility Holdings as a judge ruled in favour of the software giant in a closely watched patent dispute over how mobile communication devices operate. (capital.gr) In other news, sales of Nokia's Windows-based smartphone Lumia have been strong in China, but the momentum may be short-lived according to industry sources. (Digitimes)

JP Morgan – According to industry sources the unwinding of the co.’s trades that caused a USD 2bln loss for the firm may bring more losses as the bank struggles to exit the trades in an unfriendly market. (WSJ)

Merck – The FDA have approved the co.’s Insentress labelling, which will include 156 week data, according to the report, Insentress shows long-term viral suppression. (Sources)

S&P 500

Earnings:

Lowe's - Q1 adjusted EPS USD 0.44 vs. Exp. USD 0.42, reaffirms forecast for year sales, Q1 net sales USD 13.15bln vs. Exp. USD 13.00bln.

(Sources)

- Co. cut its forecast for year EPS, sees year EPS USD 1.73-1.83, saw USD 1.75-1.85 vs. Exp. USD 1.87

- Co. sees FY12 SSS to increase by 1%-3%

- Q1 Same Store Sales up 2.6%

- Q1 US Same Store Sales up 2.7%

Campbell Soup - Q3 adjusted EPS USD 0.56 vs. Exp. USD 0.52, Q3 revenue USD 1.82bln vs. Exp. USD 1.81bln. (Sources)

- Co. sees adjusted EPS for year at upper end prior range (USD 2.35-2.42)

- Co. sees revenue for year at lower end prior range

Other news:

Chesapeake Energy – Fitch downgraded the co.’s IDR to ‘BB-‘ from ‘BB’; outlook remains negative. (Sources) Investors looking at the health of the co. are running into accounting issues as the co. accounts for its exploration and drilling expenses using a method that experts say is generally more aggressive and less transparent. (WSJ)

ConocoPhillips – Co. is expected to make an additional USD 5bln investment to ramp up its Malaysian operations. (New Straits Times)

Nasdaq OMX – Co. CEO said that ‘poor design’ in the software it uses for driving auctions in IPOs was at fault for its Facebook problems. (Sources) In related news the co. chief Robert Greifeld said glitches were not responsible for Facebook shares declining. (NY Times) Finally the co. may look at accommodation packages post-Facebook. (CNBC)

BlackRock – Barclays Bank announced that it intends to undertake a disposal of its entire holding in BlackRock by way of a registered offering and a related buyback by BlackRock. In connection with the offering, BlackRock has agreed to repurchase up to USD 1bln of its stock from Barclays conditional on completion of the offering. (Sources)

Pitney Bowes – Co. reaffirmed its forecast, sees USD 700-800mln cash flow this year and provided notice of a USD 400mln bond repurchase. (Sources)

Avon Products - The pressure is on the co.’s new CEO Sheri McCoy after the company's stock now trades below its price directly before Coty’s first bid and some analysts say a turn-around could take years. (FT - More)

Western Union – Co. has signed a Memorandum of Understanding with Allianz SE to develop, design and distribute insurance products in several countries around the world. (Sources) In other news the co. said that additional repurchase authorization is effective immediately and the co. are to move their stock listing to the Nasdaq on June 31st. (Sources)

Northrop Grumman – Co. has announced it has signed a USD 1.7bln contract for NATO's Alliance Ground Surveillance system. (Sources)

Chipotle Mexican Grill – Co. has received a subpoena from the SEC in regards to compliance with employee work authorization laws and regulations. The co. intends to fully cooperate with the SEC in its investigation. (Sources)

Companies paying dividend: Noble Energy (USD 0.2200), Texas Instruments (USD 0.1700)

Companies paying dividend: Mattel (USD 0.3100), Valero Energy (USD 0.1500)

Nasdaq 100

Earnings:

N/A

Other news:

Apple – Co. and Samsung are to conduct settlement talks regarding the Co. concerns that Samsung are the chief culprit in copying iPad and iPhone innovations. Samsung’s chief has said his company is still seeking to resolve differences in its patent war with the Co. (FT- More) Piper Jaffray continues to expect Apple to launch its iPhone 5 in October despite the 28nm chip shortage at Qualcomm. Piper sees the worst case scenario as Apple being unable to meet demand in the short-term following the launch, meaning sales would shift from the December quarter into the March quarter. (theflyonthewall.com)

Google – Co. has won anti-trust clearance from China for their USD 12.5bln acquisition of Motorola. (WSJ) In other news the co.’s Chrome browser has overtaken Internet Explorer as the most used browser. (TheNextWeb)

Amazon – Co.’s debut of its Amazon Supply industrial supply chain business has failed to ruffle the US’ largest industrial suppliers, with businesses commenting that it is hard to imagine the Co. will have a significant impact in the short term. (FT- More) Separately, two Californian cities are offering the co. a cut in most of the sales tax it would pay in an attempt to get the co. to build its warehouses there. (LA Times)

Yahoo – Co. is close to selling half of its Alibaba stake back to Alibaba, with the changeover valued at USD 7.1bln for the 20% stake, according to sources. (WSJ)

News Corp – Co. CEO Murdoch has denied rumours the co. is planning to spin off its UK publishing and newspaper arm. (Daily Telegraph)

Qualcomm – According to Piper Jaffray, following channel checks, it remains confident that the co. will resolve its 28nm supply issue this year. (theflyonthewall.com)

Salesforce – According to Barron’s the co. could continue to perform well as subscription and support fees, which provide the bulk of the company's revenue, rose 38% in Q1 with sales accelerating along with its off-balance sheet backlog, however the stock does look very expensive, trading at 85x forward earnings. (Barron’s)

Facebook – Co. is reported to have acquired mobile gifting firm Karma for an undisclosed amount. (Sources) In other news the co. fell below its USD 38.00 issue price in pre-market trade, in what is seen as a key level for the firm that was heavily defended by the IPO under-writers on Friday. (Sources)

Broker moves

Upgrades:

JP Morgan – Co. added to Top Picks Live list at Citigroup, firm maintains a Buy rating on the stock with a USD 45 price target

Safeway – Co. upgraded to Buy from Neutral at Citigroup, firm raised its price target for shares to USD 26 from USD 22

Alpha Natural – Co. upgraded to Buy from Hold at Brean Murray, Price target is USD 15

Downgrades:

XL Group – Co. downgraded to Sell from Neutral at Goldman, Price target lowered to USD 21 from USD 23

Ross Stores – Co. downgraded to Hold from Buy at Canaccord, Price target remains USD 67

Avon Products – Co. downgraded to Sell from Neutral at UBS, Price target cut to USD 13 from USD 23

Bank of America – Co. downgraded to Underperform from Market Perform at JMP Securities

Citigroup – Co. downgraded to Underperform from Market Perform at JMP Securities

JP Morgan – Co. downgraded to Underperform from Market Perform at JMP Securities

Morgan Stanley – Co. downgraded to Underperform from Outperform at JMP Securities

Goldman Sachs – Co. downgraded to Underperform from Outperform at JMP Securities

Best Buy – Co. downgraded to Hold from Buy at BB&T

CNBC’s Jim Cramer on US corporate earnings

MONDAY earnings: Cramer said he'll be watching Lowes earnings, although he still prefers Home Depot. He was also skeptical on Campbell's Soup and recommended "listen only" mode for Tech Data.

THURSDAY earnings: Costco and Tiffany report their earnings. Cramer said that Tiffany remains in the penalty box after last quarter's debacle, but Costco remains a favourite.

Other News

Krispy Kreme - Q1 adjusted EPS USD 0.14 vs. Exp. USD 0.09; reaffirms forecast, Q1 revenue USD 108.5mln vs. Exp. USD 111.8mln. (Sources)

CVR Energy – Investor Carl Icahn said his tender offer for USD 30 per share for the co. plus a contingent value right expired on May 18th 2012, Icahn holds approximately 80% of the co.’s outstanding shares, adding 9.5mln shares tendered. (Sources)

American Eagle Outfitters – Co. announced plans to exit its children's business, 77kids, which includes 22 stores and the online business. (Sources)

US OPENING NEWS INCLUDING: The US jobs market will strengthen significantly next year

Mon, 21 May 2012 12:52:00 +0100

G8 leaders backed a ‘strong and cohesive’ Euro-zone including Greece and committed to boosting growth and demand.

Fed’s Lockhart says QE3 cannot be taken off the table.

German govt. spokesman says position on Eurobonds has not changed and Germany are still opposed.

German and French finance ministers will hold a news conference at 1530BST, according to the German finance minister.

RANsquawk European Morning Briefing Video: http://youtu.be/m6qheZqimt0

Market Re-Cap

At the beginning of the week, European equities are seen modestly higher in the major indices with underperformance noted in the peripheral markets. Markets have sought some solace in the G8 summit over the weekend, with leaders agreeing that the optimal scenario would be Greece remaining within the European Monetary Union, and have furtively agreed that further measures may be necessary to return Europe to growth. The disagreements, however, continue to rollover as leaders fail to commit to a specific growth strategy.

The tentative risk sentiment is reflected in the fixed income markets, with the German Bund remaining in negative territory for much of the session and 10yr government bond yield spread between the periphery and the German benchmark tighter on the session. Touted bids by domestic accounts helped support BTPs (Italian paper), especially in the short end of the curve, where the spread between the German equivalent is trading tighter by around 3bps.

From Tokyo, comments from Fed’s Lockhart have drawn attention, who commented that with the downside risks emerging from the Eurozone, it would be unwise to take QE3 off the table.

Looking ahead in the session, there is little in the way of US data to distract participants away from the European continent, so focus will remain over the Eurozone and any developments regarding Greek membership or growth strategies for the monetary union.

