In equity news overnight, Yahoo’s (YHOO) CEO Yang says Microsoft (MSFT) has a lot of interest in a deal with YHOO, and that they are listening. Yang said that he feels that a combination with MSFT has a tremendous amount of power. KMG Chemicals (KMGB) guided FY08 revenue “above $135M” v $148.6Me; Furthermore KMGB said that they expect 2008 EPS to be 10%-20% below 2007's $0.80, implying $0.64-0.72 v $0.99e. GE Energy (GE) signed contracts for more than $500M to support projects in Saudi Arabia  Costco (COST) reported Q3 earnings of $0.67 overnight, above estimates of $0.65, and revenue of $16.61B, above estimates of $16.35B. Total same store sales for the quarter were +8.0%. Infineon (IFX) guided Q3 revenue flat sequentially, noting that they expect Q3 EBIT to post a sequential decline. The company cited lower volumes in some wireless platform projects for the revised outlook, adding that results in Q4 are expected to improve from Q3.  

In the newspapers overnight, the Wall Street Journal wrote that General Motors (GM) is expected to announce new cost cutting measures. The measures will be announced at GM's annual shareholder meeting on June 3. According to the Independent Barclays (BCS) Bank has revised down its calculation of analysts' consensus for its FY profit for the second time this month. Barclays cut the figure for 2008 by nearly 8% after a drop of 15% two weeks ago.

In the newspapers overnight, the New York Times wrote that talks between US Airways (LCC) and United Airlines appear to have collapsed. Following the publication a source said that the talks between the two airlines have not ended, but no deal is expected in time for review by the Bush administration. The source added that United is continuing alliance talks with Continental. The Wall Street Journal looked at problems that InBev [INB.BE] could have in its bid for Anheuser-Busch (BUD). According to the article obstacles for InBev include cultural differences, potential unrest from BUD's employees and distributors and protests from US politicians. Some analysts believe that BUD will resist any takeover approach from InBev and this could raise the price of any offer for BUD to as much as $70/share. Il Sole 24 Ore wrote that Telecom Italia (TI) will not merge with Telefonica (TEF) citing a company official.

In energy news overnight, Mexico’s Pemex said that protestors have blocked the water supply to one of its refineries. The company is now using water from a different source. According to wire reports several units have been shut down at Flint Hill's (private) Corpus Christi Texas Refinery (288K bpd). The units were shut after steam production was lost at the plant. The affected units include the gasoline producing fluidic catalytic cracking unit and the sulfur recovery unit. Sinopec (SNP) plans to suspend fuel exports in order to meet domestic demand, noting that it is facing "big pressure on oil supply and earnings. The company says that it is its priority to satisfy the demand for earthquake-related areas, the Olympics and summer oil demand. In an interview with the Guardian, UK PM Brown said that the top of the economic agenda for the G8 summit should be a global strategy for addressing the impact of higher oil prices. IEA Deputy Executive Ramsey said overnight that Russia is no longer the non-OPEC growth engine as government control of oil assets chills investors. Ramsey added that OECD demand is slowing, which may lead towards a revised demand forecast in November, adding that energy markets are stressed and undersupplied. Furthermore Ramsey said that oil markets are likely to remain tight with limited flexibility. Ramsey also said that peak oil is not imminent noting that carbon constraints are a bigger problem than peak oil.

In equity news overnight, Petrobras (PBR) announced an oil and gas find in the Gulf of Mexico. Petrobras said that the find signals potential "significant reserves". According to source reports GE (GE) is mulling the sale of its Australian Wizard Mortgage unit. Wizard has 250 branches and a loan book worth $11.5B. Emergent Biosolutions (EBS) announced overnight that it will acquire protein sciences' phase III recombinant flu vaccine candidate, FluBlok, and related novel platform technology. The company also reiterated its FY08 sales guidance of $180M-$195M v $185Me.

In the newspapers overnight, the South China Morning Post wrote that there are rumors that a Chinese state-owned company is eyeing Talisman (TLM) as a buyout target.  According to the Financial Times Wal-Mart (WMT) has selected SAP (SAP) to help with the roll out of its new global IT system. The system will break from Wal-Mart's traditional reliance on home-grown IT. The Financial Times reported overnight that Blackstone Group (BX) and Apollo Management are in talks to buy Chemtura (CEM).  According to De Tijd InBev [INB.BE] may give go-ahead for Anheuser (BUD) talks today.

