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08-08-2002, Thu 10:03 AM
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EUROPEAN OUTLOOK: Feeble Stock Gains Expected
Euro-USD 0.9756 gain 0.0007 up 0.06%
Stlg-USD 1.5404 gain 0.0008 up 0.06%
USD-Franc 1.4953 loss 0.0005 dn 0.05%
ZURICH (Dow Jones)--European shares are set to open slightly higher and government bonds a bit lower. The euro is favored over the dollar.
STOCKS: European shares are expected to open higher after Wall Street's endurance, but a list of corporate heavyweights are due to release earnings. Should reports from BASF, BMW, ABN Amro, Commerzbank, Skandia and Royal & Sun Alliance reveal underlying weakness in the economy, investors may have second thoughts about plunging into equities.
On top of doubts about earnings strength, European investors are particularly sensitive to the Bush Administration's plans for military action against Iraq, say analysts. European investors fear a military attack would send stock prices into a renewed tailspin.
Chemicals conglomerate Bayer is seeking a merger partner for its ailing healthcare unit by the end of the year, and may settle for a minority stake, the Financial Times reports.
In several rounds of rumors this year, Roche has been touted as a possible buyer of Bayer's drug business.
BONDS: Euro-zone government bonds are expected to open lower after profit-taking in U.S. Treasurys following the U.S. close Wednesday.
Euro-zone government bond prices rose Wednesday as market participants speculated that the U.S. Federal Reserve might cut interest rates as soon as next week and by as much as 50 basis points.
German manufacturing orders fell more than expected, by 3.2% on the month in June, erasing May's 3.3% rise, as foreign orders slumped 7.0% on the month.
"Weak German data show that the European economy is slower to recover than the U.S. economy," said Jon Lee, a strategist at Barclays Capital.
More German figures and E.U. gross domestic product figures Thursday could seal that argument. The European Central Bank also will weigh in with its August bulletin.
But even if an economic case can be made for higher prices of government bonds, analysts still caution that yields have reached unsustainably low levels.
FOREX: The euro, despite weak figures out of Germany, may pivot slightly higher this session after the dollar's temporary correction.
"The nature of markets today is simply corrective," said Thomas Molloy, a trader at Bank Leumi in New York, noting that market bellwethers such as the dollar, gold and U.S. Treasurys saw their fortune's reverse Wednesday from a day earlier.
Many strategists continue to believe that the dollar is destined to resume its long-term downward trend in the not-too-distant future.
While U.S. economic growth has been surpringly weak this year, "Euroland growth has also been weak, but it was expected to be weak," said David Mozina, director of global fixed-income and foreign exchange research at Bank of America. As a result, "a lot of the good news priced in the dollar still needs to come off," he said.
U.S. Treasury Secretary Paul O'Neill urged Argentina on Wednesday to adopt a sound recovery strategy, but his encouraging words on a South American swing did little to ease fears the region's economic malaise could spread.
Meanwhile, gold seemed vulnerable to some profit-taking after surging on earlier rumor-driven short-covering, dealers said.
EUROPEAN OUTLOOK: Feeble Stock Gains Expected
Euro-USD 0.9756 gain 0.0007 up 0.06%
Stlg-USD 1.5404 gain 0.0008 up 0.06%
USD-Franc 1.4953 loss 0.0005 dn 0.05%
ZURICH (Dow Jones)--European shares are set to open slightly higher and government bonds a bit lower. The euro is favored over the dollar.
STOCKS: European shares are expected to open higher after Wall Street's endurance, but a list of corporate heavyweights are due to release earnings. Should reports from BASF, BMW, ABN Amro, Commerzbank, Skandia and Royal & Sun Alliance reveal underlying weakness in the economy, investors may have second thoughts about plunging into equities.
On top of doubts about earnings strength, European investors are particularly sensitive to the Bush Administration's plans for military action against Iraq, say analysts. European investors fear a military attack would send stock prices into a renewed tailspin.
Chemicals conglomerate Bayer is seeking a merger partner for its ailing healthcare unit by the end of the year, and may settle for a minority stake, the Financial Times reports.
In several rounds of rumors this year, Roche has been touted as a possible buyer of Bayer's drug business.
BONDS: Euro-zone government bonds are expected to open lower after profit-taking in U.S. Treasurys following the U.S. close Wednesday.
Euro-zone government bond prices rose Wednesday as market participants speculated that the U.S. Federal Reserve might cut interest rates as soon as next week and by as much as 50 basis points.
German manufacturing orders fell more than expected, by 3.2% on the month in June, erasing May's 3.3% rise, as foreign orders slumped 7.0% on the month.
"Weak German data show that the European economy is slower to recover than the U.S. economy," said Jon Lee, a strategist at Barclays Capital.
More German figures and E.U. gross domestic product figures Thursday could seal that argument. The European Central Bank also will weigh in with its August bulletin.
But even if an economic case can be made for higher prices of government bonds, analysts still caution that yields have reached unsustainably low levels.
FOREX: The euro, despite weak figures out of Germany, may pivot slightly higher this session after the dollar's temporary correction.
"The nature of markets today is simply corrective," said Thomas Molloy, a trader at Bank Leumi in New York, noting that market bellwethers such as the dollar, gold and U.S. Treasurys saw their fortune's reverse Wednesday from a day earlier.
Many strategists continue to believe that the dollar is destined to resume its long-term downward trend in the not-too-distant future.
While U.S. economic growth has been surpringly weak this year, "Euroland growth has also been weak, but it was expected to be weak," said David Mozina, director of global fixed-income and foreign exchange research at Bank of America. As a result, "a lot of the good news priced in the dollar still needs to come off," he said.
U.S. Treasury Secretary Paul O'Neill urged Argentina on Wednesday to adopt a sound recovery strategy, but his encouraging words on a South American swing did little to ease fears the region's economic malaise could spread.
Meanwhile, gold seemed vulnerable to some profit-taking after surging on earlier rumor-driven short-covering, dealers said.