Global Headlines

- G8 leaders backed a ‘strong and cohesive’ Euro-zone including Greece and committed to boosting growth and demand, alongside measures to fix debt-laden fiscal balance sheets, although it is reported that leaders had different ideas on strategies to fight the economic crisis. (Sources)

- French President Hollande said he will make proposals for Eurobonds at an upcoming informal EU summit on May 23rd as part of his ideas to stimulate growth and help ailing Euro-zone economies. (Telegraph)

- German Chancellor Merkel maintained her stance of fiscal austerity, stating that curbing public deficits and boosting economic growth are both needed and ‘should not be played off against each other’, she also added that G8 leaders did not discuss any proposed measures to boost growth in detail. (Sources)

-Another proposal could include empowering the Eurozone’s EUR 500bln rescue fund directly to recapitalize faltering European banks and mutually issued Eurozone bonds. (FT-More)

Asian Headlines

Chinese Premier Wen has vowed to make growth a bigger priority after the economy showed signs of weakness, although Wen said that authorities would maintain ‘proactive’ fiscal policy and ‘prudent’ monetary policy. (Xinhua)

US Headlines

The US jobs market will strengthen significantly next year, with monthly jobs growth expected to average 200,000, according to NABE survey. The report forecasts unemployment at 7.5% by the end of 2013. (Sources)

EU and UK Headlines

- The latest Greek poll showed the Syriza party in the lead with 21.7%, the New Democracy party had 20.2% and the Pasok party had just 11.7% of support. (Metro) Syriza party leader Tsipras said the party’s opposition to the terms of Greece’s financial-aid program does not mean the country would have to abandon the EUR if his party forms a government after the June 17th elections. The leader added that if elected, he would seek talks with the Troika on new terms for the country to stay in the currency. (Sources)

- The EU Commission, ECB and in-house experts are working on Greek Euro exit scenarios, and assessing the impact of such an event on the Euro-zone firewall and Euro-area banks, according to a source. The source added that the firewall should be increased if Greece does exit the Euro-zone. (Sources)

- Greece’s central bank denied a national newspaper report that the institution was planning to impose capital controls on withdrawals and to restrict the movement of capital abroad. (Sources)

- Spain re-stated its 2011 budget deficit, noting it was 8.9% of GDP vs. 8.5% initially stated because of a change in regional budgets, where three Spanish regions revealed deeper than expected 2011 budget deficits, according to budget plan documents. (Sources)

- LCH.Clearnet increased margins on Spanish bonds by 10%, for 1.25-30y bonds, and the changes will be reflected in the margin calls on May 25th 2012. (Sources)

-The EU will this week send inspectors to ascertain the exact figure of Spain’s public deficit for 2011, according to unnamed sources. (La Vanguardia)

EQUITIES

European stock markets inched up on Monday after G8 leaders backed a ‘strong and cohesive’ Euro-zone including Greece and committed to boosting growth and demand. However the price action was somewhat choppy, after comments from German government spokesman, who noted that position on Eurobonds has not changed and Germany are still opposed, raised questions as to whether French President’s attempt to push for Eurobonds at an upcoming informal EU summit on May 23rd will succeed.

Spanish banks underperformed its peers, with Santander (-2.2%) and BBVA (-1.9%), as market participants reacted to Friday’s margin hike by the LCH Clearnet, as well as various press reports which questioned the health of the domestic banking system:

- The Bank of Spain noted that Spanish banking sector holds EUR 147.19bln of ‘doubtful’ loans as of the end of March 2012, 32.7% higher than a year ago. (Expansion)

- Spain is seeking an ECB liquidity injection for its banks according to a report. (Sources)

Comments by Chinese Premier Wen, who vowed to make growth a bigger priority amid signs of weakening demand supported basic materials and industrials sectors. On that note, LME Copper advanced today on the back of a weaker USD, as well as technical buying.

**Note: For US equity news in detail, refer to the RANsquawk Daily US Equity Opening News report.

EUR/USD was been trading in a tight range for the majority of the European morning session and sitting around a touted option expiry seen at 1.2780 for the 1000am NY cut (1500BST). GBP/USD has also observed some range-bound trading in European morning trade, following the lack of market moving events/news flow.

COMMODITIES

Both WTI and Brent crude futures are seen higher ahead of the NYMEX pit open, with the G8 Summit over the weekend providing upbeat commentary about support to the Eurozone growth including Greece.

Oil & Gas News:

At the G8 Summit, leaders have hinted that there may be some movement on a decision to release strategic oil reserves to help bring down fuel costs.

EPP and Enbridge made the first shipments of oil through the 150,000bpd Seaway pipeline from Cushing OK to Houston area refineries, with the surplus at Cushing now expected to decline in a move that could see the WTI discount to Brent crude continue to narrow.

Saudi Arabia raised crude production by 0.7% to a near 31-year high at 9.92mbpd in March to become the world’s largest producer for the first time in 6-years, exports rose 3% in response to the cut in Iranian shipments according JODI.

Iran has discovered a reported 10bln barrel crude deposit; equal to 7% of Iran’s known reserves in the first oil discovery in Caspian Sea waters for over 100 years according to Fars news.

Iraq's autonomous Kurdistan region expects to start exporting its oil along a new pipeline to the Turkish border by August 2013.

Libya’s crude output has risen to almost 1.6mbpd according to NOC chairman Berruien.

China's April crude oil imports from Iran fell 23.7% from a year earlier to 388,034bpd due to pricing disputes over term contracts, customs data showed on Monday, with Beijing boosting shipments elsewhere to help fill the gap. April imports are still up 53.2% or 134,732bpd from 253,302bpd in March after Iran and Beijing resolved disputes over annual contracts.

Geopolitical News:

The head of the UN nuclear watchdog agency made an unscheduled visit to Iran on Sunday, spurring speculation that Tehran may have finally agreed to let inspectors visit secret sites and interview top nuclear officials. At the G8 summit, however, G8 leaders vowed to maintain pressure on Iran, but they acknowledged that US sanctions and an EU embargo in the coming months risked disrupting global oil supplies further.

Iran is dedicated to annihilating Israel, the Islamic regime’s military chief of staff declared Sunday.

**Note: For commodities news in detail, refer to the RANsquawk Daily Energy Commentary report.

ENERGY MARKETS REPORT INCLUDING: Iran has discovered a reported 10bln barrel crude deposit

Mon, 21 May 2012 10:14:00 +0100

Both WTI and Brent crude futures are seen higher ahead of the NYMEX pit open, with the G8 Summit over the weekend providing upbeat commentary about support to the Eurozone growth including Greece.

Oil & Gas News:

At the G8 Summit, leaders have hinted that there may be some movement on a decision to release strategic oil reserves to help bring down fuel costs.

Iran has discovered a reported 10bln barrel crude deposit; equal to 7% of Iran’s known reserves in the first oil discovery in Caspian Sea waters for over 100 years according to Fars news.

Iraq's autonomous Kurdistan region expects to start exporting its oil along a new pipeline to the Turkish border by August 2013.

Libya’s crude output has risen to almost 1.6mbpd according to NOC chairman Berruien.

Geopolitical News:

Iran is dedicated to annihilating Israel, the Islamic regime’s military chief of staff declared Sunday.

Corporate News:

Total is continuing with relief well drilling near the Elgin platform in the North Sea even as it confirms a long-running gas leak has been stopped.

ConocoPhillips is expected to make an additional USD 5bln investment to ramp up its Malaysian operations.

Weather News:

The latest Weather Derivatives update forecasts temperatures in the US for the next 6-10 days to be 3.5% warmer than normal for this time of year with the region experiencing the most unseasonably warm weather. Using data accurate on the 18th May. Finally, NHC reports that a tropical storm Alberto is located 100 miles E.N.E off St. Augustine (FL), with winds at 40mph.

WEEK IN FOCUS REPORT INCLUDING: Time is running out for Iran

Mon, 21 May 2012 08:31:00 +0100

With a lack of major data from Europe and the US this week, focus will likely remain on the macroeconomic difficulties facing the Eurozone as the fringe countries of Greece, Spain and Portugal wear away any progress made in the core economies. This weekend saw the G8 leaders’ summit in Camp David wherein they have reiterated the primary importance and significance of the European economy to the global marketplace.

Although opinions remain divided among leaders, one very strong consensus is that action needs to be taken by the European governments against the dwindling recovery, which is becoming increasingly expensive for both the leaders’ credibility and their country’s balance sheets, as peripheral bond yields remain staunchly elevated above the benchmark Bunds of Germany. Unfortunately for some, that is where the agreements end, as those at the forefront of the austerity drive, namely German Chancellor Merkel, are becoming increasingly isolated against those who favour a shift in focus from fiscal responsibility and deficit targets and onto a far more interventionist growth strategy. One such proposal for growth that has garnered attention in recent weeks is the topic of common Eurobonds, sold by the Eurozone collectively and used to fund large scale infrastructure projects across the Euroarea in a direct move to inject growth. One of the main proponents of this strategy is the new French President Hollande, who is expected to propose the plans at an informal EU summit this week; however the approach will likely face fierce opposition from German parties, who foresee the concept as adding unnecessary additional strains to government balance sheets. Other such growth strategies that are being speculated upon include a boost in capital for the European Investment Bank, but recent commentary regarding ECB action has made the central bank the focal point for many investors, as leaders including the US President and the UK Prime Minister believe the institution can do more in order to return the area to growth.

