US$ surges to 5-month high against euro, stocks mixed
Saturday, August 9, 2008
THE US dollar raced to a five-month high against the euro yesterday as worries about the euro zone economy mounted, while oil prices slid below US$118 a barrel on diminishing supply concerns.
European stocks were flat with automotive firms benefiting from the stronger US dollar but energy companies like BP pressured by the fall in oil prices.
A worse-than-expected second-quarter loss from Fannie Mae, the largest US home funding source, weighed on US stock futures, which pared early gains.
The stronger dollar was also a negative for commodities, knocking more than 2 per cent off copper to take it to a six-month low.
Oil dipped below US$118 a barrel after an indication that a key oil pipeline through Turkey, still burning after an explosion, may reopen earlier than previously expected, while gold, often seen as an inflation hedge, briefly fell below US$860 an ounce to an eight-week low.
"The US dollar is driving metals lower," said John Meyer, an analyst at Fairfax Investment Bank.
Data showing Italy's economy shrank in the second quarter cast a shadow over the eurozone, and came a day after European Central Bank president Jean-Claude Trichet highlighted risks to growth, even though he reiterated his concerns about inflation.
Trichet's comments were interpreted by markets as dovish, sparking a steep fall in bond yields as markets priced out the risk of another interest rate hike this year.
"There's going to be more speculation of ECB rate cuts later this year," said Gerhard Schwarz, head of global equity strategy at UniCredit in Munich.
The pan-European FTSEurofirst 300 index edged down 0.1 per cent, with DAX and FTSE both falling about 0.5 per cent.
MSCI main world equity index was down 0.8 per cent.
Royal Bank of Scotland posted a first half loss was £691 million, which although not as bad as feared, kept the sector's woes firmly in the spotlight.
The US dollar surged more than 1 per cent against a basket of major currencies, reaching highs last seen in late February and on track for its biggest weekly rise in 3-1/2 years, while the euro slid below US$1.51 its lowest in more than five months.
Reuters
European stocks were flat with automotive firms benefiting from the stronger US dollar but energy companies like BP pressured by the fall in oil prices.
A worse-than-expected second-quarter loss from Fannie Mae, the largest US home funding source, weighed on US stock futures, which pared early gains.
The stronger dollar was also a negative for commodities, knocking more than 2 per cent off copper to take it to a six-month low.
Oil dipped below US$118 a barrel after an indication that a key oil pipeline through Turkey, still burning after an explosion, may reopen earlier than previously expected, while gold, often seen as an inflation hedge, briefly fell below US$860 an ounce to an eight-week low.
"The US dollar is driving metals lower," said John Meyer, an analyst at Fairfax Investment Bank.
Data showing Italy's economy shrank in the second quarter cast a shadow over the eurozone, and came a day after European Central Bank president Jean-Claude Trichet highlighted risks to growth, even though he reiterated his concerns about inflation.
Trichet's comments were interpreted by markets as dovish, sparking a steep fall in bond yields as markets priced out the risk of another interest rate hike this year.
"There's going to be more speculation of ECB rate cuts later this year," said Gerhard Schwarz, head of global equity strategy at UniCredit in Munich.
The pan-European FTSEurofirst 300 index edged down 0.1 per cent, with DAX and FTSE both falling about 0.5 per cent.
MSCI main world equity index was down 0.8 per cent.
Royal Bank of Scotland posted a first half loss was £691 million, which although not as bad as feared, kept the sector's woes firmly in the spotlight.
The US dollar surged more than 1 per cent against a basket of major currencies, reaching highs last seen in late February and on track for its biggest weekly rise in 3-1/2 years, while the euro slid below US$1.51 its lowest in more than five months.
Reuters
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