European markets outlook: Stocks seen little changed as fin market regulation curbs risk appetite

European indices are expected to open little changed as concerns about the future effects of proposed financial market regulation in the US and the EU are sapping risk appetite. The DAX future and the CAC future were both up 0.1%.

Asian shares declined, led by exporters, as a slow recovery in the US would hurt their business prospects. The Nikkei lost 1.5% with Honda off 3.7% and Canon down 2.5%. The Hang Seng fell 2%. The ASX dropped 0.7% with Rio Tinto, the world third-largest miner, declining as much as 8% as the company started to sell new shares in the amount of $15.2bln.

The European calendar starts at 7:30am GMT with the interest rate decision of the SNB, which is expected to keep rates unchanged at 0.25%. The UK has May retail sales and public sector finance data at 8:30, followed by the CBI industrial trend survey at 10am. All UK numbers will be broadcast live at Need to Know News' Scream Audio.

The greenback was off 2wk lows against the yen as recent US data suggest that the Fed is unlikely to raise rates soon. USD/JPY added 10 pips to 95.76 after touching 95.52 yesterday. GBP/JPY was up 45 pips at 157.22 and EUR/JPY was up 38 to 133.78. Cable gained 25 pips to 1.6413. EUR/GBP was flat at around 0.85 and EUR/USD advanced 26 to 1.3967.

European bonds were narrowly mixed. The Bund future was down 18 ticks to 119.68. In the cash market, the 2yr Schatz yield was up 1bp to 1.54% and the 10yr Bund added 3 to 3.51%. The 2yr Gilt lost 1bp to 1.33%, while the 10yr Gilt gained 1 to 3.77%. Elsewhere, the 10yr T-note was up 1bp to 3.70%, with yields hovering around 2wk lows ahead of the Fed's policy meeting next week. The 10yr JGB was down 1bp at 1.46%.

Oil was little changed as fears about declining demand offset supply concerns arising from a potential attack on a Nigerian pipeline. WTI was up 8 cents at $71.11. Brent dropped 5 to $70.80.