(Recasts, adds Wall St. prospects)
* European shares steady, banks outperform
* Wall St. set to edge higher
* Crude dips as Saudis mull production hike, recovers
* Battered yen hits 4-mth low vs dollar
By Gerrard Raven
LONDON, June 16 (Reuters) - European shares were steady on
Monday after strong rallies on Asia's bourses, with the banking
sector outperforming in a critical week, led by Britain's
Barclays <BARC.L> which was up 5.9 percent.
The yen hit a four-month low against the dollar but suffered
against the euro as risk appetite improved on the news from
Barclays and relief that the weekend meeting of Group of Eight
finance ministers had passed off without major surprises.
Wall Street looked set to open slightly firmer but results
from Lehman Brothers Holdings Inc. <LEH.N>, which is expected to
post its first ever quarterly loss, are due at 1215 GMT, well
ahead of the opening bell.
Barclays said it planned to sell stakes to outside investors
and offer shares to existing shareholders to boost its balance
sheet. Weekend press reports said it could secure almost $8
billion from sovereign wealth funds in the next two weeks.
Its gains lifted banks across Europe in a important week for
the sector which sees U.S. investment firms Goldman Sachs <GS.N>
and Morgan Stanley <MS.N> report second-quarter earnings on
Tuesday and Wednesday respectively. Commerzbank <CBKG.DE> rose
1.75 percent.
"The focus will be on the U.S. banks this week -- I expect
Goldman to be solid and hope that all the bad news is out of the
way on Lehman," said Heinz-Gerd Sonnenschein, strategist at
Deutsche Postbank in Bonn.
Brighter news from banks was balanced by losses in the food
production sector. Unilever <ULVR.L> and Cadbury <CBRY.L> fell
between 2 and 3.5 percent after investment bank UBS downgraded
the sector to a "sell" rating.
The FTSEurofirst 300 <> index of top European shares
was down 0.07 percent at 1,266.45 points, and Britain's FTSE 100
<> was 0.16 percent lower.
Earlier, Asia stocks rallied as a U.S. dollar rebound
boosted confidence in the region's exporters.
Japan's Nikkei share average <> closed 2.7 percent
higher with the yen near a four-month low against the dollar.
BRIEF RELIEF ON OIL FRONT
Oil prices eased after United Nations chief Ban Ki-moon said
at the weekend that Saudi Arabia was set to increase output to
9.7 million barrels per day next month.
But the relief to hard-pressed consumers was temporary and
by 1034 GMT, U.S. light sweet crude for July delivery <CLc1> was
up 41 cents to $135.27 a barrel.
The dollar hit a four-month high at 108.85 yen <JPY=> and
the euro <EUR=> hit a seven-month peak against the Japanese
currency as it recovered losses sustained on Friday in the wake
of an Irish referendum "No" to a European Union reform treaty.
The euro was up 0.6 percent at $1.5476, more than a cent
above Friday's low against the dollar, after the European
Commission said inflation is its main concern and after the G8
meeting brought no joint statement on currencies.
The G8 finance ministers said little new on the outlook for
the U.S. currency, although U.S. Treasury Secretary Henry
Paulson reiterated that the U.S. government favoured a strong
dollar as a matter of long-standing policy.
"A softer yen sparked hopes for upward earnings revisions
for some exporters," said Takahiko Murai, general manager of
equities at Nozomi Securities in Tokyo.
"But we have to brace for an eventual dramatic slowdown in
Japan, where the stock market and the economy depend on overseas
demand, considering the recent declines in Asian shares and
rising inflation worries in emerging countries."
The yield curve for euro zone government bonds flattened
with short dates continuing to sell off as markets priced in
higher euro zone and U.S. interest rates ahead.
The yield on the 2-year Schatz <EU2YT=RR> was up 2.7 basis
points at 4.662 percent.
(Additional reporting by Kevin Plumberg in Hong Kong and
Sitaraman Shankar in London; Editing by Ruth Pitchford)
