GLOBAL MARKETS: European Stocks Set To Open Just Higher

LONDON -- European stock markets are expected to open higher Wednesday, benefiting from a positive close on Wall Street Tuesday, but gains are likely to limited as investors watch corporate earnings, particularly from the banking sector, with caution.

"Although European markets will be looking to move straight back in to positive territory it will have to navigate the financial results," said Jimmy Yates, a dealer at CMC Markets.

"The headline numbers will come from the corporate calendar where the financial stocks yet again take centre stage," added Yates, with Lloyds Banking Group PLC (LLOY.LN) becoming "the second state-owned bank in two days to report poor numbers after Northern Rock disappointed yesterday."

He expected London's FTSE 100 index to open six points higher at 4677, Frankfurt's DAX index up 10 points at 5427, and the CAC-40 index in Paris five points higher at 3481.

While corporate news from the banking sector will be key Wednesday, "with the Bank of England and European Central Bank rate decisions as well as the nonfarm payroll figure still to come this week the risk of traders booking profits could see the market subdued as we wait in the calm before the storm of the next two days," added Yates.

On Tuesday, the Dow Jones Industrial Average increased 33.63 points, or 0.4%, to 9320.19, marking its fourth straight day higher.

Among other indexes, the Standard & Poor's 500 tacked on 3.02, or 0.3%, to 1005.65, and the Nasdaq Composite rose 2.70, or 0.1%, to 2011.31. The Nasdaq's close marked a fresh closing high for the year and its highest close since Oct. 1.

Still, Asian stock markets edged lower Wednesday with investors wary about whether recent upwards momentum can be sustained.

Japan's Nikkei 225 closed 1.2% lower, South Korea's Kospi Composite ended down 0.4% and the Hang Seng index in Hong Kong was last seen 0.2% lower.

"Players are worried that markets are becoming increasingly immune to positive cues, while any negative cues may trigger profit-taking," said Investrust CEO Hiroyuki Fukunaga.

In foreign exchange markets, investors seemed to continue the previous session's trend of profit taking amid subdued equities, said Ashley Davies at UBS, and "the EUR/USD pair has hugged the $1.4400 level fairly precariously."

At 0605 GMT, the euro stood at $1.4394, while sterling stood at $1.6935. The dollar traded at Y95.02.

Elsewhere, spot gold was trading higher at $964.20 per troy ounce, around $2 below its close in New York.

The front-month September Nymex crude oil futures contract was also a touch lower as trading entered a lull ahead of data expected to show a growing oil surplus.

At 0610 GMT, the contract stood 13 cents lower at $71.29 a barrel on Globex, after settling at $71.42 a barrel, down 16 cents.

Analysts expect oil inventories to rise by 500,000 barrels in the week ended July 31, while distillate stocks are seen increasing by 900,000 barrels, according to a Dow Jones Newswires survey, with the data from the U.S. Department of Energy due at 1430 GMT.

Meanwhile, European government bonds have opened marginally stronger Wednesday, steadying after Tuesday's late price sell off following stronger-than-expected U.S. pending home sales data.

At 0615 GMT, the September bund contract stood at 121.69, 0.10 higher.