Europe Economy

FTSE, CAC, DAX Seen Flat; EU Summit in Focus

European stocks were called to open flat on Monday ahead of a summit of European Union leaders on Friday and a crucial meeting in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel, due to take place on Monday.

Close-up of a pen on stock price chart

London's FTSE is expected to open higher by 4 points, Germany's DAX is called 13 points higher and the CAC 40 in Paris is predicted to start the day up by 11 points.

In Asia overnight, stocks and the euro firmed amid fresh hopes that Friday's summit would bring a definitive plan of action to resolve the crisis in the euro zone.

Investor sentiment was also boosted by Italian Prime Minister Mario Monti's announcement of a raft of austerity measures on Sunday. The 30 billion euro ($40.3 billion) austerity package was revealed a day ahead of schedule and includes tax increases and a rise in the retirement age designed to drive down Italy's spiraling deficit.

US stock futures opened higher on Sunday following better-than-expected jobs data at the end of last week, showing unemployment at a 2.5 year low. However, hopes that the US economy could be on the road to recovery are likely to be overshadowed by a week of crisis talks in Europe, beginning with the Merkel-Sarkozy meeting in Paris on Monday.

The French and German leaders are under increasing pressure to reach a bi-lateral agreement on what steps the euro zone will take to contain its debt crisis and resolve the issue of sovereign debt. There is agreement between the two on the need to centralize control of euro zone budgets, but they have clashed over the function of the European Stability Mechanism (ESM) permanent rescue program and the role of the European Central Bank.

A Reuters report said on Sunday that the German position on the ESM had softened somewhat with sources suggesting there was a willingness to alter the language of the ESM statutes regarding losses suffered by private bondholders.

Chancellor Merkel and President Sarkozy will meet for lunch at 12:30pm London time to resolve their differences and devise a plan to present before all EU leaders at a major summit on Friday.

US Vice President Joe Biden is due to meet with Greek Prime Minister Lucas Papademos in Athens on Monday in a first meeting between the Obama administration and the Greek government since the resignation of George Papandreou last month.

Economic data to watch on Monday includes service sector PMI from France at 8:50am, Germany at 8:55am and the European Union at 9:00am.

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