In equity news overnight American Ecology (ECOL) announced a 20% increase to its quarterly dividend, bringing the dividend up to $0.18/share. Bunge (BG) announced an 11.8% increase to its quarterly dividend, bringing the dividend up to $0.19/share. AtheroGenics' (AGIX) ARISE trial results published in the Lancet show that the study missed its primary endpoint in diabetes. Expro [EXR.UK] has received a £1.7B or £15.25/share cash bid from Halliburton. Recall that on 5/18 the Telegraph wrote that Halliburton (HAL) may was mulling a £1.8B for the company. British Energy [BGY.UK] announced overnight that talks with Suez [SZE.FR] have ended.

In the newspapers, the Wall Street Journal’s Heard on the Street section looked at Lehman's (LEH) reliance on one-time gains overnight, noting that some investors are questioning Lehman's earnings report from the prior quarter as some are asking whether its profit was due to some one-time items. According to Cinco Dias, Cintra Concesiones de Infraestructuras [CIN.SP] holder Grupo Ferrovial [FER.SP] boosted its stake in the company from 65% to 68%. According to a piece in FT Alphaville Friends Provident [FP.UK] In talks with bidders for the sale of its 52% stake in F&C.

In equity news overnight, Nelnet (NNI) announced that it is suspending its dividend Air France [AF.FR] reported their Q4 net at a loss of €49M overnight, above estimates of €59M, and revenue of €5.7B, above the €5.6B consensus estimate. The company noted that premium traffic was hit by Easter in March. Tate & Lyle [TATE.UK] reported FY07 net income of £187M, down from the £217M in 2006, and revenue of £3.4B, up from the £3.2B seen in 2006. Cable & Wireless [CW.UK] reported FY07 net income of £164M, just below estimates of £168.2M, and revenue of £3.15B, just below estimates of £3.2B. The London Stock Exchange [LSE.UK] reports their FY07 net income at £173.8M, well above the £157M estimate, and revenue of £546.4M, above estimates of £526M.

The newspapers were relatively dry in terms of equity related stories overnight. According to the Financial Times, the world's leading banks are looking to relax accounting rules. A group of more than 300 companies (the Institute of International Finance) have created a proposal on "fair value" accounting that would enable financial companies to value illiquid assets using historical, rather than market prices.

In the newspapers, according to the Wall Street Journal, an investment group made up of Boston Properties (BXP), Goldman Sachs (GS) and 2 Middle Eastern investors is in talks to buy the GM building from Macklowe. The total deal could be worth $3.6B-$3.9B. The Financial Times noted overnight that AiG's (AIG) larger than expected capital raise has increased fears that the firm may make more big credit-related writedowns. The Wall Street Journal reported overnight that Barnes and Noble (BKS) is mulling a bid for Borders (BGP). According to the WSJ, Barnes & Noble has assembled a team of executives and advisers to study a bid for Borders. The Wall Street Journal wrote overnight that Time Warner (TWX) is expected to spin off Time Warner Cable (TWC). The article also notes that, as part of the separation, Time Warner is set to reap a $9.25B windfall from a special $10/share dividend to be paid by the cable company. Finanza & Mercati reported that Finmeccanica [FNC.IT] may sell its railway unit Ansaldo [STS.IT] for DRS (DRS) Funding, however Finmeccanica later denied the report. According to Parkiet Lukoil’s (LUKOY) Polish unit has sold all of its liquefied petroleum gas assets in Poland to Barter. Financial terms were not disclosed. Il Sole 24 wrote overnight that Telecom Italia (TI) holder Telco (23.6% holder) decided not to carry out a €900M share sale.

