Friday, Aug 17, 2012

--Stocks seen tracking Wall Street higher

--Merkel comments underpin the mood

--But caution remains and equity gains seen limited

 

   By Michele Maatouk 

 

European stocks are expected to open higher Friday, taking their cue from a positive session on Wall Street, as investors take comfort in Germany's commitment to the euro, although gains are expected to be fairly limited.

James Hughes at Alpari called London's FTSE 100 to open 21 points higher at 5856, Germany's DAX to open up three points at 6999 and France's CAC-40 to open 17 points higher at 3497.

German Chancellor Angela Merkel's comments Thursday that Germany is committed to doing everything it can to maintain the common currency have helped to lift sentiment. Merkel's comments appeared to back European Central Bank president Mario Draghi's recent pledge to do whatever it takes to save the euro.

"The comments mean we could soon see the European Financial Stability Facility and ECB work together to buy Spanish and Italian bonds, bringing yields back to sustainable levels," said Hughes.

Meanwhile, an upbeat performance on Wall Street Thursday, which was buoyed not only by Merkel's comments, but also better-than-expected quarterly earnings from Cisco, is expected to underpin the upcoming European session.

Still, investors may be tempted to consolidate the previous session's strong gains. European markets posted a healthy rise Thursday after a think-tank report suggested that Spain is preparing to apply for aid from the EFSF at the next Ecofin meeting.

James Hughes also warned investors not to get too carried away with Merkel's comments. "She may back the ECB's position, but then want to impose strict austerity measures on any country that requests it. This would make it a very unattractive option to the Spanish and Italian governments," he said. "The markets are always very quick to react to comments made by Merkel and it's regularly followed quickly by a reversal once the details of her comments emerge."

On Friday's economic calendar, the euro zone's current account and trade balances are at 0800 GMT and 0900 GMT, respectively. In the U.S., University of Michigan confidence is at 1355 GMT, while leading indicators are at 1400 GMT.

On Wall Street Thursday, the Dow Jones Industrial Average rose 0.7% to 13,250.11, the Standard & Poor's 500-stock index added 0.7% to 1415.51 and the Nasdaq Composite Index added 1% to 3062.39.

In Asia, markets were mostly higher Friday following Merkel's comments, while a weaker yen helped Japan's Nikkei Average hit a three-month high.

Japan's Nikkei was up 0.8%, the Hang Seng Index gained 0.5%, and Australia's S&P/ASX 200 climbed 0.7%, but South Korea's Kospi was down 0.6% .

On foreign exchanges, the euro settled back after climbing 0.6% overnight against the dollar. At 0600 GMT, the single currency was at $1.2352 from $1.2358 late Thursday in New York. The dollar was at Y79.35 from Y79.34.

September Nymex crude oil futures were down $0.46 at $95.14 a barrel and the Brent oil contract was down $1.08 at $114.19. Spot gold was at $1,615.80, up $1.50 while the September Bund contract was down six ticks at 141.72.

Write to Michele Maatouk at michele.maatouk@dowjones.com

(END) Dow Jones Newswires

August 17, 2012 02:18 ET (06:18 GMT)