Tuesday 30 June 2009

GLOBAL MARKETS: European Stocks Set To Slip; Caution Reigns

GLOBAL MARKETS: European Stocks Set To Slip; Caution Reigns

By Peter Nurse

LONDON (Dow Jones)--European stocks are expected to open marginally lower Tuesday, as investors book Monday's gains ahead of the month's end and amid caution ahead of the upcoming earnings season.

"There are nagging doubts as to what the imminent 2Q earnings season will bring from across the Atlantic, whilst the month and quarter-end could also see many traders out there looking to book whatever profits they can," said Matt Buckland, a dealer at CMC Markets, "again reigning in the upside potential."

Buckland expected Europe's major indexes to slip at the open, with London's FTSE 100 index set to open 10 points lower at 4284. He also saw Frankfurt's DAX index falling 8 points to 4877, and the CAC-40 index in Paris down 13 points to 3180.

However, the latest batch of economic data could suggest an upturn, noted Buckland, including the final 1Q GDP figures from the U.K. "Although there is little doubt these will remain negative, an upward revision could in turn deliver further support. Euro-zone CPI and U.S. consumer confidence will also provide further direction on the economic agenda," he said.

U.S. stocks climbed Monday, seemingly getting some help from professional investors tweaking their portfolios before the end of the second quarter.

The Dow Jones Industrial Average added 90.99 points, or 1.1%, to 8529.38. The Nasdaq Composite index rose 5.84, or 0.3%, to 1844.06. The Standard & Poor's 500 index climbed 8.33, or 0.9%, to 927.23.

This positive tone on Wall Street helped Asian stock markets post gains early Tuesday.

"The upside looks greater than the downside at the moment," said AmFraser senior vice president of equity sales Gabriel Gan. "I think the market will remain fairly strong unless we get a really nasty piece of news from the U.S., which looks unlikely, and the July 4 holiday (in the U.S.) is traditionally a good time for the market."

Japan's Nikkei 225 closed up 1.8%, while South Korea's Kospi Composite ended 0.1% higher. Hong Kong's Hang Seng index was last seen 0.7% higher.

The crude oil futures market has shown a degree of strength over the last couple of days, boosted Tuesday to an eight-month high in electronic trading in Asia on a weaker dollar against the euro and news of militant attacks against Royal Dutch Shell's oil facility in Nigeria.

At 0630 GMT, the August crude contract on Globex stood at $72.97 per barrel, up $1.48, having settled Monday at $71.49 per barrel, up $2.33, on the New York Mercantile Exchange.

Buyers were galvanized by the latest reported production outage in Nigeria's strife-torn oil-producing region. Royal Dutch Shell PLC (RDSA) confirmed it was halting some output after militants claimed attacks on two clusters of wells at the company's Estuary field.

At 0630 GMT, spot gold stood at $944.70/oz, $34.70 higher than in late New York business Monday.

In the currency markets, the dollar was a touch lower overnight as investors braved thinning markets to push the risk rally even further, said Geoffrey Yu at UBS.

"Barring external shocks, the dollar remains a risk trade at this stage and the plight of banks in the coming months is a possible trigger for a market correction," added Yu.

At 0630 GMT, the euro stood at $1.4140, towards the upper end of its overnight $1.4071-$1.4153 range, while the dollar stood at Y95.74, having moved in a range of Y95.66-Y96.33.

The safe-haven sovereign debt markets opened flat Tuesday, despite the small selloff expected in the equity markets.

At 0630 GMT, the September bund contract stood at 121.15, unchanged.

-By Peter Nurse, Dow Jones Newswires; +44-20-7842-9288; peter.nurse@dowjones.com

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(END) Dow Jones Newswires

June 30, 2009 02:34 ET (06:34 GMT)

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