Europe Factors to Watch-Stocks set to inch up ahead of Fed

By Blaise Robinson
PARIS, June 20 (Reuters) - European stocks were set to edge higher on
Wednesday, adding to the previous session's rally on expectation of fresh
measures by European policymakers to tackle the region's debt crisis and hopes
of further stimulus from the U.S. Federal Reserve.
At 0627 GMT, futures for Euro STOXX 50, for Germany's DAX
and for France's CAC were flat to up 0.2 percent.
European stocks rallied on Tuesday, with gloomy German data and a sharp rise
in Spain's borrowing costs at a short-term debt auction reviving speculation of
policy action from both sides of the Atlantic.
The Fed is set to announce its monetary policy decision at 1630 GMT on
Wednesday following a two-day meeting, and many economists expect the central
bank to extend its "Operation Twist," a program aimed at pushing down
longer-term interest rates in a bid to support the economy.
At a G20 meeting in Los Cabos, Mexico, European leaders said they intend to
work on concrete steps to integrate the region's banking sector, seen as a major
step to break the cycle of debt-troubled countries bailing out their ailing
banks which only pushes governments ever deeper into debt.
French President Francois Hollande said Italy's idea to use the euro zone's
new permanent bailout fund to buy the debt of member states stricken by high
borrowing costs was worth exploring, and that the subject would be discussed at
a meeting in Rome on Friday between him, Germany's Angela Merkel, Spain's
Mariano Rajoy and Italy's Mario Monti.
Earlier this week, the yield on Spanish 10-year bonds broke
above 7 percent, 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.
"When Spanish yields hit 7 percent, we're getting into the 'intervention'
zone. It's either policymakers taking action, or the country takes the road to
insolvency," said Franck Dixmier, chief investment officer, fixed income, at
Allianz Global Investors.
The euro zone's blue chip Euro STOXX 50 index has gained 7.2
percent since a low hit in early June, but over the past two sessions the
benchmark index has run into strong resistance on its 50-day moving average, at
2,215 points.
On the downside, the index would face support at 2,172 points, representing
the 23.6 percent Fibonacci retracement of this month's rebound.
--------------------------------------------------------------------------------

MARKET SNAPSHOT AT 0627 GMT
LAST PCT CHG NET CHG
S&P 500 1,357.98 0.98 % 13.2
NIKKEI 8,752.31 1.11 % 96.44
MSCI ASIA EX-JP 483.23 0.6 % 2.87
EUR/USD 1.2691 0.06 % 0.0007
USD/JPY 78.92 -0.1 % -0.0800
10-YR US TSY YLD 1.632 -- 0.01
10-YR BUND YLD 1.561 -- 0.05
SPOT GOLD $1,620.51 0.24 % $3.91
US CRUDE $84.16 0.15 % 0.13

GLOBAL MARKETS-Shares up on hopes Fed will 'Twist' again
Wall St gets a lift from hopes for more Fed moves
Nikkei firms, pins hopes on U.S. Fed stimulus
Brent slips under $96, not far off 17-mth low; Fed eyed
METALS-Copper drops on Spain worries; Fed hopes limit fall
FOREX-Euro slips, losses limited before Fed decision
PRECIOUS-Cash gold gains on Fed stimulus hopes

COMPANY NEWS:

EUROPEAN INSURERS
The European Union may exempt existing insurance contracts from parts of the
new Solvency II risk capital rules for a period of seven years, the Financial
Times Deutschland reports, without citing sources. The rules, due to take effect
in 2014, have been heavily criticised by European life insurers. Related news

EUROPEAN MARKET OPERATORS
A possible European financial transaction tax would be limited in scope and
could apply to buyers of stocks, similar to a British stamp duty, a Dutch paper
reported on Wednesday, citing unnamed diplomats. European finance ministers will
on Friday officially scrap a financial transaction tax, which would have applied
to all financial transactions and to both buyers and sellers, Dutch daily Het
Financieele Dagblad reported.

SPANISH BANKS
A second and more detailed audit of Spanish banks will remain on schedule,
due out on July 31, a spokesman for Spain's economy ministry said on Tuesday,
denying a report the assessment would be pushed back to September.

AEGON
The Dutch insurer said in an investor presentation that it is reducing its
exposure to Spain's troubled economy, and may end its joint venture with Banca
Civica. It said it is also in the process of quitting its joint venture with
another group, CAM, but will maintain its partnerships with Unnim and Caja3. It
did not give a value for the ventures, but the group has a total exposure to
Spain of 2.827 billion euros.

RIO TINTO
Rio Tinto will spend $3.7 billion to increase iron ore output in Australia
by a further 25 percent to 353 million tonnes a year tonnes by 2015, shrugging
off forecasts of waning demand and a looming global supply glut.

AIR FRANCE-KLM
The Franco-Dutch carrier is considering selling a stake in its Servair
catering unit, which is valued at 300 million euros ($380 million), Bloomberg
reported on Tuesday, without identifying its sources.

PSA
The auto maker's Citroen brand plans to launch two new versions of its C4
model, mirroring moves by PSA's Peugeot to cater to emerging markets and to help
reduce the struggling French car group's dependence on flagging Western European
demand.