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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.
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