Traders at the Frankfurt stock exchange checking late afternoon trading results in Frankfurt, Germany, November 9, 2016. REUTERS/Kai Pfaffenbach
LONDON: European stock markets mostly declined on Friday and the euro struck a near 12-month low against the dollar on sky-high expectations of a US interest rate hike in December.
A surge in the dollar to a near six-month high against the yen provided another rally for Japan’s Nikkei, with a cheaper Japanese currency helping exporters.
Elsewhere in Asia, foreign investors removed cash from emerging markets to seek out better US returns, traders said.
The euro slumped to US$1.0569, the lowest level since early December last year.
The greenback also reached 110.93 yen, a high since the end of May.
The ICE dollar index, a leading benchmark of the US dollar’s value against a basket of world currencies, hit its highest level since April 2003, as markets anticipate higher US interest rates in the near future.
The strong dollar weighed on both gold and oil prices which are priced in the unit on international markets. Gold slumped to a near six-month low at US$1,202.81 an ounce.
Oil traders are also nervously waiting for Opec to finalise a deal to cut production at a meeting later this month.
London, Frankfurt and Paris stocks all closed the day with small losses.
Wall Street’s main stock indices were also slightly lower approaching midday.
”The dollar is once more at the forefront of investors’ mindsets, as the incessant rise which has dominated the post-election period continues apace,” said Joshua Mahony, market analyst at IG traders.
”In a high growth environment, it is likely we will see investors moving into the US as a source of capital appreciation.
”However, the hesitancy seen in US stock markets is a clear nod to the fact that with such dollar appreciation comes an environment which is progressively more difficult for US exporters,” he added.
Last week’s shock election of Donald Trump has sent tremors through global markets, with developed nations seeing broad gains but many in Southeast Asia worried about his rhetoric on international trade agreements.
His promises to ramp up spending on infrastructure and cut taxes have led to warnings of a surge in inflation that would force the Fed to hike rates to cap prices. This in turn has led to a rush back into the dollar.
On Thursday, Federal Reserve boss Janet Yellen all but confirmed a first US rate rise in 12 months by saying such a move would be appropriate “relatively soon”.
Her remarks came as a new batch of data showed the world’s largest economy in rude health.
Weekly new jobless claims hit a 43-year low, the consumer price index posted its strongest gain in six months and monthly housing starts increased.
”Despite no concrete economic proposals on the table from Trump’s team... the market is fully subscribing to a return of Reagan-esque fiscal (spending), along with a steeper path of interest rate normalisation,” said Oanda trader Stephen Innes.
”The markets continue to price in a less dovish Fed in the future, as the market is still likely underpricing the actual inflationary impact of the anticipated fiscal spend.”
* Key figures around 1640 GMT (12:40am Malaysian time)
London - FTSE 100: DOWN 0.3% at 6,775.77 points (close)
Frankfurt - DAX 30: DOWN 0.2% at 10,664.56 (close)
Paris - CAC 40: DOWN 0.5% at 4,504.35 (close)
EURO STOXX 50: DOWN 0.5% at 3,025.73
New York - Dow: DOWN 0.2% at 18,868.38
Tokyo - Nikkei 225: UP 0.6% at 18,967.41 (close)
Hong Kong - Hang Seng: UP 0.4% at 22,344.21 (close)
Shanghai - Composite: DOWN 0.5% at 3,192.86 (close)
Euro/dollar: DOWN at $1.0586 from $1.0627 Thursday
Dollar/yen: UP at 110.67 yen from 110.09 yen
Pound/dollar: DOWN at $1.2319 from $1.2418
Oil - West Texas Intermediate: DOWN 28 cents at $45.14 per barrel
Oil - Brent North Sea: DOWN 18 cents at $46.31 - AFP
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