In energy news overnight, the Wall Street Journal noted that oil-field thefts are rising as oil prices move higher. The article noted that oil companies and law enforcement officials have been stepping up security at wells that are being targeted. Sinopec (SNP) said overnight that it is ready to resume Sichuan field output. The company said that daily natural gas production reached 3M cubic meters on May 18 and output was 8M cubic meters/day before the earthquake. OPEC's Secretary General Badri said overnight that OPEC is worried because high prices are not related to supply and demand, adding that OPEC does not need to hold an extraordinary meeting. Badri said that the declining USD and financial speculation are responsible for current oil prices, noting that oil could keep rising if non-market factors such as the USD fall continue pressuring prices. Badri reiterated that OPEC will act when market fundamentals show a need to do so. The Wall Street Journal looked at the US military’s plans to increase its reliance on alternative-fuels overnight, noting that the US military consumes 340M bpd of oil, which is 1.5% of all the oil used by the US. For synthetic fuel, the Air Force is working with aircraft makers such as Boeing (BA) and UTX (UTX). Synthetic-fuel processors, including Rentech (RTK), Baard Energy and Synthroleum are also hoping to build synthetic fuel refineries aimed at the military's needs. World Gas Intelligence wrote overnight that "It's now clear: Only about half of the nearly 20 million tons per year in new liquefaction capacity that at the start of this year looked set to begin operation in 2008 will actually do so, due to delays at Tangguh LNG, operational problems in Norway and feedgas shortages in Nigeria." The result is likely to be continued tight LNG markets at least through next winter. Less in the forefront of market analysis is a spin-off result: 2009 could well see over 40 million tons/yr in new capacity. According to Petrologistics, OPEC oil output expected at 32.4M BPD in May, up from the 31.7M in April as the result of higher levels of supply from Nigeria, Saudi Arabia, Iraq, and Iran.

In the newspapers, the Wall Street Journal wrote overnight that Ford (F) is looking to cut its production of Volvos. The move could impact 1/3 of the workers at one of Ford's two Volvo plants in Europe. The Wall Street Journal was positive on Westpac (WBK) overnight, noting that Westpac's subprime exposure is low when compared with many international banks. The article said that although Australian credit growth is expected to slow, banks in the country are not reporting any systemic signs of stress in their loan books According to the Financial Times, Goldman Sachs (GS), Morgan Stanley (MS) and UBS (UBS) plan to link their private stock trading operations. The move is aimed at improving liquidity. The Telegraph looked at the possibility of Barclays (BCS) launching a large rights issue with the purpose of both improving its capital position and funding an acquisition. The article said that the firm may target Lehman (LEH) or UBS (UBS). Some sources, according to the article, believe that Barclays may try to acquire an investment bank Financieele Dagblad wrote overnight that Deutsche Bank (DB) and BNP Paribas [BNP.FR] are interested in buying ABN assets that Fortis [FORB.BE] must sell.

In energy news overnight, President Bush signed a measure to halt oil shipments to SPR (as expected). The Times looked at Iraq's oil reserves noting that Iraq's Deputy PM said that new exploration showed that the country has the world's largest proven oil reserves, with as much as 350B barrels. The IEA's Birol said overnight that the oil market will remain tight for a few years.

It was a slow night overall, and a slow start to the week. In equity news overnight, Manitowoc (MTW) raised its offer for Enodis [ENO.UK] to 294p/share from 260p/share, representing a 5% premium to Illinois Tool Works’ (ITW) bid for the company. ING (ING) made a €64/share offer for Interhyp [IYP.GE] representing a 30.5% premium to Friday’s closing price.

Looking at the newspapers, the NY Post wrote overnight that Lehman (LEH) is expected to cut about 5% of its workforce. Citing a person familiar with the firm the article wrote that job cuts may amount to 1,400-1,500 workers. According to the Financial Times overnight, BlackRock (BLK) is among the firms which the Saudi government is talking with about managing the $10B endowment fund for a new university in the country. The Telegraph reported overnight that British Land [BLND.UK] is expected to write down £1.9B in assets when it gives a trading update on May 20 - Telegraph According to the Guardian Imperial Tobacco [IMT.UK] plans to launch a rights issue of over £4.0B. The Wall Street Journal’s Heard on the Street section questioned the strength of Radian Group’s (RDN) Q1 earnings results overnight. The WSJ notes that Radian was able to record a profit in Q1 only because its financial condition caused it to report gains of about $2B on some of its liabilities. Without a special accounting rule regarding mark-to-market accounting the company would have recorded a $215M loss. The Wall Street Journal wrote overnight that that Daimler (DAI) and BMW [BMW.GE] plan to discuss a tie-up related to components. The New York Times reported overnight that the $51.8B takeover of Bell Canada (BCE) appeared to be in trouble over the weekend. The article notes that the Wall Street banks that committed to finance the deal sought to renegotiate the lending terms. The article adds that the banks involved with the deal, have found themselves largely unable to resell the debt related to the transaction. Bankers in the deal include Citigroup, Deutsche and RBS.

