Europe Stocks Seen Higher; Spain Faces Market Test
Associate Editor, CNBC
European markets were looking at a higher open on Tuesday, tracking shares in Asia higher as investors grew hopeful that Federal Reserve chairman Ben Bernanke could signal additional quantitative easing and as Spain tests investors' appetite for its debt for the first time since it announced further austerity measures.
Weak retail sales in the United States and a lower International Monetary Fund (IMF) global economic growth forecast raised hopes of further monetary easing from the U.S. central bank.
The FTSE was called to open 19 points higher at 5681,the DAX was seen higher by 33 points at 6598 and the CAC 40 was expected to open higher by 20 points at 3199.
Spain plans to auction between 2.5 billion euros and 3.5 billion euros ($3 billion - $4.3 billion) in 12 -and 18-month bonds.
Last week, the country unveiled a 65 billion euro ($80 billion) package of savings and tax hikes in an attempt to demonstrate it can control its finances.
Moody's rating agency cut the credit ratings of ten Italian bankson Monday, bringing the country's top lenders in line with a downgrade to Italy's sovereign rating last week, as well as lowering ratings for companies and local government authorities.
The worst affected were two of Italy's largest banks, Intesa SanPaolo and Unicredit, which were downgraded to Baa2 from A3 with a negative outlook, matchi ng the country's sovereign rating lowered on Friday to two notches above junk status.
Quarterly inflation figures from the U.K and German economic sentiment survey results from the Center for European Economic Research (ZEW) may give a clue on the health of other European economies on Tuesday morning.
The Libor scandal rumbles on, with Bank of England’s governor Mervyn King expected to face questions from U.K. lawmakers over his role in the resignation of Barclays Bank’s chief executive, Bob Diamond.
While the Libor affair is not officially on the agenda, lawmakers will find it hard to resist asking the governor about what he knew, when he knew it and what action he took as a result.
It is likely to dominate an agenda that was supposed to focus on the BoE's Financial Stability Report and schemes to get credit flowing from the banks to businesses.
The BoE deputy governor Paul Tucker and the chairman of the Financial Services Authority, the U.K. financial regulator, Lord Turner, are also due to appear before the Treasury Select Committee of British MPs.
It is Tucker’s second appearance in as many weeks in the wake of the Libor scandal.
On Monday Barclays outgoing chief operating officer Jerry del Missier told the select committee he acted on orders from Diamond over Libor fixing, which he said followed a conversation between Diamond and the Bank of England.
Lord Turner, also appearing before the committee on Monday, said Diamond was aware the regulator had sent a letter detailing concerns over Barclays’ actions adding the bank was not open with its regulator and gave coded messages.
Both men’s testimony to the committee appeared at odds with Diamond’s over the affair last week.
The implications of the Libor fixing scandal widened on Monday as it emerged banks were pulling out of interest rate setting panels in Singapore and Hong Kong for fear of exposing themselves to possible allegations of manipulation for reference rates.
Later on Tuesday the focus will shift to the United States, where Ben Bernanke will appear before Congress to give his assessment of the U.S. economy after retail sales fell for the third successive month in June.