FTSE, DAX, CAC, to Open Lower As Greek Crisis Rumbles On
European stocks were called to open lower on Tuesday after euro zone finance ministers rejected an offer made by private holders of Greek debt at a meeting on Monday.
The FTSE is called 20 points lower, the DAX in Frankfurt is expected to be down by 33 points and the CAC 40 is called lower by 19 points.
At a meeting in Brussels, euro zone finance ministers said they were unwilling to accept an offer from the International Institute of Finance (IIF) that banks and other private bondholders would be willing to take a 50 percent 'haircut' on their holdings in return for a coupon of four percent on newly issued Greek bonds. The rejection of the deal is likely to spark a new series of negotiations between the Greek government and the IIF which represents private holders of Greek debt. Failure to reach an agreement is likely to result in a Greek default at the end of March when a number of bond redemptions become due.
In Asia overnight, shares rose slightly while the euro fell from three-week highs on the news that euro zone finance ministers had not accepted the IIF's offer. Tuesday saw thin trade in the region as a number of stock exchanges remained closed for the Lunar New Year holiday.
Euro zone finance ministers also discussed the details of the euro zone permanent bailout fund when they met in Brussels on Monday and there was broad agreement over the text of the treaty on the European Stability Mechanism (ESM). However, Italian Prime Minister Mario Monti said late Monday that final details on the ESM had yet to be completed. His French counterpart Francois Baroin claimed the ESM treaty would be signed on January 30.
There was more bad news for French banks on Monday when credit rating agency Standard & Poor's (S&P) downgraded its counterparty ratings on four of them. S&P announced it had downgraded Groupe BPCE, Societe Generale and Credit Agricole one notch to single-A with stable outlook. Caisse de Depots et Consignations was also downgraded one notch to double-A plus with a negative outlook.
Spain and the Netherlands will both hold bond auctions on Tuesday with the Dutch expected to tender 1.5 to 2.5 billion euros ($1.9 billion to $3.25 billion) in January 2013 and January 2042 bonds at 9:00am London time, while Spain will auction 2 to 4 billion euros ($2.6 to $5.2 billion) of 3 and 6-month treasury bills at 9:30am UK time.
All 27 EU finance ministers will meet in Brussels on Tuesday at 9:00am UK time, while Hungarian Prime Minister Viktor Orban meets European Council President Jose Manual Barroso.
Siemens first quarter operating profit missed estimates on Monday, while Swedish lender Nordea saw fourth quarter profit fall by 4 percent.
Economic releases include Flash PMI data from France at 8:00am UK time, followed by Germany at 8:30am and the euro zone at 9:00am UK time.