Euro hits 5-year low after Russia shuts off gas; stock stage small rebound

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FILE PHOTO – A stockbroker works at the Frankfurt Stock Exchange as markets react to the coronavirus disease (COVID-19), at the Frankfurt Stock Exchange, Germany March 27, 2020. REUTERS/Kai Pfaffenbach

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LONDON, April 27 (Reuters) – The euro fell to its weakest level since 2017 on Wednesday after Russia cut off gas supplies to Bulgaria and Poland amid growing investor concern for regional economy, while equities rebounded slightly after mixed results.

Russia’s decision to cut gas flow to Bulgaria and Poland for rejecting its request to pay in rubles was aimed directly at European economies and added to the euro’s woes – giving investors more reason to buy U.S. dollars. Read more

The dollar jumped more than 4% in April and is on track for its best month since January 2015, propelled by growing expectations of an aggressive interest rate hike by the Federal Reserve in the coming months and better resistance of the American economy than the euro zone.

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Investors dumped the euro and on Wednesday it fell below $1.06 with another half percent drop. Analysts say the common European currency is rocked by the war in Ukraine and growing fears that the bloc’s economy could slide into recession this year.

“The euro’s glaring inability to rally behind hawkish comments from members of the European Central Bank signifies continued vulnerability to an external environment negatively affected by a still-worrying situation in Ukraine and broad-based USD strength,” they said. wrote ING FX strategists in a note to clients.

The euro traded as low as $1.0586 before rallying back to just above $1.06. The dollar index, which measures the US currency against a basket of rivals, rose 0.5% to 102.78, its strongest since March 2020, when a COVID-19-induced market crash caused investors to rush for the dollars.

Euro against US dollar

European stocks initially fell before rebounding modestly, helped by a rally in Wall Street futures markets, which followed Tuesday’s steep declines. On Tuesday, the tech-heavy Nasdaq 100 (.NDX) closed down 3.3%, its lowest level since the end of 2020.

News that Russia had cut gas supplies to Poland and Bulgaria sent the MSCI World Stock Index (.MIWD00000PUS) tumbling to a 13-month low. Read more

As of 11:00 GMT, the Euro STOXX 600 (.STOXX) was up 0.97%, while the German DAX (.GDAXI) was up 0.56%. Britain’s FTSE 100 (.FTSE) climbed 0.96%.

A mixed set of corporate earnings, including Google parent Alphabet Inc (GOOGL.O) which reported its first quarterly revenue shortfall due to the pandemic while Microsoft forecast double-digit revenue growth for the next exercise, also weighed on investor sentiment overnight. Read more

European corporate earnings on Wednesday were also mixed. Credit Suisse announced another quarterly loss and Deutsche Bank warned that the Russian-Ukrainian conflict could hurt annual profits. Read more

Investors focused on earnings from some of Wall Street’s biggest names this week, hoping they could provide a counterweight to the deluge of negative news that hit stocks. Read more

There were more sell-offs in Asia, with MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) down 0.75% and earlier hitting its lowest level since mid-March. The Tokyo Nikkei (.N225) fell 1.17%.

Australian stocks (.AXJO) fell 0.78% as inflation hit a 20-year high, bringing interest rate hikes closer. Read more

Beaten Chinese stocks (.CSI300) bucked the trend, gaining almost 3% as sentiment received a near-term boost from data showing that industrial company profits rose at a faster pace in March than a year earlier. Read more

Chinese stocks fell to their lowest level in two years on Tuesday on fears that lingering COVID lockdowns could weigh heavily on economic activity and disrupt global supply chains. Read more

Concerns about the war in Ukraine and its impact on energy markets continue to rattle investors.

Russia’s decision to halt gas supplies to Poland and Bulgaria from Wednesday, seen as a major escalation in response to Western sanctions against Moscow over its invasion of Ukraine, has raised concerns. oil and gas prices, but not by much.

Brent crude futures were last up just 0.15% at $105.15. Brent prices had reached $140 in early March. U.S. West Texas Intermediate crude futures gained 0.18% to $101.88. Read more

In the currency markets, a dominant dollar left the pound and the Japanese yen to bear losses, although the pound then rebounded from 21-month lows.

“The U.S. dollar is benefiting from the prospect of a continued flight to safety of cash,” said Jeremy Stretch, head of G10 FX strategy at CIBC.

Gold prices weakened with the spot price remaining at $1,897, down 0.48% on the day.

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Additional reporting by Kanupriya Kapoor and Joice Alves; Editing by John Stonestreet and Mark Heinrich

Our standards: The Thomson Reuters Trust Principles.

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