News Column

European Stocks Seen Subdued After Rally

August 26, 2014

VIENNA (Alliance News) - European stocks are seen inching lower on Wednesday after two days of strong gains. While the US economy is showing promising signs of improvement, the euro zone economy is in danger of slipping again into recession, rekindling prospects of more stimulus when the European Central Bank's governing council meets next week. Investors will also keep a close eye on geopolitical developments as increased uncertainty will have spillover effects across the world.

Negotiations between Russian President Vladimir Putin and Ukraine counterpart Petro Poroshenko have been described as positive, though no breakthrough has been reached to help end four months of fighting in east Ukraine.

US President Barack Obama on Tuesday reiterated that US combat troops will not be sent back into Iraq even though the US is providing military assistance to the Iraqi government and the Kurds in their battle against Sunni extremists who have taken hold of large sections of the Middle East country.

Egyptian-mediated indirect talks aimed at finding a more durable solution to the conflict in Gaza has resulted in a breakthrough, with Israel and Palestinians agreeing to a long-term cease-fire on Tuesday, senior Palestinian officials were quoted as saying. However, Israel did not respond to Hamas' claims.

Asians stocks are broadly higher on optimism over the US economic outlook. The euro held at its lowest level in nearly a year versus the dollar in anticipation of extra liquidity in the region.

In economic releases, Market research group GfK is due to release the results of its consumer confidence survey for Germany at 2 am ET. The forward looking consumer sentiment index is expected to edge down to 8.9 in September from 9 in August.

German statistical office Destatis is scheduled to release its import prices report, with economists expecting the price index to drop 1.4% year-over-year in July following a 1.2% fall in June.

French statistical office INSEE will release its business confidence report at 2.45 am ET. The business confidence index is expected to remain unchanged at 93 in August.

French President Francois Hollande on Tuesday unveiled a new cabinet under Prime Minister Manual Valls, following the sudden resignation of the previous government a day earlier. The previous government, which was also headed by Valls, fell on Monday after Economy Minister Arnaud Montebourg and two other ministers from the left, namely culture minister Aurelie Filippetti and education minister Benoit Hamon, resigned in protest over austerity policies implemented by Paris.

In corporate news, GlaxoSmithKline PLC has received approval from the US Food and Drug Administration for a supplemental new drug, Promacta (eltrombopag), in patients with severe aplastic anaemia who have had an insufficient response to immunosuppressive therapy.

European stocks extended the previous session's rally on Tuesday, with expectations of more stimulus from the European Central Bank and positive US economic data boosting sentiment. France's CAC 40 jumped 1.2%, the German DAX rose 0.8% and the UK'sFTSE 100 gained 0.7%.

US stocks rose overnight, with the S&P 500 rising to a fresh record, buoyed by merger news and strong consumer confidence and durable goods orders data pointing to a brighter future for the economy. The Dow gained 0.2%, the tech-heavy Nasdaq advanced 0.3% and the S&P 500 edged up 0.1%.

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Source: Alliance News

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