In the newspapers, the Financial Times wrote overnight that Energias de Portugal  [EDP.PO] plans to pursue an IPO for up to 25% its renewable energy unit. According to the Financial Times Deutschland Deutsche Bahn [DBHN.GE] plans to sell its 18% stake in Arcor to Vodafone (VOD) for about €330M.  The Financial Times wrote overnight that Blackstone Group (BX) may seek to invest in distressed commercial properties.

In energy news overnight, Venezuelan President Chavez says that oil markets are well supplied, noting that the country does not have plans to nationalize any more companies. Chavez added that Venezuela would like to continue selling oil to the US. The Wall Street Journal overnight looked at a plan that would give federal regulators oversight of energy markets. The measure is part of the farm bill that the Senate passed on Thursday. Traders cited the move to close the so-called Enron Loophole as a factor behind today's trading in energy markets. Under the government’s plan, the CFTC will consider trading volumes and whether contracts are being used to establish a price reference for other contracts; The plan also requires traders to maintain audit trails by supplying reports on any large trades to the CFTC, imposes record-keeping requirements and forces electronic exchanges to monitor trading behavior and prevent manipulation. Lawmakers are also mulling proposals to increase margins on energy futures. The Enron Loophole bill does not give authority to regulators for oversight of foreign trading on US terminals The Wall Street Journal wrote overnight that oil refiners are starting to focus on diesel fuel production over gasoline.  Goldman Sachs raised its 2H WTI oil price forecast to $141/barrel from $107/barrel

In equity news overnight, Hochtief reports Q1 pretax of €103.3M, above estimates of €95.6M. Revenues were in line with expectations, while net income was slightly ahead of expectations of €26.5 at €32M. The company reaffirmed its 2008 revenue and earnings guidance. Barclays (BCS) reported a Q1 net loss of £1.0B relating to credit market turbulence, adding that writedowns include a £700M gain for valuation of notes issued by the company. The company said that exposure relating to RMBS securities were actively managed and declined over the first-quarter.

In the newspapers, the Wall Street Journal reported that Embarq (EQ) will end its wireless resale deal with Sprint (S) in 2009. Under the agreement, Embarq sold its branded wireless service using Sprint's network. The WSJ notes that sales results from the partnership between the two companies were less than expected. The Wall Street Journal was cautious on shares of Nomura (NMR) overnight, noting that some analysts believe that the large FY loss the company posted last month to address its exposure to risky debt does not mean it has put the worst behind it. According to press reports efforts to sell Germany’s IKB [IKB.GE] have faltered. The article added that BayernLB and JC Flowers will not bid for IKB. Citing sources, the Wall Street Journal wrote overnight that GE (GE) is seeking buyers for its appliances operations, and has hired Goldman as an advisor. The article speculates that the unit could be worth $5B-$8B.

In equity news overnight, Clorox (CLX) boosted its quarterly dividend by 15% overnight to $0.46/share and announced a $750M share repurchase authorization. BNP Paribas [BNP.FR] reported a Q1 Net of €1.98B overnight, above consensus estimates of €1.62B, and a loan loss provision of €546M, down from the €898M in Q4. European Aeronautic Defense [EAD.FR] reported a Q1 Net of €285M, well above the €210M consensus overnight, and revenue of €9.9B, above the €9.2B estimate. The company said that it has not yet determined the financial impact of the A380 delays. ArcelorMittal (MT) reported its Q1 Net at $2.37B overnight, just below the $2.54B consensus. Revenue was in line with expectations at $29.9B. Sainsbury [SBRY.UK] reported FY07 revenue of £19.3B, above the £17.8B consensus. Net income was in line with expectations at £333M. Bradford and Bingley [BB.UK] confirmed a £300M rights issue overnight, noting that it is trading in-line with its mid-April update.

In the newspapers overnight, the Financial Times wrote that JP Morgan (JPM) is expected to take a charge of about $9B to clean up Bear Stearns' balance sheet. The charge will also be for redundancies and litigation costs arising from its buyout of Bear. The Financial Times reported overnight that Lonmin [LMI.UK] plans to sell its pension liabilities to Paternoster. The Wall Street Journal reported overnight that some directors at AIG (AIG) may re-evaluate support of CEO Sullivan if the company posts another big loss The Wall Street Journal wrote overnight that Lloyds [LLOY.UK] does not expect "massive" subprime-related claims for the rest of the year, citing an interview with the company’s chairman. The Times wrote overnight that Credit Agricole [ACA.FR] plans to scale down its investment banking unit.

