Euro zone fears linger as euro recovers

Mon Jan 9, 2012 7:31am EST
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By Richard Hubbard

LONDON (Reuters) - The euro and stocks stabilized on Monday after last week's sell-offs, but worries over Europe's banks and caution ahead of Italian and Spanish debt sales this week left riskier assets vulnerable to further losses.

U.S. stock index futures also pointed to a mixed open for equities on Wall Street on Monday.

Attention was focused on a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy later today, which is likely to keep pressure on the euro although market expectations of any new announcements are low.

"We would be surprised if we saw concrete proof of fundamental progress towards a solution today (at the Merkel/Sarkozy meeting)," Investec chief economist Philip Shaw said.

In positive economic news, German exports jumped in November, data showed on Monday, suggesting fourth quarter gross domestic product for Europe's bulwark economy may be stronger than expected, though its industrial output that month was subdued.

This follows Friday's jobs data in the U.S. which saw the jobless rate down to its lowest level in almost three years.

The euro, which fell to a 16-month low in Asian trade of $1.2666, recovered to be up around 0.5 percent at about $1.2760 in volatile trade as traders covered short positions.