John Dance

Member Article

Ongoing concerns see Euro-Dollar hit 16 month lows

The Euro hit a 16 month low against the dollar today falling more than 1% to $1.279 at the time of writing, coming as France saw its borrowing costs over 10 years rise to 3.29%, up from 3.18% at the beginning of December. It appeared investors were demanding a greater return for their money due to rating agency threats that France is close to losing its AAA credit rating. Despite solid demand for the debt, there was a noticeable (albeit small) decrease in risk appetite and thus around a 0.2% fall in European indices following the auction, detracting from indices that were already trading around 0.5% underwater.

Robust employment data out of the US, marginally beating estimations on the upside, was sufficient to lift spirits in the early afternoon, with UK and German indices fighting back to fluctuate around the flat line.

However, eurozone concerns persisted with nerves jittery following yesterday’s announcement by UniCredit that Italy’s biggest bank was to raise €7.5 billion of new capital in a heavily discounted rights issue. The issuance of new shares at a 43% discount to it’s (at the time) current market price saw it shares fall 14% yesterday with similar losses today. Combined with concerns over a Hungarian bond auction and its relationship with Europe, indices lost ground as the afternoon wore on with the CAC and DAX finishing down 1.53% and 0.48% respectively. The UK’s FTSE 100 lost 44 points to finish down 0.8% at 5624.

This was posted in Bdaily's Members' News section by John Dance .

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