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European Stocks to Edge Higher

Published: September 25, 2012 | 8:58 am
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European stocks are expected to open tentatively higher Tuesday, bouncing back from the previous session’s losses, although gains are likely to be capped by worries about Spain and Greece, while fears of a global slowdown also weigh on investors’ minds.

Jonathan Sudaria at Capital Spreads called London’s FTSE 100 to open up 17 points at 5856, Germany’s DAX up 28 points at 7441 and France’s CAC-40 up 11 points at 3508.

Encouraging German consumer confidence figures just out are likely to help support sentiment. The forward looking GfK consumer sentiment index was unchanged at 5.9 points in October, in line with expectations. Meanwhile, the economic expectations component of the index rose to -17.2 points in September from -18.9 points in August.

“Today’s GfK survey remains relatively upbeat and it flags no increasing risks of a collapse in consumer spending in the third quarter,” said Newedge in a note to clients. “Despite increasing worries on the future of the economy, German households’ confidence has remained firm in the past few months.”

There isn’t much else of note due on the euro-zone data calendar, so all eyes will be on any headlines from the meeting between European Central Bank President Mario Draghi and German Chancellor Angela Merkel at the Federation of German Industries later.

Despite the positive opening calls, market participants were quick to point out that risks remain.

“Market sentiment has weakened in recent sessions amid signs of weak EU growth and worries about whether Spain will accept conditionality in exchange for ECB and European Stability Mechanism support,” Barclays said in a note to clients.

Spain will stay in focus for the rest of the week, with the results of the independent banks stress tests due Friday, while in Greece, the government will present a budget-cutting plan to euro-zone officials.

On Wall Street Monday, the Dow Jones Industrial Average slipped 0.2% to 13558.92, the Standard & Poor’s 500 stock index fell 0.2% to 1456.89 and the Nasdaq Composite retreated 0.6% to 3160.78.

Asian markets were mostly lower Tuesday, as concerns over Europe’s volatile economic situation weighed on cyclical stocks, with resource companies underperforming in Shanghai and Sydney.

Australia’s S&P ASX 200 fell 0.4%, Hong Kong’s Hang Seng Index was down 0.1%, South Korea’s Kospi lost 0.6% and the Shanghai Composite Index fell 0.3%.

In currency markets, the euro was weaker against the dollar early Tuesday, fetching $1.2898 from $1.2930 late Monday in New York. The dollar was at Y77.76 from Y77.83.

November Nymex crude oil futures were up one cent at $91.94 per barrel and the November Brent oil contract was down 13 cents at $109.68. Spot gold was up $1.50 at $1,762.60.

The December Bund contract was up six ticks at 140.46.

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