BS: Dollar Picks Up Strength: European Shares Slip
European shares were lower at midday on Tuesday, led by banking stocks on renewed concerns over exposure to Dubai World, while weak German industrial output also weighed on sentiment.
In London, the FTSE 100 was down 1.4 percent, while the DAX in Frankfurt declined 1.8 percent and the CAC-40 in Paris was down 1.7 percent.
The dollar strengthened again on Tuesday, which in turn helped push down both gold and oil prices. Gold was priced at about $1,150 an ounce, still high by historic standards but down substantially from earlier this month. Analysts said however that investors were attracted back into gold after prices posted a three-session decline.
“We have seen this buying on dips in the last few weeks, which is a sign of strength,” an analyst at Commerzbank, Eugen Weinberg, said. “Stronger hands are taking the place of weaker hands.”
However, the metal remains vulnerable to a turnaround in the dollar, he added.
Oil fell below $74 a barrel on Tuesday after a 2 percent fall the previous day, pressured by the slow recovery in energy demand and ample supplies, as well as a firmer dollar.
Investors in oil have looked to economic indicators and to other financial markets, such as equities, this year for signs of a recovery that would support oil demand.
“The economy is still mixed,” said David Moore, Commonwealth Bank’s commodities strategist.
“While China is strong, the U.S. is unlikely to see a smooth recovery and there will be periods of reversals. But the anticipation of a recovery will be supportive in the coming year.”
On Wall Street, shares are expected to open lower as traders try to determine the course of the economy while also preparing for the end of the year. Traders will get little guidance this week, with only the trade balance report and retail sales information scheduled for release.
The Federal Reserve chairman, Ben S. Bernanke, said on Monday that the United States recovery remained fragile and unemployment might remain high for some time, while the European Central Bank’s president ,Jean-Claude Trichet, echoed similar sentiment
In European trading, banks were among the top losers, with traders citing a report about the size of losses facing Nakheel, a unit of Dubai World, as one reason.
Royal Bank of Scotland, Barclays, HSBC, Banco Santander , Société Générale and Standard Chartered were down 1 and a half percent to 6 percent.
German industrial output unexpectedly fell in October, pointing to a slowdown in the economy’s recovery in the final quarter of this year.