Despite the few and far between data releases this week, the UK figures may garner focus in the light of the recent publication of the Bank of England’s quarterly inflation report as markets receive an update on the expected fall in inflation rates in Tuesday’s CPI figures. This release is swiftly followed by the central bank’s minutes on Wednesday which may come under particular focus considering the recent return of Adam Posen to his dovish roots, as he claims he may have been premature in taking further asset purchases off the table. Additionally, Thursday sees the release of the second Q1 GDP print from the UK. Commentary following the release of the flash reading has speculated that the first estimate overlooked some of the modest strength underlying the UK economy over the first three months of the year, so any upwards revisions will gain attention. From the US, data is light, but markets will receive the latest existing home sales and new home sales data on Tuesday and Wednesday respectively.

In the middle-east, time is running out for Iran, as this week sees a meeting between IAEA inspectors and Iranian diplomats who are set to battle over the country’s ongoing nuclear activities. Reports over the weekend that inspectors undertook an unscheduled visit may be seen by some as a signal that the nation is softening its stance on access, a sign that the looming wall of global sanctions is changing the government’s way of thinking. With recent weeks seeing multi-month lows in the energy complex, any indication that the geopolitical tensions are easing further could see an extension to the declines observed recently. This weekend’s G8 Summit saw a renewed commitment to sanctions on the country, so the pressure on Tehran to give in to inspection demands continues to build. G8 leaders also discussed the tactical release of strategic oil reserves, so any commentary regarding an increase in supply will more than likely be reflected in prices. It should be noted that any moves from the global powers are unlikely in the very-short term, but speculation that a release would happen before the US Presidential elections continues to spearhead current analyst’s thought.

EUROPEAN EQUITY OPENING HEADLINES INCLUDING: News Corp CEO Murdoch has denied rumours the co. is planning to spin off its UK publishing and newspaper arm

Mon, 21 May 2012 08:24:00 +0100

ASIA

The Nikkei share average closed 0.3% higher with short-covering prompting a recovery from the sharp losses observed last week. (Sources)

Top performing sectors in the Nikkei 225: Consumer Services (+1.50%), Telecommunications (+0.88%), Financials (+0.63%)

Worst performing sectors in the Nikkei 225: Technology (-0.41%), Consumer Goods (-0.27%), Basic Materials (0.00%)

GLOBAL

Global Banks – Regulators and central bankers from the US and the UK are crafting the world’s first concrete plans to protect the broader financial system in the event that any of seven leading cross-border banks were to collapse. (FT-More)

US equities closed down for the sixth consecutive day, and firmly down for the week, the SPX breaching 1300 to the downside. The index's YTD gains of more than 12% seen in April have now dIMInished to around 3% for 2012. At the Facebook IPO, NASDAQ OMX had issues with delivering trade execution messages, and live trade on the exchange was delayed by half an hour. The price move that traders were expecting in the stock didn't happen. On the contrary, the stock, which opened at USD 42.05, slumped down to its IPO price of USD 38.00, and after a slightly volatile first session, finally closed at USD 38.23. Finally the DJIA finished at 12367.94, down 0.60%; the NDX finished at 2478.53, down 1.22%; and the SPX finished at 1295.10, down 0.75%. For the week, the DJIA finished down 3.53%; the SPX finished down 4.31%; and the NASDAQ Composite finished down 5.28%. (RANsquawk)

Top Performing Sectors in S&P 500: Telecommunications (+0.67%) Utilities (-0.07%) Industrials (-0.57%)

Worst Performing Sectors in S&P 500: Technology (-1.18%) Financials (-1.07%) Health Care (-0.80%)

Apple – Co. and Samsung are to conduct settlement talks regarding the Co. concerns that Samsung are the chief culprit in copying iPad and iPhone innovations. Samsung’s chief has said his company is still seeking to resolve differences in its patent war with the Co. (FT-More)

Amazon – Co.’s debut of its Amazon Supply industrial supply chain business has failed to ruffle the US’ largest industrial suppliers, with businesses commenting that it is hard to imagine the Co. will have a significant impact in the short term. (FT-More) Separately, two Californian cities are offering the co. a cut in most of the sales tax it would pay in an attempt to get the co. to build its warehouses there. (LATimes)

Yahoo – Co. is close to selling half of its Alibaba stake back to Alibaba, with the changeover valued at USD 7.1bln for the 20% stake, according to sources. (WSJ)

Microsoft - Co. scored a win over Motorola Mobility Holdings as a judge ruled in favor of the software giant in a closely watched patent dispute over how mobile communication devices operate. (capital.gr)

Chesapeake Energy – Fitch downgraded the co.’s IDR to ‘BB-‘ from ‘BB’; outlook remains negative. (Sources)

ConocoPhillips – Co. is expected to make an additional USD 5bln investment to ramp up its Malaysian operations. (New Straits Times)

Google – Co. has won anti-trust clearance from China for their USD 12.5bln acquisition of Motorola. (WSJ)

News Corp – Co. CEO Murdoch has denied rumours the co. is planning to spin off its UK publishing and newspaper arm. (Daily Telegraph)

UK Banks - Michael Cohrs, who is on the committee monitoring financial risks has said Britain's banks are strong enough to withstand any Greek exit from the eurozone but need to keep bolstering their financial strength in the face of the escalating crisis. (Observer)

Royal Dutch Shell/Centrica - The UK government has been told that the country’s shale gas technology is unlikely to contribute significantly to resolving its energy needs and may be uneconomical to extract. (Independent)

HSBC – Co. has set out contingency plans on “multiple levels" for all its 15 Greek branches to cope with a return of the drachma, from updating ATM systems to changing IT systems. (Independent)

AstraZeneca – Co. plans to seal several new deals this year to fill its flagging pipeline of experimental medicines in projects that are to be jointly funded with private investors. (FT-More)

Glencore - This Friday sees the end of the lock-in that prevents staff from selling their shares, meaning a huge rise in the free float of tradable stock theoretically available to the market. That in turn means that the index tracking funds mirroring the market will need to increase their holdings, which in theory should be a positive for the shares. (Observer)

BSkyB – The UK competition regulator may relax restrictions on the firms activities in the film market after rivals such as Netflix and Lovefilm undermined its dominance of the movie market. In other news, shareholders of NewsCorp have been increasing their stakes in the Co. at NewsCorp’s expense, according to hedge fund managers. (Mail on Sunday/Daily Telegraph)

Marks & Spencer – Co. is expected to slash its bonus for nearly 80,000 staff after it posts its first fall in annual profits for three years this week, where deliver pre-tax profits are expected to be down by 3% at GBP 694mln for the year to March 31st 2012. (Independent)

British Land – Co. says its FY underlying pretax profits was up 5.1% to GBP 269mln. Co. reports FY underlying net income of GBP 480mln, previously GBP 840mln. Co. proposes a Q4 dividend of GBP 0.066, up 1.5%. (Sources)

SABMiller - Co. shareholders will vote in managing director of the co.'s European arm, Alan Clark, as the new CEO. (Times)

Vodafone – Co. could be forced to share Cable & Wireless Worldwide with the co.’s biggest shareholder, Orbis, in the face of considerable shareholder unrest over its GBP 1bln bid to buy the co. outright. (Telegraph)

Barclays/RSB/Lloyds – Barclays has held talks with UK Financial Investments over plans to give voters shares in Royal Bank of Scotland and Lloyds Banking Group. (Telegraph)

Prudential – Co. is to name Paul Manduca as its new chairman following a five-month search to replace the departing incumbent, Harvey McGrath. (Telegraph)

Companies paying dividend: GKN (GBP 0.0444) IMI (GBP 0.2111), Reed Elsevier (GBP 0.1767), Resolution (GBP 0.1342)

OTHER UK

JD Wetherspoon – Co. Chairman Martin has denied speculation he is planning to take the co. private after increasing his stake to 26.56% on Friday. (The Times)

Punch Taverns - Co. has started talks with creditors to take a majority share of the co.'s equity in return for losses on existing loans. Co. currently has liabilities of GBP 2.3bln. (Times)

FRENCH

Total – Co. says inspections on their Elgin platform have confirmed that the leak has ended, and the next phase is to re-man the complex. (Sources)

Companies going ex-dividend: Vinci (EUR 1.2200)

GERMAN

Volkswagen – Co.’s Audi unit is looking into a management reshuffle as it pushes for further expansion into China, Latin America and the US, according to the Audi head. (WirtschaftsWoche)

RWE – Co. has had a fresh lawsuit filed against them by Russia’s Sintez Group. The lawsuit concerns the Co. dropping out of a plan to buy a Russian electricity generator, TGK-2, jointly with Sintez. The lawsuit is seeking EUR 675mln in damages. (Sources)

Fresenius – Co. has said it will not raise its EUR 22.50 per share offer for Rhoen-Klinikum. (Sources)

Metro - Co. is considering the sale of the eastern European operations of its discount hypermarket subsidiary Real, according to an unsourced report. (Handelsblatt)

PAN EUROPEAN

Spanish banks - The Bank of Spain has announced that the Spanish banking sector holds EUR 147.19bln of ‘doubtful’ loans as of the end of March 2012, 32.7% higher than a year ago. (Expansion) Spain is seeking an ECB liquidity injection for its banks according to a report. In other news, according to an IMF report, 70% of the Spanish banking sector is healthy. The remaining 30%, of which half is comprised of Bankia assets, is likely to need state funding and may need to be nationalized. (El Mundo/Sources)

BBVA – Co. has sounded out the market for portfolios of real estate assets that could be worth up to EUR 4bln, according to unidentified financial sources. (El Confidencial)

ING – Kyobo Life insurance and Prudential financial have withdrawn from the deal to buy ING’s Asian business for a reported USD 7bln. (Seoul Economic Daily)

Finmeccanica – Co. is in talks with the US Department of Transportation to modernise US railroads, in a contract that could be worth up to USD 150bln over five years. (La Stampa)

