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Euro gains on Angela Merkel comments; global stock markets, oil rise

LiveMint logoLiveMint 22-05-2017 Hilary Russ

New York: The euro surged to a more than six-month high on Monday after German Chancellor Angela Merkel said it was “too weak,” while oil prices were bolstered by expectations that top exporters will extend supply curbs this week.

A one-month high for oil futures on hopes of a supply cut by the Organization of the Petroleum Exporting Countries helped Asian shares to their best session in weeks.US crude rose 0.61% to $50.98 per barrel and Brent was at $53.80, up 0.35% on the day.

European shares struggled to maintain momentum, but the US stock market gained, lifted by defense and tech stocks, after US President Donald Trump announced arms deals of up to $350 billion with Saudi Arabia over the weekend.

The Dow Jones Industrial Average rose 68.11 points, or 0.33%, to 20,872.95, the S&P 500 gained 8.04 points, or 0.34%, to 2,389.77 and the Nasdaq Composite added 33.64 points, or 0.55%, to 6,117.35.

The pan-European FTSEurofirst 300 index lost 0.09% and MSCI’s gauge of stocks across the globe gained 0.43%.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.05% higher, while Japan’s Nikkei rose 0.45%.

Currency markets flipped 180 degrees as Merkel, during a trip to a Berlin school, made a surprise reference to the euro being weak because of the European Central Bank’s ultra-low interest rates and money printing program.

Until that point, the single currency had been in the red, but the comments saw it swiftly climb to a six-month high $1.1250 and bring the morning’s rebound in the dollar to an abrupt halt. The euro was last up 0.22% at $1.1229.

“The thing with euro/dollar is that you have quite a positive mood on the euro at the moment,” said ABN Amro FX strategist Georgette Boele. “And when Merkel makes comments that the euro is probably too low then this is taken as another positive reason to push it higher.”

Sterling was also in the firing line, last trading at $1.3002, down 0.25% on the day, as polls showed the country’s election race tightening. Britain’s chief Brexit negotiator again threatened to walk away from EU exit talks unless the bloc eased its demands.

“Last week was all about US uncertainty but we have had a reminder that Europe still has plenty of uncertainty too,” said Alvin Tan at Societe Generale.

Against a basket of currencies, the dollar opened higher after closing lower on Friday, when it had its largest weekly drop since April 2016. But on Monday, it quickly lost steam, falling back to low levels where it was trading in November. The dollar index fell 0.15%.

US Treasury yields were little changed as selling tied to this week’s government and corporate bond supply offset safe-haven bids underpinned by worries about investigations into possible links between Trump’s campaign officials and Russia.

The benchmark 10-year Treasury yield was last at 2.245%.

Spot gold added 0.4% to $1,259.47 an ounce. US gold futures gained 0.52% to $1,260.10 an ounce. Reuters

Additional reporting by Marc Jones in London, Tanya Agrawal in Bengaluru, and Richard Leong in New York.

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