eur news

Euro Steady at 1.2550

Friday, 13 October 2006 08:32:41 GMT  |  Terri Belkas, Junior Currency Analyst

The Euro entered early London trading right where it ended at yesterday’s US close, despite deflationary readings out of France. Consumer prices in France fell short of expectations and slipped 0.2% in the month of September, bringing the annual rate down to 1.2% from 1.9% in August. While the data did not meet estimates, it is not very surprising to see weaker inflation reports for the month of September given the decline in oil that month, as energy prices pulled the index lower after they posted at -2.6% month over month. The European Central Bank has continued to tout the accommodative nature of monetary policy right now, and today's data does little to reduce the probability of another rate hike before year end. As if 8:27GMT, EUR/USD trades at 1.2557, up slightly from Thursday’s New York close of 1.2554.

European equities were flat on Friday as gains for oil groups and telecoms stocks were offset by profit taking in the banking sector after several days of strong gains. In early trade, the FTSE Eruofirst 300 was flat at 1,436.16, the CAC 40 in Paris was fractionally lower at 5,358.48 and London’s FTSE 100 edged 0.1% lower to 6,116.2. Frankfurt’s Xetra Dax bucked the trend, rising 0.2% to 6,171.9. A number of banking stocks fell as investors took profits following recent strong gains. Banca Intesa and Sanpaolo IMI, prospective Italian merger partners, were both lower in spite of the boards of both companies approving the merger. Santander, the Spanish bank which holds an 8.4% stake in Sanpaolo, voted against the deal however, saying the proposed share swap did not fully reflect the value of Sanpaolo. Intesa fell 1.6% to €5.50, Sanpaolo shed 1.8% to €17.24, while Santander lost 0.6% to €13.36. Oil stocks were higher as crude prices remained above $58 a barrel after a surprise fall in heating oil stocks. Neste Oil, the Finnish refiner, gained 1.4% to €23.26, while Norsk Hydro rose 0.9% to NKr148.75.

Fixed income markets were down in Europe on the French CPI results, with prices on 10-year German bunds slipping to 101.570 and yields holding at 3.800%.

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