In equity news overnight Arch Capital (ACGL) added $500M to its existing buyback program overnight. Finmeccania [FNC.IT] announced an official deal to acquire DRS Technologies (DRS) for $81/share for a total of $5.2B. The offer represents a 4.9% premium to yesterday’s closing price. Societe Generale [GLE.FR] reported a first-quarter net of €1.09B overnight, above consensus estimates of €994M. Operating profit declined to €1.18B from €2.16B a year ago, while revenue declined to €5.68B from €6.05B. Societe General had first-quarter corporate and investment bank writedowns of €1.179B, which were offset by gains from one-off items. As of March 31 the bank reported a tier-1 ratio of 7.9%. Credit Agricole [ACA.FR] reported a first-quarter net of €892M, below consensus expectations of €1.17Be. The bank noted that it expects to post €1.2B in writedowns, and added that it is considering a capital increase of €5.9B. Toll Brothers (TOL) reported preliminary second-quarter revenue well ahead of analysts’ estimates this morning, but also relayed some frightening metrics including a 49% y/y decline in gross contracts, a 58% y/y decline in net new contracts, and a 17% y/y decline in average price per unit.

In the newspapers overnight, the Wall Street Journal noted that Exxon (XOM) sent an e-mail to its large shareholders seeking support for its plan to not support the establishment of an independent chairman. Les Echos wrote overnight that EDF [EDF.FR] is the sole bidder for British Energy [BGY.UK], noting that EDF's bid is worth about £11.4B. The Wall Street Journal’s Heard on the Street was cautious on MBIA (MBI) and HSBC (HBC) overnight. The article notes that MBIA is urging investors to not focus on the company's stated book (measure of net worth based on assets minus liabilities), but to pay more attention to its analytic adjusted book value. In terms of HSBC, the WSJ questions if the company has seen the worst of its US related write-downs According to Il Sole 24 Ore, Banca Italease’s [BIL.IT] board may review an offer from Germany's DZ Bank. WirtschaftsBlatt wrote overnight that Telekom Austria (TKA) may sell a stake in its mobile-phone unit. The newspaper said that potential buyers include Telefonica (TEF), Vodafone (VOD), and AFK Sistema. The New York Post wrote overnight that members of the New York Mercantile Exchange (NMX) are moving ahead with plans to kill the $9B takeover by the Chicago Mercantile Exchange (CME) unless the rival futures trading giant significantly boosts its offer.

On the whole things were pretty quiet in Europe overnight. In equity news Germany’s Allianz (AZ) reports Q1 net income of €1.14B, below consensus estimates of €1.41B, and revenue of €27.7B, above estimates of €27.3B. The company reported a Q1 banking loss of €538M and said that further writedowns cannot be ruled out.

In the newspapers overnight, The Telegraph wrote that EDF [EDF.FR] is set to make a £9B all cash bid for British Energy [BGY.UK]. Business Week made positive mentions on Starbucks (SBUX), A-Power Energy Generation (APWR), and Radioshack (RSH) in its Inside Wall Street section. According to the Financial Times, Citigroup (C) may announce more than $200B in non-core assets that could be sold today. Citigroup's CEO is also expected to confirm his plan to cut the firm's costs base by about 20%.

