European Factors to Watch - Rally to pause before inflation data

LONDON Fri Nov 29, 2013 2:23am EST

LONDON Nov 29 (Reuters) - European stocks were expected to open flat to lower on Friday as weak German retail sales dented sentiment and investors waited for confirmation that euro zone inflation is holding up before committing more money to a three-month rally in local indexes.

Retail sales in Germany unexpectedly fell in October, cooling investor enthusiasm over the region's largest economy after a higher-than-expected inflation reading on Thursday and sending a cautious signal ahead of the Christmas sales season.

"German retail sales make me a little bit worried that Christmas sales in Germany may not turn out as good," Markus Huber, senior sales trader at Peregrine & Black, said.

"It's the last day of the month so I would expect range trading and a bit of profit taking."

At 0719 GMT, futures for the Euro STOXX 50, Britain's FTSE 100 , Germany's DAX and France's CAC were between flat a 0.1 percent lower.

After higher-than-expected German consumer prices data on Thursday, investors were speculating euro zone flash inflation estimates for November, due out at 1000 GMT, would beat economists' expectations for a paltry 0.8 percent rise.

A higher reading would paint a healthier picture of the region's economy and reduce pressure on the European Central Bank to cut interest rates or take other action to ease monetary policy.

"With these preliminary figures, Eurozone flash (estimates) will likely print a higher than expected level in November," Credit Agricole wrote in a note, adding it expects a 0.9 percent inflation rate.

The DAX index reached an all-time high on Thursday and the euro zone's blue-chip Euro STOXX 50 rose 0.3 percent to 3,092.42 points, a closing high not seen for five years. It was now a whisker away from an intra day of 3,106 hit on Nov 7.

With one day to go, the Euro STOXX 50 is up 0.7 percent so far in November, in what would be its third consecutive monthly gain.

Stan Shamu, a market strategist at IG, said further evidence of reduced deflation risk for the euro zone could push the Dax higher.

Trading was expected to be light as the U.S. stock market was due to close early at 1800 GMT. Volume on the pan-European FTSEurofirst 300 so far this week has been the lowest since the first week of January, when the index only traded for four days.

> GLOBAL MARKETS-Nikkei pauses, yen hits 5-yr low vs euro > Nikkei near flat after 6-year closing high; exporters sag > FOREX-Yen under pressure from carry trades > Gold set for biggest loss in 5 months on U.S. stimulus concerns > Copper up, but on track for 3 pct monthly drop > Brent holds near $111, Libya worries support

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