GLOBAL MARKETS: European Stocks Mostly Up, But Caution Apparent
-- Most European stocks post modest gains; investors return to risk assets
-- Investors hoping for a nod toward quantitative easing by Ben Bernanke
-- Spain's IBEX outperforms after well-received T-bill auction
-- Alcatel-Lucent slumps on profit warning; Nokia follows suit
By Michele Maatouk & Andrea Tryphonides
Most European stocks were marginally higher and the euro was up against the dollar Tuesday, although a note of caution was apparent as investors await the start of Federal Reserve Chairman Ben Bernanke's two-day testimony before Congress, hoping for at least a nod toward further quantitative easing to boost the U.S. economy.
Day one of Mr. Bernanke's testimony in front of the Senate Banking Committee begins at 1400 GMT. Recent mixed fundamental data, including disappointing U.S. retail sales for June released Monday, have increased hopes for the Federal Reserve to make a move.
"Mr. Bernanke's testimony comes at an interesting time with many U.S. economists slashing their second-quarter [growth] numbers," said Deutsche Bank.
"We can't help thinking that without a significant policy response it will be tough to avoid a recession over the coming year. A lot rests in the fairly constrained hands of Bernanke, Congress and the Senate," concludes Deutsche Bank.
Most equity markets held their own Tuesday, although indexes were off earlier highs and it looked as though some caution was creeping in ahead of Mr. Bernanke's testimony. Indeed, not all commentators were convinced that easing is on the cards any time soon. "We still expect Bernanke to reiterate that the Fed is ready to act if action is needed, but to fall short of providing guidance that further easing is indeed imminent," said Barclays.
Meanwhile, data out of Germany gave investors little to cheer about, showing economic expectations fell for a third straight month in July to hit the lowest level since January. The ZEW's economic expectations index fell to -19.6 from June's unrevised -16.9, compared with expectations for a drop to -20.0. ING said the data will add to growing concerns about the strength of the German economy. "However, throughout the financial crisis, the ZEW index has rather been a euro crisis thermometer than a good leading indicator for German growth," ING added.
At 1025 GMT, the benchmark Stoxx 600 index was down 0.1% at 256.52. Germany's DAX was up 0.3% at 6583.35 and France's CAC-40 was 0.3% higher at 3190.84. London's FTSE 100 was faring worse than its peers and giving up early gains to trade down 0.3% at 5642.89, despite the release of better-than-expected data, which showed U.K. inflation fell to its lowest level in two-and-a-half years in June. The annual increase in the consumer price index was 2.4% in June, down from 2.8% in May and much lower than a consensus forecast of 2.8%.
Spain's IBEX-35 significantly outperformed its European counterparts, up 1% at 6599.10 following a well-received Spanish Treasury bill auction. Spain sold 3.562 billion euros ($4.362 billion) of 12- and 18-month treasury bills, which was more than planned, and yields fell sharply. Still, the tougher task will be Spain's bond auction on Thursday.
Italy's FTSE Mib was up 0.3% at 13,702.04, off earlier highs but still faring pretty well considering the downgrade of a whole host of Italian banks by Moody's Investors Service late on Monday. The ratings firm lowered its long-term ratings on 10 Italian banks following its downgrade of Italy's government bond rating last week. But the move was expected and overall, Italian banks weren't doing too badly. Intesa Sanpaolo was down 1.1%, but UniCredit was up 0.1%.
In company news, telecom equipment maker Alcatel-Lucent slumped 15.2% after issuing a profit warning, citing weak economic conditions. Peer Nokia followed suit, dropping 4.8%, as investors grew nervous about its quarterly results Thursday.
Elsewhere, Barclays was up 2% as the interbank lending rate manipulation scandal rumbled on. Paul Tucker and Mervyn King, deputy governor and governor of the Bank of England, respectively, were appearing in front of a parliamentary committee.
On foreign exchanges, the dollar was weaker against the euro on concerns that the slowing economy may prompt the Fed to ease monetary policy as a stimulus measure. The euro was up at $1.2290 by 1025 GMT, from $1.2272 late Monday in New York. However, the dollar clawed back gains against the yen, fetching Y79.01 from Y78.86 Monday.
In other asset classes, spot gold was up $5.80 at $1,595.50. The August Nymex crude contract was $0.24 higher at $88.67 and the September Brent contract was $1.12 higher at $104.49. The September bund was down 0.22 at 144.82 as investors moved back into assets such as equities.
At 1025 GMT, U.S. futures were pointing to a slightly higher open on Wall Street, where Goldman Sachs, Johnson & Johnson and Coca-Cola are among the companies slated to report second-quarter earnings.
