28 November 2003
AMSTERDAM — European stock markets lost ground on Friday morning due to renewed fears over a weak US dollar, while the euro topped a psychological barrier as it soared above USD 1.20.
Midway through the afternoon, the 1999-launched common European currency had reached USD 1.2015, its highest level ever. The euro narrowed in on the USD 1.20 mark last week.
Analysts said demand for the US dollar had fallen because investors were no longer prepared to continue financing the massive debt being carried by the US government. They also felt that the US could not sustain the 8.2 percent economic growth rate it recorded in the previous quarter.
Global security concerns have also made the dollar unpopular, but the euro’s strength might also be partly due to thin trading during the US Thanksgiving holiday, BBC reported.
European stock markets reacted negatively to the rise of the euro, with investors concerned that the expensive currency would pressure the profits of European companies, newspaper De Telegraaf said.
The leading stock indicator in Amsterdam, the AEX index, turned a modest profit at the start of the day’s trading into a loss of 0.9 percent. Other European stock markets — such as the DAX in Germany, the CAC in Paris and the London market — also lost early gains.
Embattled Dutch retailer Ahold was the biggest loser on the AEX, losing 2.7 percent after it received another reduced analyst investment, this time from UBS. Ahold has suffered this year after revelations of a massive bookkeeping scandal in the US and other subsidiaries.
Only two funds were making ground on the AEX on Friday, namely publisher Reed Elsevier and chemical concern DSM.
Meanwhile, the strong performance of the euro represents a coming of age for the five-year-old currency as it weathered an intense political storm this week.
European Union ministers decided earlier this week against fining Germany and France, the single currency’s two biggest economies, for continued budget deficits breaching the stability act aimed at maintaining the euro’s stability.
In the battle over EU monetary policy, Dutch Finance Minister Gerrit Zalm came off second best after he demanded the possibility be held open to impose fines. A small majority of EU member states voted against his proposal.
Germany and France argued that budget cuts would hurt Europe’s fragile economic recovery, but the European Commission was not swayed and was clearly dissatisfied with the outcome of the talks.
[Copyright Expatica News 2003]
Subject: Dutch news