Greek Banks: Fitch downgraded 5 Greek banks to 'CCC', including the National Bank of Greece and Piraeus, following the rating action on Greek's sovereign rating and reflecting the heightened risk that Greece might not be able to sustain its membership of EMU. In the event that the new general elections fail to produce a government with a mandate to continue the EU-IMF bailout programme, Fitch believes an exit from Greece would be probable and /or this could be followed by a withdrawal of international support to Greek banks. (Sources)

Banco Popular – Fitch downgraded the co.’s IDR to BBB; outlook stable. (Sources)

Companies going ex-dividend: Eni (EUR 0.5200), Generali (EUR 0.2000), Telecom Italia (EUR 0.0430)

SMI

Credit Suisse – Co. is considering a sale of its JO Hambro Investment Management unit, according to a person with knowledge of the plans. (FT-More)

Companies going ex-dividend: Swatch Group (CHF 5.7500)

OTHER SWISS

Lonza – Co. may need to stage a rights issue due to its weakened balance sheet, with rumours circulating between unidentified financial market sources. (Finanz und Wirtschaft)

BROKER MOVES

AstraZeneca ADDED TO UBS MOST PREFERRED LIST

BRITISH AMERICAN TOBACCO RAISED TO BUY VS NEUTRAL AT CITI

EADS RAISED TO BUY VS NEUTRAL AT UBS

GDF SUEZ RAISED TO NEUTRAL FROM REDUCE AT NATIXIS

MERCK KGAA RAISED TO BUY VS NEUTRAL AT UBS

THYSSENKRUPP RAISED TO NEUTRAL VS SELL AT UBS

BANCO POPOLARE UPGRADED TO BUY FROM NEUTRAL AT BOFA

ROCHE ADDED TO UBS’S LEAST PREFERRED LIST

GOLDMAN SACHS CUT TO 'MARKET UNDERPERFORM' AT JMP SECURITIES

JPMORGAN CUT TO 'MARKET UNDERPERFORM' AT JMP SECURITIES

BANK OF AMERICA CUT TO 'MARKET UNDERPERFORM' AT JMP SECURITIES

MORGAN STANLEY CUT TO 'MARKET UNDERPERFORM' AT JMP SECURITIES

CITIGROUP CUT TO 'MARKET UNDERPERFORM' AT JMP SECURITIES

UK OPENING NEWS INCLUDING: David Cameron pushes for workplace rights shake-up

Mon, 21 May 2012 08:18:00 +0100

Robert Chote, chair of the OBR has warned that there was risk that a fresh downturn would do irreparable damage to the UK, referring to the on-going problems in Europe, particularly in Greece. (Observer)

Rightmove House Prices (May) M/M 0.0% (Prev. 2.9%)

Rightmove House Prices (May) Y/Y 2.0% (Prev. 3.4%)

The continued squeeze on finances has also led home sellers to keep the price of their property unchanged from April in the early weeks of May, the first time prices have not risen in May since Rightmove began its survey in 2001. The average asking price in England in Wales was GBP 243,759. (Sources)

According to a Markit survey, UK consumers spending power was squeezed yet again over the past two months as the rising cost of goods, higher mortgage rates and muted earnings growth weighed on the ability to spend. (Sources)

The UK will lose its prized AAA credit rating next year as a result of the recession and the euro crisis, according to one of the City's most respected bond fund managers Richard Hodges, who heads Legal & General’s dynamic bond trust. (Independent)

Pension savings are at an all-time low, according to a new report which comes as data also reveal that Britons are facing plunging disposable incomes.

The Scottish Widows Pensions Report says that the percentage of people saving enough for a comfortable retirement has fallen from 51% to 46% over the past year. (Times)

A report published by the 2020 Tax Commission has called for Britain’s ‘extraordinarily complex tax system‘ to be replaced with a simple 30% flat rate of income tax. The report argues that the changes would allow workers to keep thousands more in earnings to spend in the UK economy and make the country a global hub for trade. (Telegraph)

The British government have ruled out those on the Conservative right who want an in-out referendum on the UK membership of the EU. (FT-More)

David Cameron pushes for workplace rights shake-up. (Telegraph) Business leaders are set to welcome radical plans to overhaul employment rights which the Government hopes will make it easier to hire new workers and spark growth. Business Secretary Cable has vowed to resist the proposals, dubbing the shake-up as ‘bonkers’. (FT-More)

EUROPEAN OPENING NEWS INCLUDING: Spain is seeking an ECB liquidity injection for its banks

Mon, 21 May 2012 08:12:00 +0100

ASIA

10-yr JGBs were trading down 21 ticks at 143.24 with thin trading being observed, dealers noted some regional banks had sold 10-yr JGBs in small lots. Last price taken at 0635BST. (RANsquawk)

GLOBAL

G8 Summit update:

-Another proposal could include empowering the Eurozone’s EUR 500bln rescue fund directly to recapitalize faltering European banks and mutually issued Eurozone bonds. (FT-More)

T-notes settled in positive territory on Friday, with the 10y yield making a new low for the year. US paper was in demand as concerns regarding Europe continue to drive the market. The WI in the 2,5,7y maturities continues to trade lower ahead of next week's issuance, which could set record low yields in this week's auctions at the current levels. At the pit close, t-notes settled at 133.25+, up 1 tick. Finally the DJIA finished at 12367.94, down 0.60%; the NDX finished at 2478.53, down 1.22%; and the SPX finished at 1295.10, down 0.75%. For the week, the DJIA finished down 3.53%; the SPX finished down 4.31%; and the NASDAQ Composite finished down 5.28%. T-notes were trading down 11+ ticks at 133.14+ heading into the European session, following some positive commentary out of the G8 meeting, noting they back a strong and cohesive Eurozone including Greece. Last price taken at 0630BST. (RANsquawk)

EUROPE

Greek updates:

- The ECB increased the limit of the ELA program for Greek banks to EUR 100bln from EUR 90bln. (Der Spiegel)

- Greece’s central bank denied a national newspaper report that the institution was planning to impose capital controls on withdrawals and to restrict the movement of capital abroad. (Sources)

- German finance minister Schaeuble is reported to have suggested the possibility of Greece holding a referendum on staying in the Euro-zone simultaneously with the forthcoming elections. (Der Spiegel)

- EU’s Juncker said the majority of EU finance ministers have doubts about Greek membership of the EUR and sees elections on June 17th as ‘last chance’, adding that if no government can be formed to implement the Troika program then ‘it is over’. (Der Spiegel)

- Former ECB executive Bini-Smaghi said Greece’s structural problems may take up to 10 years to fix and the country may need assistance from the World Bank to make the needed adjustments. (RTE)

- Former ECB executive Stark said the EUR would survive Greece leaving the common currency, calling a German exit and return to the Deutsche Mark as ‘unthinkable’. (Die Welt)

Spain update:

- The Bank of Spain says Spanish banking sector holds EUR 147.19bln of ‘doubtful’ loans as of the end of March 2012, 32.7% higher than a year ago. (Expansion)

- Spain is seeking an ECB liquidity injection for its banks according to a report. (Sources)

- LCH.Clearnet increased margins on Spanish bonds by 10%, for 1.25-30y bonds, and the changes will be reflected in the margin calls on May 25th 2012. (Sources)

-The EU will this week send inspectors to ascertain the exact figure of Spain’s public deficit for 2011, according to unnamed sources. (La Vanguardia)

France may be forced to nationalise one of its largest mortgage providers, Caisse Centrale du Crédit Immobilier de France (3CIF), after the lender became the latest victim of the Eurozone crisis. (Times) The institution has EUR 33bln in advanced mortgages. Another option being considered is an emergency funding deal with a rival institution. 3CIF missed an April 30 deadline to file its 2011 accounts, prompting French regulators to suspend trading in its bonds two weeks ago.

Irish finance minister Noonan said Ireland would support giving the ESM a banking license that would allow it to borrow effectively ‘unlimited amounts’ from the ECB. (RTE)

Italian PM Monti will propose a pan-European bank deposit guarantee scheme to be backed by the ECB. (Corriere della Sera)

The CFTC said the net EUR short position was USD 27.7bln, an increase of 18% from the previous week, and largest net EUR short position since January 2012; the net JPY short position was USD 5.3bln, a decrease of 17%; the net CHF short position was USD 3.5bln, an increase of 58%; the net USD long position was USD 28.3bln, an increase of 38%. (Sources)

GEOPOLITICAL

The head of the UN nuclear watchdog agency made an unscheduled visit to Iran on Sunday, spurring speculation that Tehran may have finally agreed to let inspectors visit secret sites and interview top nuclear officials. (WSJ) At the G8 summit, however, G8 leaders vowed to maintain pressure on Iran, but they acknowledged that US sanctions and an EU embargo in the coming months risked disrupting global oil supplies further.

COMMODITIES

WTI crude futures were seen trading up USD 0.42 at USD 91.90, heading into the European session following upbeat comments out of the G8 meeting at Camp David. Last price taken at 0635BST. (RANsquawk)

At the G8 Summit, leaders have hinted that there may be some movement on a decision to release strategic oil reserves to help bring down fuel costs. (FT-More)

Saudi Arabia raised crude production by 0.7% to a near 31-year high at 9.92M BPD in March to become the world’s largest producer for the first time in 6-years, exports rose 3% in response to the cut in Iranian shipments according JODI. (Sources)

EPP and Enbridge made the first shipments of oil through the 150,000 BPD Seaway pipeline from Cushing OK to Houston area refineries, with the surplus at Cushing now expected to decline in a move that could see the WTI discount to Brent crude continue to narrow. (Sources)

US EQUITIES OPENING HEADLINES INCLUDING: Hewlett-Packard is reported to be planning cuts of up to 25,000 jobs

Fri, 18 May 2012 14:01:00 +0100

US equity futures indicate a higher open, recovering strongly from overnight lows ahead of the Facebook IPO and on reports of a possible short-selling ban in Spain on domestic banks.