Write to Michele Maatouk at michele.maatouk@dowjones.com
-- Investors hoping for a nod toward quantitative easing by Ben Bernanke
-- Spain's IBEX outperforms after well-received T-bill auction
-- Alcatel-Lucent slumps on profit warning; Nokia follows suit
By Michele Maatouk & Andrea Tryphonides
Most European stocks were marginally higher and the euro was up against the dollar Tuesday, although a note of caution was apparent as investors await the start of Federal Reserve Chairman Ben Bernanke's two-day testimony before Congress, hoping for at least a nod toward further quantitative easing to boost the U.S. economy.
Day one of Mr. Bernanke's testimony in front of the Senate Banking Committee begins at 1400 GMT. Recent mixed fundamental data, including disappointing U.S. retail sales for June released Monday, have increased hopes for the Federal Reserve to make a move.
"Mr. Bernanke's testimony comes at an interesting time with many U.S. economists slashing their second-quarter [growth] numbers," said Deutsche Bank.
"We can't help thinking that without a significant policy response it will be tough to avoid a recession over the coming year. A lot rests in the fairly constrained hands of Bernanke, Congress and the Senate," concludes Deutsche Bank.
Most equity markets held their own Tuesday, although indexes were off earlier highs and it looked as though some caution was creeping in ahead of Mr. Bernanke's testimony. Indeed, not all commentators were convinced that easing is on the cards any time soon. "We still expect Bernanke to reiterate that the Fed is ready to act if action is needed, but to fall short of providing guidance that further easing is indeed imminent," said Barclays.
Meanwhile, data out of Germany gave investors little to cheer about, showing economic expectations fell for a third straight month in July to hit the lowest level since January. The ZEW's economic expectations index fell to -19.6 from June's unrevised -16.9, compared with expectations for a drop to -20.0. ING said the data will add to growing concerns about the strength of the German economy. "However, throughout the financial crisis, the ZEW index has rather been a euro crisis thermometer than a good leading indicator for German growth," ING added.
At 1025 GMT, the benchmark Stoxx 600 index was down 0.1% at 256.52. Germany's DAX was up 0.3% at 6583.35 and France's CAC-40 was 0.3% higher at 3190.84. London's FTSE 100 was faring worse than its peers and giving up early gains to trade down 0.3% at 5642.89, despite the release of better-than-expected data, which showed U.K. inflation fell to its lowest level in two-and-a-half years in June. The annual increase in the consumer price index was 2.4% in June, down from 2.8% in May and much lower than a consensus forecast of 2.8%.
Spain's IBEX-35 significantly outperformed its European counterparts, up 1% at 6599.10 following a well-received Spanish Treasury bill auction. Spain sold 3.562 billion euros ($4.362 billion) of 12- and 18-month treasury bills, which was more than planned, and yields fell sharply. Still, the tougher task will be Spain's bond auction on Thursday.
Italy's FTSE Mib was up 0.3% at 13,702.04, off earlier highs but still faring pretty well considering the downgrade of a whole host of Italian banks by Moody's Investors Service late on Monday. The ratings firm lowered its long-term ratings on 10 Italian banks following its downgrade of Italy's government bond rating last week. But the move was expected and overall, Italian banks weren't doing too badly. Intesa Sanpaolo was down 1.1%, but UniCredit was up 0.1%.
In company news, telecom equipment maker Alcatel-Lucent slumped 15.2% after issuing a profit warning, citing weak economic conditions. Peer Nokia followed suit, dropping 4.8%, as investors grew nervous about its quarterly results Thursday.
Elsewhere, Barclays was up 2% as the interbank lending rate manipulation scandal rumbled on. Paul Tucker and Mervyn King, deputy governor and governor of the Bank of England, respectively, were appearing in front of a parliamentary committee.
On foreign exchanges, the dollar was weaker against the euro on concerns that the slowing economy may prompt the Fed to ease monetary policy as a stimulus measure. The euro was up at $1.2290 by 1025 GMT, from $1.2272 late Monday in New York. However, the dollar clawed back gains against the yen, fetching Y79.01 from Y78.86 Monday.
In other asset classes, spot gold was up $5.80 at $1,595.50. The August Nymex crude contract was $0.24 higher at $88.67 and the September Brent contract was $1.12 higher at $104.49. The September bund was down 0.22 at 144.82 as investors moved back into assets such as equities.
At 1025 GMT, U.S. futures were pointing to a slightly higher open on Wall Street, where Goldman Sachs, Johnson & Johnson and Coca-Cola are among the companies slated to report second-quarter earnings.
Write to Michele Maatouk at michele.maatouk@dowjones.com
