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Abu Dhabi, UAESunday 24 June 2018

Surging euro hits European stocks

Fall comes after ECB chief holds back from talking down the currency

The stock exchange in Frankfurt, Germany. European stocks have taken a hit.Reuters
The stock exchange in Frankfurt, Germany. European stocks have taken a hit.Reuters

European shares fell on Monday in a broad sell-off as the euro strengthened after the ECB chief Mario Draghi did not express concern about a strong currency in a closely watched speech.

While London was closed for a holiday, reducing activity, the broad STOXX index for euro zone stocks fell as much as 0.7 per cent to a two-week low.

At 07.49 GMT, the index was down 0.6 per cent, while the export-oriented DAX index fell 0.7 per cent and the broader pan-European STOXX 600 index slipped 0.5 per cent.

In his speech at a symposium of central bankers at Jackson Hole in Wyoming, Mr Draghi held back from talking down the currency, sending the euro to a 30-month high against the dollar.

“The Jackson Hole meeting has been explosive for the euro and the US dollar traders,” said the London Capital Group analyst Ipek Ozkardeskaya.

“The strong euro is weighing on the European stock markets ... Tapering talks could further demoralise stock traders on the run-up to the ECB verdict,” she said.

Euro-zone shares hit their highest point in more than two years in May, as strong macro data and company results drew heavy inflows in the region, but the recent surge in the euro has weighed.

Almost all sectors suffered losses on Monday with materials the biggest drag to the region’s equities. Finnish paper maker Stora Enso fell 4.6 per cent.

Reinsurance stocks suffered after flooding triggered by Tropical Storm Harvey devastated Houston. Shares in Hannover Re were down 1.3 per cent and Munich Re fell 0.8 per cent.

Among the very few gainers were shares in telecoms firm Altice, up 1 per cent, as investors welcomed news of a near US1 billion share buyback.