Stock market news: Euro edges down
Stock market news centers on the euro, which drifted back from a two-month high versus the dollar.
LONDON — The euro drifted back from two-month highs against the dollar Monday as traders booked recent profits despite evidence that the eurozone economy has started the year at a fairly buoyant pace.
Stocks traded in narrow ranges ahead of another batch of earnings, mainly out of the U.S., and amid expectations that China will soon be tightening monetary policy to put a lid on rising inflationary pressures.
The most noteworthy stock market news, though, centered on the euro currency, which earlier spiked to $1.3646, its highest level since Nov. 22. That proved to be a cue for investors to book some recent gains — just two weeks ago the euro was trading at a four month low of $1.2875.
The euro's return to favor has been largely due to waning concerns over Europe's debt crisis amid signals from policymakers that a comprehensive settlement is being discussed that will increase their firefighting powers and financial muscle.
Despite the modest fall back, there are many in the markets who think that the euro will remain supported over the coming week, especially if the bond market pressures on countries like Portugal continue to subside.
"Although a correction is still possible in the near term, we do not envisage much from the scheduled economic, earnings and funding news to interrupt the current upward momentum in yields and in the currency this week," said Frederik Ducrozet, an analyst at Credit Agricole.
The euro has also been supported by positive economic news and market speculation that the European Central Bank might start raising interest rates sooner than anticipated in the wake of higher-than-expected inflation.
Monday's data provided further evidence that the eurozone economy as a whole continues to grow at a fairly steady pace.
Financial information services company Markit revealed that its monthly purchasing managers' index — a broad gauge of business activity — for the services sector rose by a point in January to 55.2 while the equivalent figure for the manufacturing sector remained elevated at 56.9 despite a modest decline from December's eight-month high of 57.1. Anything above 50 indicates expansion.
Though the headline figures showed that the eurozone economy is in fairly good health, they mask big disparities between countries. Germany, Europe's biggest economy, continues to power ahead while countries like Greece, Portugal and Ireland lag as their governments pursue painful austerity programs to get their public finances into shape.
Separate figures from Eurostat, the EU's statistics office, also showed that the industrial sector continues to go from strength to strength, with new orders in November up a monthly 2.1 percent.
The figures did little to jolt investors into buying stocks, however.
But elsewhere, markets were lagging. Hong Kong's Hang Sang dropped 0.3 percent to 23,801.78. Banking shares were among the decliners, including Bank of China, which dropped 1.4 percent, and HSBC, down 0.4 percent.
Benchmark crude for March delivery was down 49 cents at $88.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 48 cents to settle at $89.11 on Friday.