Europe Economy

FTSE, CAC, DAX to Open Higher, US Data Brings Cheer


European stocks were called higher on Friday, after better than expected US jobless claims figures on Thursday suggested the recovery in the world’s largest economy was beginning to gather pace.

US stocks were also boosted by a deal in Congress on a payroll tax cut for 160 million Americans.

In what is expected to be a light trading day in terms of volume before the Christmas break the FTSE is called higher by 33 points, the CAC 40 is called 28 points higher and the DAX 57 points up.

Europe took a back seat on Thursday, as House of Representatives Speaker John Boehner caved in to growing criticism from within and outside his Republican Party on a short-term deal to extend the payroll tax cut.

In a dramatic reversal that appeared to end a standoffwith Democrats, Boehner told Senate Majority Leader Harry Reid he would set a vote in the House on a two-month extension of the tax cut, which has already been passed by the Senate, and jobless benefits – key supports for a fitful U.S. economic recovery.

There was more good news in the form of initial jobless claims figures in the USwhich fell to 364,000, the lowest level since April 2008, the second week in a row that the figures were better than expected.

Meanwhile Italy's Senate passed a vote of confidence in the government of Prime Minister Mario Monti on Thursday, which put the final seal on an emergency austerity budget rushed through to restore market confidence in the euro zone's third biggest economy.

The upper house voted 257 to 41 for the government, following a similar easy win in the lower house last week.

Monti said he was happy with the vote and Italy could hold its head high in Europe after passing the package of spending cuts, tax rises and pension reform.

The European Central Bank (ECB) has the option to use quantitative easing-style policies if the threat of deflation emerges and can also boost its bond buying if required, departing ECB Executive Board member Lorenzo Bini Smaghi told the Financial Times.

Smaghi, who will leave the ECB next week, said in an interview with the newspaper that the ECB should use U.S. and UK-style quantitative easing tactics if the situation required them.

"It is appropriate if economic conditions justify it, in particular in countries facing a liquidity trap that may lead to deflation ... this is not currently the case in the euro area because the ECB currently sees no risk of deflation," he said.

Elsewhere Hungarian Prime Minister Viktor Orban told state television the country would remain stable, even if it doesn't make an agreement with the International Monetary Fund (IMF).

He stressed that the government approached the IMF and the European Union to secure financial backing in November as a safety provision should the euro zone crisis take a turn for the worse. He added that Hungary can get by without the IMF and will continue to finance itself from the markets.

The government will be looking for a precautionary agreement, which did not require the government to change its policies. He added the details and all specifics of any agreement that will eventually be signed will be hammered out during the course of talks that are to start next January.

Moody's Investors Service cut the sovereign foreign currency credit rating for Slovenia one notch to A1 from Aa3, citing the increasing pressure on the government's balance sheet from the potential need to further support the nation's banking system.

The outlook for the credit rating is negative, Moody's said in a statement. Slovenia is rated one notch higher, at AA-minus, by both Standard & Poor's and Fitch Ratings.

Moody's added the outlook on Denmark's Aaa ratings is stable but warned the euro zone debt crisis complicates its fiscal consolidation efforts and that prolonged volatility in sovereign and bank funding markets could pressure even top-rated European countries.

The ratings agency said Denmark's ratings could come under downward pressure if the authorities fail to deal with structural fiscal sustainability problems, which have already resulted in a marked deterioration in public finances.

France sold off a second batch of higher-quality fourth-generation mobile frequencies for 2.64 billion euros ($3.45 billion) in an auction that will shape the competitive landscape of the market for years to come.

Telecoms regulator ARCEP said on Thursday it awarded licences to Vivendi'sSFR, France Telecom and Bouygues, while it said a fourth bidder, Iliad could apply to share SFR's network. Remember to take the quotes out if and when you put in quote boxes.

Together with a first batch of frequencies previously sold to all four operators for 936 million euros, the French government has raised close to 3.6 billion, above the minimum amount targeted of 2.5 billion, ARCEP said in a statement.

The U.S. Justice Department on Thursday gave antitrust clearance to the merger of NYSE Euronext and Deutsche Boerse AG,but said a Deutsche Boerse subsidiary must sell its stake in Direct Edge Holdings.

The parties have agreed to a proposed settlement, filed in a Washington federal court, that addresses the Justice Department's concerns.

The department said the transaction as originally proposed would have lessened competition for equities trading services, listing services and real-time data products in the U.S.

China Three Gorges won the competition to buy Portugal's stake in utility EDP paying 2.7 billion euros ($3.5 billion), in a privatisation deal seen as key to the indebted euro zone country's ability to sell state assets.

The deal, which also includes Chinese investment in the wider economy, is the brightest news for Portugal since it was forced to seek a 78 billion euro bailout from the European Union and International Monetary Fund in the spring after its financing costs soared.

State holding company Parpublica said on Thursday that China Three Gorges' offer for the 21 percent stake in EDP, Portugal's largest company, was at a 53 percent premium to its share price.

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