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European Shares to Open Lower; Eyes on Trichet

Reuters and CNBC.com
Thursday, 3 Feb 2011 | 2:22 AM ET

European shares were expected to slip in opening trade on Thursday, with a recent rally losing steam as investors stayed cautious ahead of a flurry of corporate results and a policy decision from the European Central Bank (ECB) later in the session.

Sharon Lorimer

European shares edged higher on Wednesday, with miners gaining as copper remained near record highs on supply concerns, though weak results from engineering firms Atlas Copco and Sandvik weighed.

All eyes will be on the European Central Bank on Thursday, which is set to keep its key interest rate on hold at a record low 1.0 percent for the 21st month running.

Accelerating inflation in the euro zone and peripheral banks' problems accessing funds via the market will top the agenda at the bank's monthly policy meeting. Traders are watching the monthly news conference by ECB President Jean-Claude Trichet for clues on the bank's next move.

Inflation in the 17-country euro zone hit 2.4 percent in January, above the central bank's target of below, but close to 2 percent.

Euro zone retail trade numbers for December are also out on Thursday.

As the euro zone debt crisis continues to simmer, Spain's Treasury aims to raise between 3 billion euros and 4 billion euros at its Thursday bond auction.

Manuel Campa, Secretary of State for the Economy told CNBC on Wednesday that the Spanish government is ready to implement further austerity measures to defend this year's budget deficit target and is confident that demand for Spanish bonds will stay strong.

On Wednesday, Portugal sold a total of 1.255 billion euros in 12-month and six-month T-bills on, with yields falling from previous auctions last month, further easing pressure on the indebted country to seek a bailout.

Ireland was also in focus once again after ratings agency Standard & Poor's cut its credit grade for the country and warned it could fall further because of doubts about the true scale of defaulting loans yet to surface in the country's largely state-owned banks.

Joerg Asmussen, State Secretary at Germany's Federal Ministry of Finance told CNBC on Wednesday an increase in the euro zone rescue fund was not necessary at this point, but did not rule it out altogether.

"There's room for manoeuvre," he said, but an increase would only be necessary in the case of significant market turbulence.

Contact Europe: Economy

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