Europe Markets

FTSE,CAC, DAX Seen Higher on Fiscal Pact Success


European stocks were called to open higher on Tuesday after European Union heads of government backed plans for greater fiscal integration in Europe at the first major summit of 2012.

The FTSE is called 19 points higher, the DAX in Frankfurt is expected to be up by 32 points and the CAC 40 is called higher by 19 points.

At a summit in Brussels on Monday, all but two EU member states voted in favor of a German-led fiscal pact proposed by France and Germany last December.  The UK and the Czech Republic were the only EU members to reject the plans which include tough measures for countries that breach new EU budget deficit conditions due to be enshrined into national law.

In Asia overnight, shares and the euro recovered early session losses on news from Greece that a deal with private bondholders could be reached this week.  Following the European leaders' summit and a separate meeting with ECB and EU officials, Greek Prime Minister Lucas Papademos said early Tuesday that "significant progress" had been made in negotiations with private investors.

However, Portuguese Prime Minister Pedro Passos Coelho was forced to address growing concerns that private bondholders will have to face similar writedowns due to his country's massive debt.  Coelho said "Portugal's debt is perfectly sustainable" and Portugal was doing everything possible to meet the conditions of a 78 billion euro ($103 billion) bailout.

Portugal saw yields on ten-year bonds jump to record highsof 17 percent on Monday and became the second most expensive sovereign to insure after Greece, prompting fears that the Iberian nation may require a second bailout.

The FT reported on Monday that troubled European banks could seek further loans from the ECB after the central bank supplied a record $643 billion in emergency funding at an auction last month.  The newspaper quotes an anonymous euro zone bank chief who told the newspaper at the World Economic Forum in Davos last week: "Banks are not shy second time round" and "We should have done more (the) first time."

Credit rating agency Standard and Poor's warned on Monday that it could downgrade "a number of highly rated" G20 countries from 2015 if they fail to address rising healthcare costs and the impact of aging populations. 

In a report published on Monday, S&P claimed European nations along with the United States and Japan face significant declines in public sector finances over the next four decades due to the cost of care provision for the elderly. S&P analyst Marko Mrsnik wrote in the report: "If governments do not change their social protection systems, they will likely become unsustainable."

Belgium will hold an auction of 3 and 6-month treasury bills at 10:30 London time in the only European bond auction of the day.

A team from the International Atomic Energy Agency (IAEA) will conclude its visit to Iran on Tuesday where it has been investigating allegations that the Iranian government is secretly developing nuclear weapons.

UK semiconductor firm ARM Holdings posted a fourth quarter operating profit of £47.1 million ($74.1 million) on Tuesday, beating expectations. 

Broadcaster BSkyB posted strong first half results on Tuesday, recording a six percent revenue increase, in line with expectations.

Mining firm Xstrata announces fourth quarter output data on Tuesday and fourth quarter results from Spanish bank Santander are also due.

German unemployment data will be released at 9:00am UK time.

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