Europe Economy

European Stocks Seen Falling as Gold Hits New High

European stocks are expected to open lower on Monday following heavy selling of equities on Thursday and Friday of last week.

Euros & Downward Graph
Steven Hunt

The DAX was seen down 64 points, Britain's FTSE 100  was expected to open 63 points lower and France's CAC was seen 35 points lower.

The performance of Europe's major banks will remain in major banks will remain in focus following huge volatility in the sector.

Late last week Europe's major banks saw stock prices fall sharply amid fears that the euro zone's debt problems are deteriorating into crisis.

Over the weekend German Chancellor Angela Merkel told public broadcaster ZDF that she was opposed to the idea of a euro bond amid mounting pressure for Germany to accept the idea.

"Euro bonds are exactly the wrong answer to the current crisis. They lead us to a debt union and not to a stability union," said the Chancellor.

CNBC correspondent Silvia Wadhwa pointed out last week that there had already been a tectonic shift in Berlin given the German government have gone from saying "no way" on a euro bond to indicating not now.

A raft of confusing headlines hit the wires following Merkel's interview on ZDF.

The Financial Times reported that she had ruled out euro bonds whilst Deutsche Welle said that Merkel was hesitant on euro bonds but had left herself with some wriggle room on the issue.

Brent oil prices fell in overnight trade as pictures from Libya indicated the 41-year reign of Muammar Gaddafi is coming to an end.

Rebels took control of large parts of Tripoli and placed two of the Libyan president's son's under house arrest.

Gold and other precious metal prices have had a strong session with gold hitting new all-time highs as Asian stocks looked for direction amid volatile trade.

While the market awaits word from Federeal Reserve Chairman Ben Bernanke at the central bank's meeting in Jackson Hole on Friday, two other central banks are expected to take center stage.

Overnight the Japanese authorities indicated they were ready to intervene to push the yen lower should it make further losses against the dollar.

Japanese Finance Minister Yoshihiko Noda said Japan was ready to take decisive action against any speculative moves in the currency market.

In Switzerland speculation is mounting that the Swiss National Bank will intervene to curb the rise in the Franc.

Over the weekend the Swiss newspaper SonntagsZeitung reported that the Swiss government expects the Swiss National Bank to set an exchange rate target against the euro of 1.20.

A poll in the same paper found 63 percent of those questioned backed intervention to weaken the Swiss franc even if it leads to higher inflation.

Related Tags