High-fly­ing euro lays Euro­pean shares low

Kuwait Times - - BUSINESS -

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 au­tomak­ers, 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 0.2 per­cent 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. The euro has risen in re­cent weeks on ex­pec­ta­tions the Euro­pean Cen­tral Bank will be­gin to scale back its bond­buy­ing mon­e­tary stim­u­lus scheme be­fore long.

On Fri­day, the day af­ter an ECB pol­icy meet­ing, four sources with di­rect knowl­edge of the dis­cus­sions said pol­i­cy­mak­ers saw Oc­to­ber as the most likely date to de­cide on this.

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

Ger­man govern­ment bond yields edged lower af­ter euro zone busi­ness ac­tiv­ity data also came in be­low fore­casts. The 10-year yield - the bench­mark for euro zone bor­row­ing costs - fell to 0.49 per­cent, down 0.4 ba­sis points and its low­est in more than a week. It later nudged back up to 0.5 per­cent.

‘Path of least re­sis­tance’

The dol­lar in­dex was last up 0.1 per­cent 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.

In­ves­ti­ga­tions into al­leged Rus­sian med­dling in last year’s US pres­i­den­tial elec­tion are seen as po­ten­tial im­ped­i­ments to Pres­i­dent Don­ald Trump im­ple­ment­ing his eco­nomic agenda.

Spec­u­la­tive in­vestors turned neg­a­tive on the dol­lar last week for the first time in more than a year, data from the Com­mod­ity Fu­tures Trad­ing Com­mis­sion showed on Fri­day. Yes­ter­day, MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan re­versed losses to edge up 0.3 per­cent. But Ja­pan’s Nikkei dropped 0.6 per­cent, pres­sured by a stronger yen. Aus­tralian shares re­treated 0.7 per­cent and South Korea’s KOSPI edged down 0.1 per­cent.

Chi­nese bluechips closed up 0.4 per­cent and close to 18-month highs as in­sti­tu­tional in­vestors stepped up pur­chases of big com­pa­nies’ shares. Oil re­versed ear­lier falls af­ter lead­ing OPEC pro­ducer Saudi Ara­bia pledged to limit ex­ports next month, with Brent crude, the in­ter­na­tional bench­mark, up 43 cents at $48.49 a bar­rel.

Min­is­ters from the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries and other non-OPEC pro­duc­ers will meet in St Peters­burg to re­view mar­ket con­di­tions and ex­am­ine any pro­pos­als re­lated to their pact to cut out­put. Sources fa­mil­iar with the talks said the meet­ing may rec­om­mend a con­di­tional cap on pro­duc­tion from Nige­ria and Libya - two OPEC mem­bers so far ex­empt from cuts al­though some an­a­lysts were skep­ti­cal of such a move.

The weaker dol­lar helped push cop­per close to its high­est since March, 0.4 per­cent higher on the day at $6,025 a ton. Gold hit its high­est in four weeks and stood at $1,256 an ounce, up 0.1 per­cent on the day.

TOKYO: A man walks past a stock quo­ta­tion board flash­ing the Nikkei 225 key in­dex of the Tokyo Stock Ex­change in front of a se­cu­ri­ties com­pany in Tokyo yes­ter­day.

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