Data since the last MPC decision

• Mar PPI Input M/M: 1.8% v 1.9%e || Prior revised from 1.7% to 1.9%
• Mar PPI Input Y/Y: 20.6% v 19.3%e || Prior revised from 19.4% to 19.7% (highest since 5/80)
• Mar PPI Output M/M: 0.9% v 0.5%e || Prior revised from 0.3% to 0.5%
• Mar PPI Output Y/Y: 6.2% v 5.6%e || Prior revised from 5.7% to 5.9% (highest since 8/85)
• Mar PPI Output Core M/M: 0.3% v 0.4%e
• Mar PPI Output Core Y/Y: 3.1% v 3.0%e || Prior revised from 3.0% to 3.1%
• Mar RICS House Price Balance: -78.5% v -67.0%e || Prior revised from -64.1% to -65.7% (lowest since records began in January of 1978))
• Mar CPI M/M: 0.4% v 0.6%e
• Mar CPI Y/Y: 2.5% v 2.6%e
• Mar CPI Y/Y Core: 1.2% v 1.3%e
• Mar RPI M/M: 0.3% v 0.5%e
• Mar RPI Y/Y: 3.8% v 3.9%e
• Mar RPI Y/Y Ex-Mortgage: 3.5% v 3.6%
• Mar Claimant Count Rate: 2.5% v 2.5%e
• Mar Jobless Claims Change: -1.2K v -1.8Ke || Prior revised from -2.8K to +0.6K
• Feb Average Earnings Including Bonus: 3.7% v 3.6%e || Prior revised from 3.7% to 3.9%
• Feb Average Earnings Excluding Bonus: 3.8% v 3.7%e
• Apr Rightmove House Prices: M/M -0.1% v 0.8% prior
• Apr Rightmove House Prices: Y/Y 1.3% v 5.0% prior (lowest since 10/05)
• Mar Retail Sales M/M: -0.4% v -0.3%e || Prior revised from 1.0% to 1.1% (lowest since 1/07)
• Mar Retail Sales Y/Y: 4.6% v 4.3%e || Prior revised from 5.5% to 6.3%
• Q1 Advanced GDP Q/Q: 0.4% v 0.4%e
• Q1 Advanced GDP Y/Y: 2.5% v 2.6%e (lowest since Q1 2006)
• Mar Mortgage Approvals: 64K v 66Ke || Prior revised from 73K to 72K (lowest since records began in April of 1993))
• Apr GFK Consumer Confidence: -24 v -20e (lowest since 11/92)
• Apr Nationwide House Prices M/M: -1.1% v -0.5%e || Prior revised from -0.6% to -0.7%
• Apr Nationwide House Prices Y/Y: -1.0% v 0.0%e (lowest since 1/96)
• Apr Manufacturing PMI: 51.0 v 50.8e
• Apr Halifax House Prices M/M: -1.3% v -0.6%e
• Apr Halifax House Prices Y/Y: -0.9% v -0.8%e (lowest since records began in December of 1992)
• Apr Construction PMI 46.1 v 47.0e
• Apr Services PMI: 50.4 v 51.7e
• Apr Nationwide Consumer Confidence: 70 v 74e (lowest since records began in May of 2004)
• Mar Industrial Production: M/M -0.5% v -0.1%e
• Mar Industrial Production: Y/Y 0.2% v 0.8%e || Prior revised from 1.3% to 1.2%
• Mar Manufacturing Production M/M: -0.5% v 0.0%e
• Mar Manufacturing Production Y/Y: 0.6% v 1.2%e

BOE speakers since the last MPC decision

BOE's Gieve:

• UK is not in same position as US in regards to recession.
• UK manufacturing sector is performing well
• BoE will continue to take liquidity easing steps to unfreeze markets.

BOE's Bean:

In equity news overnight Portland General Electric (POR) announced a 4.3% dividend increase to $0.245/share overnight. The dividend is payable on July 15, to holders record on record as of June 25. US retail giant Costco (COST) reported April same store sales of +8.0% overnight, and an ex-fuel reading of +5.0%; consensus expectations were +5.0%. Deutsche Telecom (DT) reported first-quarter net income of €924M, well above consensus estimates of €636M, and revenue of €15.0B, just below estimates of €15.1B. DT reported T-Mobile US Q1 net new customers adds of 981K, breaking the 30M customer milestone.

In Germany, DT reported broadband adds of 416K and a fixed line loss of 582K. Illinois Tool Works (ITW) announced overnight a deal to acquire the UK’s Enodis [ENO.UK] for 280p/share, representing a total value of $2.1B. The acquisition price represents a 14.9% premium to Wednesday’s closing price. Unicredit [UCG.IT] reported first-quarter net income of €1.0B, roughly in line with the €1.08B consensus estimate, and noted a €1.0B loss in investment banking. Unilever (UL) Reported first-quarter revenue of €9.57B, in line with consensus estimates of €9.54Be, and net income of €1.34B, above the market consensus of €950M. The company guided FY08 revenue growth ahead of the previously issued growth range of +3%-5% The CEO of RWE [RWE.GE] said overnight that he does not believe that any of the company’s competitors are seriously interested in the acquiring RWE, and added that he has heard nothing about an offer from EDF [EDF.FR].

