LONDON, 8 February 2005 — The dollar rose to a three-month high against the euro yesterday, helping to lift European shares to fresh 2-1/2 year highs after stocks in Asian markets also made impressive gains.
Government bonds were steady after Friday’s stellar gains driven by poor US jobs data, and US stock index futures point to a firmer opening on Wall Street.
Crude oil futures slipped toward $46 a barrel after OPEC members signaled the cartel could wait until its mid-March meeting to make any production cuts.
The dollar’s gain came after Friday’s upbeat comments on the US economy by Federal Reserve Chairman Alan Greenspan and President George W. Bush’s presentation of the US budget for fiscal 2006. Greenspan said market forces and a tighter US fiscal policy should stabilize and may cut the massive US current account balance of payments deficit, which has been a major drag on the dollar.
The dollar was trading around a quarter percent firmer against the euro at $1.2855, having earlier hit its strongest level since Nov. 5, 2004 at $1.2828. A firmer dollar tends to be bullish for many European shares, since it pushes up returns of European firms with a large proportion of US sales and earnings and makes European products more competitive compared with US rivals.
Nevertheless, the dollar is still substantially weaker than three years ago, having slipped about 25 percent from early 2002 levels when the euro was worth just $0.87.
In London, leading British shares closed around new 2-1/2 year highs. The FTSE 100 index closed up 38.3 points or 0.78 percent at 4,979.8, a gain of 3.4 percent since the start of the year and around its highest level since mid-2002, when the index was in retreat from readings above 5,200.
The FTSEurofirst 300 index of pan-European blue chips was 0.56 percent stronger at 1,088.5 points, at highs last seen in June 2002. In Frankfurt, the DAX index ended at 4,366.35 points, up 27.07 or 0.62 percent. In Paris, the CAC-40 index closed at 3,981.9 points, up 23.89 or 0.60 percent.
In Zurich, the Swiss market index closed at 5,870.7 points, up 27.6 or 0.47 percent.
In New York, US stocks were little changed yesterday as a mixed batch of earnings reports gave investors little direction, but a slip in oil below $46 a barrel and strength in drug stocks helped the blue-chip Dow.
The Dow Jones Industrial Average was up 5.85 points, or 0.05 percent, at 10,721.98. The Standard & Poor’s 500 Index was down 0.64 points, or 0.05 percent, at 1,202.39. The NASDAQ Composite Index was down 2.53 points, or 0.12 percent, at 2,084.13.
Oil prices fell yesterday on expectations of warmer weather in the United States.
New York’s main contract, light sweet crude for delivery in March fell 28 cents to $46.20 a barrel in electronic deals. In London, the price of Brent North Sea crude oil for delivery in March dropped 23 cents to $43.66 a barrel.