Europe Factors to Watch-Shares set to rally; eyes on Ukraine

Mon Aug 18, 2014 2:27am EDT

PARIS, Aug 18 (Reuters) - European stocks were set to rally on Monday,
reversing the previous session's losses, helped by easing worries over
geopolitical risks from Ukraine and Iraq.
    Ukrainian forces have raised their national flag over a police station in
the city of Luhansk that was for months under rebel control, Kiev said on
Sunday, in what could be a breakthrough in Ukraine's efforts to crush pro-Moscow
separatists. q
    Also reassuring investors, Russia's Foreign Ministry said on Monday a
'certain progress' was achieved during talks between Russia, Germany, France and
Ukraine in Berlin on Sunday on ways to end the military conflict in eastern
Ukraine. 
    In Iraq, Kurdish fighters pushed to retake Iraq's largest dam on Sunday and
the United States conducted a second day of air strikes in the area in a drive
to reverse gains by Islamic State insurgents who have overrun much of the
country's north. 
    At 0625 GMT, futures for Euro STOXX 50, for UK's FTSE 100,
for Germany's DAX and for France's CAC were up 0.6-1.6 percent.
    News on Friday that Ukrainian forces had destroyed a Russian military column
in Ukrainian territory fuelled fears of an escalation in the conflict, and hit
European equities, with Germany's DAX falling 1.4 percent.
    The European auto sector will be in focus on Monday after Russian daily
Vedomosti said Russia may tighten retaliatory sanctions against Western nations
to include a ban on imports of cars if the United States and the European Union
impose additional sanctions on Moscow. 
    Daimler will also be eyed after China's official Xinhua news
agency reported on Sunday that the luxury brand division Mercedes-Benz has been
found guilty of manipulating prices of after-sales services. 
    European stocks have tumbled in the past few weeks, with the FTSEurofirst
300 losing as much as 7.4 percent between late June and early August
while Germany's DAX dropped as much as 11 percent, knocked by fears that an
escalation of the Ukrainian crisis and tensions between the West and Moscow
could derail Europe's fragile economic recovery and hit corporate results.
    The German equity market's recent underperformance has dragged down the
average price-to-earnings ratio of local shares to a level not seen since
October 2013, according to data from Thomson Reuters Datastream.
    The MSCI Germany index trades at 12 times expected earnings
while the MSCI Europe trades at 13.6 times earnings, making
Germany's P/E ratio relative to Europe the cheapest in nearly 10 years, data
shows. By comparison, Wall Street's S&P 500 trades at 15 times expected
earnings.
                
    Europe bourses in 2014: (link.reuters.com/pad95v)
    Asset performance in 2014: (link.reuters.com/rav46v)
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  MARKET SNAPSHOT AT 0624 GMT: 
                                         LAST   PCT CHG  NET CHG
 S&P 500                             1,955.06   -0.01 %    -0.12
 NIKKEI                               15322.6    0.03 %     4.26
 MSCI ASIA EX-JP                       508.43   -0.04 %    -0.19
 EUR/USD                                1.339   -0.06 %  -0.0008
 USD/JPY                               102.36    0.02 %   0.0200
 10-YR US TSY YLD                       2.359        --     0.01
 10-YR BUND YLD                         0.986        --     0.02
 SPOT GOLD                          $1,301.30   -0.24 %   -$3.09
 US CRUDE                              $96.66   -0.71 %    -0.69
 
  > GLOBAL MARKETS-SHARES UP BUT GAINS LIMITED AS UKRAINE SOURS MOOD 
  > US STOCKS-WALL ST ENDS MIXED, RECOVERS FROM UKRAINE-DRIVEN SLIDE 
  > NIKKEI CHOPPY AS MARKET EYES UKRAINE, JACKSON HOLE; CHUGAI JUMPS 
  > FOREX-STERLING OFF TO SPRIGHTLY START, MARKETS EYE JACKSON HOLE 
  > GOLD EXTENDS LOSSES TO BELOW $1,300 AS EQUITIES GAIN 
  > METALS-LONDON COPPER REBOUNDS FROM NEAR TWO-MONTH LOW 
  > BRENT FALLS ON HIGHER LIBYAN OUTPUT, LOWER GEOPOLITICAL RISK 
    
    COMPANY NEWS:
    
    DAIMLER 
    The German car maker's luxury brand division Mercedes-Benz has been found
guilty of manipulating prices for after-sales services in China, the official
Xinhua news agency reported, citing authorities in Jiangsu province. 
    
    TELECOM ITALIA, VIVENDI, TELEFONICA 
    The Italian telecoms group is preparing to offer up to 7 billion euros ($9.4
billion) to outbid Spain's Telefonica in the race to acquire Vivendi's Brazilian
broadband unit GVT, according to a Bloomberg report on Sunday. 
    
    COMMERZBANK 
    The lender expects profit margins in private banking to bottom out as rivals
charge higher prices, Boersen-Zeitung reported on Saturday, citing wealth
management chief Gustav Holtkemper. 
    
    PORSCHE 
    Porsche Automobil Holding SE persuaded a U.S. federal appeals court to
uphold the dismissal of a lawsuit by more than 30 hedge funds that claimed to
suffer big losses because the German automaker fraudulently cornered the market
in Volkswagen AG shares. 
    
    FINMECCANICA 
    Canadian plane and train maker Bombardier and Japanese industrial
giant Hitachi are the two frontrunners to buy Finmeccanica's rail
subsidiaries, several sources close to the auction process said. 
    
    CREDIT SUISSE 
    Credit Suisse helped put together billions of dollars in securities that
were issued by offshore investment vehicles of Banco Espirito Santo SA 
and then sold to the Portuguese bank's retail customers, the Wall Street Journal
reported on Sunday. 
    
    ROCHE 
    Chugai Pharmaceutical Co Ltd 4519.T shares rose 21 percent to a record high
following a media report that Roche Holding AG is in talks to buy the
almost 40 percent stake in the Japanese firm that it doesn't already own for
about $10 billion. 
    
    AREVA 
    The French nuclear group won a contract to replace six steam generators at
South Africa's Koeberg nuclear power plant, state utility Eskom said
on Saturday.    
    
    

 (Reporting by Blaise Robinson, editing by Tricia Wright)