European Factors to Watch-Shares seen up, focus on commods

Tue Jan 7, 2014 2:35am EST

LONDON Jan 7 (Reuters) - European equities were expected to open slightly higher on Tuesday, mirroring gains in U.S. stock index futures, with firmer commodity prices seen prompting investors to look for beaten-down mining and energy shares.

Brent oil futures climbed to trade above $107 a barrel as cold weather across the central United States threatened production, while key base metals prices rebounded after sharp declines in the previous session.

U.S. stock index futures were all up 0.2 percent after Wall Street ended lower on Monday, when the FTSEurofirst 300 index closed 0.2 percent weaker.

The STOXX Europe 600 basic resources index, which fell more than 2 percent in the previous session to record its worst one-day drop in five months on concerns about metals demand in top consumer China, could bounce back as investors look for bargains after recent declines.

Societe Generale's European equity strategists backed the mining and oil sectors - the two worst-performing parts of the market in 2013 - arguing that concerns over a Chinese economic slowdown have been exaggerated and that oil stocks should benefit from rising production and free cash flow.

"We recommend buying the laggards. Or maybe better still, loving what everybody else hates (oil, mining)," it said in a research note.

The European mining index fell 13.4 percent last year to make the sector the worst-performer in Europe. The second worst-performer was the STOXX Europe 600 Energy sector, which rose 3.8 percent but underperformed bigger gains in other equity sectors.

At 0729 GMT, futures for Britain's FTSE 100, Germany's DAX, France's CAC and the Euro STOXX 50 were 0.1 to 0.2 percent higher.

Commerzbank said the Euro STOXX 50 futures have been showing a consolidation phase after last week's high of 3,127 points and the pattern would be sustained in the medium term, as long as the support zone at 2,990-2,910 was not breached.

"Based on the generally positive medium-term technical conditions, the conservative sale of February Euro STOXX 50 puts, strike 2,800 is of interest," Commerzbank said in a note.

On the macro economic front, data showed German retail sales rose 1.5 percent month-on-month in November. The market also awaits German employment figures due at 0855 GMT.

---------------------------------------------------------------- -------------- > Asian shares steady, dollar rebounds after weak U.S. data > Wall St dips for third straight day after mixed data

> Nikkei sags for 2nd day hit by weak U.S. data

> U.S. bond prices gain as services data disappoints

> Dollar firmer vs yen but gains limited after disappointing U.S. data > Gold near 3-wk high on softer equities, physical demand

> London copper edges up as investors eye rosier growth

> Brent rebounds above $107 as Libya conflict escalates

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