While you were sleeping More signs of EU weakness

Tuesday 19th February 2013

Equities in Europe fell as European Central Bank President Mario Draghi warned of "further weakness" in the region's economy.

Data released last week showed that the EU economy contracted more than expected in the fourth quarter, shrinking 0.6 percent from the previous three months.

"Available indicators signal further weakness at the beginning of 2013, with domestic demand remaining dampened," Draghi told EU lawmakers in Brussels today.

Europe's Stoxx 600 Index declined 0.2 percent. The UK's FTSE 100 also fell, closing down 0.2 percent. France's CAC 40 gained 0.2 percent, while Germany's DAX strengthened 0.5 percent.

Wall Street was closed for the President's Day holiday on Monday.

Draghi also sought to play down any talk of currency wars as central banks provide cheap money to help revive their economies. The euro fell 0.2 percent against the US dollar.

New Zealand Story

"Most of the exchange rate movements that we have seen were not explicitly targeted, they were the result of domestic macro-economic policies meant to boost the economy," Draghi said. "In this sense, I find really excessive any language referring to currency wars."

The Japanese yen slid fell 0.5 percent against the US dollar, and weakened 0.4 percent against the euro, after Group of 20 finance ministers and central bank governors refrained from asking countries to avoid targeting exchange rates.

"There's renewed selling pressure on the yen and it's a reaction to the G-20 statement," Adam Myers, head of foreign-exchange strategy at Credit Agricole Corporate & Investment Bank in London, told Bloomberg. "Everyone has woken up to the realisation that the G-20 couldn't criticise Japan when many other countries are manipulating their own currency."

One development that could help the yen is the naming of a new governor for the Bank of Japan. Reuters says that Prime Minister Shinzo Abe may nominate former financial bureaucrat Toshiro Muto as early as this week. Masaaki Shirakawa will give up the post on March 19.

Commodities including nickel, copper and aluminum weakened amid concern about the pace of growth in China, following a report showing disappointing retail sales.

Nickel for delivery in three months was last down 2.7 percent to US$17,890 a metric ton on the London Metal Exchange, after earlier sliding as much as 3.1 percent, the most since October 12, and dropping below the 34-day moving average at about US$17,837, according to Bloomberg.

BusinessDesk.co.nz

Comments from our readers

No comments yet