Europe Economy

European Shares to Open Higher; Greece Weighs on Markets


European shares signaled a slight rebound on Thursday but the ongoing problems in Greece still weighed on sentiment as the country announced a second round of elections would be held on June 17 and European leaders talked of a Greek departure from the euro zone.

The FTSE was set to open 6 points higher at 5396, France's CAC was due to open 7 ppoints higher at 305 and the DAX was set to open 28 points higher at 6419.

While all the major markets are open on Thursday, it is expected to be a light trading day as many European countries celebrate a public holiday.

On Wednesday Greek President Karolos Papoulias appointed senior judge Panagiotis Pikrammenos as caretaker prime minister until elections are held, as news filtered out that more than 1 billion euros ($1.27 billion) had been taken out of Greek banks since Monday by depositors. The Greek stock market has lost more than 10 percent since Monday. The European Central Bank (ECB) said on Wednesday that it  had stopped providing liquidity to some Greek banks as they have lot been successfully recapitalized, confirming news earlier reported by Reuters. 

of a Greek exit from the euro. Opinion polls suggest that leftist party Syriza, led by 37-year-old Alexis Tsipra, would win enough support in the elections to form a government in June. Syriza wants to renegotiate Greece’s international bailout amid growing domestic support for a Greek exit from the euro.

In an interview with the BBC on Wednesday evening, Tsipra accused German Chancellor Angela Merkel of “playing poke with European people’s lives” by insisting on austerity measures.

That sentiment appeared to be echoed by the governor of the Bank of Englandearlier in the day when he warned the euro zone was tearing itself apart and that the UK would be buffeted by the storm raging in Europe. Bank of England Governor Mervyn King also warned that Germany had yet to face up to the reality that it would have to rebalance its own economy as he revised down UK GDP growth for the year, forecast that the recession would last for at least one more quarter, and warned that inflation would remain above the central bank’s target of 2 percent for the remainder of this year and well into next.

Underlining the scale of the crisis, Italian Prime Minister Mario Monti, French President Francois Hollande, Merkel and British Prime Minister David Cameron will hold a video conference on Thursday ahead of this weekend's G8 meeting. The conversation will give the four European leaders a chance to prepare for another summit at Camp David in the United States and to discuss European economic issues, a source in the Italian government told Reuters.

That video call might prove difficult for Britain’s Cameron, who is set to promise on Thursday to do whatever is needed to protect Britain's economy and banks from a break-up of the euro zone, and will urge leaders of the single currency bloc to "sort out its problems" in a speech to business leaders.

In a separate development, the head of the European Union's task force monitoring the implementation of economic changes in Greece was the victim of an arson attack at his home, according to a Wall Street Journal report. The attack occurred early Monday morning at the home of Horst Reichenbach, a German finance expert who has been overseeing the EU's aid programs for Greece, a spokesman for the German prosecutor's office in Potsdam said. 

A sedan belonging to Reichenbach's wife was set on fire and glasses filled with paint were hurled at his house in a suburb west of Berlin. Nobody was injured in the attack, but the car was completely destroyed, the spokesman said. It wasn't immediately clear if the attack was politically motivated or a random act of vandalism. 

Asian shares steadied on Thursday from the previous day's sell-off, but investors found no reason to take on risk amid the deepening turmoil in Greece and fears of problems spreading to other stressed euro zone economies. 

There was some good news, however, as Japan's economy bounced back from a year-end lull in the first quarter, powering ahead of other major industrial nations thanks to rebuilding of the tsunami-battered northeast, solid private spending and some improvement in exports. The world's third-largest economy grew 1 percent in the January-March quarter, just ahead of a median market forecast of 0.9 percent, and growth in the final three months of 2011 was revised to flat from a 0.2 percent contraction, government data showed on Thursday.  Japanese Prime Minister Yoshihiko Noda said on Thursday he hopes the country's central bank will continue to take bold action when necessary to beat deflation, keeping up pressure for additional monetary stimulus. 

In company news, Britain was on the course to secure a deal that would see General Motors build the next generation of its key Astra compact model at Ellesmere Port rather than in Germany, sources said on Wednesday. 

In the U.S., JPMorgan Chase becoame the target of two separate lawsuits by shareholders on Wednesday, accusing the bank and its management of excessive risk that led to trading losses of at least $2 billion.  A spokesman for JPMorgan Chase declined to comment on the lawsuits, which were filed in U.S. District Court in Manhattan, days after Chief Executive Jamie Dimon's May 10 statement that a "failed hedging strategy" caused the massive loss over the last month.