European bourses seen lower
EUROPEAN OUTLOOK & US/ASIAN SUMMARIES:
Asian markets are higher on Tuesday in catching up with Wall Street's advance on Monday, but U.S. stock futures are lower again so any further gains look iffy. European stock markets as a result are likely to open lower, with government debt little changed. The euro and pound are a bit lower against the dollar and yen, while spot gold is edging lower and oil futures are higher.
STOCKS:
European stock markets are set to open lower, as markets continue to gyrate, while investors get a look at more earnings reports on Tuesday and ponder Greece's budget prospects.
For Tuesday's opening, IG Markets is calling the FTSE down 18 at 5229, the DAX down 10 at 5644 and the CAC down 13 at 3749.
The European Union's monetary affairs commissioner, Joaquin Almunia, alleviated some fears about Greece by saying the country's planned budget cuts look ambitious but achievable. Yet some investors remain concerned about the risk of contagion and are awaiting for the release of the European Commission's review of Greece's stability program Wednesday for further direction.
The DAX index may see a bit of technical chart pressure, and individual sectors such as tech could see pressure.
German technology stocks have outperformed blue chips over the past year, but high valuations and the uncertainty around solar-power shares cloud the outlook for the sector.
"The outperformance (of the TecDAX) was very much linked to what we saw in the U.S.," said Heino Ruland, equity strategist at Ruland Research GmbH. "Tech stocks are becoming a very cyclical industry. They had quite a run last year because investors were betting on a recovery."
"But will that continue? I doubt that," Ruland said. "Tech stocks will be a little bit left behind, in part because one of the big drivers within the tech industry has been solar energy and the incentives are being cut dramatically."
Upcoming data and central bank meetings should provide broader guidance to stock investors.
"There is certainly a keen eye on the important macro economic data out later this week and the PMI data out of China (Monday) which points to the likelihood of policy tightening in the not too distant future is keeping investors alert for any growth setbacks," says Nick Serff at City Index.
In the U.K., investors pondered the notion of an election deadlock leading to gridlock in Parliament.
Regardless of the outcome, the election will impose a "brutal" reality check on the victor, wrote strategists at BNP Paribas, led by Hans-Guenther Redeker, in a research note.
"It will be Hobson's choice: either cut deficits, which will weaken demand, or face rating downgrades, which will drive borrowing costs higher," they wrote.
Higher borrowing costs would clearly be the worst option in an overleveraged economy, they noted.
"A fine line between fiscal consolidation and keeping the economy going needs to be found and currency strength would be counterproductive to that stance," the strategists said. "What the U.K. needs is a combination of tight fiscal and loose monetary policies which will create textbook style currency weakness."
Wall Street futures are lower on Tuesday, after markets rose broadly Monday as better-than-expected quarterly earnings from Exxon Mobil and a rebound in crude-oil prices lifted the energy sector, while materials stocks including Alcoa and DuPont got a boost from a rise in metals futures.
Equity valuations point to further consolidation or even an extended correction for the U.S. stock market, among other indicators, some analysts say.
The usual matrixes for determining the value of what investors are paying for stocks should be put in context, given "this isn't a normal environment for valuations," said Ed Clissold, senior global analyst at Ned Davis Research. But Clissold believes stock valuations are at or near their ceiling, at least if one puts them in context of the last half a dozen or so years.
Asian stock markets are trading mostly higher Tuesday as gains in Wall Street overnight buoyed sentiment, with auto makers in Japan rising after Toyota Motor took steps to fix recalled vehicles and as the region's resources plays rebounded.
"We believe that Asia ex-Japan's more attractive valuations after the recent market pullback and uncertainties about the U.S. economic and political outlook prompted some bottom-fishing by investors," Daiwa's Mun Hon Tham said in a research note. "Asia's positive macro outlook for the year will continue to provide downside support for the equity market, in our view."
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February 02, 2010 01:00 ET (06:00 GMT)
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