Bond yields may hit US equities

MARKET OUTLOOK

- US: Last week's surprised rate hike from the China forced equity markets to pause. The Nasdaq fell following disappointing results from Microsoft. More than 5% of the software maker changed hands Friday (a record) and another 1% yesterday. Stocks from the health care equipment, consumer durables and software sectors are under pressure. The 10yr yield is at its highest level since May 2002. Caution should prevail as the earnings season continues and rising yields could eventually hurt equity markets.


- EUROPE: European markets were under pressure towards the end of the week after failing to accelerate upward earlier, reinforcing the risk of a short term consolidation. The euro's strength should provide some reason to sell exporting companies. Stocks from the technology, energy and basic resources sectors fell most while stocks from telecom and health care gained thanks to their more defensive positions. The BoE and ECB are meeting this week. On the index side, the downside risk remains high and only new 52w highs would reinstate the upside.



COMPANY PREVIEW


Verizon Communications (USD 32.79 ; 1.52% ; VZ ; VZ.N)

On Tuesday Verizon Communications publishes its 1Q results. The market is looking for an EPS $0.59, down from $0.63 a year ago on revenue which is expected to have surged 25% to $22.81bln.


Procter & Gamble (USD 57.88 ; 2.26% ; PG ; PG.N)

On Wednesday Procter & Gamble scheduled to release its 1Q earnings. The company raised the lower end of its EPS forecast for the Q by 1 cent to $0.59-$0.61 back in March, which failed however to exceed consensus estimates of $0.61. Revenue expected to increase to $17.60bln from $14.29bln same time last year.


Royal Dutch Shell (GBp 1876 ; -3.5% ; RDSA ; RDSa.AS)

On Thursday Royal Dutch Shell reports its 1Q results. Net income, on an adjusted current cost-of-supply basis, is expected around $5.57bln, slightly higher than the previous year's £5.55bln. Output for the Q is expected to decrease to around 3.65mln BOED from 3.847m BOED same time last year following disruptions at Shell's oil fields in Nigeria.


Total (EUR 219.2 ; -3.35% ; FP ; TOTF.PA)

On the same day Total publishes its 1Q results. The group recently posted a severe drop in its 1Q crude-processing margins, to $25.80 a ton from $45.50 a ton same time last year.


Sanofi-Aventis (EUR 74.75 ; -1.65% ; SAN ; SASY.PA)

And finally on Friday Sanofi-Aventis reports its 1Q earnings. The company's weight-loss medicine Acomplia received the backing of a European panel for use in the treatment of obese or overweight patients last week.