Stocks flat as euro shaken by ECB uncertainty

[February 14, 2011]  LONDON (AP) -- The relief generated by the resignation of Egypt's president Hosni Mubarak last week has proved short-lived, with stock markets in Europe failing to make headway Monday. The euro, meanwhile, was undermined by growing uncertainty over who will take the helm at the European Central Bank later this year.

Asian markets had earlier rallied as investors there had their first chance to respond to Friday's resignation of Mubarak. Tokyo's Nikkei hit a nine-month high despite figures showing that China has officially overtaken Japan as the world's second largest economy after shrinking during the fourth quarter of 2010.

"Friday's news from Egypt was seen by some as a significant catalyst for equity markets," said Yusuf Heusen, senior sales trader at IG Index. "Although Asia found support from these leads, Europe appears to be stumbling."

In Europe, the FTSE 100 index of leading British shares was down around 3 points at 6,060 while Germany's DAX rose 0.3 percent to 7,394. The CAC-40 in Paris was up 0.1 percent at 4,103.

Wall Street was also poised for a fairly subdued opening, with Dow futures up 5 points at 12,246 while the broader Standard & Poor's 500 futures fell less than a point to 1,326.70.

After a big advance over recent weeks, which has sent the main U.S. indexes to their highest levels since June 2008, analysts said Monday's flat performance was unsurprising, especially as the economic newsflow is light.

Tuesday is expected to be more eventful, with a raft of economic growth figures out of Europe and the latest estimate of inflation in Britain likely to dominate sentiment.

Investors will also be watching the monthly meeting of eurozone finance ministers later in light of renewed concerns over Europe's debt crisis.

The flare-up in concerns is most evident in the big ramp up in Portugal's borrowing costs in the markets and the recent drift in the value of the euro. That suggests that the "comprehensive solution" promised by EU leaders will need to be outlined soon.

Though the eurozone finance ministers are not expected to announce anything dramatic, the markets will be monitoring any statements to make sure that divisions about how to deal with the crisis are not growing.

The euro has also been undermined Monday by the increase in uncertainties over who will replace the European Central Bank's president Jean-Claude Trichet later this year, following the decision by Germany's Axel Weber to quit his post as Bundesbank post and not run for the ECB presidency.

The main reason behind Weber's withdrawal is thought to have been his opposition to the European Central Bank buying up bonds of the more indebted countries in Europe.

"The euro is likely to remain pressured near-term by the increase in uncertainties about who will replace Trichet at the helm of the ECB in October and by ongoing concerns about peripheral debt," said Jane Foley, senior currency strategist at Rabobank International.

By mid morning London time, the euro was 0.7 percent lower at $1.3453.

Earlier in Asia, Tokyo's Nikkei 225 stock average climbed 1.1 percent to 10,725.54 -- its highest close since May 6, 2010 -- unfazed by confirmation from Japan's government that China's economy surpassed its own as the world's second largest in 2010. And while gross domestic product shrank at an annualized rate of 1.1 percent in the October-December quarter, the contraction wasn't as bad as forecast.

Hong Kong's Hang Seng added 1.3 percent to 23,121.06 and Australia's S&P/ASX 200 climbed 1.1 percent at 4,935.80. South Korea's Kospi gained 1.9 percent to 2,014.59.

Mainland Chinese share markets rose on expectations that inflation data due out Tuesday would be lower than previously expected at just over 5 percent. The inflation rate in December was 4.6 percent compared with a 28-month high of 5.1 percent the month before.

The benchmark Shanghai Composite Index gained 2.5 percent to 2,899.13 and the Shenzhen Composite Index rose 2.3 percent to 1,262.11.

Benchmark crude for March delivery was down 28 cents at $85.30 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.15 to settle at $85.58 a barrel on Friday.

[Associated Press; By PAN PYLAS]

Pamela Sampson in Bangkok contributed to this report.

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