• FTSE (-0.76%), CAC (+0.11%), DAX (+0.23%), SMI (-0.75%), IBEX (+0.74%), EURO STOXX (+0.48%) prices taken at 1343BST

DJIA

JP Morgan – Co.’s chief investment office has been the biggest buyer of European mortgage backed securities and other complex debt securities for the past three years, building positions totalling more than USD 100bln in asset-backed securities and structured products, according to senior traders and credit experts. (FT)

General Electric – Co. announced it wants to double the number of joint ventures it has in China in about five years from the 28 it has now according to co. Vice Chairman John Rice. (Sources)

Bank of America – RBC may bid USD 2bln for a unit of the Co. (Globe&Mail)

Hewlett-Packard – Co. is reported to be planning cuts of up to 25,000 jobs amid declining demand. (Telegraph)

Wal-Mart – Co. suggested in an SEC filing that it was investigating possible bribery and other misconduct by its officials in places other than Mexico.(NY Times)

Intel – Co. is expected to launch four entry-level Celeron processors in Q3, including the Celeron ULV 877 and 807, which will cost USD 86 and USD70, respectively. (DigiTimes)

Microsoft – Co. is claiming that its Windows Phone has edged out the iPhone in China with a 7% market share compared to Apple's 6%.

(Electronista)

Pfizer – Co. reported that their Lyrica drug cut connectivity in pain processing in the brain and said the drug may affect grey matter density processing pain. (Sources)

S&P 500

Earnings:

Gap - Q1 adjusted EPS USD 0.46 vs. Exp. USD 0.46; Q1 revenue USD 3.49bln vs. Exp USD 3.49bln. (Sources)

- Q1 same store sales up 4%

- Co. sees FY operating margin about 10%

- Co. sees FY EPS USD 1.78-1.83, saw USD 1.75-1.80 vs. Exp. USD 1.98

Applied Materials - Q2 adjusted EPS USD 0.27 vs. Exp. USD 0.24, Q2 revenue USD 2.54bln vs. Exp USD 2.40bln. (Sources)

Autodesk - Q1 adjusted EPS USD 0.47 vs. Exp. USD 0.47, Q1 revenue USD 588.6mln vs. Exp. USD 586.18mln. (Sources)

Intuit - Q3 adjusted EPS USD 2.51 vs. Exp. USD 2.48, Q3 revenue USD 1.95bln vs. Exp. USD 1.95bln. (Sources)

Foot Locker - Q1 EPS USD 0.83 vs. Exp. USD 0.74, Q1 revenue USD 1.57bln vs. Exp. USD 1.55bln. (Sources)

Other news:

AIG – According to Deutsche Bank, the Federal Reserve did not curtail plans to sell Maiden Lane III assets; rather it delayed the bidding process because bidders may have needed additional information. (theflyonthewall.com) Additionally the NY Fed says May 22 planned Putnam CDO auction is proceeding from Maiden Lane III portfolio. (Sources)

Boston Scientific – Co. said that endoscopy presents promising clinical data during digestive disease week. (Sources)

Sears Holdings – Co.’s Canadian arm is not interested in pursuing strategic moves such as a merger according to source. (Globe and Mail)

CSX – Co. sees ebit and net earnings growth in 2012, still targets 65% operating ratio by 2015. (Sources)

Kinder Morgan to be added to S&P 500; El Paso deleted as of 5/24

Nasdaq 100

Earnings:

Salesforce.com – Q1 adjusted EPS USD 0.37 vs. Exp. EPS USD 0.34; Q1 revenue USD 695.0mln vs. Exp. USD 677.97mln. (Sources)

- Co. raised FY 13 revenue guidance to USD 2.97-3.0bln

Marvel Tech - Q1 adjusted EPS USD 0.23 vs. Exp. USD 0.20, Q1 revenue USD 796.0mln vs. Exp USD 768.4mln. (Sources)

- Co. plan to initiation a quarterly dividend of USD 0.06

Other news:

Facebook – Co. announced the pricing of its IPO of 421.2mln shares at USD 38 per share, the co. is set to begin trading at 1100EDT according to CNBC. (CNBC/Sources)

Amazon – Co. is reportedly looking to launch a 10.1-inch Kindle Fire in Q3. Additionally, the company may suspend the launch of a rumoured 8.9-inch model. (Digitimes)

Yahoo - According to multiple sources the co. is close to a deal to sell a large chunk of its stake in Alibaba back to the company. The deal couldinclude a multi-billion-dollar share buyback to Yahoo investors and the eventual IPO of Alibaba and a deal could be announced as early as Monday.(AllThingsDigital)

Research In Motion - A new design concept for a next-generation, smaller nano-SIM card has been submitted by Motorola and RIM, which tweaks adesign originally pushed by Apple. (Apple Insider)

Broker moves

Upgrades:

CBOE Holdings – Co. upgraded to Equal Weight from Underweight at Evercore

CME Group – Co. upgraded to Overweight from Equal Weight at Evercore

Morgan Stanley – Co. upgraded to Buy from Neutral at UBS

AutoZone – Co. upgraded to Outperform from Neutral at Credit Suisse, Price target raised to USD 440 from USD 350

Salesforce.com – Co. upgraded to Buy from Outperform at CLSA, Price target raised to USD 180 from USD 160

Peabody Energy – Co. upgraded to Buy from Neutral at Davenport, Price target is USD 35

Downgrades:

Sysco – Co. downgraded to Underweight from Equal Weight at Barclays, Price target lowered to USD 27 from USD 28

CNBC’s Jim Cramer on US corporate earnings

FRIDAY earnings: the expected IPO of Facebook and Cramer once again told investors to get in on the IPO, if they can, but absolutely do not buy anyshares in the aftermarket.

Other News

Brocade - Q2 adjusted EPS USD 0.15 vs. Exp. USD 0.12, Q2 revenue USD 543.4mln vs. Exp. USD 541.37mln. (RTRS)

US Banks - Fed's Bullard said he supports the Volcker rule as banks should not take insured deposits, commenting that JP Morgan is among those‘too-big-to-fail’ banks that ought to be split up. (Sources)

China Mobile – Co. is expecting US approval of a telecom license according to a Chinese government official. (Sources)

US OPENING HEADLINES INCLUDING: Market talk of asset-reallocation from fixed-income and into equities has helped lift sentiment from the open

Fri, 18 May 2012 13:38:00 +0100

Market talk of asset-reallocation from fixed-income and into equities has helped lift sentiment from the open.

Reports that Spanish banks are pressing market regulators to reinstate a short-selling ban on domestic financials has helped keep negative sentiment at bay.

BoE’s Posen says he is debating whether he was premature in thinking the extra GBP 125bln in QE was enough; returning to his dovish roots.

RANsquawk European Morning Briefing Video: www.youtube.com/watch?v=raIDBz_HNjI

Market Re-Cap

With a lack of European data, markets have remained focused on the macroeconomic issues throughout the morning. European equities have seen mixed trade this morning, starting off sharply lower following Moody’s downgrade of 16 Spanish banks late last night. Equities have been observed on a relatively upwards trend as market talk of asset reallocation into stocks from fixed-income has somewhat buoyed sentiment, however this remains unconfirmed. The news that Spanish banks are pressing regulators to reinstate a short-selling ban on domestic banking stocks has also helped keep negative sentiment towards Spanish financials at bay, with Bankia dramatically reversing recent trends and seen higher by around 25% at the midpoint of the session. Elsewhere, BoE’s Posen appears to have returned to his dovish roots, saying that his previous views on further QE may have been premature, prompting some initial weakness in the GDP currency, which has since pared the losses. Earlier reports from the EU’s De Gucht saying that the ECB and the European Commission are preparing exit scenarios for Greece have since been denied by the German finance ministry, however the topic still remains the point of focus and any commentary regarding this will be keenly observed. With no Tier 1 data expected the next risk event of the session will be Canadian CPI due at 1330BST/0730CDT and any commentary from the ongoing G8 Summit in Camp David.

Global Headlines

The chief of the Australia and New Zealand Banking Group has said volatile conditions in global markets have caused the wholesale funding market for Australian banks to freeze, a further sign that the European turmoil is taking its toll on global markets. (Sources)

Asian Headlines

A Chinese think tank has said GDP is likely to grow by around 7.5% in the second quarter of this year, with inflation at 3.3% across the same period. (Sources)

Chinese authorities may cut their benchmark lending rates as early as the current quarter, according to the chief economist of the State Information Center. (Sources)

Chinese new home prices across April were lower month-on-month in 43/70 cities surveyed and 46/70 citied were lower on the yearly reading according to the National Bureau of Statistics. (Sources) The Chinese Finance Ministry have announced further subsidies for public housing projects this year and will provide CNY 21.1bln for slum reconstruction and CNY 10.5bln for public rental housing.

