Weak euro powers European stocks to new highs

15:48 • 16.03.15
Economy

The euro struck a fresh 12-year low on Monday and euro zone stocks reached new peaks on bets that the currency's relentless fall will boost corporate earning prospects just as the rising dollar hits those of U.S. firms.

German stocks powered above 12,000 points for the first time, while the main pan-euro zone benchmark indices hit new seven-year highs.

The euro rebounded as European trading got underway, however, while U.S. oil prices recovered after slipping to a fresh six-year low, although they were still down on the day.

This week's focal point for global financial markets is the U.S. Federal Reserve's policy decision on Wednesday, with the euro/dollar exchange rate likely to remain the dominant driver for major equity, currency and bond markets until then.

"With dollar momentum this strong and investors unlikely to ride any euro rally ahead of the (Fed) meeting, risks for the euro are still to the downside for the next couple of days and any bounces are likely to be limited," Unicredit FX analysts said on Monday.

In early European trading the euro was up 1/3 of a percent against the dollar at $1.0530EUR=, having slid to $1.0457 early in the Asian session, its lowest since January 2003.

The euro has lost roughly a quarter of its value versus the dollar since mid-2014 and suffered its biggest weekly fall since September 2011 last week, shedding 3.2 percent as the European Central Bank launched its trillion euro money-printing scheme.

Goldman Sachs now sees the euro at $0.80 by the end of 2017.

European stocks took heart. Germany's DAX .GDAXI was up 0.85 percent at 12,001 points, France's CAC 40 .FCHI half a percent higher at 5,039 points, and Britain's FTSE 100 index up 0.25 percent at 6,758 points .FTSE.

The FTSEurofirst 300 .FTEU3 index of top European shares rose 0.3 percent to 1,584 points and the euro zone top 50 stocks index was up 0.5 percent at a seven-year high of 3,673 points.

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