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KCG: THE LOOK…May 5th, 2014

U.S. stock-index futures fell, following weekly gains for benchmark indexes, as a measure of
Chinese manufacturing missed estimates, and investors watched the situation in Ukraine.

JPMorgan Chase & Co., the world’s biggest investment bank by revenue, declined 2.1 percent early in New York after saying a trading slump has deepened. Pfizer Inc., the drugmaker that has offered to buy Britain’s AstraZeneca Plc, fell as it reported earnings.

Futures on the Standard & Poor’s 500 Index expiring in June lost 0.4 percent to 1,867 at 7:23 a.m. in New York. Dow Jones Industrial Average contracts decreased 60 points, or 0.4 percent, to 16,387.

“We are still overweight equities, but we know where the risks are,” said Joost van Leenders, who helps oversee about $650 billion as a strategist at BNP Paribas Investment Partners in Amsterdam. “We had good years for equities but the mood among investors seems to have changed a bit from risk-on to
profit taking.”

U.S. stocks rose last week, with the Dow average reaching an all-time high, as earnings topped forecasts and the Federal Reserve said it would further trim bond purchases as the economy gains momentum. The S&P 500 added 1 percent, taking its gain this year to 1.8 percent.

China’s manufacturing contracted for a fourth month in April. HSBC Holdings Plc and Markit Economics said their purchasing managers’ index rose to 48.1. That missed the median estimate of 48.4 and the preliminary reading of 48.3. Numbers below 50 indicate contraction.

Ukraine sought to dislodge separatists from its eastern industrial heartland over the weekend as violence that’s spread to the Black Sea gateway of Odessa threatens to loosen Kiev’s control of the regions. Fighting in the eastern city of Kramatorsk left seven people dead, according to the website Kramatorsk.info. Clashes continued in Odessa yesterday.

European stocks fell, following a third week of gains for the region’s equities, as violence intensified in eastern Ukraine, while a report showed Chinese manufacturing contracted for a fourth month. U.S. stock-index futures also declined, while Asian shares were little changed.

Credit Suisse Group AG dropped 2.4 percent after JPMorgan Chase & Co. forecast that its trading revenue will slide this quarter. Wincor Nixdorf AG slumped 6.2 percent after the maker of self-checkout tills in supermarkets posted worse-than- expected earnings. Wacker Chemie AG dropped 4.1 percent after
the chemical maker also reported earnings that missed estimates.

The Stoxx Europe 600 Index slid 0.8 percent to 335.12 at 1:05 p.m. in London. The benchmark gained 1.3 percent last week, its largest rally in a month, amid renewed mergers-and-acquisitions activity. The U.K. market is closed for a holiday today. Standard & Poor’s 500 Index futures fell 0.4 percent, while the MSCI
Asia Pacific Index lost less than 0.1 percent.

• Support:1875, 1870, 1858
• Resistance:1888, 1896, 1909

Australian stocks, which have never cost so much relative to a gauge of Asia-Pacific shares, may get more expensive as an economic recovery broadens, said a global money manager at Equity Trustees Ltd.
The CHART OF THE DAY’s top panel shows Australia’s S&P/ASX 200 Index trades for 15.3 times estimated earnings and the MSCI Asia Pacific Index has a price-earnings ratio of 12.7, based on Bloomberg forecasts for profits. The lower panel shows the spread between the valuation measure for the two gauges sank at the end of April to the narrowest since Bloomberg began compiling the data in 2005.
Investors are paying for earnings growth in the region’s fourth-biggest equity market as record-low interest rates drive a recovery in housing and consumer spending. The S&P/ASX 200 reached the highest level in almost six years last month.
“We’ve got more stable global conditions and low interest rates, suggesting some premium for future earnings is warranted,” said George Boubouras, Melbourne-based chief investment officer at Equity Trustees, which oversees $32 billion for clients. Valuations “are expected to expand in the year ahead.”

Benchmark stock gauges in Japan, Hong Kong and China fell in 2014, dragging valuations lower for Australia’s larger regional peers. Australia’s S&P/ASX 200 hasn’t diverged from the MSCI World Index, a global developed-market measure that counts nine U.S. companies among its 10 most-heavily-weighted firms.
Australian gross domestic product growth will quicken to 2.8 percent this year from 2.4 percent in 2013, while Asia’s expansion will slow to 6.2 percent from 6.3 percent, according to the median forecasts of economists surveyed by Bloomberg.