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Todays Market Headline
Bank of Japan Hold Rates at 0.0% to 0.1% World Bank cut China GDP forecast for this year from 8.4% to 8.2% EU leaders meet in Brussels for Summit Bank of England Release MPC Minutes (8:30GMT) Deputy Finance Minister Steffen speaks on ESM, fiscal pact (10:30GMT) Spain economy minister speaks in parliament on banks (16:00GMT) Iranian hold nuclear talks with Security Council members (Middle-east Highlights) PTT Exploration Agrees to Pay 240p-Shr for Cove Energy (Risk Arbitrage news) German 5bln Euro 2 year (9:30GMT) & 1.5bln Euro 2023 (10:00GMT) bond auctions Euro Zone Current Account, Italian Consumer Confidence & UK Retail Sales US House Price Index & New Home Sales (14:00GMT)
Equity
DOW JONES NASDAQ S&P 500 Euro Stoxx50 FTSE 100 DAX 30 CAC 40 RDXUSD NIKKEI 226

Last
12,502.81 2,839.08 1,316.63 2,192.85 5,403.28 6,435.60 3,084.09 1,473.96 8,557.07

Change
-0.01% -0.29% 0.05% 1.99% 1.86% 1.65% 1.88% 0.59% -1.97%

Commodities
Gol d Na tura l Ga s Crude Oi l 1,559.68 2.69 91.02 -0.56% -0.63% -0.90%

Currencies
EUR/USD 1.2673 1.5753 0.80446 1.20093 79.6 -0.09% -0.06% 0.06% 0.02% -0.45% GBP/USD EUR/GBP EUR/CHF USD/JPY

Market Overview
Good Morning, equities ended the day higher and Europe & near flat in the US, the FX market which was on a vacation on the first half of the day joined the trading session only after European markets closed and was characterized by a stronger USD and JPY against other currencies, commodities ended the day lower and German bonds & US Treasuries were lower (higher yield) even as risk was sold-off towards the US close. The Vix Index was up 2.14% and closed at 22.48, From a technical point of view yesterdays price action on the Vix can be viewed as a re-test of the inverted H&S neckline near 20 which was followed by a sharp intraday reversal to the upside (Inverted H&S eventually target a move to 27.48 chart attached to morning email). Facebook was down another 8.9% and closed the day at $31.00. News wise, the market continued with its speculations around the EU Summit today and continued to try and figure out what are the varied of possibilities to deal with the crisis. Towards the end of the US session a comment from Greek politicians about it exiting the Euro Zone triggered a mini sell-off causing US equities to lose their early gains and triggering a USD rally
1

US Rates
US 2Y US 10Y 0.29 1.76 -0.29% -0.01%

Europe Spreads (vs. Germany)

Fra nce 2Y Spa i n 2Y Ita l y 2Y Fra nce 10Y Spa i n 10Y Ita l y 10Y 0.54 47.22 -3.7 -14.7 -9.0 -1.5 -4.7 -2.6 3.91 383.93 3.43 336.39 2.77 130.46 6.03 456.31 5.55 408.40

World Spreads (vs. US)

Germa ny 2Y 0.07 -22.36 UK 2Y 0.28 -1.26 0.8 -1.7 0.4 2.7

Germa ny 10Y 1.47 -29.73 UK 10Y 1.87 10.21

PROBE: a proprietary index measuring the break-even probability of a given deal. 23 May 2012

and a commodity sell-off. On the macro field, worth noting is the disappointing US Richmond Fed (4 vs. 11 expected) and the better existing home sales (+3.4% vs. +2.9% expected and an annual pace of 4.62mln homes) it can easily be said that these figures had obsoletely no impact on yesterdays price action. Asia markets are lower today, US Futures are negative (0.6%) and European markets are set for a lower open on the day (Euro Stoxx Futures currently down 1.4%). EU Summit in Brussels; another one bites the dust! IMF Lagarde was quoted yesterday saying more needs to be done to support growth in Europe through structural reforms and not through stimulus (the Merkel view). Again, besides a joint statement that will express the willingness of EU leaders to work together, given the huge difference of opinion between leading countries in the region, we find it hard to expect leaders to come up with any kind of material progress from this summit. EU Rehn was also quoted yesterday saying that the EU is likely to give growth initiative in more details only next month signaling he doesnt expect anything much from todays summit. The EU union and European parliament did agree yesterday to introduce a pilot phase on European project bonds but besides the fact that this step will encourage Euro Zone countries and institutions to practice their corporation this is far away from forefeeling market expectations. Last but not least is that this Summit is unlikely to come up with any kind of solution for Greece which is scheduled for new elections on June 17 and given how tense investors are behaving regarding this topic any result from todays summit is likely to be dwarfed by it. Bank of England release MPC Minutes; the BOE held its bond purchase target at 325bln GBP this month and kept rates unchanged at 0.5%. The IMF warned the UK yesterday about its economic conditions and said it believed further monetary easing and rate cuts are required but still investors would like to see this kind of tone/commitment coming from the committee. Focus today will be on the language of the statement and how did the members vote. Economic data today offers Euro Zone Current Account, Italian Consumer Confidence, UK Retail Sales & US House Price Index & New Home Sales, and Good Luck!
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Middle East Focus on Israel/Palestinian relations & the Iranian Story

