Euro, shares stall as investors turn cautious

File picture: Alex Grimm

File picture: Alex Grimm

Published Jan 28, 2013

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London - Rallies in European shares and the single currency stalled on Monday after strong gains last week as investors awaited confirmation that financial market conditions and the outlook for the euro area have improved.

Investor sentiment rose strongly on Friday after data showed European banks would repay more than expected of the emergency loans they borrowed from the European Central Bank (ECB) and that business sentiment in Germany was improving sharply.

A solid start to the corporate earnings season has also helped send many equity indexes to pre-financial crisis highs, with the Standard & Poor's 500 index closing last week at its highest level in over five years.

In the equity markets Europe's FTSEurofirst 300 index shed 0.1 percent in early trade to 1,173.87 points, levelling off near its highest level for almost two years, though traders said there was still strong underlying demand.

“All European benchmarks are at their 2012-2013 highs. Every time there's even a slight pull-back, the buying pressure comes in,” Aurel BGC chartist Gerard Sagnier said.

The market's cautious mood on Monday also followed a weaker session in Asia, where falls in technology companies saw the MSCI's broadest index of Asia-Pacific shares outside Japan drop 0.4 percent.

The euro held near an 11-month high against the dollar $1.3440 Meanwhile, German government bond futures, a key gauge of investor sentiment, continued to ease, slipping a further 7 ticks to 142.40 on Monday, and gold is languishing near a two-week low as hopes for an economic recovery worldwide dampen the metal's appeal as a safe haven.

Investors are keenly awaiting the ECB's monthly data on bank lending to companies and consumers, due later, for confirmation that growth is returning to the economy. Italy will also provide a test of investor sentiment when it auctions almost 7 billion euros ($9.4 billion) of 2-year and 5-year bonds.

However, the main focus for investors this week will be on the US, where the Federal Reserve's Open Market Committee meets on Tuesday and Wednesday, and where the nonfarm payrolls report is due out on Friday.

Oil prices were being held in check by the events coming up in the US, with Brent crude unchanged at $113.28 a barrel, while US crude rose 17 cents to $96.05 after seven straight weekly gains - the longest such streak since early 2009. - Reuters

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