Cautious approach to equities

MARKET OUTLOOK

- US: Last Thursday's 1Q GDP data and Friday's April consumption provided some temporary relief on the inflation front, driving markets higher. The automobiles, software and real estate sectors rebounded the most. With few earnings reports out this week the main focus will remain on economic growth, inflation and commodity prices. Caution should prevail as the current bounce could be short lived. The US market is closed today for Memorial Day.

- EUROPE: In Europe, stocks from the basic resources, utilities and technology sectors drove last week's rebound. With London closed today trading volume should be low. Volatility is expected to ease as markets rebound but should rise again as the bears take control of the market, at least in the short term. There is a 1-2% upside potential for European indices for now before the slides resumes.


COMPANY PREVIEW

Vodafone Group (GBp 119.75 ; -1.44% ; VOD ; VOD.L)

On Tuesday Vodafone is expected to report a FY loss after the company booked a charge to write down assets, which the company expects to be at the higher end of the £23bln-£28bln range it previously forecast. FY loss is seen at £22.2bln compared to a profit of £6.41bln a year earlier. Revenue is expected to drop to £29.35bln from the £34.07bln posted last year after the sale of its Japanese unit.

KBC (EUR 86.25 ; 1.47% ; KBC ; KBKBt.BR)

On the same day KBC Groep publishes its results. The bank agreed last week to sell its entire 99.74% stake in Banco Urquijito to Banco Sabadell for E760m. The capital gain KBC is expected to realise on the transaction should be in the region of E495m.

CA Inc (USD 22.16 ; -0.4% ; CA ; CA.N)

And after US markets close that day, CA Inc. reports its 4Q results. EPS is expected to climb 10% to $0.22 on revenue up 7% to $910m.

Costco Wholesale (USD 54.43 ; 0.42% ; COST ; COST.O)

On Wednesday Costco publishes its 3Q earnings. The market is expecting a 16% increase in quarterly EPS to $0.50 YoY, while revenue is seen rising to $13.12bln from $11.99bln posted same time last year.

HJ Heinz (USD 42.9 ; 3.5% ; HNZ ; HNZ.N)

And finally on Thursday H.J.Heinz reports its 4Q results. Last week the company rejected plans drawn up by investor Nelson Peltz to elect new board members and cut annual costs by $575m, stating the move would 'cripple' the group. EPS is expected to drop to $0.50 from $0.63 last year on sales of $2.36bln, down from 2.45bln.