BBC: The talks are being held in the Iraqi capital, Baghdad, at Iran's request. They come a day after the UN's nuclear watchdog held talks with Iran to try to gain better access to the regime's nuclear installations. Tehran insists its uranium enrichment program is for peaceful purposes, but the West fears Iran is developing a nuclear weapon. The five permanent members of the UN Security Council - the US, Britain, France, Russia and China - plus Germany will try to persuade Iranian officials to scale back their nuclear program. Security is tight, with about 15,000 Iraqi police and troops protecting the venue inside Baghdad's heavily fortified Green Zone. Previous talks in Istanbul in mid-April managed to find enough common ground to arrange a further meeting in Baghdad. Correspondents say Wednesday's talks will put these renewed efforts to the test. A senior Western official quoted by Reuters said that the six - led by EU foreign policy chief Catherine Ashton would make Iran "a detailed proposal that will include confidence-building measures". However, no details were given on what those measures might be. Bloomberg: United Nations atomic inspectors and Iran broke a five-year stalemate with an agreement that gives the International Atomic Energy Agency access to the Persian Gulf nations disputed Parchin military complex. IAEA head Yukiya Amano announced the breakthrough yesterday after he returned from a surprise visit to Tehran, saying the two sides 23 May 2012

agreed yesterday to create a document outlining the steps necessary for Iran to clear suspicions over its atomic program. Its the first time since June 2007 that the IAEA and Iran have agreed on methods to give inspectors greater access to facilities including Parchin, where work may have taken place on the trigger for a nuclear weapon, according to the agency.

Risk Arbitrage
In an unexpected move, PTT Exploration topped Royal Dutch Shells' bid for Cove Energy by raising its offer price to 240p a share. Shell's offer is valid until today 1pm. PTT's offer values Cove at about 1.22b GBP. Bloomberg: SAP AG, the largest maker of enterprise-applications software, agreed to buy Ariba Inc., an online trading platform for businesses, for $4.3 billion in the German companys biggest push into cloud computing. SAP will pay $45 a share for Ariba, Walldorf, Germany-based SAP said in a statement yesterday. That is 20 percent more than Aribas closing price on May 21. The transaction will probably be completed in the third quarter, subject to approval by Ariba shareholders and regulators. Reuters: United Technologies Corp is confident that its pending $16.5 billion takeover of aircraft components maker Goodrich Corp will close in July, despite an ongoing European Union antitrust review of the deal. "We have good confidence ... that we will close by mid- to late July," United Tech Chief Executive Louis Chenevert told an investor conference on Tuesday. "We have been working aggressively with the customers, with the agency for antitrust approval." That expression of confidence comes after EU antitrust regulators earlier this month extended to August 31 from August 9 their deadline to decide whether to approve the deal. Bloomberg: Harwood Feffer LLP is investigating potential claims against the board of directors of Benihana, Inc. concerning the proposed acquisition of the Company by Angelo, Gordon & Co. in a transaction valued at approximately $296 million. Benihana shareholders will receive $16.30 in cash per share held. Bloomberg: Misys Plc, a provider of banking enterprise software, changed the structure on $1.07 billion of loans backing its buyout by Vista Equity Partners LLC, according to a person with knowledge of the transaction. A $730 million term loan was increased to $945 million, while a 250 million-euro ($317 million) term portion was cut to 100 million euros, said the person, who declined to be identified because the terms are private. Reuters: Royal Dutch Shell is likely to have to wait to secure its $2 billion takeover of Cove Energy as shareholders in the Mozambique-focused target company look for potential counter-bidder Thailand's PTT to show its hand. Some Cove investors said on Tuesday they expected Shell to extend the tender period for its 220 pence a share offer, as they said they would not offer their shares ahead of the 1200 GMT, May 23 deadline Shell has set for acceptances. Bloomberg: Consolidated Communications Announces Pricing of Senior Notes to Fund SureWest Acquisition. Consolidated Communications Holdings, Inc. announced today that its wholly-owned subsidiary, Consolidated Communications Finance Co., priced an offering of $300,000,000 in aggregate principal amount of 10.875% senior notes due 2020. The Notes bear interest at a rate of 10.875% per annum, payable semi-annually on June 1 and December 1, commencing on December 1, 2012. The Notes were priced at 99.345% of par, for a yield to maturity of 11%, which will result in total gross proceeds of $298,035,000.

