June 19, 2012 / 5:22 AM / 7 years ago

Europe Factors to Watch-Stocks set to inch up; Spain auction eyed

 By Blaise Robinson
 PARIS, June 19 (Reuters) - European stocks were set to inch up on Tuesday
following the previous roller-coaster session, although gains were seen limited
ahead of Spain's short-term debt auction, while Danone will be in
focus after a profit warning linked to Spain's recession.
 At 0622 GMT, futures for Euro STOXX 50, Germany's DAX and 
France's CAC were up 0.1-0.2 percent.
 Jittery investors were bracing for key debt auctions by Spain on Tuesday and
Thursday, at which the country is seen paying record high rates.
 Spain's Treasury will issue between 2 billion and 3 billion euros ($2.52
billion-$3.79 billion) of 12- and 18-month debt on Tuesday, and between 1
billion and 2 billion euros of bonds due in 2014, 2015 and 2017 on Thursday.
 
 The yield on Spanish 10-year bonds hit a fresh high of above 7 percent on
Monday, a key threshold above which borrowing costs become too expensive for a
country to afford over the long term. Such levels have previously led to
bailouts in Greece, Ireland and Portugal.
 "(Today's) risks will initially be to the downside whilst Spain holds its 12
and 18 month debt auction," GFT market strategist Andrew Taylor said.
 "This shouldn't provide any new revelations and I expect markets to rally
towards the end of the day in short cover trading in anticipation of the Fed's
meeting tomorrow."
 
 The euro zone's blue chip Euro STOXX 50 index ended 1.2 percent
lower on Monday, with Italy's FTSE MIB losing 2.9 percent and Spain's
IBEX dropping 3 percent, as renewed fears over the two countries'
borrowing costs reversed an early rally sparked by Greek election results that
lessened the likelihood of the country's imminent exit from the euro zone.
 Adding to worries over euro zone peripheral economies, French food group
Danone warned early on Tuesday that it cut its 2012 operating profit
margin target, blaming a deteriorating economic climate in Southern Europe,
notably Spain. Shares of Danone traded in Frankfurt were down 4
percent.
 Investors were also cautious ahead of this week's Federal Reserve's policy
meeting. The central bank officials head into the June 19-20 meeting under
pressure to take further steps to boost the stalled U.S. economic recovery and
revive the faltering labour market.  
 A recent poll by Reuters found that a rising number of economists expect the
Fed will come up with some form of quantitative easing action, if not in the
coming week then soon, in response to the weakening jobs market. 
 "The Fed doesn't have much ammunition left, even unconventional ones, to
support the economic recovery. Short-term and long-term rates are already
extremely low," said Christian Parisot, head of global research at Aurel BGC.
 "The central bank should opt for an extension of 'Operation Twist', while a
QE3 would not have much impact on the economy and could fuel a rally in oil
prices."
 Tech shares will be in the spotlight after U.S. software major Oracle Corp
 reported stronger-than-expected quarterly profit on Monday.
 
--------------------------------------------------------------------------------
 MARKET SNAPSHOT AT 0622 GMT                                     
                                              LAST   PCT CHG  NET CHG
 S&P 500                                     1,344.78    0.14 %     1.94
 NIKKEI                                      8,655.87   -0.75 %   -65.15
 MSCI ASIA EX-JP                               479.31    0.04 %     0.20
 EUR/USD                                       1.2608    0.26 %   0.0033
 USD/JPY                                        78.98   -0.15 %  -0.1200
 10-YR US TSY YLD                               1.572        --     0.00
 10-YR BUND YLD                                 1.432        --     0.02
 SPOT GOLD                                  $1,629.86    0.12 %    $1.92
 US CRUDE                                      $82.96   -0.37 %    -0.31
 
 GLOBAL MARKETS-Asia stocks soft as Spain in focus           
 US STOCKS-Europe hits Wall St, Oracle rallies late          
 Nikkei slips from one-month high; Sharp rises               
 FOREX-Euro licks wounds as focus shifts from Greece to Spain 
 METALS-London copper steadies; euro zone eyed               
 Brent hovers around $96, near 16-month low as Europe weighs 
 Gold rises for 8th day, euro zone worries support           
 
 COMPANY NEWS:
 
 DANONE 
 The French food group said it was cutting its 2012 operating profit margin
goal, citing a deteriorating economic climate in Southern Europe, notably Spain,
and higher-than-expected raw material costs. Shares in Danone traded in
Frankfurt were down 4.2 percent in early trade. 
 
 KPN 
 The Dutch telecoms firm has asked Latin American cell phone giant America
Movil to waive some voting rights if it builds up a significant stake,
a Dutch newspaper reported on Tuesday quoting an executive at the Mexican firm.
 
 UNICREDIT 
 Italy's largest bank by assets, plans to further streamline its internal
structure, CEO Federico Ghizzoni said on Monday, while playing down the
possibility of more branch closures or layoffs. 
 
 INDITEX 
 The world's largest fashion retailer said on Monday it had bought its
flagship Zara store in London for 155 million pounds ($242.88 million) from
German fund manager Deka. 
 
 SANTANDER 
 Santander said on Monday it would offer a scrip dividend for all
four dividend payments for 2012, compared to 3 out 4 of its 2011 payments.
 
 
 BANCA MONTE DEI PASCHI DI SIENA 
 S&P placed its credit ratings on Monte dei Paschi on CreditWatch with
negative implications. It said asset quality had deteriorated more than that of
its domestic peers. It also said while MPS had reduced the capital shortfall it
understood the bank still needed about 1.5 billion euros in regulatory capital.
 
 
 EDF / BOUYGUES 
 The French utility EDF has selected a Bouygues and Laing O'Rourke joint
venture as its preferred bidder to build a new nuclear power station at Hinkley
Point in Somerset, England. The contract could be worth up to 2 billion pounds
($3.1 billion) and EDF will make a final invesment decision by the end of the
year. 

 (Reporting by Blaise Robinson; Editing by Atul Prakash)
 
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