European Shares to Open Lower as Fed ‘Twists’ Again
European shares were called to open lower on Thursday after Federal Reserve Bank president Ben Bernanke lowered his forecast for U.S. economic growth and said job creation in the economy was unlikely to pick up significantly until at least 2014.
The FTSE as called to open 9 points lower at 5613, the DAX was expected to open 13 points lower at 6379 and the CAC 40 was seen opening 2 points lower at 3125.
Bernanke warned the euro zone economic crisis was having far-reaching implications for the global economy and said it presented the greatest threat to the U.S. recovery He said the Fed stands ready to act if the economy slows further.
As he did so, Bernanke also announced a further round of monetary stimulus, expanding the central bank’s asset-swap program known as “Operation Twist,” by $267 billion, adding that the program would now continue to run through to the end of the year.
Europe will see Spain attempt to auction up to two billion euros ($2.5 billion) of government debt on Thursday morning, with yields expected to push beyond a previous euro era high of 7.3 percent seen on Tuesday.
Later on Thursday, the Spanish government is expected to give details of the state of its banks, which should shed some light on the scale of the likely bailout it will require from the European Union (EU).
The government could make a request for up to 100 billion euros to shore up its banking system, which is riven with debts after the collapse of Spain’s property market, at a meeting of euro zone finance ministers in Luxembourg set for Thursday evening.
The request will make Spain the fourth euro zone country to formally ask for financial aid from its European partners. The Cypriot government has suggested it may also request aid.
In Greece, where the euro zone crisis originated four years ago, the conservative New Democracy party announced on Wednesday that it had agreed to form a coalition government with the socialist Pasok party.
New Democracy leader Antonis Samaras was sworn in as Greece’s new prime minister on Wednesday but has still to name his cabinet.
The new government is expected to form a team to renegotiate the terms of the 130 billion euro rescue plan agreed upon with the European Union and International Monetary Fund (IMF), with European leaders led by Germany indicating that they are willing to adjust the terms of the deal agreed to in March but not to rewrite it.
Elsewhere, China's factory output contracted for an eighth month in a row in June, with export orders and prices at their weakest since early 2009, the HSBC Flash Purchasing Managers Index showed on Thursday.
The index showed China's industrial activity fell to a seven-month low of 48.1 in June from a final reading of 48.4 in May.
Asian stocks struggled, and commodities fell broadly on Thursday on the news following the gloomy forecast on U.S. economic growth from Bernanke In corporate news, Caterpillar reported a sharp slowdown in sales growth in Europe, the Middle East and Africa (EMEA) in the three months to the end of May, with steadier growth in Asia and North America.
Caterpillar recorded 4 percent sales growth in EMEA, down from 14 percent growth for the three months to April and 21 percent in the three months ended March.
Caterpillar shares fell 2.6 percent at $86.52 in afternoon trading on Wall Street.
A U.S. judge questioned Apple’s bid for an injunction against Google’s Motorola Mobility unit, in an ongoing dispute between the iPhone maker and several other phone manufacturers over smartphone patents.
Federal Judge Richard Posner in Chicago called the U.S. patent system "chaos" and said an order barring the sale of Motorola phones could have "catastrophic effects."
Mikhail Fridman, the Russian billionaire, has been meeting institutional investors in London to canvas support for his plan to buy half of BP's stake in TNK-BP, according to the Financial Times on Thursday.
TNK-BP is a joint venture that in Russia that BP has been attempting to exit.
The report cited people familiar with the matter as saying Fridman has proposed two scenarios for changing TNK-BP's ownership structure.
JPMorgan Chase has already sold as much as 70 percent of the controversial investment position that caused huge trading losses for the bank, CNBC revealed on Wednesday.
JPMorgan said this week that it will detail the size of the loss and the status of the position on July 13 when it reports earnings for the second quarter.
The bank said it will hold a webcast conference call with analysts that day that could last two hours, starting at 7:30 a.m.in New York. It has previously estimated the size of the losses at $2 billion.