European Shares to Open Higher on Fed Easing Hopes
Associate Editor, CNBC
European shares were called to open higher on Wednesday tracking shares in Asia, on hopes of more quantitative easing in the U.S. after Federal Reserve chairman Ben Bernanke outlined a gloomy view of the U.S. economic recovery to Congress on Tuesday.
The FTSE was seen opening 21 points higher at 5650, the DAX was expected to open higher by 30 points at 6607 and the CAC40 was called to open up by 18 points at 3197.
While not explicitly saying the Fed would introduce a third round of bond purchasesm Bernanke said the U.S. central bank was ready to act if the economic picture worsened and forecast GDP growth would be no higher than 2 percent in the second quarter or for the remaining quarters in the year.
Elsewhere Spain's government will be liable for a bailout of up to 100 billion euros ($122 billion)to prop up the country's financial sector, German finance minister Wolfgang Schaeuble said Wednesday, a day before a Bundestag vote on the Spanish bank rescue.
"The aid goes to a state authority, the state is responsible for paying back the aid and in return the state ...
commits to a far-reaching reform of its banking sector and other adjustment measures," Schaeuble told the Rheinische Post newspaper.
Schaeuble ‘s comments came as European Central Bank (ECB) president Mario Draghi said the question of burden sharing with senior bondholders was still evolving in Europe and that any developments would be reflected in Ireland's adjustment program (explain what this is?).
The ECB is now willing to see senior bondholders take losses when banks that are not systemically important fail, but euro zone finance ministers oppose such a move, euro zone officials said on Monday.
Meanwhile, Greece's coalition government will seek a bridging loan while it tries to implement 11.7 billion euros of spending cuts to bring its derailed bailout plan back on track and appease frustrated international lenders.
The measures must be submitted for approval by July 24, when auditors of the so-called "troika" of the European Union, the International Monetary Fund and the ECB are expected to return to Athens to check on the government’s progress.
In company news, new orders lifted revenues of wireless chip venture ST-Ericsson in the second quarter, but the company reported another steep loss.
ST-Ericsson, a 50-50 joint venture of Swedish group Ericsson and French STMicro, reported an adjusted operating loss of $235 million for its April-June quarter, adding to the more than $2 billion it has lost in its three years of operation.
The venture has been hit by problems at its key clients - revenue from Nokia and SonyEricsson has shrunk 70 percent - which it has struggled to compensate for.
Officials of HSBC assured a U.S. Senate panel on Tuesday the bank was changing the way it polices illicit funds, but senators were sceptical the bank could deliver on promises it had broken before.
HSBC's top compliance officer announced he was stepping down and that the bank will shut down businesses in tax havens such as the Cayman Islands, but those offers did not blunt the senators' allegations that the bank sacrificed propriety for profits.
Analysts expect the bank to face a fine of up to $1 billion.