23 May 2012

Bloomberg: R.R. Donnelley & Sons Co., the Chicago-based commercial-printing company, agreed to buy Edgar Online Inc. in a $70.5 million deal, gaining a website that lets investors view regulatory filings. The transaction is slated to close in the third quarter, Donnelley said yesterday in a statement. The company expects Edgar Online to begin adding to earnings in the first year after the acquisition is completed. This is a natural fit with our growing portfolio of financial disclosure management services, Tom Juhase, president of Donnelleys financial services, said in the statement. Bloomberg: Intercontinental Exchange Inc. and Hong Kong Exchanges & Clearing Ltd. are the two companies left bidding for the London Metal Exchange, the worlds biggest metals market, after the CME Group Inc. was said to be removed. CME, the worlds biggest futures exchange, is no longer in the running to buy the LME, according to two people with direct knowledge of the matter, who declined to be identified because the information isnt public. Two parties are still in the bidding process, according to an e-mailed statement from the bourse today, which didnt name any companies. Bloomberg: RailAmerica Inc., the short-line railroad operator whose majority owner is Fortress Investment Group LLC, said its studying strategic alternatives that may include a sale of the company. Deutsche Bank Securities Inc. is working as a financial adviser, Jacksonville, Florida-based RailAmerica said today in a statement. The shares jumped 9.5 percent to $24.23 at 5:51 p.m. after regular New York trading. Bloomberg: AMR Corp., the parent of American Airlines Inc., said it has not entered into merger discussions of any kind with US Airways Group Inc. The statement was made in a brief AMR filed after the conclusion of the trial that began in April for permission to modify existing union contracts. AMR filed the papers to counter the unions arguments that the court shouldnt sanction alterations in collective bargaining agreements because less drastic changes could be made through merger with US Airways. Because less dramatic contract changes would stem from a merger, the unions contend they had good cause to turn down AMRs offer.

Corporate News & Equity Highlights

Financial Times: Finlands Outokumpu is facing a lengthy in-depth investigation by European Union regulators into its proposed acquisition of ThyssenKrupps Inoxum stainless steel division. The European Commission said that preliminary analysis had found potential serious competition concerns from the 2.7bn bid, which would create Europes largest stainless steel maker. Bloomberg: Morgan Stanley defended its role in Facebook Inc.s initial public offering after a Massachusetts regulator subpoenaed the bank over talks between an analyst and investors about the social media companys revenue outlook. Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs, Pen Pendleton, a spokesman for the New York-based investment bank, said yesterday in an e-mailed statement. These procedures are in compliance with all applicable regulations. Financial Times: Dell missed Wall Street forecasts for its first-quarter earnings and damped expectations for its second quarter performance as mobile devices and tablets cut further into the desktop market. Dell, the worlds third largest personal computer maker by shipments, saw its shares fall as much as 13 per cent in after-hours trading on Tuesday after reporting a steeper drop in revenues and profits in the first quarter than analysts had anticipated.

