European stock markets mostly declined yesterday and the euro struck a near 12-month low against the dollar on sky-high expectations of a US interest rate hike in December.
In London, the FTSE 100 closed 0.3 % down at 6,775.77 points, Frankfurt’s DAX 30 ended 0.2 % down at 10,664.56 points and Paris’ CAC 40 was slipped 0.5 % to close at 4,504.35 points. The Euro Stoxx 50 was down 0.5% at 3,025.73 points at close.
The euro slumped to $1.0569, the lowest level since early December last year.
The greenback also reached 110.93 yen, a high since the end of May.
The ICE dollar index, a leading benchmark of the US dollar’s value against a basket of world currencies, hit its highest level since April 2003, as markets anticipate higher US interest rates in the near future.
The strong dollar weighed on both gold and oil prices which are priced in the unit on international markets.
Gold slumped to a near six-month low at $1,202.81 an ounce.
Oil traders are also nervously waiting for Opec to finalise a deal to cut production at a meeting later this month.
London, Frankfurt and Paris stocks all closed the day with small losses.
Wall Street’s main stock indices were also slightly lower approaching midday.
“Despite no concrete economic proposals on the table from Trump’s team the market is fully subscribing to a return of Reagan-esque fiscal (spending), along with a steeper path of interest rate normalisation,” said Oanda trader Stephen Innes.
“The markets continue to price in a less dovish Fed in the future, as the market is still likely underpricing the actual inflationary impact of the anticipated fiscal spend.”
Last week’s shock election of Donald Trump has sent tremors through global markets, with developed nations seeing broad gains but many in Southeast Asia worried about his rhetoric on international trade agreements.
His promises to ramp up spending on infrastructure and cut taxes have led to warnings of a surge in inflation that would force the Fed to hike rates to cap prices.
This in turn has led to a rush back into the dollar.
On Thursday, Federal Reserve boss Janet Yellen all but confirmed a first US rate rise in 12 months by saying such a move would be appropriate “relatively soon”. Her remarks came as a new batch of data showed the world’s largest economy in rude health.
Weekly new jobless claims hit a 43-year low, the consumer price index posted its strongest gain in six months and monthly housing starts increased.