Strengthening euro hits stock markets

THE euro hit an almost two-year high against an ailing dollar yesterday, largely shrugging off data showing Eurozone business growth slowed last month and weighing on exporters’ shares.

Strength in the euro, which helped pitch the dollar to a 13-month low against a basket of major currencies, depressed European carmakers, other sectors and major stock indexes, while Wall Street was also indicated lower.

The euro touched $1.1684 in Asian trade, before pulling back to trade at $1.1648, down 0.2pc on the day.

The European single currency hit a low for the day of $1.1631 after preliminary data showing German private sector growth slowed more than expected in July.

European shares fell yesterday, with the exporter-dominated German DAX index dropping 0.5pc, slightly underperforming the pan-European STOXX 600 index, which lost 0.4pc. The STOXX index dropped 1pc on Friday as the strong euro weighed on earnings.

German government bond yields edged lower after Eurozone business activity data also came in below forecasts.

The 10-year yield – the benchmark for Eurozone borrowing costs – fell to 0.49pc, down 0.4 basis points and its lowest in more than a week. It later nudged back up to 0.5pc.

The dollar index was last up 0.1pc on the day. “A weaker dollar seems to be the path of least resistance given the soft data coming out of the US and the political uncertainty,” Michael Hewson, chief markets strategist at CMC Capital Markets in London, said.

Speculative investors turned negative on the dollar last week for the first time in a year, data from the Commodity Futures Trading Commission showed on Friday.