The Japanese government have boosted its view on the domestic economy for the first time in nine months, raising its assessments on exports and consumer spending, but reiterating that the government is still mindful of risks from Europe. Elsewhere, the BoJ is likely to leave monetary policy on hold when its board meets next week as political pressure on the bank eases and recent data has been favourable, according to people familiar with the BoJ’s thinking. (Sources)

EU and UK Headlines

Moody's downgraded 16 Spanish banks and Santander UK, the downgrades primarily reflecting the concurrent downgrades of most of these banks' standalone credit assessments, restricted market funding, and rapid asset quality deterioration. For five of the banks, the downgrade also reflects the assessment that the Spanish government’s ability to support the banks has reduced. The rating agency said it expects Spanish bank asset quality to deteriorate further. (Sources)

Following the recent downwards trend in Spanish banking stocks, the companies are now pressing on the market regulator to reinstate a short-selling ban on domestic financials, according to banking sources. (Cinco Dias)

After a brief hawkish turn, BoE’s Posen has returned to his dovish roots by saying that it may have been premature to think the extra GBP 125bln in QE was sufficient, adding that the underlying strength of the UK economy is weaker, although official data does overstate the weakness somewhat. Following the comments, GBP saw some brief weakness and gilt futures did see a slight move to the upside, but the volatility did not last as the assets resume their trends. (Sources)

The EU’s Trade Commissioner De Gucht was quoted in Dutch press saying that the ECB and the European Commission are working on emergency exit scenarios for a Greek exit from the Eurozone, however the German finance ministry have denied the reports, but did hasten to add that it is in the government’s responsibility to consider every eventuality for the Eurozone. (Sources)

Some commentary from ECB’s Bonnici has garnered focus as he said it would be possible to use low bond rates of some European states to provide assistance to others, without giving further details. Bonnici did also say that the ECB’s recent LTRO effectiveness is somewhat reduced due to banks parking their funds with the ECB instead of passing on the capital in the form of lending. (Sources)

EQUITIES

European equities opened markedly lower in the wake of the Moody’s Spanish banking downgrade, and have seen some choppy trade since then, with most cash markets managing to tip into positive territory as the US comes to market with the exception of the FTSE-100. Market talk of asset-reallocation into stocks from fixed-income has helped lift sentiment throughout the morning, however this remains unconfirmed. With the periphery outperforming, some attention has been given to reports that Spanish banks are pressing the market regulator to reinstate a short-selling ban on domestic financials in light of the recent moves. This has helped keep any negative sentiment towards the sector at bay, with peripheral financials making up a significant segment of the top gainers in Europe today. As such, shares in Bankia, seen on a sharp downwards trajectory for the past few weeks have bounced back somewhat and now trade markedly higher by as much as 30% at some points of the session.

In individual stocks news, FTSE-listed Man Group are seen lower following overnight reports from a Numis analyst, highlighting that the company is unlikely to be an acquisition target unless it was to trade below liquidation value. On top of this, the Man Group have had their outlook changed to negative from stable at S&P. As such, Man Group shares now trade lower by 1.5%.

A large option expiry of around EUR 2bln in EUR/USD at the 1.2700 handle has helped the pair from breaking lower in the light of the Moody’s downgrade. As such, relative EUR strength is observed across the board as the US comes to market, with EUR crosses touching on session highs in recent trade.

AUD weakness was observed going into the EU session following overnight comments from the ANZ group, saying that wholesale funding for Australian banks had frozen in the light of the European crisis. Since then, AUD is seen grinding higher across the board, with AUD/USD now trading between two touted option expiries at 0.9850 and 0.9900 respectively.

COMMODITIES

WTI crude futures came under selling pressure overnight following weaker Chinese housing data, however heading into the NYMEX pit open WTI crude futures retraced the overnight losses moving in tandem with the equity markets in Europe.

Oil & Gas News: Qatar expects its condensate production to exceed its crude output very soon even while it produces its maximum OPEC quota of oil. Iranian oil production fell by 12% in the first three months of the year and is likely to fall even more, industry experts say, as sanctions make it increasingly hard for the country to find markets for its crude. Total chief economist expects USD 100 oil in next few years and does not expect oil prices to drop below USD 100. Japan seeks 15% summer power savings in western regions.

Geopolitical News: Iran and the U.N. nuclear watchdog are nearing a framework deal on how to tackle concerns about its atomic activity. Japanese oil refiner Idemitsu Kosan has renewed its annual crude oil purchase deal with Iran but cut the volume in line with its peers to comply with US sanctions against the Islamic nation.

ENERGY MARKETS REPORT INCLUDING: Alaska saw strong industry interest at its latest lease auction for acreage in the in Cook Inlet area

Fri, 18 May 2012 11:12:00 +0100

Geopolitical News: Iran and the U.N. nuclear watchdog are nearing a framework deal on how to tackle concerns about its atomic activity Japanese oil refiner Idemitsu Kosan has renewed its annual crude oil purchase deal with Iran but cut the volume in line with its peers to comply with US sanctions against the Islamic nation.

Corporate News: Alaska saw strong industry interest at its latest lease auction for acreage in the in Cook Inlet area. In total, state officials received 52 bids from five companies for 44 separate tracts and awarded about 198,000 acres. British oil explorer Cairn Energy said investors holding two thirds of its stock voted against executive pay awards in one of the biggest rebellions to take place yet in the 'shareholder spring' of salary disapproval. China will exclude foreign firms from bidding in its second tender for shale gas blocks.

Weather News:

The latest Weather Derivatives update forecasts temperatures in the US for the next 6-10 days to be 2.4% warmer than normal for this time of year with the Northeast region experiencing the most unseasonably warm weather. Using data accurate on the 17th May.

EUROPEAN EQUITY OPENING HEADLINES INCLUDING: Lloyds has hired Barclays to advise on the sale of its GBP 1.2bln loan portfolio

Fri, 18 May 2012 08:57:00 +0100

ASIA

The Nikkei share average has fallen for the seventh straight week, in the index’s worst run since 2001. The index closed lower by 3% as investors cut their exposure to risky assets as the Eurozone crisis deepens. (Sources)

Top performing sectors in the Nikkei 225: Utilities (-0.67%), Consumer Services (-0.74%), Health Care (-1.58%)

Worst performing sectors in the Nikkei 225: Technology (-4.09%), Financials (-4.07%), Industrials (-3.96%)

GLOBAL

Australian Banks – The chief of the Australia and New Zealand Banking Group has said volatile conditions in global markets have caused the wholesale funding market for Australian banks to freeze. (Sources)

US equities continued their decline throughout yesterday following a bout of weaker than expected US macroeconomic data, where US Philadelphia Fed gave a negative reading for the first time since September 2011, the new orders component was at its lowest level since September 2011 and the employment component at its lowest level since June 2010. News that Moody's might potentially downgrade 21 Spanish banks' rating during the day also spooked the markets, increasing investors' concerns that Euro-deBT contagion is still a high possibility. The SPX has now lost more than 7.0% from its intra-day highs made on May 1st, and is rapidly approaching the 1300 level; and the DJIA broke down through 12500, levels last seen in January of this year, surrendering about 6.5% since its May 1st intra-day highs. Finally the DJIA finished at 12442.57, down 1.24%; the SPX finished at 1304.86l, down 1.51%; and the NDX finished at 2509.05, down 2.05%. (RANsquawk)

Top Performing Sectors in S&P 500: Telecommunications (+0.38%) Oil & Gas (-0.66%) Utilities (-0.69%)

Worst Performing Sectors in S&P 500: Financials (-2.12%) Basic Materials (-2.03%) Consumer Services (-2.00%)

US Banks - Fed's Bullard said he supports the Volcker rule as banks should not take insured deposits, commenting that JP Morgan is among those ‘too-big-to-fail’ banks that ought to be split up. (Sources)

JP Morgan – Co.’s chief investment office has been the biggest buyer of European mortgage backed securities and other complex deBT securities for the past three years, building positions totalling more than USD 100bln in asset-backed securities and structured products, according to senior traders and credit experts. (FT-More)

Bank of America – RBC may bid USD 2bln for a unit of the Co. (Globe&Mail)

Salesforce.com – Co. reported Q1 adjusted EPS USD 0.37 vs. exp. EPS USD 0.34; Q1 revenue USD 695.0mln vs. exp. USD 677.97mln; Co. raised FY 13 revenue guidance to USD 2.97-3.0bln. (Sources)

Gap - Co. reported Q1 adjusted EPS USD 0.46 vs. exp. USD 0.46; Q1 revenue USD 3.49bln vs. exp USD 3.49bln; Q1 same store sales up 4%. Co. sees FY operating margin about 10% and sees FY EPS USD 1.78-1.83, saw USD 1.75-1.80 vs. exp. USD 1.98. (Sources)

Facebook – Co. announced the pricing of its IPO of 421.2mln shares at USD 38 per share, the co. is set to begin trading at 1100EDT according to CNBC. (CNBC/Sources)

Hewlett-Packard – Co. is reported to be planning cuts of up to 25,000 jobs amid declining demand. (Telegraph)

UK Banks – Co.’s still have GBP 212bln exposure to the domestic commercial property market, with a quarter of the loans in breach of covenants. (Times)

HSBC – Co. may pull out of its British operations if it fails an upcoming new profit test. Co. CEO told City analysts yesterday that the British retail bank would have to meet strict internal targets when the new rules came in — and if it did not, it would be sold. (Times)

Lloyds – Co. has hired Barclays to advise on the sale of its GBP 1.2bln loan portfolio, according to unsourced reports. (Sky News)

Man Group – The possibility of the Co. being acquired is remote, unless it was to trade below liquidation value, according to a Numis analyst. (Sources)

ARM Holdings – Co. CEO expects licensees to capture approximately 10-20% of the notebook PC market by 2014-15. (WSJ)

Aviva – Co.’s interim CEO has said the Co. will exit some businesses following a review of its global operations. (FT-More)

Companies paying dividend: ARM Holdings (GBP 0.02322), Petrofac (USD 0.3720)

FTSE 100 May options expiry (1015BST/0415CDT)

OTHER UK

Heritage Oil – Co. reports its Miran East operations are on schedule. (Sources)

LSE – Co. reports FY net of GBP 522mln, previously GBP 151.6mln. Co. FY pretax GBP 639.7mln, previously GBP 238.2mln. Co.’s final dividend rises 6% to GBP 0.19 per share and adds that the economic environment remains uncertain. (Sources)

