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European Factors to Watch - Shares to edge up on U.S. debt plan
January 21, 2013 / 6:16 AM / 5 years ago

European Factors to Watch - Shares to edge up on U.S. debt plan

By Francesco Canepa
    LONDON, Jan 21 (Reuters) - European stocks were seen opening a touch higher
on Monday as a political attempt to break a budget impasse in the United States
revived appetite for shares, although buying momentum was subdued as a key index
hovered just below 18-month highs. 
    At 0709 GMT, futures for the Euro STOXX 50, France's CAC 
and Britain's FTSE 100 were 0.2 percent higher, while contracts on
Germany's DAX added 0.1 percent.
    The futures were taking their cue from a late rebound on Wall Street, where
the Dow Jones and the S&P 500 posted five-year closing highs after
Republicans said the House would consider a bill to raise the U.S. debt ceiling
enough to allow the country to pay its bills for another three months.
    The strategy would buy time for the Democratic-controlled Senate to pass a
budget plan that shrinks the federal deficit.  
    "Although this again could be seen as another round of political battle, any
progress to avoid the immediate dangers will likely be seen as positive by the
market," Credit Agricole said in a note
    Trading volume may be thinner than usual and markets struggle for direction
as Wall Street, the world's largest stock market, is shut for Martin Luther King
Jr. Day. 
    The euro zone blue-chip Euro STOXX 50 index closed 0.3 percent
lower at 2,709.59 points on Friday.
    The index has traded in a 1.8 percent range since hitting an 18-month high
of 2,735.36 points on Jan. 14, showing buying momentum was waning as some
investors locked in their profits on a 11.6 percent rally since mid-November.
    "I've been seeing selling flows on a regular basis for the past few days," a
trader said.
    "People are especially locking in profits on stocks that did very well, like
banks, or single names like Danone."
    The euro zone banking sector has risen 73 percent since late July
while French food group Danone is up 10 percent since mid-October.
    The trader said charts pointed to a bullish market over the next 18-months
after the index broke a string of technical resistances, including the 61.8
percent retracement level of the 2011 selloff at 2,639.
    In the shorter-term, however, he flagged momentum indicators were starting
to show investor fatigue and said the index could pull back to around 2,610, a
high hit in March and tested again in September.
    The Euro STOXX 50's Relative Strength Index, a momentum indicator, has been
falling after testing a six-year high earlier this year.
    The euro zone blue-chip Euro STOXX 50 index has risen around 33
percent since mid-2012 as bond-buying programmes unveiled by the European
Central Bank and other monetary authorities averted the prospect of a break-up
in the currency bloc and pushed investors towards assets offering higher
    Returns on euro zone equities were 9.5 percent above the triple-A rated
German bund, while U.S. shares offered a return 7.5 shares higher than the
10-year Treasury, Datastream data showed. 
    "Our advice is to reduce duration and sell out of triple A (bonds), which 
could be the bad story of the year," Lorne Baring, managing director of wealth
management firm B Capital, said.
    "We've got more equities than we've had since 2010."
    Baring recently turned "overweight" European equities versus their U.S.
peers based on more attractive valuations and expected returns.
    The STOXX Europe 600 index offers a dividend yield of 3.6 percent
for the current year, compared to 2.5 percent for the U.S. Standard & Poor's
500, Reuters data showed.
    The yield on 10-year Treasuries is around 1.9 percent, just above an
annualised inflation rate of 1.7 percent based on the Consumer Price Index.
    Fund flows data also showed investors showed investors were piling up
European shares, which yielded more than safe heaven government debt and U.S.
                                                LAST    PCT CHG  NET CHG
 S&P 500                                    1,485.98     0.34 %     5.04
 NIKKEI                                    10,747.74    -1.52 %  -165.56
 MSCI ASIA EX-JP                                        -0.34 %    -1.89
 EUR/USD                                      1.3331      0.1 %   0.0013
 USD/JPY                                       89.65    -0.44 %  -0.4000
 10-YR US TSY YLD                              1.840         --     0.00
 10-YR BUND YLD                                1.571         --     0.01
 SPOT GOLD                                 $1,690.00      0.4 %    $6.66
 US CRUDE                                     $95.10    -0.48 %    -0.46

