UK Market Snapshot UK markets finished lower yesterday, as commodity stocks dragged the indices down. BG Group, Tullow Oil and Royal Dutch Shell declined between 2.0% and 3.2%, as crude oil prices tumbled. Kazakhmys, Antofagasta, Xstrata, ENRC and Vedanta Resources retreated between 2.0% and 2.8%, in line with a fall in base metal prices, as investors speculated that further monetary tightening by China to rein in inflation, may curb demand for metals. ITV dropped 5.3%, after the company stated that its first-half advertising revenue growth would be sluggish. HSBC Holdings slid 1.5%, after the bank published a strategic review, following Monday's first-quarter results. Reed Elsevier and Marks & Spencer gained 1.8% and 0.8%, respectively, after brokers upgraded the stocks. The FTSE 100 shed 0.7% to close at 5,976.0, while the FTSE 250 edged down 0.3% to settle at 12,017.9. US Market Snapshot US markets closed lower yesterday, led by declines in commodity sector stocks. Mining sector stocks, Freeport-McMoRan Copper & Gold and Alcoa dropped 6.5% and 2.7%, respectively, amid fears of stifled demand for metals, on speculation that China would further tighten its monetary policy to curb inflation that was higher-than-expected in April. Energy sector stocks, Cabot Oil & Gas, Range Resources, Exxon Mobil, Chesapeake Energy and Chevron retreated between 2.0% and 5.7%, as crude oil prices fell. Yahoo! tumbled 7.3%, amid worries that its stake in a Chinese Internet business, Alibaba Group Holding Ltd. might lose value after a restructure. Walt Disney declined 5.4%, after the company reported a lower-than-expected second-quarter profit. Intel rose 1.7%, after it raised its quarterly dividend. The DJIA edged down 1.0% to settle at 12,630.0, while the NASDAQ slid 0.9% to close at 2,845.1. The S&P 500 slipped 1.1% to settle at 1,342.1. Europe Market Snapshot Other European markets finished mostly higher yesterday, after several companies reported strong quarterly results, outweighing concerns over the Euro-zones debt issues. Freenet jumped 5.1%, after the company reported upbeat first-quarter result. Hermes International climbed 3.3%, after it reported a 26% rise in first-quarter sales. Axel Springer gained 1.6%, after the company posted higher-than-anticipated first-quarter earnings. SAP rallied 0.8%, after a broker stated that there might be 20% possible upside to the shares. E.On rose 0.7%, as its first-quarter net profit matched market expectations. BASF Se, the biggest laggard on the German DAX Xetra retreated 2.2%. The FTSEurofirst 300 index gained 0.3% to close at 1,153.4. Among other European markets, the German DAX Xetra 30 edged down 0.1% to close at 7,495.1, while the French CAC-40 advanced 0.1% to settle at 4,058.1. Asia Market Snapshot Markets in Asia are trading lower this morning, as investors remained concerned over Chinas stance of further tightening measures to curb soaring inflation. In Japan, Inpex is trading 2.9% lower, despite announcing a rise in its full-year profit. Nintendo is trading 1.7% lower, as the euro weakened against the yen; the company gets a third of its revenue from Europe. In Hong Kong, China Resources Land is trading 1.9% lower, amid speculation that a probable hike in the interest rates by Chinese policymakers would lower housing demand. Cnooc is trading 1.8% lower, as crude oil prices fell yesterday. In South Korea, energy sector stocks, S-Oil and SK Innovation are trading 5.6% and 4.2% lower, respectively. The Nikkei 225 index is trading 0.7% lower, at9,793.8. Hang Seng index is trading 0.8% down, at23,098.8, while the Kospi index is trading 1.3% lower, at 2,139.4. Commodity, Currency and Fixed Income Snapshots Crude Oil At 0331GMT today, Brent crude oil one month futures contract jumped 1.18% or $1.33, to trade at $113.9 per barrel. Yesterday, the contract dipped 4.30% or $5.06, to settle at $112.57 per barrel, after the US Energy Information Administration reported that crude oil supply rose 3.78 million barrels to 370.33 million barrels for the week ended 6 May 2011. Gold At 0331GMT today, gold futures contract climbed 0.29% or $4.30, to trade at $1,505.7 per ounce, as investors opted to buy the yellow metal as a safe-haven asset, amid concerns over the Euro-zones debt issues and soaring global inflation. Yesterday, the contract lost 1.02% or $15.50, to close at $1,501.4 per ounce. Currency At 0331GMT today, the EUR strengthened against the USD, gaining 0.15%, to trade at $1.4228. Yesterday, the EUR lost 1.33% versus the USD, to close at $1.4207, amid speculation that European leaders are slowing the drive to grant Greece additional aid, stoking worries that the nation might be under pressure to restructure its debt. At 0331GMT today, the GBP rose against the USD, advancing marginally 0.07%, to trade at $1.6377. Yesterday, the GBP strengthened against the USD, gaining marginally 0.04%, to close at $1.6366, amid reports that the trade deficit in the US widened to $48.2 