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Market Observations

European Stocks Seen Soft On Fears Over US Budget

 European stocks may turn in another lackluster performance on Thursday, as investors grapple with the uncertainty about Federal Reserve policy and watch keenly political developments in the U.S. for signs of progress on a budget agreement ahead of the September 30 deadline to avert a partial government shutdown.

Meanwhile, Treasury Secretary Jack Lew sent a letter to Congress on Wednesday warning that the extraordinary measures the Treasury is employing to preserve U.S. borrowing capacity will be exhausted no later than October 17th. The Congress must agree to raise the nation's debt ceiling by 17th to avoid a potential default.

A slew of U.S. reports on jobless claims, pending home sales and second quarter GDP are slated for release later the day, which could provide insights into Federal Reserve's tapering plans at its next meeting in October.

The Asian markets are turning in a mixed performance, recouping most of their early losses despite worries about the U.S. federal budget and debt ceiling. Japan's Nikkei is rising 0.9 percent on a weaker yen on expectations the government will implement more corporate tax reforms.

The key benchmark indexes in Australia, India, Indonesia, Singapore and South Korea are up between 0.2 percent and 0.8 percent, while the markets elsewhere are subdued. China's Shanghai Composite is losing 1.6 percent as investors adopt a cautious stance ahead of the upcoming Golden Week holidays starting Tuesday.

Closer home, the International Monetary Fund approved the next slice of bailout tranche for Ireland, amounting to EUR 770 million, after completing its eleventh review of Ireland's performance under an economic program supported by a three-year arrangement under the Extended Fund Facility.

Unemployment in France declined in August for the first time in more than two years, data from the labor ministry showed. The number of people claiming job seekers' benefits declined 50,000 or 1.5 percent in August from the previous month. However, the number of registered job seekers totaled 3.24 million, up 7.3 percent from a year earlier.

In corporate news, Anglo-Australian mining giant BHP Billiton said that it has priced a $5 billion bond offering, including notes that will mature in 2043.

French construction giant Vinci SA is mulling the sale of all or part of its parking contract business, Vinci Park, and expects to raise up to 2 billion euros or $2.7 billion, according to a report in French business daily Less Echos.

Nokia Corp's board has discussed a tie-up with French firm Alcatel-Lucent following the planned sale of its handset business to Microsoft Corp, the Wall Street Journal reported, citing several people familiar with the deliberations.

Royal DSM N.V., a life and material science company, said it would furnish a review of its strategic progress and an update on its 2015 targets at its annual Capital Markets Day being held in Vaalsbroek, The Netherlands.

Ablynx and Merck Serono, the biopharmaceutical division of Merck KGaA, announced a multi-year research alliance that could lead to at least four co-discovery and co-development collaborations.

The European markets ended Wednesday's session with modest losses despite positive German consumer confidence data. The German DAX and France's CAC 40 recovered early losses to end largely unchanged, while the U.K.'s FTSE 100 declined 0.3 percent.

U.S. stocks dropped overnight, with the Dow and the S&P 500 extending declines for the fifth straight session, as a lack of progress in Congress over budget talks and continued uncertainty surrounding Federal Reserve monetary policy overshadowed encouraging reports on durable goods orders and new home sales. The major indexes ended down between 0.2 percent and 0.4 percent.

by RTT Staff Writer