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European Stocks Seen Subdued Ahead Of Spain Bond Auction

4/17/2012 2:35 AM ET

European shares are seen opening lower on Tuesday, as investors exercise caution ahead of a Spanish debt auction later in the day, where the government aims to raise between EUR 2 billion and EUR 3 billion from the auction of short-term Treasury bills.

Investors remain worried about Spain's fiscal problems and a resurgent euro zone crisis after Spanish 10-year government bond yields rose above 6 percent for the first time this year yesterday following news that the ECB lending to the country's financial institutions almost doubled since February.

Investors also await the results of the Zew economic sentiment survey for Germany and consumer price inflation data from the U.K. for more clues about the economic outlook for the euro zone.

Markets across Asia are trading mostly lower as rising Spanish borrowing costs reignited worries about Europe's debt crisis. Also weighing on investor sentiment to some extent, official data released today showed that foreign direct investment into China dropped for the fifth consecutive month in March on renewed concerns over Europe's debt crisis and a slowing domestic economy.

Indian shares are outperforming, with the benchmark Sensex trading up 0.6 percent after the Reserve Bank of India slashed its key policy rates for the first time in three years by an unexpectedly sharp 50 basis points. Brent crude, used to benchmark the price of oil produced outside of the U.S., slipped to $118 a barrel in Asian trading on Tuesday, continuing its steep decline from the previous session, as tensions eased over Iran's nuclear program and growing global growth worries sparked concerns about waning fuel demand.

In domestic corporate news, Spanish oil giant Repsol YPF SA said the Argentinian government has initiated a process of parliamentary approval of a law for a change in control in YPF. With this, 51 percent of YPF's Class D shares owned by Repsol will be declared of public interest and subject to expropriation.

Wincor Nixdorf AG, a provider of IT solutions and services to retailers and retail banking, said it expects operating profit for the fiscal year to contract significantly to around EUR100 million, compared to prior year's profit of EUR 162 million after taking into account costs of about EUR40 million attributable to a restructuring program already initiated by the company.

Rio Tinto Plc reported first-quarter global iron ore shipments of 54 million tonnes, up 2 percent than than the first quarter of 2011.

Swiss Re has reiterated its focus on its 2011 - 2015 financial targets and said it is well positioned to benefit from unique business opportunities.

French dairy giant Danone reported 7.6 percent growth in its first-quarter 2012 consolidated sales to 5.12 billion euros and said its aims for a 5-7 percent increase in sales on a like-for-like basis for 2012.

European shares rebounded after after recent falls on Monday, with a bigger-than-expected increase in U.S. retail sales and a strong start to the U.S. earnings season underpinning sentiment. The Euro Stoxx 50 index of eurozone bluechip stocks rose 0.4 percent and the the Stoxx Europe 50 index, which includes some major U.K. companies, added half a percent, while around Europe, the U.K.'s FTSE 100, France's CAC 40, the German DAX and Switzerland's SMI ended up between 0.3 percent and 0.9 percent.

On Wall Street, stocks turned in a mixed performance overnight, as traders reacted to soaring Spanish borrowing costs and mixed U.S. economic data on retail sales, New York manufacturing activity and homebuilder confidence. The Dow ended up 0.6 percent and the S&P 500 ended largely unchanged, while a retreat in the shares of Apple and Google dragged the tech-heavy Nasdaq index down about 0.8 percent.

by RTT Staff Writer

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