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07-08-2002, Wed 11:32 AM
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EUROPEAN OUTLOOK: Stocks To Start Higher, Bonds Lower
Euro-USD 0.9678 gain 0.0009 up 0.1%
Stlg-USD 1.5398 gain 0.0010 up 0.06%
USD-Franc 1.5079 loss 0.0006 dn 0.04%
ZURICH (Dow Jones)--European shares are set to extend gains, with government bonds seen lower and the euro struggling.
STOCKS: European shares will open at least slightly higher but a spate of earnings reports will help determine whether prices can stage a significant advance after Tuesday's powerful rally.
On tap for earnings reports are Royal Bank of Scotland, Standard Chartered, Vivendi Environnement and Syngenta, among others.
The German market received an extra shot of confidence Tuesday on talk that a large market participant had moved about EUR5 billion out of two-year Schatz notes and into equities.
One trader put Tuesday's rally down to a short squeeze: "There's a lot of misplaced hope out there and it's still a very nervous market."
Nomura Securities strategist Anais Faraj echoed the trader's sentiment, saying fundamentally it is still a sellers' market.
"The countertrend rally is now over as investors begin to price in weaker economic data. With little economic data to mitigate the negative sentiment, we fear that even the most positive earnings surprise will be overlooked," he said.
Martin Brooker, equity strategist at e*trade Securities, said value is now starting to appear in equity markets. He said investors are best advised to screen the market for high-yielding stocks with solid earnings prospects and stick to sectors such as utilities, tobacco and selected financials.
BONDS: Euro-zone government bonds will extend Tuesday's losses in price as stocks continue to gain.
"We have a strong correction due to the equities rally but we'll see more volatility on the markets in the near term," said Herve Cros, fixed-income strategist at BNP Paribas.
"It's hard to say how long this move would last, but so far we have seen that the financial-markets environment had a deep impact on the real sector and the next economic releases could be worse than the latest ones, because investors' confidence has weakened," said Cros.
On the supply side in Europe, Germany confirmed it will issue EUR10 billion of new five-year Bobls on Aug. 14. "The five-year area isn't a place to be now," said Cros.
German economic data Wednesday includes factory orders and unemployment.
FOREX: The euro starts the session in a struggle against the dollar, to the dismay of euro bulls.
Despite a slew of signals that the U.S. economic recovery may be faltering, the dollar jumped on the coattails of rallying U.S. equities Tuesday, reaching its highest point against the yen and euro in over six weeks and also climbing higher against other key counterparts.
The dollar's gains have gotten investors wondering whether the currency's long-term fortunes may have turned. For now, analysts continue to call the rally a temporary correction, led largely by a flow of funds into the U.S. government bond market. But the volatile trading conditions - both in currency and other asset markets - could prompt a more sustained rebound for the dollar, particularly as it has now breached resistance levels against many of its key counterparts.
In Latin American markets, sentiment in the Brazilian real showed some improvement, after center-left opposition candidate Ciro Gomes, who has been viewed as a potential opponent of a new International Monetary Fund accord for Brazil, said he wouldn't oppose a deal with the multilateral lender.
Australia's central bank left its benchmark interest rate unchanged Wednesday amid concerns over the faltering U.S. economic recovery.
EUROPEAN OUTLOOK: Stocks To Start Higher, Bonds Lower
Euro-USD 0.9678 gain 0.0009 up 0.1%
Stlg-USD 1.5398 gain 0.0010 up 0.06%
USD-Franc 1.5079 loss 0.0006 dn 0.04%
ZURICH (Dow Jones)--European shares are set to extend gains, with government bonds seen lower and the euro struggling.
STOCKS: European shares will open at least slightly higher but a spate of earnings reports will help determine whether prices can stage a significant advance after Tuesday's powerful rally.
On tap for earnings reports are Royal Bank of Scotland, Standard Chartered, Vivendi Environnement and Syngenta, among others.
The German market received an extra shot of confidence Tuesday on talk that a large market participant had moved about EUR5 billion out of two-year Schatz notes and into equities.
One trader put Tuesday's rally down to a short squeeze: "There's a lot of misplaced hope out there and it's still a very nervous market."
Nomura Securities strategist Anais Faraj echoed the trader's sentiment, saying fundamentally it is still a sellers' market.
"The countertrend rally is now over as investors begin to price in weaker economic data. With little economic data to mitigate the negative sentiment, we fear that even the most positive earnings surprise will be overlooked," he said.
Martin Brooker, equity strategist at e*trade Securities, said value is now starting to appear in equity markets. He said investors are best advised to screen the market for high-yielding stocks with solid earnings prospects and stick to sectors such as utilities, tobacco and selected financials.
BONDS: Euro-zone government bonds will extend Tuesday's losses in price as stocks continue to gain.
"We have a strong correction due to the equities rally but we'll see more volatility on the markets in the near term," said Herve Cros, fixed-income strategist at BNP Paribas.
"It's hard to say how long this move would last, but so far we have seen that the financial-markets environment had a deep impact on the real sector and the next economic releases could be worse than the latest ones, because investors' confidence has weakened," said Cros.
On the supply side in Europe, Germany confirmed it will issue EUR10 billion of new five-year Bobls on Aug. 14. "The five-year area isn't a place to be now," said Cros.
German economic data Wednesday includes factory orders and unemployment.
FOREX: The euro starts the session in a struggle against the dollar, to the dismay of euro bulls.
Despite a slew of signals that the U.S. economic recovery may be faltering, the dollar jumped on the coattails of rallying U.S. equities Tuesday, reaching its highest point against the yen and euro in over six weeks and also climbing higher against other key counterparts.
The dollar's gains have gotten investors wondering whether the currency's long-term fortunes may have turned. For now, analysts continue to call the rally a temporary correction, led largely by a flow of funds into the U.S. government bond market. But the volatile trading conditions - both in currency and other asset markets - could prompt a more sustained rebound for the dollar, particularly as it has now breached resistance levels against many of its key counterparts.
In Latin American markets, sentiment in the Brazilian real showed some improvement, after center-left opposition candidate Ciro Gomes, who has been viewed as a potential opponent of a new International Monetary Fund accord for Brazil, said he wouldn't oppose a deal with the multilateral lender.
Australia's central bank left its benchmark interest rate unchanged Wednesday amid concerns over the faltering U.S. economic recovery.