Europe Factors to Watch-Shares to rise; UBS fine seen priced in

Wed Dec 19, 2012 2:35am EST

LONDON, Dec 19 (Reuters) - European stocks are poised to rise at the open on
Wednesday as growing expectations of a budget deal in the United States and of
further monetary stimulus from Japan underpinned sentiment.
    The European banking sector will be in the spotlight after Swiss bank UBS
 was hit with a $1.5 billion bill and admitted to fraud on Wednesday in
order to settle charges of manipulating global benchmark interest rates.
 
    The fine, the second largest to be received by a bank, was in line with
expectations and shares in UBS were expected to open 0.3 percent higher in
Zurich. 
    "I think the fines for Libor rigging have been priced in for some time now,"
said Zahid Mahmood, senior dealer at London Capital Group.
    "While they are substantial to say the least and they will certainly impact
a banking sector that has been under attack for a while, I don't think they will
have any material impact to temper the broader rally we are undergoing due to
the various economic and political reasons, such as additional central bank
stimulus, broader signs showing global economic improvement," the trader said.
    In the broader market, futures for the Euro STOXX 50 and France's
CAC were up 0.3 percent, while contracts on Britain's FTSE 100 
added 0.2 percent and Germany's DAX futures were 0.1 percent higher at
0714 GMT.
    The euro hit multi-month highs and Japan's Nikkei average rose above the
10,000 mark for the first time in more than eight months on Wednesday, as signs
of progress towards averting a "fiscal cliff" of growth-curbing austerity
measures and expectations of more aggressive monetary stimulus from the Bank of
Japan lifted riskier assets. 
    "European markets look once again supported and you'd be brave to
aggressively short this market, given the current news flow and momentum," Chris
Weston, chief market strategist at IG, said in a trading note.
    "Pull-backs in so many asset classes are non-existent, and we are seeing
break-outs not just in European markets and certain Asian bourses, but in key
major currencies."
    Weston expected Spain's IBEX 35 to be the standout performer with a
0.5 percent higher open on Wednesday, after it broke out of a downward channel
earlier this week.
    He cautioned Britain's FTSE 100 which closed 0.4 percent higher at
5,935.90 on Tuesday, would struggle to break a major psychological resistance at
6,000 unless market sentiment surrounding Europe was further boosted by a major
consensus-beat in Germany's Ifo business morale survey, due at 900 GMT.
    The closely watched Ifo was expected to have risen for a second straight
month, reaching 102 from 101.4 in November, according to a Reuters poll.
     
    EURO ZONE RALLY   
    The euro zone blue-chip Euro STOXX 50 index gained 0.6 percent
to close at 2,643.50 points on Tuesday, a level not seen since mid-2011. 
    The index was poised to end the year in positive territory for the first
time since 2009 after a 14 percent rally in the past twelve months, largely
fuelled by cash injections by global central banks to stimulate the economy and
soothe the sovereign debt markets. 
    The Euro STOXX 50 Volatility Index, or VSTOXX, Europe's widely-used
measure of investor risk aversion, hit a five-year low on Tuesday and slipped
below Wall Street's own 'fear gauge', the VIX, only for the fo urth t ime
in the past 10 years, s ignalling inve stors we re positioning fo r additional gains
in European equities.
    Earnings momentum in the euro zone momentum had also bottomed out but it
remained a reason for caution as estimate downgrades still outweighed upgrades
by nearly 5 percent in the past three months, Datastream data showed, consistent
with bleak growth expectations in the region.
    "There is a clear disconnect between earnings momentum and the market
performance," Emmanuel Cau, a strategist at JPMorgan, said.
    Datastream data showed the broad STOXX Europe 600 trading at 11.5
times 12-month forward earnings, a multiple last seen in May 2010, and Cau
estimated forecasts would need to rise if share prices were to continue their
rally.
    "Momentum will have to turn up, but we think that it is unlikely to happen
very quickly and that's why we fear the market reprice the weaker earnings."
    