In equity news a series of notable European companies reported overnight. Electricite de France [EDF.FR] reported Q1 revenue in line with expectations at €18.3B, and reaffirmed its FY08 forecast. Total (TOT) reported Q1 net income in line with expectations of €3.25B, and revenue of €44.21B, ahead of the €42.03Be consensus estimate. Tui [TUI1.GE] reported Q1 revenue of €5.1B, just above the €5.0B consensus estimate. British American Tobacco [BATS.UK] reported Q1 revenue of £2.54B, pretax of £871M, and operating profit of £807M, all of which were ahead of expectations. Alstom [ALO.FR] reported FY08 net income of €852M, above the €816Me consensus estimate, and revenue of €16.9B, which was slightly ahead of estimates. Commerzbank [CBK.GE] reported Q1 operating profit of €435M, and net income of €280M, both of which were in line with estimates. The bank took a €244M hit in Q1 as the result of the market turmoil and said that reaching results that are in line with those of 2007 will be difficult in 2008. KBR (KBR) announced overnight that it plans to acquire the privately held BE&K, Inc. for $550M. BK&E had revenues of $2B for the year ended March 30, 2008, serves both domestic and international customers, and employs roughly 9,000 people. BE&K's international operations are located in Poland and Russia. MBIA (MBI) said overnight that it has ample liquidity to meet normal operating expenses, noting that it is too early to say slowing deterioration will continue. MBIA sees no need to raise dilutive equity capital.

In the newspapers overnight the Financial Times reported that one of UBS's (UBS) most senior private bankers has been detained by US authorities in a tax evasion probe. Officials are probing if UBS helped US clients evade taxes. The Times wrote overnight that WPP Group [WPP.UK] may make a hostile approach for Taylor Nelson Sofres [TNS.UK] The Wall Street Journal noted overnight that the rising costs of high-fructose corn syrup may lead to soft drink makers increasing their use of sugar in beverages - WSJ According to the Financial Times Airbus [EAD.FR] has ended talks regarding the possible sale of two of its French plants. The New York Times reported overnight that Take-Two’s (TTWO) Grand Theft Auto 4 had first week sales of $500M, which was above analysts’ expectations Il Sole reported overnight that JC Flowers is interested in buying Banca Italease [BLT.IT] In the Heard on the Street column the Wall Street Journal questions whether or not Fannie Mae (FNM) will need to raise more capital. The article questions if the recently announced $6B capital raise by Fannie Mae will be enough to shore up its balance sheet. Some bears believe that Fannie may need to raise between $5B-$15B in added funds. The article notes that Fannie's $12.2B (the firm's total net worth) effective balance-sheet cushion against future losses is equal to only 1.4% of the firm's $866.7B in assets. Furthermore the article notes that if Fannie's losses continue it may face pressure to create a special reserve against portions of its $17.8B in deferred tax assets.

The Financial Times wrote overnight that, according to Morgan Stanley, European investment banks are expected to see their M&A and capital markets revenues fall by at least 50% in 2008. The article notes that some analysts had been expecting a 30% decline. In sector rotation overnight, Morgan Stanley cut the European property sector to a cautious rating from an attractive rating.

UBS (UBS) reported first-quarter results overnight, with a net loss of CHF -11.5B, which was slightly better than expectations for a net loss of CHF -11.9Be. UBS noted that they plan to cut 2,600 jobs at investment banking unit; Expects to have "5,500 fewer employees by mid-2009", adding that market conditions remain "tough”. UBS also confirmed overnight that they are in talks to sell $15B of asset to Blackrock (BLK). Bovis Homes [BVS.UK] said overnight that conditions in the housing market have deteriorated, adding that they see their 1H results significantly below targeted levels. Shares of Tullow [TLW.UK] oil were notably higher overnight after the company announced that they hit a significant column of light oil at the mahogany-2 well. Nicox [COF.FR] traded sharply lower at the open after announcing that phase 2a results of PF-03187207 failed to meet their primary endpoint in a glaucoma study. As a result partner Pfizer (PFE) has decided that the compound will be pursued for global development.