23 May 2012

Financial Times: Ryanair could be forced to sell its minority stake in rival Irish airline Aer Lingus following a decision by the UK Court of Appeal to allow competition authorities to investigate whether the shareholding is damaging competition. The Office of Fair Trading began an inquiry in 2010 to determine if Ryanairs purchase of a 29.8 per cent stake in Aer Lingus would lead to a substantial lessening in competition for consumers in the UK. It is investigating whether Ryanair can use its minority stake to influence the behaviour of Aer Lingus, thereby harming competition in the UK market where both airlines have substantial operations. Financial Times: Googles finest legal brains will in coming days cram into a shabby room in central Brussels to hear what Europes top antitrust watchdog has found intolerable with the USs most powerful internet group. There will be no official paper handed over, no formal or informal charge sheet, no dossier of evidence just an oral briefing and a deadline to change its behaviour or face the biggest transatlantic antitrust fight since Brussels took on Microsoft about a decade ago. Financial Times: Anglo American and Codelco, the Chilean copper miner, have agreed to restart settlement talks to try to avoid a lengthy legal battle over the ownership of copper mines in Chile worth as much as $22bn. The companies, which were due to meet in court in Santiago on Tuesday, have both requested that legal action be suspended to allow them time to discuss a possible agreement. Bloomberg: Technip SA, Europes second-largest oilfield-services provider, said the acquisition of Shaw Group Inc.s energy and chemicals business will help it expand in the U.S. petrochemicals industry. We are seeing more projects on the horizon yesterday than we have seen for the past 10 years both in petrochemicals and fertilizers, Chief Executive Officer Thierry Pilenko said yesterday on a conference call. A lot of cheap resources are now directed as a feedstock for petrochemicals and fertilizers. Financial Times: The owners of Getty Images, the worlds largest distributor of stock photos, video and other digital content, have retained bankers to examine a possible sale or public offering of the business they took private four years ago for $2.4bn. Hellman & Friedman, the US private equity fund, is working with Goldman Sachs and JPMorgan Chase, five people familiar with the plans said, adding that a sale or IPO could value the business at as much as $4bn. Financial Times: Accor, Europes largest hotels group by number of rooms, has sold its underperforming Motel 6 chain of US budget hotels to Blackstone in a $1.9bn deal, and will use some of the net 330m cash proceeds to expand in emerging markets. The disposal accelerates Accors asset-light strategy of selling property assets and operating hotels as a franchisee or on management contract.

Broker Recommendations
Positive Carrefour Added to Credit Suisse Focus List; Rated Outperform HomeServe Raised to Equalweight at Morgan Stanley Naturex Raised to Buy From Hold at SocGen Savills Raised to Buy vs Neutral at UBS Corio Raised to Buy From Neutral at UBS Naturex Raised to 'Buy' at Societe Generale 23 May 2012

 Negative US:

Eramet Upgraded to Outperform from Neutral at Exane Bilia Raised to Buy vs Neutral at Swedbank

Michelin Cut to Sell from Neutral at Goldman Sachs Pirelli Cut to Neutral from Buy at Goldman Sachs Dunelm Group Cut to Neutral from Overweight at JPMorgan Wartsila Cut to Reduce vs Buy at Swedbank LPP Cut to to Hold From Buy at ING Ariba Cut to Neutral vs Buy at Goldman

Economic Calendar Key Events

Time (GMT) 8:00 8:00 8:00 8:30 8:30 8:30 8:30 8:30 11:00 14:00 14:00 14:00 14:00
Research Disclaimer
This publication has been prepared by Makor Capital Limited (Makor Capital) and is intended for professional or qualified investors only. Makor Securities LLP (Makor Securities)is distributing this material to its clients who are Eligible Counterparties or Professional Clients under FSA Rules. It may also be disseminated to persons who are Investment Professionals within the meaning of the Financial Services and Markets Act 2000 (Financial Promotion) order 2005. If you do not fall into any of these categories you should disregard it. This research material is a marketing communication. It is not investment research and has not been prepared in accordance with legal requirements designed to promote the independence of investment research. It is not subject to any prohibition on dealing ahead of the dissemination of investment research. It has not been produced by Makor Securities. This material does not take into account the particular investment objectives, financial situation or needs of individual clients or other recipients. Before acting on this material, clients and other recipients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice.

Country EC EC IT UK UK UK UK UK US US US US US

Event Euro-Zone Current Account nsa ECB Euro-Zone Current Account SA Consumer Confidence Ind. sa Bank of England Minutes Retail Sales Ex Auto Fuel(MoM) Retail Sales Ex Auto Fuel(YoY) Retail Sales w/Auto Fuel (MoM) Retail Sales w/Auto Fuel (YoY) MBA Mortgage Applications House Price Index MoM House Price Purchase Index QoQ New Home Sales New Home Sales MoM

Period MAR MAR MAY APR APR APR APR 18-May MAR 1Q APR APR

Survey --89.5 -0.70% 0.70% -0.80% 1.00% -0.30% 0.10% 337K 2.60%

Actual -------------

Prior -5.9B -1.3B 89 1.50% 2.80% 1.80% 3.30% 9.20% 0.30% -0.10% 328K -7.10%

Revised -------------

23 May 2012

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23 May 2012