--------------------------------------------------------------------------------
 MARKET SNAPSHOT AT 0721 GMT                            
                                         LAST  PCT CHG  NET CHG
 S&P 500                             1,446.79   1.15 %    16.43
 NIKKEI                             10,160.40   2.39 %   237.39
 MSCI ASIA EX-JP                       546.16    0.4 %     2.16
 EUR/USD                               1.3236   0.05 %   0.0007
 USD/JPY                                84.26   0.07 %   0.0600
 10-YR US TSY YLD                       1.812       --    -0.01
 10-YR BUND YLD                         1.421       --     0.00
 SPOT GOLD                          $1,674.96   0.32 %    $5.42
 US CRUDE                              $87.89  -0.05 %    -0.04
 
  > Shares, euro rise on hopes of U.S. "cliff" deal, BOJ easing 
  > Wall St climbs on economy bets as it looks past 'cliff'     
  > Nikkei rises above 10,000 led by exporters, financials      
  > Treasuries fall on hopes of fiscal deal                     
  > Yen hits 16-month low vs euro, BOJ meeting in spotlight     
  > Gold bounces on weak dollar; but near 4-mth low             
  > Copper prices tread water as U.S. nears fiscal cliff deal   
  > Brent nears $109 on hopes of US budget crisis resolution    
    
    
  COMPANY NEWS
    
    UBS 
    Swiss bank UBS was hit with a $1.5 billion bill, the second-largest fine
ever levied on a bank, and admitted to fraud on Wednesday in order to settle
charges of manipulating global benchmark interest rates. 
    
    GENERALI 
    Moody's on Tuesday placed the Baa2 senior debt rating, the Baa3 subordinated
debt rating and the Ba1 preferred stock debt ratings of the Italian insurer on
review for downgrade. The Baa1 insurance financial strength rating at
Assicurazioni Generali SpA was unaffected by the announcement. 
    Unicredit Chief Executive Federico Ghizzoni said on Tuesday he is
comfortable with the sale of the Bank of Italy's stake in Generali to
state-backed fund Fondo Strategico Italiano (FSI). 
    
    FRENCH BANKS    
    French President Francois Hollande's long-awaited bank reform will be
unveiled on Wednesday, almost a year after his campaign pledge of a "long war"
against the financial sector. 
    
    LVMH 
    Louis Vuitton's new chief executive has quit suddenly from the helm of
luxury group LVMH's top brand because of health reasons. 
    
    SAP 
    Top rival Oracle reported fiscal second-quarter revenue and earnings that
beat consensus on Tuesday and said it was gaining share against SAP in Europe.
 

    SOCIETE GENERALE 
    The French bank's finance head Bertrand Badre is to join the World Bank as
chief financial officer on March 1 after a year spent steering France's No. 2
bank through asset sales, cost cuts and the euro crisis. 
    
    SCHNEIDER ELECTRIC 
    The French engineering company said it plans to scrap its supervisory board
and name Jean-Pascal Tricoire as both chairman and chief executive officer of
the group. 
    
    BANKIA 
    Bankia chief Jose Ignacio Goirigolzarri said he would like the nationalised
entity to be privatised through successive share listings, though he did not
rule out the possibility the bank could be sold. "An auction is a possibility,
but it's not the main scenario," Goirigolzarri said in an interview with
Actualidad Economica, published in newspaper Expansion. 
    Bankia said on Tuesday it is paying 608 million euros to British insurer
Aviva for its stake in a joint venture, to settle a dispute over the breaching
of an exclusive distribution agreement.  
    
    BUNZL 
    The packaging firm said overall trading in 2012 has been consistent with
expectations, with group revenue growth for the year expected to be
approximately 6 percent at constant exchange rates, and it unveiled two
acquisitions in Canada and Australia. 
    
    MERCK KGAA 
    The drugmaker said its cancer drug Stimuvax did not reach its target of
improving survival of lung cancer patients in a late-stage study. 
    
    FINMECCANICA 
    The board of Finmeccanica is expected to discuss asset sales at a board
meeting later on Wednesday. Italian newspaper says no decision will be taken at
this board meeting on the sale of unit AnsaldoEnergia, for which Siemens
, Doosan and the Italian state-backed strategic fund FSI
have expressed an interest.
    
    ZODIAC AEROSPACE 
   The aerospace group forecast a rise in like-for-like sales for its current
financial year as it posted a 17 percent rise in first-quarter revenue.
 
        
    TELEFONICA 
    Telecoms company Telefonica said on Tuesday it would invest $2 billion in
Argentina in 2013 and 2014 to increase its client base and improve capacity,
especially its mobile network. The group, which is expected to list its Latin
American business, also said it transferred about half of the shares of its
Peruvian unit to its Latin American holding company in a further step towards an
Initial Public Offering. 
    
    REPSOL 
    China's sovereign wealth fund China Investment Corp (CIC) is interested in
Repsol's natural liquefied gas division, El Confidencial reported on Wednesday,
citing unnamed sources.