billion in March, compared to a revised deficit of $45.4 billion recorded in February. Fixed Income In the US, long term treasury prices rose yesterday, pushing the yields on 10-year notes lower, after the US treasury department sold 10-year notes at a lower-than-expected yield. The treasury department sold $24 billion in 10-year notes at a yield of 3.21%. Yields on 3-year notes decreased 7 basis points to 0.96%. Yields on 10-year notes decreased 4 basis points to 3.19%, while yields on 2-year notes decreased 3 basis points to 0.56%. Meanwhile, 30-year bond yields decreased 3 basis points to 4.31%. Key Economic News UK visible trade deficit widened in March On a seasonally adjusted basis, visible trade deficit in the UK increased to 7.7 billion in March, compared to a visible deficit of 7.0 billion recorded in February. Market had expected a visible trade deficit of 7.5 billion in March. Additionally, the total trade deficit in the UK widened to 3.0 billion in March, compared a deficit of 2.7 billion recorded in the previous month. BoE raised inflation outlook and signals rate hike this year The Bank of England (BoE) raised its medium term inflation estimate following the rise in energy prices and cut the economic growth outlook, while signaling that interest rates may be raised this year. Inflation would hit 5.0% as growth slows, predicts Mervyn King The Governor of the BoE, Mervyn King, warned that the economy has hit a "soft patch" and consumers must prepare themselves for a continued squeeze on living standards, with inflation likely to hit 5.0% this year. German wholesale price inflation slowed in April On an annual basis, the wholesale price inflation in Germany eased to 9.2% in April, compared to a rate of 10.9% recorded in March. Additionally, on a monthly basis, the Wholesale Price Index (WPI) rose 0.2% in April, following a 1.3% increase recorded in the previous month. German inflation steadied in April On an annual basis, the consumer price inflation in Germany remained unrevised from the initial estimate at 2.4% in April. Meanwhile, on an annual basis, the harmonised consumer price inflation in Germany was revised upwards to 2.7% in April, compared to an initial estimate of 2.6%. French current account deficit narrowed in March The current account deficit in France narrowed to 4.1 billion in March, compared to a deficit of 5.1 billion recorded in February. US trade widened more-than-expected in March The trade deficit in the US widened to $48.2 billion in March, compared to a revised deficit of $45.4 billion recorded in February. Market had expected the trade deficit to widen to $47.7 billion in March. US weekly MBA mortgage applications climbed According to Mortgage Bankers Association (MBA), for the week ended 6 May 2011, mortgage application volume in the US, on a seasonally adjusted basis, rose 8.2% from one week earlier. Additionally, the refinancing demand for the week increased 9.0% from the week before. Rate hike possible by end of the year, says Kocherlakota Minneapolis Fed President Narayana Kocherlakota indicated that increasing core inflation and a robust labour market may warrant a 50 basis point hike in the Fed funds rate by the end of the year. Rate of inflation to ease, says Lockhart Federal Reserve Bank of Atlanta President Dennis Lockhart indicated that the rise in jobs this year would reduce unemployment slowly and higher inflation in recent months probably will not persist. US budget deficit shrank in April The budget deficit in the US narrowed to $40.5 billion in April, compared to a deficit of $82.7 billion recorded in the same period previous year. Canadian trade surplus widened in March The trade surplus in Canada increased to C$627.0 million in March, compared to a surplus of C$356.0 million recorded in February. Japanese current account surplus declined in March The adjusted current account surplus in Japan fell to 752.7 billion in March, compared to an upwardly revised surplus of 1.218 trillion recorded in the previous month. Market had expected the current account surplus to fall to 972.2 billion in March. Meanwhile, the trade balance reflected a surplus of 240.3 billion in March, compared to a surplus of 723.3 billion recorded in February. Japans M2 money stock increased in April The M2 money stock in Japan increased 2.7% annually to 796.8 trillion in April, in line with market expectations and following the downwardly revised 2.6% increase recorded in the previous month. Japanese leading index dropped in March The leading index in Japan declined to a reading of 99.5 in March, following a reading of 104.0 recorded in February. Market had expected the leading index to post a reading of 99.8 in March. Meanwhile, the coincident index fell to a reading of 103.6 in March, compared to a reading of 106.8 recorded in the previous month. Market had expected the coincident index to post a reading of 103.7 in March.

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