Wednesday 13 December 2017

Single currency plummets to four-month low

Herbert Lash

GLOBAL stocks slid and the euro hit a four-month low yesterday amid worries about a potential exit by Greece from the eurozone.

Poor industrial production figures from Europe didn't help sentiment. And a Chinese move to prop up lending in China raised concerns that a key driver of world growth was weaker than previously thought.

Data pointing to a deeper European recession, along with growing skittishness about the Greek debt crisis, helped push European shares down nearly 2pc to their lowest levels in more than four months. In Dublin, the benchmark ISEQ Overall Index slid 2.2pc, the lowest close in three months. Stocks on Wall Street touched a three-month low before recovering some losses.

Government bonds gained, pushing German yields to record lows, after coalition talks in Greece faltered, upping the chance of a mid-June election.

The yield on US Treasuries, which moves inversely to price, fell to the lowest level since early October, breaking decisively below 1.8pc, a key resistance point.

"Treasuries are higher as fears about new political realities in Germany and Greece, global growth and Spanish banks drive investors into safe-haven debt markets," said William O'Donnell, managing director and head of US Treasury strategy at RBS Securities.

Attacks

The crushing defeat of German Chancellor Angela Merkel's Christian Democrats on Sunday stoked fears that Germany's opposition parties will step up attacks on her European austerity policies. Ms Merkel said yesterday the defeat would not alter her view on how to achieve growth.

Safe-haven currencies, such as the dollar and the Japanese yen, rose.

Expectations are for the euro to continue to fall, driven by speculation over Greece's possible exit from the eurozone.

Compounding the picture for investors was data that showed output at factories in the eurozone unexpectedly fell in March.

Industrial production in the 17 countries sharing the euro fell 0.3pc from February, the EU's Eurostat statistics office said. Economists had expected a 0.4pc increase in March.

Oil fell sharply to extend recent heavy losses. Brent crude was down $1.27 (98c) to $110.99 a barrel. US crude fell $1.54 to $94.59 a barrel.

The euro fell 0.54pc to $1.2845. Analysts said the euro could hit the 2012 low of $1.2623 in coming weeks, with some forecasting a break toward $1.20. (Reuters)

Irish Independent

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