  > Asian shares retreat from highs, yen volatile before BOJ 
  > Dow, S&P 500 end at 5-yr highs on early earnings beats   
  > Nikkei sluggish as expectations for BOJ action priced in 
  > Treasuries' prices climb as buyers emerge after sell-off 
  > Yen bounces off 2 1/2-year low ahead of BOJ verdict      
  > Gold inches up on Japan easing hopes                     
  > Copper edges higher as China's economy picks up pace     
  > Brent steadies on oversupply concerns; outlook steady    
    Spain's Santander is considering making a 2 billion pound($3.2 billion) bid
for National Australia Bank's UK business to accelerate its British
expansion, the Sunday Times reported citing unnamed sources. 
    The French bank has agreed to spin off a fund that invests in clean energy
projects, which will now be rebranded Glennmont Partners, according to the
Financial Times. The fund will continue to invest the 437 million euros raised
in 2010.
    VW's Bentley unit aims to double vehicle sales to 15,000 by 2018, the unit's
head told Die Welt newspaper.
    Separately, Matthias Mueller's contract as head of Porsche has been extended
until 2014, he told Automobilwoche.
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    Daimler Chief Executive Dieter Zetsche expects his contract to be renewed
after his current term as head of the car and truck maker expires at the end of
this year, he told a German newspaper. 
    Manchester Airports Group (MAG) said on Friday it had agreed to buy London's
Stansted airport from Heathrow Airport Holdings for 1.5 billion pounds ($2.4
    A French activist investment fund, Lutetia Capital, has asked the Dutch mail
group for a discussion about the firm's strategy to create value, and says
PostNL is undervalued, Dutch daily Het Financieele Dagblad reported on Monday.
    PostNL confirmed to the paper it has received a letter from Lutetia but
declined further comment.
    A renewal of the law covering postal services could be put into effect in
the current legislative period, following a delay, Der Spiegel reports. The
proposed law would require Deutsche Post to submit contracts with big customers
to the federal network office to ensure there was no price dumping that could
hurt competition.
    APRR, the toll road unit of the French construction and concessions group,
said full-year revenues slightly rose as higher fees offset a decline in
    The luxury goods group, maker of Cartier jewellery, gave a cautious outlook
on Monday after slowing wholesale demand for its pricey products pushed
third-quarter sales growth below forecasts. 
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    The chemicals company said it and Petronas have terminated heads of
agreement for a joint speciality chemicals venture. 
    Related news 
    The French nuclear company said on Friday it has signed a five-year 1.25
billion euro revolving credit facility with a syndicate of 19 banks, which
replaces a previous facility expiring in 2014. 
    The company has urged unions to return to talks and is seeking a fair
compromise on wages, board member for personnel Regine Stachelhaus told Welt am
Sonntag newspaper.
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    HeidelbergCement's chief executive said investors hoping for big dividend
hikes will have to wait while the cement maker focuses on further trimming its
debt pile, a German newspaper reported. 
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    Siemens' loss-making lighting unit and spin-off candidate Osram aims to post
a 512 million euro ($681 million) pretax profit by 2015 thanks to tough cost
cutting, a German magazine reported. 
    Separately, the Financial Times reported that Nokia Siemens Networks
 (NSN) - a joint venture of Siemens and Nokia is planning to
raise as much as 700 million euros from public markets in the spring.
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    The Frankfurt airport operator said more than 200 flights to and from
Frankfurt had been cancelled on Sunday due to snow and ice on the ground. More
flights were cancelled on Monday.
    Related news 
    Chief Executive Tom Enders told Der Spiegel magazine decisions on when and
where to develop aircraft in the future would be made on economic grounds and he
would not tolerate interference by the German government.
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    The company wants to cut employee salaries as part of its cost-saving
effort, Focus and Der Spiegel magazines reported. Air Berlin declined to comment
on the reports.
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