March 20, 2014 / 6:20 AM / 6 years ago

European Factors to Watch-Shares to fall on Fed shift in rates stance

(Adds company news, futures)

LONDON, March 20 (Reuters) - European stocks were set to open lower on Thursday, tracking U.S. and Asian shares lower after the U.S. Federal Reserve indicated that it could start to raise interest rates much earlier than expected.

Fed Chair Janet Yellen sent U.S. stocks and bonds tumbling after she suggested that interest rates could rise by mid-2015, pointing to a more aggressive path toward higher interest rates than many had anticipated.

Yellen also said the central bank could end its bond-buying programme this autumn. The Fed’s easy policy stance of low rates and asset purchases has pushed many investors into equities.

Her statement came after the market close in Europe. The pan-European FTSEurofirst 300 held roughly steady on Wednesday, but was expected to drop on the open in line with Wall Street, which fell after the comments and set a negative tone for trading in Asia.

“Assuming a continuation in the current pace of tapering the bond buying program looks likely to end in Q4, and in answer to a question about when interest rates might rise the Fed chief suggested that a rise in rates might come as early as Q2 2015, much earlier than markets had expected,” Michael Hewson, chief market analyst at CMC Markets, wrote in a note.

“Whether she intended to be taken so literally is open to debate but it was enough to prompt a sharp reversal, and as such we can expect to see a lower open in Europe this morning.”

At 0726 GMT, futures for the Euro STOXX 50, Britain’s FTSE 100 , Germany’s DAX and France’s CAC were down between 0.6 percent and 1.1 percent.

The FTSEurofirst 300 is currently up 1.6 percent this week, lifted by moves to ameliorate a recent crisis over the status of Crimea. However, it remains over 3 percent off its February high.

The crisis has weighed on a market that has seen decent reported earnings, even as companies have cautioned about the 2014 outlook. As the earnings season winds down, 58 percent of companies on the DJ STOXX Europe 600 that have reported have beaten or met expectations, according to Thomson Reuters StarMine.

In one of a few corporate reports out on Thursday, Hermes hiked its dividend after the French luxury retailer reported record profit margin.

Europe bourses in 2014:

Asset performance in 2014: ------------------------------------------------------------------------------ > Dollar, bond yields jolted higher by Fed rate risk > Wall St drops after Yellen moves up possible rate hike > Nikkei down as Yellen sours mood, softer yen helps stem losses > U.S. bond market sags on Fed's change on rate guidance > FOREX-Dollar buoyant as investors reprice Fed hike call > PRECIOUS-Gold hovers near 3-week low on Fed, firm U.S. dollar > METALS-London copper falls on U.S. interest rate signal > Brent climbs above $106 as Fed shows confidence in US economy


Chip designer ARM Holdings expects the value of ARM-based chips in smartphones and mobile computing application processors to reach $20 billion by 2018 from $13 billion last year.


BP rejoined bidders for exploration and production leases in the Gulf of Mexico on Wednesday and won 24 tracts after the U.S. government lifted a 16-month ban barring the company from new federal contracts.


Royal Bank of Scotland must face a U.S. lawsuit seeking to force it to cover losses suffered by a bond insurer on a $1.15 billion securities offering backed by allegedly defective and fraudulent home loans.


France’s third-biggest bank by market value, which is hosting an investor day in London, aims to lift net profit by 60 percent to over 4 billion euros ($5.56 billion) in 2016, helped by cost cuts and more product cross-selling at a time of slow growth at home.


The French luxury goods maker hiked its dividend on Thursday after operating profit rose 8.9 percent in 2013 and operating margin reached a new all-time high.


Telecom Italia’s largest shareholder, Telco, has proposed as new non-executive chairman Giuseppe Recchi, currently the chairman of energy group Eni, in a list of mostly independent candidates for the phone group’s new board.

Second-largest shareholder Marco Fossati has proposed veteran Italian business executive Vito Gamberale as chairman.


The Italian aerospace and defence group on Wednesday reported net profit of 74 million euros ($103 million)for 2013 after two years in the red due to heavy writedowns, and predicted slightly lower revenue but a rise in core earnings.

The company releases full-year results on Thursday before the bourse opens, and will then host a conference call.

French aerospace, defence and transportation group Thales and Canada’s Bombardier have submitted indications of interest to Finmeccanica for its transportation units AnsaldoBreda and Ansaldo STS, Italian newswire Radiocor reported on Wednesday. Finmeccanica had no immediate comment to make on the report.


The Italian gas transporter is ready to start shipping imported gas to eastern Europe as early as 2015 thanks to a new two-way gas flow infrastructure, at a time when a growing crisis over Ukraine is threatening Russian gas supplies to Europe.


The chief executive of the French utility told a German newspaper he sees “absolutely no signs” that Russia could halt shipments of natural gas to western Europe due to the current Crimea crisis.


French carmaker PSA Peugeot Citroen is to cut the size of its executive pension packages, French daily Les Echos reported, months after public criticism forced former chief executive Philippe Varin to turn down his pension. (Reporting by Alistair Smout; Editing by John Stonestreet/Sudip Kar-Gupta)

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