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European markets open modestly higher; may pause after recent gains

The major European indexes opened higher on Monday, the first trading session of the week. With the markets trading near their multi-year higher, some degree of profit taking cannot be ruled out.

Nonetheless, oil stocks may continue to derive support from higher oil prices, as the price of oil is edging after it a scaled a 9-month high on Friday. Further, M&A speculation swirling in the markets could also cushion any potential downside from the current levels.

Currently, the French CAC 40 Index is gaining about 0.06% and the German DAX Index is climbing 0.38%, while the FTSE 100 Index is little changed. The markets rose in the week ended June 15th after experiencing a rout in the previous week over interest rate concerns. The major indexes of the region closed at a fresh 7-year closing high. The recent week's strength was mainly due to the buoyancy in the US markets following some favorable economic readings that support an unchanged stance on interest rates in the US, M&A speculation and a climb in oil prices.

The CAC 40 Index posted a weekly gain of 3.8% compared to a 5.8% advance by the DAX Index. The FTSE 100 Index was up 3.5% for the week. Meanwhile, across the Atlantic, the Dow Industrials advanced 215.09 points 1.6% to 13,640 in the week ended June 15th. The broader S&P 500 Index rose 25.24 points or 1.67% to 1,533, while the Nasdaq Composite advanced 53.17 points or 2.07% to 2,627. On Monday, the Asian markets were higher across the board, encouraged by outperformance of the US markets on Friday.

Japan's Nikkei gained close to a percentage point and Hong Kong's Hang Seng Index is trading with a gain of over 2%. The Chinese Shanghai Composite Index advanced about 2.76%. Crude oil futures are currently up $0.06 at $68.06 a barrel after they rose 5% in the week ended June 15th to $68 a barrel, which represents their highest level since September 2006. Currently, gold is trading up $2.90 at $661.60 an ounce.

Metal prices are mostly higher, with the exception of Aluminum. Among corporate news, shares of Cadbury Schweppes are likely to react to reports that the chocolate manufacturer may slash 5,000 jobs at its confectionaries business. The New York Times also said the company is likely to announce as early as tomorrow a deal to sell its American beverage business. BHP Billiton is expected to be in focus following a report by the London Times that BHP Billiton is reviving its $40 billion offer for the US aluminum maker after its current CEO Chip Goodyear retires in October.

Imperial Chemical company may see some weakness after it said it rejected a take over offer from Akzo Nobel, which valued the company at £7.2 billion. Publisher Pearson is expected to retreat after reports suggested that it is discussing with partners including US-based Generic Electric to table a bid for financial information provider Dow Jones, the publisher of the Wall Street Journal. Alliance Boots is expected to react to reports that private equity firm Kohlberg Kravis Roberts & Co. is mulling another payment to the company's pension funds.

The macroeconomic calendar is light, with no major reports due out from the region. In the US, the housing market index of National Association of Homebuilders is expected to be released today after the European markets close. The Rightmove released its UK house price index for June, which rose to 194.7 in June from 193.1 in May. The average property asking price advanced 0.8% on a monthly basis to £239,317, while annually the increase was 13.2%. The increases were higher than the rates recorded in the prior month. (rttnews.com)