Monday 23 July 2018

Politics and euro hit European shares

Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange (NYSE)

Helen Reid

Political tensions and a surging euro sent European shares to their lowest in six months yesterday after a missile launch by North Korea sapped global risk appetite.

The pan-European STOXX 600 ended the session down 1 pc, recovering some of the ground lost earlier in the day but still firmly on track to make August its third month of declines in a row.

Britain's FTSE fell 0.9pc and the exporter-heavy DAX hit a five-month low. The euro surged above $1.20 for the first time since January 2015, after European Central Bank Chief Mario Draghi chose at last week's Jackson Hole conference not to talk down a currency that has gained 14pc year-to-date against the dollar.

With risk aversion escalating after Pyongyang fired a missile over northern Japan, all market sectors fell in Europe.

Among the only bright spots were gold miners Randgold Resources and Fresnillo, up 4.6pc and 2.6pc respectively, as safe-haven asset gold soared to a 9-and-a-half month high.

Banking stocks sank 1.4pc to a two-month low. The VSTOXX, a gauge of European investor anxiety, jumped to its highest in a week.

"I think today's correction is more due to the stronger euro, and North Korea is more an excuse or a catalyst," said Angelo Meda, fund manager at Banor SIM. "Markets are discounting the impact of EUR/USD on European earnings, but as of today it's too early to call for a long-term correction," he added, saying the US market was still supported by low interest rates and good earnings growth.

German commercial broadcaster Prosiebensat fell 14.5pc after flagging a weaker outlook for advertising in the third quarter, the third cut in advertising guidance this year according to Deutsche Bank analysts.


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