Things were quiet in Europe overnight as the UK was on a banking holiday, and there was little follow through from Asia as Golden Week is in full swing. In sector rotation overnight ING’s European Equity Strategy segment raised both the chemical sector and the oil and gas sector to neutral from underweight, and cut the media, telecom, healthcare, and technology sectors to neutral from overweight.

In the papers, the Financial Times wrote overnight that Lloyds [LLOY.UK] is expected to announce write-downs of between £500M and £900M. Die Welt wrote overnight that Boeing (BA) has signaled a further 9-month delay to deliveries of the 787 Dreamliner. A Boeing spokeman refused to comment on the report, which cited a letter sent by the company explaining that orders will now be fulfilled 27 months late. According to the Wall Street Journal United Airlines is mulling a tie-up with US Airways (LCC). The article notes that a potential merger with US Airways carries large labor risks and regulatory uncertainties. According to people familiar with the matter, a decision could come in the next 10 days. The Financial Times reported overnight that Sotheby's (BID) and Christie's plan to sell up to $1.8B of art during the New York selling season (+25% y/y) According to the Wall Street Journal American Capital Strategies (ACAS) may be improperly valuing some of the loans which it holds. Specifically, the WSJ notes that American Capital Strategies has been placing full value of various loans it has made even as other investors who hold the same debt already have cut the values. The article notes that a new account rule may force the firm to lower the valuations on these assets. The Times wrote overnight that AOL (TWX) is looking to pursue a partnership with Microsoft (MSFT) The article notes that AOL has approached Microsoft about a potential tie-up after the deal between Yahoo and Microsoft collapsed.

The European markets were relatively quiet overnight as many market participants made the May day holiday into an extended weekend. In sector rotation overnight Goldman Sachs raise its view on the European basic resources sector to an overweight from a neutral, cut its view on the European retail sector to an underweight from a neutral, and cut its rating on the European household goods sector to a neutral from an overweight.

In the newspapers, the Wall Street Journal reported overnight that the proposed merger between Rio Tinto (RTL) and BHP Billiton (BHP) is looking less likely. The article notes that on Thursday a key barometer of the odds that BHP's offer for Rio Tinto will succeed hit its worst level since the deal was officially announced in early Feb, as Rio Tinto's market value fell about 7% below that of BHP's offer. According to the Wall Street Journal Yahoo (YHOO) could announce a Google (GOOG) ad agreement within week. The agreement would involve Yahoo carrying search ads from Google. Note that there was speculation on a deal of this nature in mid-April. The Independent wrote overnight that Lloyds TSB [LLOY.UK] is expected to resist pursuing a rights offering. The article also noted that the company is expected to report bigger write-downs at its interim trading statement next week.

In equity news overnight, Costco (COST) announced overnight a 10.3% increase to its quarterly dividend, bringing the dividend up to $0.16. The dividend is payable May 30, 2008, to shareholders of record at the close of business on May 16, 2008. Siemans (SI) reported a first-quarter net of €384M overnight, and revenues of €18.1B, while software company SAP (SAP) reported a first-quarter net of €242M and revenue of €2.46B. Siemans shares were higher at the open, while SAP shares were sharply lower. Elsewhere, Sanofi-Aventis (SNY) reported a second-quarter net of €1.86B, and revenue of €6.9B. Sanofi shares were slightly lower at the open. Eon [EOA.GE] announced that it will boost its dividend by 22% to €4.10.

In the newspapers overnight, the Financial Times wrote overnight that AstraZeneca (AZN) said that it is in talks with the UK government regarding the taxation of foreign profits. An AstraZeneca spokesman said that the company is in "constructive dialogue" with the government to ensure that business issues are fully discussed and understood. According to the Times Unilever (UL) will transfer 14 of its European food brands into a separate company. The brands are specifically from the UK, France and Germany. The Wall Street Journal wrote overnight that the Rockefeller Family wants Exxon (XOM) to change its corporate governance. The family, which is an influential shareholder of Exxon, said that it plans to support proposals which urge Exxon to create an independent chairman position and examine if it (Exxon) should take a more active role in developing sustainable energy technologies. The Times wrote overnight that Time Warner's (TWX) CEO is expected to announce Wednesday plans to spin-off the company's cable tv unit. Sweden’s Dagens Industri reported that the country’s industrial minister prevented Vattenfall [VATT.SW] from making a bid for British Energy [BGY.UK].