GLOBAL MARKETS-German confidence lifts Europe shares to 18-mo high

Tue Dec 11, 2012 8:29am EST

* European shares rise after ZEW German confidence jump
    * Wall Street expected to open higher
    * Euro up 0.4 pct on dollar, Italian bonds reverse falls
    * Oil prices tick up on Egypt, Syria tensions

    By Marc Jones
    LONDON, Dec 11 (Reuters) - European shares hit an 18-month
high and the euro climbed on Tuesday, buoyed by a pick-up in
German confidence indicators and expectations the Federal
Reserve will keep pumping money into the U.S. economy.
    Wall Street shares were likely to crawl higher too, with
futures prices pointing to a 0.22 rise in the S&P 500 and
0.26 percent and 0.30 gains in the Dow Jones and Nasdaq
100.
    Following some disappointing euro zone data this month, the
ZEW survey provided some relief for markets, showing confidence
among German investors and economists increased sharply this
month. 
    Markets had been rattled on Monday by Italian Prime Minister
Mario Monti's announcement he would step down some weeks early.
But the upbeat ZEW data helped lift shares and the euro from
their gloom.
    The pan-European FTSEurofirst 300 share index rose
to 1137.90 points, its highest since June 2011, though it later
eased back a little. Italian bonds shrugged off
their early morning weakness and the euro jumped to
four-day high of $1.29970. 
    Many economists expect the German economy to contract in the
fourth quarter under the weight of the euro zone's troubles, but
leading indicators like the ZEW and a separate survey from the
Ifo institute now suggest it could bounce back in early 2013.
    "The (ZEW) rise confirms earlier worldwide survey results
signalling that the global industrial cycle has turned and that
world trade is picking up," said Aline Schuiling a senior
economist at ABN Amro.     
 
    
    FED FOCUS
    The other main focus for investors was a meeting of the
Federal Reserve, and ongoing "fiscal cliff" talks in the U.S. to
avoid $600 billion of previously drawn up spending cuts and tax
hikes suddenly kicking in in the new year.
    When the Fed concludes its two-day meeting on Wednesday, the
central bank is expected to extend its asset purchase scheme and
commit to buy $45 billion of U.S. debt each month.
    "Since the October FOMC meeting, the majority of
policymakers highlighted that the current policy accommodation
is needed as the labour market has been too weak for too long,"
said Annalisa Piazza, an economist at Newedge Strategy.
    "Recent labour market reports have been relatively
encouraging but - in our view - we need to see much more
improvement before some sort of accommodation will be removed." 
  
    Expectations of more easing put the dollar on the
back foot and pushed the Canadian dollar to a
two-month high of C$0.9873 per U.S. dollar, while the New
Zealand dollar hit a nine-month high of $0.8369.
    The euro was stronger against most major currencies as the
afternoon session gathered pace. It had initially climbed after
Italy's Monti played down his decision to resign, saying he
wanted to continue to influence politics whatever role he fills
after a parliamentary election in the new year. 
    Bank of England Governor Mervyn King warned on Monday that
continued imbalance in the global economy may see more
competitive depreciation of currencies as countries resort to
"actively managed exchange rates", in place of domestic monetary
policy priorities, as a way to encourage growth. 
    
    HOLDING PATTERN        
    In the oil market, Brent crude rose back above $108 a barrel
as the dollar weakened and continued unrest in Egypt and Syria
underscored the continuing tensions blighting the Middle East,
the world's major oil exporting region. 
    Gold was steady near $1,710 an ounce, with more U.S.
stimulus expected to support gold's appeal as a hedge against
inflation. 
    Asian equities had earlier hit a 16-month high and the
combined rises in Europe left the MSCI index of world stocks
 up 0.2 percent at 335.51 ahead of the U.S. open,
its highest level in almost two months.
    Still to come in macroeconomic data are U.S. international
trade figures for October at 1330 GMT followed by consumer
confidence and wholesale inventory data at 1500 GMT.
    "We've been getting a lot of the beginning of our day from
seeing what Europe has been doing and I think that's going to
hold true today," said Kim Forrest, senior equity research
analyst at Fort Pitt Capital Group in Pittsburgh.
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