European Factors to Watch - Shares head for worst week since Nov on Cypriot crisis

Fri Mar 22, 2013 3:25am EDT

LONDON, March 22 (Reuters) - European stocks were expected to edge lower on
Friday, heading for their worst weekly loss since November as Cyprus scrambles
to find a solution to its funding crisis, which could see the island become the
first country to leave the euro zone.
    Futures for the Euro STOXX 50, Britain's FTSE and France's
CAC were 0.4-0.5 percent lower at 0723 GMT, with contracts on Germany's
DAX down 0.3 percent.
    In a sign it was at least preparing for the worst, the Cypriot government
sought powers to impose capital controls to stem a flood of funds leaving the
island if there is no deal before banks reopen on Tuesday. Such a scenario could
also dent confidence in banks elsewhere in the euro zone.
    The Cypriot parliament was due to debate crisis measures on Friday, but they
looked likely to be insufficient to raise 5.8 billion euros ($7.5
billion)demanded by the European Union in return for a 10 billion euro lifeline
in time for Monday's deadline. 
    Cyprus's hopes of securing help from Russia were also dashed, with Moscow
saying on Friday that talks have finished, and that Russian investors were not
interested in Cypriot gas reserves. 
    Lee Robinson, founder of asset management firm Altana Wealth, said a default
in Cyprus would send investors seeking shelter in assets perceived as safe, such
as German and U.S. government bonds, on concerns that other euro zone countries
may be affected and bank accounts raided .
     Robinson has been seeking protection against possible swings in share
prices by buying implied volatility, an index which moves in the opposite
direction to cash equities and is based on option contracts.
    "Volatility to me is a very underpriced asset given the potential outcomes
globally," Robinson said.
    "If we have a meltdown in Europe it could go to the levels of 2008. If we
have a bit of a recovery, it will probably trade sideways for a long period of
time."
    The cost of options on euro zone blue chips, as measured by the Euro STOXX
50 volatility index, or VSTOXX, has ticked up since the Cypriot crisis
started, but it is still at around half its 2012 high and a quarter of its
all-time peak seen in 2008, in a sign investors still thought the worst of the
crisis was now behind us.
    The VSTOXX closed at 19.79 on Thursday, still down around 35 percent since
the European Central Bank president Mario Draghi pledged to save the euro in
July 2012.
    "The market seems relatively calm given the distinct risks of Cyprus exiting
euro zone but we expect the uncertainty to continue to weigh on market
sentiment", analysts at Credit Agricole wrote in a note.   
    The pan-European FTSEurofirst 300 index has fallen in four of the
past five sessions, suggesting some profit taking was setting in. The index
closed at its lowest level since Mar 7 on Thursday but it was still only 1.5
percent away from a 4-1/2-year high hit last week.
    A possible boost for the index could come from the widely followed German
Ifo business climate survey at 0900 GMT, which was expected to show a fifth
consecutive monthly rise in March.      

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 MARKET SNAPSHOT AT 0724 GMT                                        
                                                  LAST     PCT CHG     NET CHG
 S&P 500                                      1,545.80     -0.83 %      -12.91
 NIKKEI                                      12,338.53     -2.35 %     -297.16
 MSCI ASIA EX-JP                                533.44     -0.41 %       -2.18
 EUR/USD                                        1.2902      0.04 %      0.0005
 USD/JPY                                         94.72     -0.17 %     -0.1600
 10-YR US TSY YLD                                1.904          --       -0.01
 10-YR BUND YLD                                  1.344          --       -0.02
 SPOT GOLD                                   $1,612.00     -0.13 %      -$2.09
 US CRUDE                                       $92.54       0.1 %        0.09
 
    
  > Asian shares, euro pressured by growth worries, Cyprus  
  > Wall St slides as Oracle drops, Cyprus worries escalate 
  > Nikkei retreats from multi-year highs on Cyprus concerns 
  > TREASURIES-Prices gain as Cyprus scrambles for help     
  > Cyprus debacle keeps euro in doldrums, yen steadies     
  > Gold heads for biggest weekly rise in 4-mths on Cyprus  
  > LME copper up, but set for biggest weekly drop in four  
  > Brent holds above $107 ahead of Cyprus bailout deadline 
    
    COMPANY NEWS
    
    BP 
    The British oil company said on Friday it would launch an $8 billion share
buy-back programme to return cash to shareholders after closing the sale of its
stake in its Russian unit.
    
    LUXURY SECTOR, MULBERRY 
    The British luxury brand on Friday warned on year profit again, partly
blaming reduced tourist spending in London stores for weaker than expected
post-Christmas revenue.
    
    E.ON 
    Eike Batista, the controlling shareholder of Brazilian energy company MPX
Energia SA, confirmed on Thursday he is in talks to sell a stake in
the company to E.ON. 
    
    ALSTOM 
    The French power and transport group said it has renewed its existing bank
guarantee facility for 9 billion euros, extending the maturity by three years to
July 2016. 
    
    LUFTHANSA 
    The airline begins a next round of wage talks with union Verdi after
pre-emptive strikes on Thursday forced the airline to cancel almost 700 flights.
 
    
    MAN SE, VOLKSWAGEN 
    Remaining outside shareholders in MAN SE may receive a cash compensation of
80.89 per share and dividend of 3.07 euros (or 3.30 euros before tax) per share
if a domination and profit and loss agreement with VW is approved at the AGM.
 
    
    SALVATORE FERRAGAMO 
    The Italian star shoemaker forecast a rise in revenues and profits this year
after demand from the Asia Pacific area helped lift its 2012 net profit by 30
percent to 106 million euros. 
    
    SAP 
    The company announced plans to change its legal form to that of an SE
(societas europaea), and that it planned to seek approval for the move at the
AGM in 2014. 
    
    SALZGITTER  
    Annual press conference. It has already reported a pretax loss of 29 mln
euros for 2012 and said it sees 2013 profit in the low double-digit million euro
range. 
    
    SANOFI 
    The effects of Sanofi's experimental multiple sclerosis drug Lemtrada
continue to benefit the majority of patients long after they have completed
their treatment, the French drugmaker said. 
        
    HAVAS 
    The French advertising agency reported a 5 percent rise in group net profit
for 2012 on revenue growth that was slower than rivals. 
    
    KBC, BANCO SANTANDER  
    Belgium's KBC and Spain's sold almost 20 million of shares in Polish lender
Bank Zachodni WBK for 4.9 billion zlotys ($1.5 billion), or 245 zlotys
per share, BZ WBK said in a statement. 
    
    ANHEUSER-BUSCH INBEV SA 
    Cia de Bebidas das Americas SA, Latin America's largest brewer, plans to
limit its exit of the Venezuelan market to the closure of a plant and will
market its products in the Andean country through a local partner.
 
    
    HOCHTIEF 
    Chairman Stephen Johns and non-executive directors Wayne Osborn and Ian
Macfarlane of Leighton resigned Friday on their view that "Hochtief no
longer supports an independent board at Leighton". 
    
    UNIPOL 
    The Italian insurer said on Thursday the 2012 net profit of the new group
that will be created from the merger with peer Fondiaria-SAI was 441
million euros.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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