De La Rue – Co. is preparing for a potential reintroduction of the drachma. Co. has asked its production staff to select potential security threads for use in new banknotes and retrieved covers from an old collection of copper moulds, used for watermarks, should Greece exit the euro and an order come in from Athens. (Times)

FRENCH

EADS – Co. and its owners must target the eventual complete free float of the Co., according to the CFO Ring in an interview. (Frankfurter Allgemeine Zeitung)

Companies going ex-dividend: Michelin (EUR 2.100)

GERMAN

PAN EUROPEAN

Spanish Banks - Moody's downgraded 16 Spanish banks and Santander UK, the downgrades primarily reflecting the concurrent downgrades of most of these banks' standalone credit assessments, restricted market funding, and rapid asset quality deterioration. For five of the banks, the downgrade also reflects the assessment that the Spanish government’s ability to support the banks has reduced. The rating agency said it expects Spanish bank asset quality to deteriorate further. (Sources)

Elsewhere, the Spanish banking reform independent auditors are to be appointed today at noon according, to a Spanish government source. (Sources)

Also, the Spanish finance ministry is planning to force the banks to swap their preferred shares into ordinary shares or convertible bonds, as well as set the criteria to determine the swap ratio. (Cinco Dias)

Italian Banks – JP Morgan have cut their EPS estimates for the Co. adding that recession in the country is likely to put additional pressure on the bank’s balance sheets. (Sources)

Bankia – Co. is to present its restructuring plan next week and parent co. BFA estimated that provisions to cover sound loans are to be revised up, according to a senior Spanish source. The Spanish government have hired Goldman Sachs to value the assets of the Co., according to unidentified people with knowledge of the matter. (Expansion/Sources)

ING Groep – Samsung Life have dropped their bid for the Co.’s Asian Insurance unit, according to a stock exchange announcement. (Sources)

Companies going ex-dividend: Telefonica (EUR 0.5300)

Companies paying dividend: Telefonica (EUR 0.5300)

EUROSTOXX May options expiry (1100BST/0500CDT)

SMI

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BROKER MOVES

ANGLO AMERICAN CUT TO 'SECTOR PERFORM' AT RBC CAPITAL BT GROUP RAISED TO BUY FROM HOLD AT BERENBERG MORGAN STANLEY RAISED TO BUY VS NEUTRAL AT UBS

UK OPENING NEWS INCLUDING: UK Banks still have GBP 212bln exposure to the domestic commercial property market

Fri, 18 May 2012 08:22:00 +0100

EUROPEAN OPENING NEWS INCLUDING: A Chinese think tank has said GDP is likely to grow by around 7.5% in the second quarter of this year

Fri, 18 May 2012 07:51:00 +0100

ASIA

A Chinese think tank has said GDP is likely to grow by around 7.5% in the second quarter of this year, with inflation at 3.3% across the same period. (Sources)

Chinese authorities may cut their benchmark lending rates as early as the current quarter, according to the chief economist of the State Information Center. (Sources)

China’s corporate debt has exceeded warning levels and borrowers could begin defaulting if growth decelerates, according to a government research institute. (Xinhua) Companies have a debt-to-asset ratio of 105% and will have trouble making payments in a downturn, according to the institute.

JGBs prices remain sharply higher, up 28ticks at 143.53. A bullish curve-flattening bias in US treasuries overnight has kept yields lower with poor Chinese housing data and Spanish fears prompting a demand for safe haven assets. Last price taken at 0637BST. (RANsquawk)

The BoJ is likely to leave monetary policy on hold when its board meets next week as political pressure on the bank eases and recent data has been favourable, according to people familiar with the BoJ’s thinking. (Sources)

T-notes settled in positive territory yesterday as a series of disappointing economic releases for the US weighed on risk-appetite. Fears on the solvency of Spanish banks also prompted a flight to quality, a strong 10y TIPS auction also pushed 10y futures higher, to see the 10y yield touch 1.70%. At the pit close, t-notes settled at 133.24+, up 11 ticks. Finally the DJIA finished at 12442.57, down 1.24%; the SPX finished at 1304.86, down 1.51%; and the NDX finished at 2509.05, down 2.05%. T-notes remained higher overnight, benefitting from safe-haven flows as Spanish fears prompt a flight to quality. T-note prices were seen higher by 1+ticks at 133.26. Last price taken at 0643BST. (RANsquawk)

Yesterday’s USD 13bln 10y TIPS auction drew a yield of -0.391% vs. exp. -0.329% (and the WI stopped at -0.340%); with B/C 3.01 vs. avg. 2.72 (prev. 2.81). Indirects accounted for 50.7% vs. avg. 35.92% (prev. 24.88%), with 86.03% allotted at high. (Sources)

The NY Fed survey of primary dealers said the median dealer forecast for the first Fed rate hike was Q3 2014, with dealers seeing a median 45% chance of QE3 in the form of asset purchasing within the next year. (Sources) The survey highlighted that dealers are worried about the US outlook for growth and considerable downside risks, citing concerns of fiscal tightening in the US and the sovereign and banking crisis in Europe.

Fed's Bullard said that quarterly monetary policy reports are one option that is on the table at the Fed, and a single mandate may be beneficial in the current environment, adding that although some recent economic data has been mixed, it is not significant enough to make him reconsider his forecast. (Sources)

Foreign Central Bank holdings of US debt rose USD 3.0bln to USD 3.493trl as of May 16; Fed holdings of US Treasuries rose USD 9.12bln to USD 3.493trln as of May 16 vs. USD 1.668trl the prev. week; Fed holdings of agency debt fell USD 6.12bln to USD 708.43bln as of May 16 and Fed holdings of MBS totalled USD 858.23bln of May 16 vs. USD 847.830bln the prev. week. (Sources)

A Greek opinion poll surveying 1027 Greeks showed the bailout-supporting the New Democracy party now has 23.1% support, while the anti-bailout SYRIZA party had 21%, and the PASOK party had 13.2%. This would mean New Democracy could have 123 seats and PASOK 41 seats, meaning a majority of 164 if these two parties formed a coalition. (Alpha TV) The SYRIZA party would have 66 seats according to this latest poll.

Fitch said it would place all Euro-zone sovereign ratings on Rating Watch Negative (RWN) following the Greek elections should the risk of a Greek exit from the EU seem probable in the near term. (Sources) An aide to the Canadian PM has said the G8 are to today contemplate a Greek exit from the Eurozone. (Sources)

Fitch downgraded Greece’s long-term IDR to ‘CCC’ from ‘B-’, saying the cut reflects the risk that Greece may not be able to sustain its EU membership. (Sources) The rating agency commented that if the new elections fail to create a government mandate for austerity, a Greek exit from Euro would be probable. Anti-austerity parties and failure to form a government underscore the lack of support for the bailout. Fitch added that it would treat re-denomination of sovereign and private debt as a default event.

The Spanish Treasury Secretary said Spain's regions are to cut their 2012 spending by EUR 13bln and increase their 2012 revenues by EUR 5.2bln, and the Spanish Finance Minister added that the Spanish central government is ready to take further steps if needed. (Sources)

Cyprus have announced that they are to underwrite a EUR 1.8bln capital raising by Popular Bank of Cyprus that analysts have said could force the nation to seek bailout assistance from Brussels. The EUR 1.8bln is roughly equal to 12% of Cypriot GDP. (FT-More)

German chancellor Merkel, French President Hollande, UK PM Cameron, and Italian PM Monti all agreed that both fiscal consolidation and growth are necessary, and that there is no contradiction between growth and consolidation, according to a German government spokesman. (Sources) Today’s G8 summit meeting has been referred to as a Eurozone crisis summit that will be dominated by talks regarding the Eurozone. (FT-More)

NY Fed said the ECB tapped USD 326mln from dollar swap facility in the week ending May 16th vs. USD 532mln the prev. week. (Sources)

GEOPOLITICAL

Western powers want to move towards the first in a series of confidence-building deals with Iran over its nuclear activities next week, hoping that the nation will cease its plutonium enrichment in return for a package of concessions. (FT-More)

COMMODITIES

WTI crude futures are seen USD 0.85 lower at USD 91.71 heading into the European open with poor Chinese housing data dampening future energy demand. (RANsquawk)

ENERGY MARKETS REPORT INCLUDING: Iran continues to develop its ballistic missile programme

Thu, 17 May 2012 10:31:00 +0100

WTI crude futures were seen trading higher heading towards the NYMEX pit open rebounding from a six-month low, following the stronger than expected Japanese data overnight.

Oil & Gas News: Enbridge are to spend around USD 3bln to boost capacity of its mainline system and give Western producers access to refiners in the Midwest and Quebec. Elsewhere, Enbridge are to conduct the reversal of their Seaway pipeline today, alongside expectations. The pipeline now flows oil from the Cushing hub to the Gulf coast. The IEA Chief Economist said oil prices pose a serious risk to the global economic recovery, and the IEA is ready to release strategic stocks if the conditions warrant it. The White House declined to comment on a news report that the US will seek G8 support for a strategic oil release although the Obama Administration affirmed that all options remain on the table for an SPR release. Royal Dutch Shell’s CEO has said he expects US natural gas prices to double by 2015, but remain under pressure in the short term. Turkey has said it is close to bring gas from the Caspian Sea to Europe, in a deal that could mark the end of a plan to combine gas from Azerbaijan with central Asian gas to reduce Europe’s dependence on Russian imports. Further European refineries may face closure as US rivals become more profitable and leases begin to expire across the continent. Analysts speculate that the refineries will be converted into storage facilities.

