December 5, 2012 / 6:27 AM / 5 years ago

Europe Factors to Watch-Shares set to resume brisk 2-week rally

PARIS, Dec 5 (Reuters) - European equities are set to rise on Wednesday,
resuming their recent brisk rally and tracking gains in Asia after comments from
China's new leader fuelled hopes for an economic recovery.
    At 0725 GMT, futures for Euro STOXX 50, for Germany's DAX 
and for France's CAC were up 0.6-0.8 percent.
    Chinese Communist Party chief Xi Jinping said the country will maintain its
fine-tuning of economic policies in 2013 to ensure stable economic growth,
sparking a sharp rally in Chinese shares with the Shanghai Composite Index
 surging 2.9 percent.
    Xi listed tax reform, urbanization and allowing the market to play a bigger
role in setting resource prices as among his key priorities.
    The comments eclipsed the HSBC Purchasing Managers Index for China's
services sector, which slipped to 52.1 in November from October's 53.5, as sales
prices continued to fall despite a rise in input prices. 
    Investors' focus will remain on Washington where legislators continue to
negotiate a deal to avoid a $600 billion package of tax hikes and federal
spending cuts that would begin Jan. 1, the so-called fiscal cliff which could
drag the U.S. economy back into recession. 
    The banking sector will be in the spotlight after HSBC sold its
entire stake in China's Ping An Insurance for $9.38 billion to a
group linked to Thailand's richest man, Dhanin Chearavanont. Shares in HSBC
traded in Hong Kong were up 1.4 percent.
    The euro zone's blue chip Euro STOXX 50 index has surged nearly
7 percent in the past two weeks, as investors bet the worst of Europe's debt
crisis is over and that a U.S. budget deal will be reached before the year-end,
while recent data signalled a recovery in China.
    However, the index this week failed to pierce through a strong resistance
level representing a peak in March. Crossing above the level, at 2,611 points,
would send a strong bullish signal.
    "The index should be able to break above its year high, there's no selling
pressure at the moment and the sentiment that this is the start of a long-term
rally is quite strong," Aurel BGC chartist Gerard Sagnier said.
    "The rise is also fuelled by the fact that global investors have a very
small exposure to European equities."
    Significant measures unveiled over the past year by the European Central
Bank to resolve the debt crisis have soothed fears of break up of the euro zone
and triggered a recovery rally in European shares, which have strongly
outperformed U.S. stocks indexes in the past six months.
    The price-to-earnings ratio of the broad STOXX Europe 600 hit a
2-1/2 year high this week, trading at 11.3 times 12-month forward earnings, a
level not seen since May 2010, compared with 12.5 for Wall Street's S&P 500
. The spread between the two ratios is the smallest since May 2006, and
well below a 10-year average spread of 1.9, signalling a profound reversal in
investors' perception of both markets.
 MARKET SNAPSHOT AT 0722 GMT                            
                                         LAST  PCT CHG  NET CHG
 S&P 500                             1,407.05  -0.17 %    -2.41
 NIKKEI                              9,468.84   0.39 %    36.38
 MSCI ASIA EX-JP                       534.57   1.02 %     5.40
 EUR/USD                               1.3111   0.14 %   0.0018
 USD/JPY                                82.24   0.43 %   0.3500
 10-YR US TSY YLD                       1.615       --     0.01
 10-YR BUND YLD                         1.405       --     0.00
 SPOT GOLD                          $1,704.46   0.45 %    $7.72
 US CRUDE                              $88.91   0.46 %     0.41
  > GLOBAL MARKETS-Shares up on China hopes, US budget worries weigh 
  > Wall St slips as investors seek cliff progress 
  > Nikkei rises to 7-month closing high on China, weak yen 
  > Euro hits 7-week high as fears ease over Greece, Spain 
  > Gold bounces from 1-month low, US budget talks drag 
  > Shanghai copper chases London to 6-week high 
  > Brent hovers near $110 on US demand worries, Iran tension 
    A group linked to Thailand's richest man, Dhanin Chearavanont, has bought
the global bank's entire stake in China's Ping An Insurance for
$9.38 billion.
    The Spanish government is designing a plan that would force BBVA to invest
in the country's bad bank after its resistance to becoming a shareholder in the
entity, Expansion reported, citing unnamed sources with knowledge of the
    Spain's sixth largest bank said on Tuesday its 2.5 billion euro capital
increase was oversubscribed.
   Repsol filed a U.S. lawsuit to block Chevron Corp's deal with
Argentina's YPF, ramping up the Spanish oil company's legal response
to the loss of its assets in Argentina. 
    An Italian parliamentary panel on Tuesday rejected a government proposal to
change the terms of state loans for the bank, plunging a bailout scheme for the
country's third biggest lender into confusion. 
    ENEL, EDF 
   The Italian energy group said on Tuesday it had ended its cooperation with
EDF in the EPR nuclear project in France. Enel will receive about 613
million euros by way of reimbursement. 
   The owners of German public sector insurer Provinzial Nordwest will decide
very soon if and how the unit will be put up for sale, one of the owners, the
Westfalen-Lippe savings bank association said on Tuesday. 
    The British supermarket operator will launch a strategic review of its
money-losing Fresh & Easy chain in the United States, Sky News reported on
   An acquisition of Vivendi unit Maroc Telecom by France Telecom
 could be "strategically interesting," the French telecom operator's
chief executive told daily Le Figaro. 
   Shareholders in the European aerospace group pored over a handful of clauses
in the closing stages on Tuesday of talks to shake up the group, people familiar
with the discussions said. 
   Two potential buyers submitted offers for the Italian television broadcaster
on Tuesday after majority owner Telecom Italia extended the deadline on bidding
for its 77 percent stake. 
   The Italian mid-tier lender said on Tuesday it will not pay a quarterly
coupon due on Jan.2, 2013, on its company preferred securities.
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