AMERICAN MARKETS OUTLOOK:

U.S. stock markets are set to open lower Thursday, according to Angus Campbell of Finspreads. He says U.S. indexes will look closely at the trade balance figures due to be released at 1330 GMT. Following signs Wednesday that European economies are suffering from widening trade gaps on an influx of Chinese goods, investors will be watching for yet another record trade deficit. City Index Strategist Tom Hougaard also forecasts U.S. markets to open lower and cites "an increasing amount of selling as many of our clients are expecting the market to take a breather and potentially trade sideways or lower for a while."

Finspreads is calling the Dow Jones Industrial Average to open 10 points lower at 11033, the S&P 500 down 1.5 points at 1294 and the Nasdaq 100 down just one point at 1757.

EUROPEAN MARKETS: European stocks are narrowly mixed midday, after a fall in telecom shares when France Telecom warned that 2006 sales would be below expectations.

The U.K.'s FTSE 100 index is up 0.1% at 5735.9, as industrial production data met expectations. Shire Pharmaceuticals surged 6.2% on hopes the company is close to settling patent litigation for its attention deficit hyperactivity disorder treatment, Adderall XR. The German DAX index is down 0.11% at 5526.68 in quiet trading. "After Wednesday's gains the DAX has entered a sideways movement Thursday. Trade is slowing down as investors are waiting for the ECB meeting and U.S. economic data," a trader says. The French CAC 40 is down 0.2% at 4880.8.

Bunds and gilts are "marking time" ahead of interest rate verdicts from the Bank of England and European Central Bank. Both central banks are expected to leave rates unchanged - at 4.50% and 2.25%, respectively. "The ECB press conference is the wild card, with the markets wondering how hawkish (ECB President Jean-Claude) Trichet will be given the strength of recent data," a trader says. The press conference starts at 1330 GMT. The March bund future is up 0.03 at 121.95 and the March gilt is up 0.07 at 114.39.

Focus on U.S. trade data later in the day is keeping the dollar on the slide even though forecasts continue to predict a narrowing in the deficit. Strong investment flows into Asia are also boosting the yen, with the dollar falling to Y113.69. The euro has risen to $1.2146 as the market continues to price in hawkish post-ECB-meeting comments from Trichet. The pound is up at $1.7687.

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TOP STORIES:

RUSSIA, US, EU, CHINA TO DISCUSS IRAN: Russia's foreign minister said Thursday that Russia, the U.S., the E.U. and China will discuss Iran's nuclear program in London next week. (AP)

GERMAN 2005 GROWTH UP 1.1% ON EXPORTS,INVEST: A powerful export market carried Germany's economy again in 2005, but increased investment helped boost growth in the latter part of the year. (Data Snap by Emily Barrett)

FRANCE TELECOM WEIGHS ON EUROPEAN TELECOM STKS: France Telecom SA shares tumbled after the French telecommunications operator trimmed its guidance for the second time in around three months. (News Snap by Taska Manzaroli)

UK MANUFACTURING SECTOR GROWS: The U.K. manufacturing sector halted a three-month run of decline in November, with production of transport equipment and machinery hitting record monthly levels. (Data Snap by Andrew Peaple)

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INSIGHT & ANALYSIS FROM DOW JONES NEWSWIRES:

=FOREX FOCUS: Don't be surprised if the European Central Bank press conference later Thursday fails to give the euro quite the lift some may be looking for. (By Nicholas Hastings)

=THE SKEPTIC: Tesco, Asda and William Morrison better watch out: supermarket chain J Sainsbury's back on the forward track. (By Howard Wheeldon)

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STILL TO COME

ET/GMT
COUNTRY PERIOD
0700/1200 UK Jan Bank of England Interest Rate
announcement
N/A GER ECB Governing Council mtg, with
press release at 1345 CET & press
conference with president &
vice-president at 1430 CET on interest
rate decision
0830/1330 US Jan Jobless Claims
0830/1330 US Dec Import Prices
0830/1330 US Nov Trade Deficit
0930/1430 US Japanese Fin Min Tanigaki meets with
IMF Managing Director Rato in
Washington
0930/1430 US US Senate panel continues hearings on
Alito nomination to be associate
justice Of Supreme Court
1000/1500 EU Ifo, Insee and ISAE release joint euro
zone growth forecast
1000/1500 US Dec DJ-BTM Business Barometer
1030/1530 US Jan US Energy Dept Natural Gas Stocks
1400/1900 US Dec Tsy Budget Statement
1425/1925 US Pres Bush speaks on Gulf Coast
reconstruction in Waveland, Miss.
1500/2000 US Japanese Fin Min Tanigaki meets with
Fed Chmn Greenspan in Washington
1630/2130 US Jan Money Supply
1830/2330 US Chicago Fed Pres Moskow speaks at a
financial roundtable
1850/2350 JP Weekly Portfolio Flows Data
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OTHER NEWS:

German telecommunication company Deutsche Telekom AG (DT) said it is maintaining its earnings targets for 2005 and 2006.(News Snap by Stefan Mechnig)

J Sainsbury PLC, the U.K.'s third largest grocer, Thursday cited improvements in product availability, promotions and seasonal products for better than expected fourth quarter trading. (News Snap by Jessica Hodgson)

Nordic Telephone Company, the group of five private equity funds moving to take over TDC A/S (TLD), Thursday said it controlled 85.5% of TDC shares by the 0500 GMT deadline. (News Snap By Frances Schwartzkopff)

Dutch retailer Royal Ahold N.V. reported fourth-quarter sales up 0.5%, as the positive effects from a stronger U.S. dollar were partly offset by this year's fewer trading days than a year ago. (News Snap by Fred Pals)

Alstom SA confirmed its outlook for revenue growth this year and lifted its forecast for order intake after strong demand boosted orders for its power generation equipment in the third quarter. (News Snap by Greg Keller)

GUS PLC posted a better-than-expected third-quarter performance from its retail businesses Thursday despite continued weak trading conditions. (News Snap by Michael Carolan)

Scottish Power abruptly changed its chief executive, hiring corporate heavyweight Philip Bowman and triggering renewed speculation about its place in the consolidation in the European power sector. (News Snap by Brooke Donovan and Jackie Range)