Geopolitical News: Iran continues to develop its ballistic missile programme, launches missiles in violation of sanctions according to a UN expert panel. The panel noted that sanctions have slowed Iran's procurement of critical nuclear technology and a sanctioned subsidiary of an Iranian shipping line continues to operate vessels. The US Senate is to ask the chamber to approve a new package of oil and economic sanctions today aimed at further pressuring Iran to abandon its nuclear plans. U.S. plans for a possible military strike on Iran are ready and the option is “fully available,” the U.S. ambassador to Israel said, days before Tehran resumes talks with world powers which suspect it of seeking to develop nuclear arms.

Corporate News: Valero Energy have shut a unit at its Corpus Christ refinery in Texas, after gases were flared due to unplanned maintenance, according to filings. Cairn Energy says it has found “all the necessary ingredients” for a potential oil strike off Greenland despite the UK independent repeatedly throwing up dust in the region.

Weather News: The latest Weather Derivatives update forecasts temperatures in the US for the next 6-10 days to be 3.4% warmer than normal for this time of year with the Northeast region experiencing the most unseasonably warm weather. Using data accurate on the 16th May.

UK OPENING NEWS INCLUDING: Two of Britain’s most senior civil servants have been given a mauling by MPs

Thu, 17 May 2012 08:23:00 +0100

UK PM Cameron is to today warn that the Eurozone could unravel in such a way that creates huge risks for everyone unless the 17 members move closer towards a full fiscal and political union. (FT) Elsewhere, the PM will today tell business leaders that Britain is moving in the right direction and will insist that he will not blow the budget on additional spending in an attempt to kickstart the UK economy. (FT)

Two of Britain’s most senior civil servants have been given a mauling by MPs for failing to put a figure on the number of jobs being created by the Government’s much-criticised flagship Regional Growth Fund. (Times) The audit office have calculated that the fund, which grants money to businesses or projects, was costing the taxpayer GBP 33,000 for every job created — GBP 5,000 more than the cost of Labour’s Regional Development Agencies, which it replaced.

EUROPEAN EQUITY OPENING HEADLINES INCLUDING: HSBC reports that it has made a sustainable cost saving of USD 2bln

Thu, 17 May 2012 08:23:00 +0100

ASIA

Nikkei share average closed higher 0.86% as positive Japanese GDP data eased fears and investors picked up cheap stocks after earnings season. (Sources)

Top performing sectors in the Nikkei 225: Basic Materials (+2.04%), Industrials (+1.83%), Financials (+1.76%)

Worst performing sectors in the Nikkei 225: Utilities (-1.13%), Health Care (-1.07%), Consumer Services (-0.55%)

The non-performing loans ratio of China’s commercial banks at the end of Q1 was 0.9%, compared with 1.0% three months earlier, according to the Chinese Banking Regulatory Commission. (Sources)

GLOBAL

Global Gold Miners – The WGC reports Q1 mine production at 673.8 tons, up 3% from the previous quarter. (Sources)

Despite a higher open thanks to positive US macroeconomic data, US equities gradually slipped back into negative territory, the positive data quickly forgotten, Euro-woes dragging the market sentiment down for the fourth consecutive day. The FOMC minutes released during the afternoon session caused a brief moment of volatility, as the minutes showed a few members were in favour of further QE should the economy falter. Finally, the DJIA finished at 12599.38, down 0.26%; the SPX finished at 1324.83, down 0.44%; and the NDX finished at 2561.56, down 0.74%. (RANsquawk)

Top Performing Sectors in S&P 500: Consumer Goods (+0.31%), Health Care (+0.24%), Consumer Services (-0.09%)

Worst Performing Sectors in S&P 500: Financials (-1.38%), Basic Materials (-1.19%), Technology (-0.92%)

US Banks – In the wake of losses at JP Morgan, the White House is seeking to ensure a tougher interpretation of a regulatory measure designed to prevent banks from making bets with their own money, according to people familiar with the matter. (WSJ)

JP Morgan – Co.’s trading losses have increased by at least 50% in recent days, exceeding the previous estimate of USD 2bln by at least USD 1bln, according to unnamed sources. A spokesperson for the Co. has declined to comment. (New York Times)

Limited Brands – Co. reported Q1 adjusted EPS USD 0.41 vs. exp. USD 0.40; Q1 revenue USD 2.15bln vs. Exp. USD 2.15bln; Co. boosted its forecast: co. sees Q2 EPS USD 0.40-0.45, and sees 2012 EPS USD 2.63-2.83, saw USD 2.60-2.80, vs. exp. USD 2.84. (Sources)

Altria Group – Co. raised their 2012 EPS view to USD 2.25-2.31, saw USD 2.14-2.20. (Sources)

Electronic Arts – Co. and Activision Blizzard have settled their lawsuit concerning Call of Duty: Modern Warfare 2. (Sources)

Activision Blizzard – Co. and Electronic Arts have settled their lawsuit concerning Call of Duty: Modern Warfare 2. (Sources)

CVR Energy – Hedge fund manager Paulson reports that he owns 9.9% of the Co., and believes the Co. can fetch USD 36 per share. (Sources)

HSBC – Co. reports that it has made a sustainable cost saving of USD 2bln after the first year of their three-year turnaround plan. Co.’s progress towards improving their return on equity and cost efficiency, however, is falling behind target, according to a report sent to the Hong Kong Stock Exchange. Co. CEO said the Co. is to restructure their US operations and reposition their global private banking position in order to adapt to the changing regulatory environment. (Sources)

GlaxoSmithKline – Co.’s combination of two melanoma medicines has slowed the progression of cancer with few skin complications, according to an early study. The data suggests the dabrafenib and trametinib combination may not have as many side effects as existing single drug treatments. (Sources)

Xstrata – Co. investors are requesting more financial data from Glencore in what is seen as a softer approach to their opposition to a merger between the firms. (Sources)

BHP Billiton – Co. has withdrawn from a joint venture with Breakaway Resources in Australia following a technical review of a drilling campaign at the Altia silver deposit in Queensland. (Sources)

ICAP – Co. is in talks to buy the PLUS Markets Group holding company, according to people familiar with the situation. (FT-More)

Vedanta Resources – Co. reports FY revenue of USD 14bln, and reports FY EBITDA up 13% to USD 4bln. Co. announces a final dividend of USD 0.35 per share on the 17th May. (Sources)

Antofagasta – Co. reports Q1 group EBITDA rose 35% to USD 1.1bln, but says higher operating costs offset revenue gains. Co. adds Q1 performance was boosted by higher gold prices. (Sources)

National Grid – Co. reports operating profit fell 6% to GBP 3.54bln and recommends a FY dividend of GBP 0.3928 per share, up 8%. (Sources)

Invensys – Co. reports FY operating profit of GBP 209mln, down 20% and proposes a FY total dividend of GBP 0.044 per share, up from GBP 0.04 previously. (Sources)

Aviva – Co. reports it had a solid start to 2012, adding that the Co. had a combined operating ratio of 96% and profitability was in line with targets. (Sources)

Companies paying dividend: Man Group (GBP 0.0486)

OTHER UK

Cairn Energy - At the Ira Sohn investor conference Greenlight Capital’s Einhorn said that he is positive on the firm. (Sources)

Premier Oil – Co. output averaged 56,100 BOEPD in the first four months of this year and reports recent performance as strong. Co. keeps its medium-term target of 100,000 BOEPD for 2012. (Sources)

3i – Co. reports FY realizations GBP 771mln, previously GBP 609mln and plans to distribute up to 20% of the realizations as dividends. Co. reports gross portfolio loss of GBP 329mln. Co. names Borrows as the new CEO. (Sources)

OTHER FRENCH

Areva – Co. CEO said that no profit warning is in preparation, confirmed all forecast of their 2016 strategic plan and said the co. may resume its dividend in 2013. (Sources)

GERMAN

RWE – The Nabucco consortium has reportedly submitted a proposal for the smaller Nabucco West version of its pipeline project to the Shah Deniz 2 group.

Companies going ex-dividend: BMW (EUR 2.3000)

Companies paying dividend: BMW (EUR 2.3000)

PAN EUROPEAN

ENEL – Moody’s have downgraded the Co. to ‘Baa1’ from ‘A3’; Outlook stable. (Sources)

Bankia – Co. clients have pulled more than EUR 1bln from their accounts since last Wednesday, according to Spanish press. (El Mundo)

Santander – UK Councils have been removing millions of GBP from Co. UK branches due to fears regarding the Spanish economy. Arlingclose, an investment adviser, said council deposits with the Co. had fallen from GBP 600mln to GBP 400mln since 2010. (Times)

Banca Monte dei Paschi – Co. is considering issuing a CoCo bond in order to strengthen Co. capital, according to the Co. CEO who said the topic would be discussed at a board meeting on June 14th. (Finanza & Mercati)

Repsol – Co. is to evaluate the potential of two hydrocarbon blocks in Bolivia and will decide on an investment plan within the next ten months, according to Bolivian oil group YPFB. (Sources)

Iberdrola – The Spanish government has confirmed it is participating in negotiations between the Co. and Neoenergia concerning the Co. selling its stake in Neoenergia. (Valor Economico)

Finmeccanica – Co. may be targeted by international investors due to their low market capitalization, according to reports. (Finanza & Mercati)

SMI

Novartis – Co.’s NVA237 phase III data has shown a rapid and sustained improvement lung function and symptom relief over a one year period in COPD patients. (Sources)

BROKER MOVES

ICAP RAISED TO BUY FROM HOLD AT NUMIS SECURITIES CARNIVAL RAISED TO BUY FROM HOLD AT NUMIS BBVA UPGRADED TO NEUTRAL FROM UNDERPERFORM AT EXANE