THURSDAY OCTOBER 19 2000 Euro hits fresh lows as US shares see-saw BY LEA PATERSON, DAVID LISTER AND JAMES MOORE THE euro suffered one of its worst trading days on record yesterday, setting fresh lows as volatile US share price movements triggered sharp swings in asset prices across the globe. The single currency plunged through the 84 cents level for the first time  racking up a single days loss of almost 3 per cent  after the benchmark Dow Jones industrial average rebounded from a 430-point drop at Wall Streets opening bell.

The euros tumble came as Wim Duisenberg, President of the European Central Bank, prepared for his first public appearance since his interview with The Times triggered the latest round of selling in the ailing single currency.

Analysts explained that the euros failure to capitalise on the initial steep losses on Wall Street, sparked by disappointing sales by IBM and strong inflation data, removed one of the final legs of psychological support for the currency. Some analysts had held that the euro would inevitably benefit from US share price turmoil. But with the dollar holding its own as the Dow plunged below the 10,000 level, traders found themselves with the perfect excuse to sell the euro as US shares recovered.

Stop-loss selling accelerated the euros decline, and the currency fell as low as 83.3 cents to the US dollar. European policymakers rushed to issue statements of support for the troubled currency, with Gerhard Schrvder, the German Chancellor, insisting that the robustness of Europes economies merited a far stronger euro. His comments were echoed by Jean-Claude Trichet, Governor of the Bank of France, and Laurent Fabius, the French Finance Minister.

Although the Dow and the Nasdaq recovered the worst of their losses  which sent the Dow to its lowest intra-day level for 18 months  share prices remained under pressure amid pessimism about US corporate earnings. Stronger than expected US inflation figures also undermined sentiment. At the close in New York, the Dow was down 114.69 points at 9,975.02, while the Nasdaq recovered an earlier 180-point loss to finish down 42.40 at 3,171.56.

The US share price volatility had knock-on effects across Europe, with Londons FTSE 100 index marking the eve of the anniversary of the 1987 stock market crash with a 180-point fall. But as Wall Street recovered, so did sentiment in the City, and the FTSE ended the day down just 55 points at 6,148.2. Justin Urquhart-Stewart, of Barclays Stockbrokers, said: Retail investors are sitting on their hands.

Sterling again benefited from safe-haven flows, surging to five-month highs of 58p against the euro and putting on 2 cents against the dollar to close at $1.4529. The stock market turmoil meant the pound more than reversed earlier losses triggered by an unexpected unanimous vote by the MPC. Minutes of the October meeting, out yesterday, revealed the MPC voted 9-0 to keep rates at 6 per cent.

A benign set of labour market data also soothed nerves of imminent UK interest rate rises. Annual average earnings growth in the three months to August held steady at 3.9 per cent. This was despite another fall in the jobless rate which took the claimant count

http://www.thetimes.co.uk/article/0,,21660,00.html

-- Martin Thompson (mthom1927@aol.com), October 18, 2000

Answers

When the euro sinks below the 85 cent barrier it's time for the intervention crew to swing back into action.

-- Billiver (billliver@aol.com), October 19, 2000.

I recall, in January, when a management consultant on one of these boards confidently predicted that the euro--which was at $1.05 at the time--would drop below $1.00.

Everybody laughed.

Ha, was he ever right on. Plus, plus, plus.

-- JackW (jpayne@webtv.net), October 19, 2000.