Europe Economy

European Stocks Seen Higher; Dexia Rescue Approved

European stocks were expected to open higher on Monday after all of Europe's main indexes closed up on Friday, marking a five week high as investor optimism rose following better-than-expected jobs data from the US.

Close-up of a pen on stock price chart

Investors drew a sigh of relief after the board of troubled Franco-Belgian bank Dexia approved a government-led rescue plan, but await details on plans announced by Angela Merkel and Nicolas Sarkozy to recapitalize under fire euro zone banks.

The FTSE is called 41 points higher, the DAX in Frankfurt is expected to open up by 51 points and the CAC 40 is predicted to be higher by 29 points.

The announcement on Sunday by German Chancellor Angela Merkel and French President Nicolas Sarkozy, that they will unveil a comprehensive plan to resolve the debt crisis in peripheral Europe within the next month could provide some relief to investors in Europe, but it was a mixed picture in Asia overnight where sentiment remained cautious following downgrades of Italy and Spain by ratings agency Fitch on Friday.

The Belgian government's decision to buy up the Belgian operation of Dexia for 4 billion euros ($5.4 billion) should come as welcome news to investors, but a Der Spiegel report out on Monday claiming that the bank's German operation is fighting for survival due to significant exposure to troubled euro zone economies may compound concerns.

Dexia's board approved the rescue plan put forward by the governments of France, Luxembourg and Belgium early Monday morning. It is unclear whether the Dexia shares will resume trade on Monday.

The euro rose in Asian trading following the Franco-German pledge to recapitalize troubled euro zone banks.  The common currency last stood at $1.346, up from $1.3375 on Friday when the Fitch downgrades were announced.

In London on Monday, Parliament's Treasury Select Committee will hear evidence on the Independent Commission on Banking's (ICB) final report from ICB chair Sir John Vickers.  The report which came out on September 12 recommended that bank retail businesses should be separated from their investment banking operations.

Angela Merkel will celebrate six years since she was named as Germany's first female Chancellor and policymakers in Malta will vote on whether to approve the European Financial Stability Facility (EFSF)at 5pm London time.

Key economic data on Monday includes manufacturing turnover figures and foreign trade data from Germany at 7:00 London time.  This is followed by August industrial production data for France at 7:45 and Italy at 9:00.