Europe Factors to Watch-Shares set to halt bounce after Spain downgrade

Fri Apr 27, 2012 2:52am EDT

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PARIS, April 27 (Reuters) - European stocks were set to drop on Friday,
reversing a three-day tentative recovery rally after Standard & Poor's cut its
credit rating on Spain by two notches, reviving worries over the debt-stricken
country.	
    S&P, citing expectations Spain's finances will deteriorate even more than
previously thought due to the recession and the country's ailing banking sector,
downgraded Spain to BBB-plus with a negative outlook, saying the situation could
deteriorate further unless strong measures were taken at a European level.
 	
    At 0638 GMT, futures for the Euro STOXX 50, for Germany's DAX
 and for France's CAC were down 0.5-1.1 percent.	
    "We're expecting another strong wave in this euro zone debt crisis,"
Carmignac Gestion's Global Manager Frederic Leroux said. "The divergence between
German policymakers and the rest of the euro zone is too big for a solution to
emerge right now."	
    The French asset management firm, which has about 50 billion euros ($66
billion) under management, has no French, Italian or Spanish debt in its
portfolios.	
    "We're not playing against Europe or France, we're just investing where the
potential for growth is the strongest, and it's not in Europe," Leroux added.	
    Spanish banks will be in the spotlight after Popular reported a 46
percent drop in first-quarter profit as it set aside provisions to cover for
losses in bad property investments. 	
    Investors were also bracing for Italy's debt auction on Friday. The country
is set to offer up to 6.25 billion euros in bonds, with borrowing costs expected
to climb above 5.5 percent for the benchmark 10-year bond.	
    It yielded 5.8 percent on Thursday, up from an auction level of 5.2 percent
at the March sale. 	
    "Thursday's bill auction did nothing to reassure the markets, with yields
soaring," Saxo Bank sales trader Alexandre Baradez said. "The LTRO boost is
over.	
    "The rally we had this week was purely a technical rebound. We're now back
in a market driven by headlines and comments from political leaders."	
    On Thursday, Italy paid the highest yield since January to sell six-month
bills.	
    The European Central Bank called on authorities to set up a body to manage
bank rescues in the euro zone, marking the central bank's strongest intervention
yet in the debate on whether the costs of bailing out troubled banks should be
shared. 	
    The euro zone's blue-chip Euro STOXX 50 index has lost 11
percent over the past six weeks, while Spain's IBEX has dropped nearly
20 percent.	
   
--------------------------------------------------------------------------------	
 MARKET SNAPSHOT AT 0640 GMT                            
                                         LAST  PCT CHG  NET CHG
 S&P 500                             1,399.98   0.67 %     9.29
 NIKKEI                              9,520.89  -0.43 %   -40.94
 MSCI ASIA EX-JP                       514.61   0.08 %     0.40
 EUR/USD                               1.3171  -0.12 %  -0.0016
 USD/JPY                                80.72  -0.38 %  -0.3100
 10-YR US TSY YLD                       1.893       --    -0.05
 10-YR BUND YLD                         1.653       --    -0.03
 SPOT GOLD                          $1,652.40  -0.29 %   -$4.88
 US CRUDE                             $103.96  -0.56 %    -0.59
    	
    GLOBAL MARKETS-Shares inch up, Spain debt downgrade caps 	
    US STOCKS-Housing, profits lift Wall St, Amazon up late  	
    Nikkei up after BOJ eases monetary policy                	
    FOREX-Euro stung by Spain downgrade, yen looks to BOJ    	
    TREASURIES-US bonds rise after S&P downgrades Spain      	
    Gold inches down after Spain downgrade; dollar weighs    	
    Brent slips, Spain downgrade revives euro zone woes      	
    LME copper snaps 3-day rise after Spain downgrade        	
    	
    COMPANY NEWS:	
    	
    POPULAR 	
    The Spanish bank reported a 46 percent drop in first quarter profit on
Friday after it set aside provisions to cover for losses in bad property
investments. 	
    	
    TOTAL 	
    French oil group Total posted a 1 percent decline in first-quarter
adjusted net income on Friday due to tough refining and chemicals activities and
as production of oil and gas remained flat. 	
    	
    DAIMLER  	
    The German automotive group reported a surprise increase in first-quarter
operating profit on Friday, in part thanks to stronger-than-expected earnings at
its financial services business. 	
    	
    SANOFI 	
    French drugmaker Sanofi confirmed that earnings could decline by up to 15
percent this year as top-selling drugs previously protected by patents,
including blood thinner Plavix, are hit by competition from cheap copies.
 	
    	
    BASF 	
    The world's largest chemicals maker reported better-than-expected
first-quarter operating earnings, boosted by its oil and gas division and on
higher sales of liquid chemicals. 	
        	
    NOBEL BIOCARE  	
    Swiss dental implant maker Nobel Biocare on Friday posted
first-quarter net profit of 13.7 million euros, outstripping the 12.5 million
euros forecast by analysts in a Reuters' poll. 	
    	
    NOVARTIS  	
    U.S. health regulators approved on Thursday Novartis AG's Afinitor for the
treatment of non-cancerous kidney tumors in patients with a rare genetic disease
known as tuberous sclerosis complex. 	
    	
    DEUTSCHE BANK, BARCLAYS 	
    Barclays and Deutsche Bank on Thursday won a fierce bidding war for a
portfolio of toxic assets the US government acquired in the 2008 bailout of
insurance giant AIG. 	
    	
    DEUTSCHE BOERSE  	
    Deutsche Boerse AG's first-quarter earnings before interest and taxes fell
19 percent to 260 million euros ($344 million), hit by a charge for the failed
takeover of NYSE Euronext. 	
    	
    REPSOL GAS NATURAL  	
   Spanish oil major Repsol is considering a merger with gas and electricity
group Gas Natural to prevent a takeover bid or the sale of its 30 percent stake
to buy a medium-sized oil firm such as Galp, Cinco Dias reported, citing unnamed
sources.	
    	
    FONDIARIA-SAI, UNIPOL, PREMAFIN, MILANO
ASSICURAZIONI 	
   Italy's Antitrust authority has opened an investigation into the planned
merger between Unipol and Fondiaria-SAI and suspended the operation until the
end of the probe, which will last up to 75 days. Fondiaria also said in a
statement on Thursday the board had named Cosimo Rucellai had been appointed as
the new chairman. 	
    	
    DSV 	
    Danish freight forwarder DSV A/S reported a smaller-than-expected
rise in core profits for the first quarter, held back by lower revenue in its 	
Air & Sea division due to falling freight rates and volumes. 	
    	
    OUTOKUMPU 	
    Finnish stainless steel maker reported a fall in first-quarter profit and
forecast its second-quarter operational results would be negative or break-even
due to cheaper nickel.	
    	
    WPP 	
    The world's largest advertising group, nudged its full-year outlook higher
on Friday after strong growth in Asia Pacific and Latin America got the group
off to a solid start to 2012. 	
    	
    AREVA  	
   The world's biggest maker of nuclear plants posted a 2.4 percent increase in
first-quarter revenue as growth in reactor services more than offset a decline
in its uraniam transformation business.
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