GLOBAL MARKETS: European Stocks Seen Down; Rallies Pause

Thu, Aug 27 2009, 06:40 GMT
http://www.djnewswires.com/eu

GLOBAL MARKETS: European Stocks Seen Down; Rallies Pause

By Andrea Tryphonides
Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--European stocks are expected to open in the red Thursday, as the recent equity market rally starts to run out of steam.

"Sentiment is beginning to change, especially in the U.S.," said Ben Potter, a research analyst at IG Markets.

"Only a few weeks ago, last night’s sharply better-than-expected new home sales data and U.S. durable goods orders would have sent the market surging into the close. However, markets are struggling to hold onto gains now, as we saw overnight," he said.

Potter called London's FTSE 100 index down 21.6 points, or 0.4%, at 4869, Frankfurt's DAX down 15 points, or 0.3%, at 5507 and France's CAC-40 16.3 points lower, or down 0.4%, at 3652.

IG Markets also said that with the company reporting season nearly over, it would not be surprised to see stocks suffer from a short-term "information void".

Nevertheless, the corporate earnings calendar remains rather busy on Thursday. Casino's and GDF Suez's first-half results and Credit Agricole's second quarter will all be in focus, along with Diageo's preliminary results out of London.

Meanwhile, Asian stock markets were lower Thursday, with weakness in Chinese shares dampening sentiment. In Japan, the yen's strength dragged exporters' stocks lower.

Although U.S. equity markets inched higher after the new home sales data and durable goods orders for July beat expectations, analysts said Wall Street's tepid reaction to the positive data indicated the markets' recent uptrend may be running out of steam.

"Signals from Wall Street are somewhat negative, because the market wasn't lifted by better-than-expected economic data," said Mizuho Securities' senior technical analyst Yutaka Miura. "The U.S. market may be facing stronger resistance now," he added.

Japan's Nikkei 225 index was down 1.6%, although off its lows, while South Korea's Kospi Composite lost 1.1%. Hong Kong's Hang Seng index shed 1.3%, while in China the Shanghai Composite index was 0.9% lower after weaving between positive and negative territory in early trade. The index was weighed down by weakness in energy producers and property developers, while gains in airlines and pharmaceutical stocks provided support.

U.S. stocks closed slightly higher on Wednesday as a report of rising new home sales fueled consumer companies, although Caterpillar, General Electric and some of the market's other recent leaders pulled back.

Marking its seventh straight day in the green, the Dow Jones Industrial Average closed up 0.04% at 9543.5. The Standard & Poor's 500 was flat, up just 0.01% at 1028.1. The technology-heavy Nasdaq Composite was also flat, up 0.01% at 2024.4.

In the currency markets Thursday, the euro and the dollar fell against the yen in Asia as weak regional share markets prompted players to sell those currencies for the safety of the yen.

By 0630 GMT, the euro was trading in Europe at Y133.56, down from Y134.35 in late New York trade Wednesday. The dollar was trading at Y93.73, down from Y94.26. The euro was quoted at $1.4247, down from S1.4256.

Elsewhere, base metals were slightly higher after pulling back on the London Metal Exchange Wednesday. The market was well supported as sentiment improved along with the economic data, although reports that China's State Council was seeing over capacity added a note of caution.

Spot gold was up $2.75 at $945.50 per troy ounce. But the October Nymex crude oil futures contract was 28 cents lower at $71.15 per barrel.

Meanwhile, European bond markets opened lower, with September bund futures down 0.05 at 122.76.

By Andrea Tryphonides, Dow Jones Newswires; +44-20-7842-9281; andrea.tryphonides@dowjones.com

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(END) Dow Jones Newswires

August 27, 2009 02:40 ET (06:40 GMT)