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Dollar rises; earnings help Europe stocks

The euro remained under pressure from persistent concerns over Greece’s debt crisis, while a firmer dollar and the IMF’s plan to sell more gold weighed on the metal and other commodities.

Wednesday’s upbeat data on the U.S. housing and industrial sector and evidence that the Federal Reserve had discussed strategies to withdraw some of its emergency stimulus buoyed the dollar.

In contrast, the picture in the euro zone may be deteriorating because of an expected impact on growth from a lingering debt crisis and fiscal austerity measures.

“The ECB (European Central Bank) tightening risks being delayed, and yield differentials are playing in favour of a lower euro/dollar,” said Tom Levinson, currency strategist at ING.

The dollar rose 0.3 percent against a basket of major currencies while the euro lost a third percent to $1.3566.

The minutes from the January Fed meeting showed several policymakers wanted to begin selling securities relatively soon to cut back on the central bank’s extraordinary economic support programme.

“It is the FOMC’s commentary on asset sales and the view that policy tightening is likely to precede any decision to start shrinking the Fed’s balance sheet that makes it difficult to not to be bullish on the dollar,” Lloyds TSB said in a note to clients.

“Admittedly, the timing of a first Fed hike may be some time off, but with the EU and the UK dealing with problems of their own, it is difficult to argue against selling euro and sterling rallies versus the dollar.”

The FTSEurofirst 300 index erased early losses to rise 0.3 percent on the day.

French insurer AXA almost quadrupled annual net earnings while consultancy Capgemini reported above-forecasts earnings and Swiss Re swung to a net profit in 2009. The MSCI world equity index fell 0.2 percent after hitting its strongest level in almost two weeks on Wednesday. U.S. stock futures fell 0.15 percent.

Emerging stocks fell half a percent while emerging Asian stocks lost 0.7 percent.

Greek problem

The premium investors demand to hold 10-year Greek sovereign debt rather than Germany’s rose to a one-week high of around 338 basis points.

Greece, whose debt mountain is set to reach 120 percent of gross domestic product, needs to sell some 53 billion euros in debt this year, including at least 20 billion in April and May, and is looking for EU support to reduce its borrowing costs.

Bund futures fell 23 ticks, but two-year euro zone government bond yields fell as low as 0.958 percent, the lowest since the euro’s inception, due to expectations euro zone interest rates would stay low for longer.

Commodity prices were hit by a combination of a stronger dollar and the International Monetary Fund’s plan for a phased sale of 191.3 tonnes of gold earmarked in its plan to raise new resources for lending.

Gold slipped to $1,100 an ounce while oil fell 1.1 percent to $76.48 a barrel. The Australian dollar fell almost half a percent to US$0.8951.