European markets await Trichet briefing
LONDON -- European stock markets were mostly higher Thursday following two days of losses as investors awaited a press briefing from the head of the European Central Bank after it decided to keep interest rates on hold.
Germany's DAX was up 23.86 points, or 0.5 percent, at 5,078.39 while France's CAC-40 index was 18.42 points, or 0.6 percent, higher at 3,328.07. Britain's FTSE 100 index lagged the other two main European markets for a second day running amid ongoing uncertainty about the future of Prime Minister Gordon Brown.
Wall Street was expected to recoup some of Wednesday's losses at the open. Dow futures were up 15 points, or 0.2 percent, at 8,684 while the broader Standard & Poor's 500 futures rose 1.4 points, or 0.2 percent, to 933.10.
Investors in Germany and France in particular will be closely monitoring this afternoon's press briefing from the European Central Bank's president Jean-Claude Trichet after the bank decided to keep its benchmark rate on hold at 1 percent. Britain's Bank of England also kept its benchmark rate unchanged at 0.5 percent earlier in the day.
"At the ECB there is still the open question of another rate cut and the market should watch for use of the word 'appropriate' in the ECB statement," said David Keeble, an analyst at Calyon Credit Agricole.
"We think it stays (in the statement), mainly due to pressure from the German members," said Keeble.
The markets will also be interested to see what Trichet says about the euro, which has risen sharply against the dollar in recent weeks. A higher euro makes life even more difficult for the euro zone's already hard-pressed exporters. The main reason why the recession in the euro zone is deeper than that being experienced in the U.S. or Britain is that demand for high-value exports, such as cars and machinery, have slumped with the collapse in world trade.
Over the last day or so the euro has fallen back towards $1.42 from over $1.43 amid increasing expectations that Trichet will weigh into the euro debate.
"Trichet can give the move some extra help by expressing either concern about the strength of the euro or by expressing support for a stronger dollar," said Neil Mackinnon, chief economist at ECU Group.
The big event this week though is likely to be Friday's U.S. non-farm payrolls report for May. Figures Wednesday from the ADP payrolls firm indicated that another fairly grim set of figures could emerge.
"Looking ahead to the U.S. opening, the initial jobless claims data from the end of last month may set the tone for the day, with a better-than-expected figure adding to the suggestion that the wider economy is staging something of a comeback," said Tim Hughes, head of sales trading at IG Index.
The rally in stock markets since mid-March has been fueled by a run of better than expected economic data, particularly out of the U.S. As stocks usually start rallying 6 to 9 months before actual recovery emerges in the official data, investors have bet that the massive sell-off in markets during the financial crisis was overdone.
If the data starts to continually come in below expectations, then investors may have to start revising down their recent optimistic tendencies.
European and U.S. stocks fell sharply on Wednesday after disappointing U.S. economic data stoked renewed concerns about the state of the world's largest economy ahead of the jobs report.
Those concerns spilled through into the Asian session, where investors booked some profits made on Wednesday when the rest of the world was in retreat. Japan's benchmark Nikkei 225 stock average fell 72.71 points, or 0.8 percent, to 9,668.96. Hong Kong's Hang Seng shed 73.7, or 0.4 percent, to 18,502.77, but was down over 2 percent earlier.
Elsewhere in Asia, South Korea's Kospi swooned 36.75, or 2.6 percent, to 1,378.14. Benchmarks in Australia and Taiwan were off around 2 percent.
Oil prices recouped some of Wednesday's losses, with benchmark crude for July delivery up 97 cents to $67.09 a barrel.