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Europe Stocks Seen Higher, Germany Votes on Spanish Aid

Thursday, 19 Jul 2012 | 2:04 AM ET

European shares were seen opening higher on Thursday on stronger than expected corporate earnings in the U.S. which offset worries about a slowdown in the world’s largest economy and on hopes German lawmakers would approve a planned bailout of the Spanish banking system.

Brandenburg Gate, Berlin
Nikada | Vetta | Getty Images
Brandenburg Gate, Berlin

The FTSE was seen opening higher by 12 points at 5956, the DAX was expected to open higher by 40 points at 6724 and the CAC40 was expected to open higher by 30 points at 3265.

German lawmakers look set to approve Berlin's contributionto the euro zone aid package for Spain's struggling banks in a vote seen as a test of German chancellor Angela Merkel's authority within her center-right coalition.

Merkel can count on broad opposition support to push the bill through the Bundestag, the lower house of parliament, but some members of her own coalition, nervous about the rising costs of the euro zone debt crisis for Germany, may rebel.

But Spain's mid-term borrowing costs are expected to rise at an auction on Thursday with investors still unconvinced the government can control its finances and revive growth, despite broad spending cuts and tax hikes unveiled last week.

Spanish Government Will Also Need a Bailout: Pro
"The key event risk would be the Spanish auction, Spain had no problem pushing short end paper in the market but longer end it will have to pay up and that will put emphasis on the fact that the outlook for Spanish government debt looks unsustainable at the rate they are paying," Jan Lambregts, global head of financial markets research at Rabobank International, told CNBC.

Spain aims to raise 2-3 billion euros ($2.4-$3.7 billion) from three issues of two- to seven-year debt, and secondary market prices suggest the yields will rise, even though short-term T-bill yields dropped from a month earlier at an auction on Tuesday.

Meanwhile, regulators are focusing on at least four of Europe’s biggest banks as they investigate the attempted manipulation of the region’s Euro Interbank Offered Rate (Euribor), suspecting that Barclays’ traders were the ringleaders of a circle that included Crédit Agricole, HSBC, Deutsche Bank and Société Générale.

Evidence of links between traders at all four banks and Barclays’ former euroswaps trader Philippe Moryoussef is under scrutiny, people involved in the process told the Financial Times.

Societe Generale confirmed it had been contacted as part of the investigations but said there had so far been no allegation of wrongdoing, a spokeswoman for the French bank said on Wednesday.

Central bankers and regulators will hold talks in September on whether the London Interbank Offered Rate (Libor) can be reformed or whether it is so damaged that it should be scrapped altogether.

Bank of England Governor Mervyn King told fellow central bankers in a letter that it was "very clear that radical reforms of the Libor system are needed" while Federal Reserve chairman Ben Bernanke and global financial regulator Mark Carney, also governor of the Bank of Canada have suggested possible alternatives.

British prime minister David Cameron said he could not see an end to the government's austerity program, telling the UK’s Daily Telegraph newspaper the government’s planned five year austerity program could last until 2020.

"This is a period for all countries, not just in Europe, but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts.

I can't see any time soon when ...the pressure will be off," Cameron said in an interview with the newspaper.

Nokia investors were braced for the Finnish mobile phone maker to report weak sales of its new Lumia phones seen as crucial to its turnaround effort and a rapidly diminishing cash pile, in its second-quarter results later on Thursday.

Once the world's dominant mobile phone maker, Nokia was late to embrace smartphones and has lost out to Apple and Samsung Electronics in the most profitable part of the market.

Shares in Nokia have fallen 84 percent since its Microsoft Windows strategy launch.

Analysts told Reuters they expected Nokia to have burned through more than 1 billion euros in cash in the second quarter while it was expected to have sold only 4 million Windows phones in the quarter. Nokia had earlier in the year forecast sales of 19 million for the year.

One of the world’s biggest football teams, Manchester United, is expected to launch on the New York stock exchange as early as next week, for pricing in early August, after earlier attempts in Hong Kong, Singapore and the UK.

The time table marks a change from the original schedule to proceed after the U.S. Labor Day holiday on September 3, Reuters reported citing multiple sources close to the situation.

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Contact Europe: Economy

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