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European Shares Called Higher on ECB Hopes

Published: August 21, 2012 | 6:21 am
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European markets are set to continue their upward trajectory on Tuesday as investors hold on to hopes the European Central Bank (ECB) will act to lower borrowing costs for struggling euro zone economies, despite denials from the central bank.

The FTSE 100 [.FTSE 5824.37 -28.05 (-0.48%) ] is called to open at 5,838 up 14 points, the German DAX [.GDAXI 7033.68 --- UNCH ] at 7036 up 2 points and the French CAC [.FCHI 3480.58 --- UNCH ] 40 up 6 points at 3,487.

European markets have enjoyed a rally over the past six weeks and in the euro zone on expectations that the ECB will introduce a policy of bond buying to help struggling economies such as Spain and Italy with their borrowing costs.

On Monday, the German newspaper Der Spiegel that stated that the central bank was ready to buy an unlimited amount of bonds to help struggling economies such as Spain and Italy with their borrowing costs.

Italian and Spanish bond yields fell to their lowest point in a month on the back of the rumored yield cap report, but rose after the ECB and Germany’s Bundesbank said there will be no yield cap on bonds, quashing speculation that they were preparing to set an interest rate threshold for the debt of each euro zone nation.

Moody’s said the euro zone is only half-way through the crisis in a report issued Tuesday morning. The ratings agency has said that for countries such as Greece and Ireland, it could take until 2016 for their fiscal issues to be sorted out.

Shares in mining company Lonmin are in focus after falling by 4 percent on Monday. Strikes by workers are continuing after the shooting of 34 men and wounding of 78 at a disturbance at the Marikana platinum mine in South Africa on August 16. Only a third of the 28,000 employees at the mine turned up for work on Monday and Lonmin says mining cannot be resumed without at least 80 percent of its workforce. It has threatened to dismiss anyone that continues to strike.

Miners will also be in focus with first-half results from commodities trader Glencore [GLEN Unavailable () ], which is in the middle of a bid for miner Xstrata [XST Unavailable () ], owner of around a quarter of Lonmin shares. Glencore is expected to report first-half adjusted earnings of $2.4 billion, down 27 percent from the same time last year, after falls in commodity prices.

Austrian-based brick maker Wieneberger will announce its second-quarter earnings and the UK-based housebuilder Persimmon will release earnings for the first half of 2012.


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