European Stocks Set for Tentative Gains
06/27/2012| 02:55am US/Eastern
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European stocks are expected to edge cautiously higher at the open Wednesday, taking their cue from positive U.S. and Asian sessions, although any gains will likely be capped by caution ahead of the European Union summit.
Chris Weston at IG Markets called London's FTSE 100 index to open 24 points higher at 5471, Germany's DAX index to start up 37 points at 6174 and Paris's CAC-40 index to open up 15 points at 3028.
"We really need to get this week out of the way as some of the moves we are seeing simply don't make sense, and it seems that positioning ahead of the summit is the likely driver of price action, something which is difficult to trade around," said Weston. "We therefore feel risk assets are likely to trade recent ranges ahead of the summit, before heading in a new trend the following week."
German Chancellor Merkel and French President Hollande are due to meet later Wednesday. This comes after Merkel reportedly told lawmakers Tuesday that there would be no jointly-backed euro-zone bonds in her lifetime.
In London, miners Glencore International and Xstrata will be in focus after sovereign-wealth fund Qatar Holding, which has a substantial stake in Xstrata, called on Glencore to sweeten the terms of its merger proposal. Qatar Holdings said an exchange ratio of 3.25 new Glencore shares for every one existing Xstrata share would provide a more appropriate distribution of benefits for the merger. UBS said this was not expected and "there is now a material risk that the merger could fail with both management teams adamant that the current terms are fair and had only been agreed after extensive negotiations."
On the economic calendar, U.K. CBI distributive trades data are at 1000 GMT, while the preliminary estimate of German CPI is due at 1200 GMT. In the U.S., durable goods orders are at 1230 GMT, while pending home sales figures are at 1400 GMT.
On Wall Street Tuesday, consumer-discretionary and energy shares led the Standard & Poor's 500-stock index higher Tuesday, after data showed U.S. home prices fell less than expected in April. The S&P 500 rose 0.5% to 1319.99, the Dow Jones Industrial Averaged rose 0.3% to 12,534.67 and the Nasdaq Composite added 0.6% to 2854.06.
In Asia, stocks crept higher Wednesday ahead of a forthcoming European Union summit, while there was some support from better-than-expected U.S. housing data.
The Nikkei was up 0.3%, South Korea's Kospi was up 0.1%, Australia's S&P ASX 200 was 0.6% higher and Hong Kong's Hang Seng Index was up 1%.
On European foreign exchanges, the euro was trading in a tight range against the dollar, fetching $1.2498 from $1.2492 late Tuesday in New York. The dollar was at Y79.43 from Y79.51.
Among commodities, spot gold was at $1570.90 a troy ounce, down $1.60 from New York, while August Nymex crude oil futures were down 10 cents at $79.26 per barrel and August Brent futures were down 23 cents at $92.79. The September bund contract was down 10 ticks at 141.60.
Write to Michele Maatouk at michele.maatouk@dowjones.com
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