European Factors to Watch - Shares seen little changed as Fed warns on cliff

Thu Dec 13, 2012 2:31am EST

By Francesco Canepa
    LONDON, Dec 13 (Reuters) - European stocks are seen opening flat to higher
on Thursday as investors balanced a new monetary boost from the U.S. Federal
Reserve with lingering concerns that austerity measures could derail the world's
largest economy. 
    At 07 23 GMT, futures for the Euro STOXX 50 were up 0.2 percent ,
 contracts on Germany's DAX were flat and futures for France's CAC
 were up 0.1 percent.   
    The Fed announced a new round of monetary stimulus on Wednesday and
indicated interest rates would remain near zero until unemployment falls to 6.5
percent, but chairman Ben Bernanke warned that monetary policy won't be enough
to offset damage from a "fiscal cliff" of steep tax hikes and budget cuts
scheduled to kick in on Jan. 1. 
    Congressional Republicans and the White House are in talks to avert the
'fiscal cliff' but negotiators warned on Wednesday the showdown could drag on
past Christmas as sharp differences remained.
    The Fed's new stimulus plan had briefly pushed the U.S. S&P 500 to a
seven-week high on Wednesday before Bernanke's comments on the 'cliff' dampened
investor optimism, sending the index to a flat close.
    "While these measures clearly show that the Fed is doing everything in their
power to give the economy a major boost it still remains questionable just how
much if at all these bond really help and if instead they merely raise the
prospects of inflation in the future," Markus Huber, a senior trader at ETX
Capital, said. 
    "Now with the Fed out of the way, focus will now increasingly shift towards
the 'fiscal cliff' with time starting to run out and some major progressed will
have to be made soon otherwise markets might just start pricing in the US going
over the cliff."
    Copper and crude prices, which depend on economic activity,
fell early on Thursday and concerns about U.S. economic growth was expected to
cap gains on European equity indexes after a steep three-week rally.
    Charts showed the FTSE 100, DAX, CAC 40 and the
euro zone's blue chip Euro STOXX 50 heading into 'overbought'
territory, with their relative strength index (RSI), a closely-watched momentum
indicator, above 70, which could trigger a pause in the recent rally.
    The Euro STOXX 50 index hit a 16-month high on Wednesday and is up 30
percent since June as asset purchase plans by global central banks drove down
bond yields and led investors to chase superior returns among equities.
    Sentiment surrounding the euro zone, in particular, had improved on the back
of a September pledge by the European Central Banks to buy the debt of countries
that apply for international aid, driving implied volatility on the region's
blue chips, as measured by VSTOXX index to lows not seen in five years.
    The euro zone made further steps towards closer integration on Thursday as
it clinched a deal to give the ECB new powers to supervise banks from 2014.
 
    But the region's recession was estimated to have deepened in the last three
months and the chances of a recovery faded further into 2013, according to a
Reuters poll, clouding the prospects for corporate earnings and making its more
difficult for governments to reduce their deficits. 
    Companies in the pan-European STOXX 600 index were expected to
report a 9 percent increase in earnings next year, Thomson Reuters StarMine data
showed, an estimate that many strategists saw as overly rosy.
    The index traded at 11.3 times its expected earnings for the next twelve
months, its highest valuation multiple since 2010, according to Datastream
figures, capping the appeal of European shares.
    "Earnings expectations are still too high and we do not see much room for
higher valuations," Joost van Leenders, asset allocation specialist at BNP
Paribas Investment Partners, said.
    "We do not think that the fiscal crisis in the eurozone is fully under
control, so (that) may weigh on markets at some point."
    He expected European stock indexes to fall between 5 and 10 percent by
mid-2013 and rebound in the second half, thanks to a stabilisation in the
economy, to end the year between flat and 5 percent down.

    
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    MARKET SNAPSHOT AT                  
    729 GMT                             
                          LAST     PCT    NET
                                   CHG    CHG
    S&P 500              1,428  0.04 %   0.64
                            48          
    NIKKEI               9,742  1.68 %  161.2
                            73          
    MSCI ASIA  <.MIASJ0         0.35 %   1.88
    EX-JP      00PUS>                   
    EUR/USD              1.309  0.14 %  0.001
    USD/JPY              83.61  0.43 %  0.360
    10-YR US   <US10YT=  1.711      --   0.01
    TSY YLD    R>                       
    10-YR      <EU10YT=  1.357      --   0.02
    BUND YLD   R>                       
    SPOT GOLD            $1,69   -0.81  -$13.
                           .71       %      4
    US CRUDE             $86.5   -0.25  -0.22
                                     %  
 
    
  > Asian shares rise, yen falls after Fed's stimulus steps 
  > Wall St ends almost flat as Bernanke warns on "cliff"   
  > Nikkei touches 8-month high above 9,700, exporters rise 
  > Treasuries drop as Fed unveils new bond-buying program  
  > Dollar broadly weak after Fed, yen also retreats        
  > Gold falls as Fed move raises concern on stimulus scope 
  > LME copper falls after Fed; fiscal cliff worries drag   
  > Crude slips as U.S. stocks rise, fiscal concerns weigh  
    
    COMPANY NEWS:
    
    VOLVO 
    French carmaker Renault said late on Wednesday it would sell its
6.5 percent stake in the world's second biggest truckmaker. 
    
    EDF 
    EDF Energy said it will sell its 819 megawatt (MW) Sutton Bridge gas power
station in England to a group of investors led by Australian bank Macquarie
. 
    
    TECHNIP 
    The oil and gas services group said it has signed an agreement with Shell to
enhance collaboration on the design, engineering, procurement, construction and
installation of future Floating LNG facilities. 
    
    EADS 
    Canada scrapped a controversial sole-source plan to buy F-35 jets from
Lockheed Martin Corp, saying it will now evaluate all available options
for acquiring new fighters. 
    
    SAFRAN 
    The French aerospace group said it plans to pay shareholders an interim
dividend of 0.31 euros a share for 2012 on Dec. 20.   
    
    STMICRO 
    The European semiconductor group may not disclose details about its plan to
exit its wireless chip venture with Ericsson until as late as the
second quarter of 2013, its CEO said. 
    
    TELE2 
    The Swedish mobile operator will take a pragmatic approach to the future of
its Russian operations, CEO Mats Granryd said at the company's capital markets
day on Wednesday. 
    
    ERICSSON 
    The European Union is concerned about the security implilcations of the
increasing dominance of Chinese mobile network equipment makers. 
    
    MUNICH RE 
    The reinsurer named former Volkswagen chief Bernd Pischetsrieder
to replace its supervisory board chairman, Hans-Juergen Schinzler, who is
retiring at the end of the year. 
    
    SOCIETE GENERALE 
    The French bank has agreed to sell its majority stake in Egypt's National
Societe Generale Bank to Qatar National Bank for a net gain
of around 350 million euros and boosting its Core Tier 1 ratio under Basel III
by close to 30 basis points. 
      
    CREDIT AGRICOLE 
    The French bank is mulling a new round of job cuts in its investment bank,
Dow Jones reported, citing unnamed sources. 
    
    BANKS   
    A German parliamentary mediation committee failed on Wednesday to reach an
agreement on ratifying a tax deal signed by the German government with
Switzerland, a battle tinged by next year's federal election.
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