November 29, 2012 / 6:40 AM / 5 years ago

European Factors to Watch - Shares seen higher on U.S. deal optimism

LONDON, Nov 29 (Reuters) - European shares were expected to open higher on
Thursday, boosted by rising expectations that U.S. lawmakers will reach an
agreement to postpone growth-curbing austerity measures.
     At 0718  GMT, futures for the Euro STOXX 50 and France's CAC
 traded 0.7 percent higher, while contracts on Germany's DAX and
Britain's FTSE 100 were up 0.5 percent and 0.3 percent, respectively.
    Buying momentum was building up across risk assets after U.S. House of
Representatives Speaker John Boehner voiced optimism that Republicans could
broker a deal with the White House to avoid a US$600 billion 'fiscal cliff' of
austerity measures that could stall growth in the world's largest economy.
    President Barack Obama added to the good feeling, saying he hoped to get a
deal done in the next four weeks. 
    "Market action once again is expected to be dominated by the ongoing budget
negotiations in the U.S., where a deal between Democrats and Republican seems to
be getting closer," Markus Huber, a senior trader at ETX Capital, said.
    He flagged 7,413 points as a key level on Frankfurt's Dax index,
which closed up 0.2 percent at 7,343.41 on Wednesday, saying a close above that
level would make a test of the yearly highs at 7,478 likely and end a
consolidation pattern started in mid-September could be coming to an end.
    On the downside, he said recent momentum would be intact as long as the Dax
keeps above Wednesday's low at 7,265 points.    
    Boehner's and Obama's comments helped European equities recoup losses late
on Wednesday and fuelled a rally in U.S. and Asian shares, as well as in copper
and oil prices, which depend on economic growth.
    The Euro STOXX 50 closed 0.1 percent higher at 2,546.84 on
Wednesday and was now facing short-term resistance at 2,563, which corresponds
to Tuesday's high.
    The euro zone blue-chip index has traded in a broad range between 2,450 and
2,600 points since early September as a boost from central bank stimulus
measures was offset by concerns about the fiscal outlook in the U.S. and
troubled euro zone countries such as Spain and Greece.
    Strategists said any further gain in equities this year would depend on an
agreement to set U.S. public finances on a  sustainable path or, at least, a
delay of the fiscal cliff.
    "Markets are becoming increasingly headline driven, with risk appetite
gyrating on any fresh lead on fiscal cliff developments," Credit Agricole said
in a note.
    "Data releases are generally taking a back seat to fiscal cliff developments
but once again there will be stark contrasts between Europe and the U.S., with
weakening economic sentiment indicators in Europe on the one hand and an upward
revision to U.S. Q3 GDP on the other".
    German unemployment figures for November were due for release at 0855 GMT,
with an unchanged 6.9 percent reading expected, although ETX's Huber warned of
downside risk to that figure as the German economy increasingly feels the pinch
from the effects of austerity measures being implemented across Europe.       
    Euro zone economic sentiment, due on Thursday, was expected to have fallen
for an eighth straight month in November, although the pace of decline was
starting to slow.
    The European Commission sentiment indicator, due at 1000 GMT, was expected 
to come in at 84.2, down from 84.5 in October.
    The preliminary U.S. GDP reading for the third quarter, due at 1330 GMT, was
expected to be revised up to 2.8 percent, from a prior reading of 2.0 percent.  
 MARKET SNAPSHOT AT 720                    
                            LAST  PCT CHG     NET
 S&P 500                  1,409.   0.79 %   10.99
 NIKKEI                   9,400.   0.99 %   92.53
 MSCI ASIA    <.MIASJ000           0.94 %    4.91
 EX-JP        PUS>                         
 EUR/USD                  1.2945  -0.05 %  -0.000
 USD/JPY                   82.13    0.1 %  0.0800
 10-YR US     <US10YT=RR   1.637       --    0.00
 TSY YLD                                   
 10-YR BUND   <EU10YT=RR   1.377       --    0.00
 SPOT GOLD                $1,718  -0.03 %  -$0.47
 US CRUDE                 $86.70   0.24 %    0.21

GLOBAL MARKETS-Asian shares up on hopes of U.S. budget deal    
  > Wall St jumps in another 'fiscal cliff' swing              
  > Japan's Nikkei advances on optimism over U.S. fiscal deal  
  > Treasuries gain on standoff in U.S. budget talks           
  > Yen eases from 1-week high, euro firm on U.S. fiscal hopes 
  > Gold inches up after sell-off; U.S. fiscal worries weigh   
  > LME copper edges up, US fiscal hopes support               
  > Brent rises on Mideast tensions, U.S. budget hopes         
    Siemens struck a deal to buy Invensys' rail business for 1.74
billion pounds ($2.8 billion) as part of a major overhaul to focus on its core
expertise and boost productivity. 
    Spain's Telefonica said on Wednesday it would slash 776 million euros ($1
billion) from its over 50 billion euros of debt after receiving 97 percent
uptake in a swap of preference shares for stocks and bonds. 
    Microsoft Corp Chief Executive Steve Ballmer said smartphones
running Microsoft's new Windows software were selling four times as much as they
did at this time last year. Microsoft has never given sales numbers of Windows
phones, primarily made by Nokia, Samsung and HTC. 
    The media group is examining four non-binding offers above 6 billion euros
for its Brazilian broadband company, GVT, according to a source familiar with
the situation. 
    Telekom's plans for building out Internet provision have run into criticism
from an expert group advising the German government. "There is a danger that a
new monopoly will be created during the last mile and competition will suffer,"
Daniel Zimmer, chairman of the monopoly commission, told the Frankfurter
Allgemeine Zeitung newspaper. 
    Fnac, the music and book division of the French retail and luxury group,
said it had agreed to sell its Italian business to investment fund Orlando
    The Dutch retailer has increased its cost cutting programme to 600 million
euros from 350 million, it said on Wednesday after market close.
    A French law designed to curb banks' risky trading also would tighten
oversight of brokers, insurers and consumer-credit providers, according to a
draft version obtained by Reuters. 
    Banco Popular fully covered its 2.5 billion euro capital hike the
same day the European Commission approved the recapitalisation plan of four
nationalised Spanish banks. 
    The company said it was confident of being able to maintain an attractive
and sustainable dividend, and reiterated its business operating profit after tax
return on equity target of 16 percent, though it said in the current tough
environment returns could be reduced by two percentage points.
    Swiss Re is to invest $500 million in infrastructure projects, the latest
investor to seek out stable returns by buying into assets such as roads,
railways and utilities.
    Volkswagen and FAW Group have agreed to extend their partnership beyond its
expiration date of 2016, the German automaker said on Thursday, brushing aside
reports by some German media outlets that FAW infringed on Volkswagen's
intellectual property rights. 
    China's Changan Automobile Group is selling its 50 percent stake in a car
venture with PSA to its listed unit, Chongqing Changan Automobile Co
, sources with direct knowledge of the matter said, in a sale worth 2
billion yuan ($320 million).   
    France is not reviewing the sale of shares in power group GDF to finance a
rescue of ArcelorMittal's Florange steelworks, Industry Minister Arnaud
Montebourg said. 
    The French government has found an industrialist willing to invest 400
million euros to renovate the Florange steelworks, the minister said.
    Norwegian aluminium maker Norsk Hydro said it saw demand for aluminium
outside China increasing 2-4 percent next year and that it aimed to maintain the
absolute dividend level for 2012. 
    The German state of Thuringia's environment ministry said it regretted a
decision by authorities in the neighbouring state of Hesse that allows K+S to
continue releasing salt water run-off from mining activities into a river that
runs between the two states.
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