The battered euro set a new
record low on Friday, rallied briefly on signs of a softening in
Belgrade over Kosovo, then flopped to another new low.
European bourses enjoyed better fortunes, chasing Wall
Street ever higher, traders said.
The euro hit its first new record low of $1.0557 on signs of
strong U.S. growth.
It then scrambled back above $1.06 after the Yugoslav
Foreign Ministry said Yugoslavia could consider letting an
international armed force into Kosovo if the United Nations
Security Council moves in that direction.
The comment came as Russian Balkans envoy Viktor
Chernomyrdin was in Belgrade looking for a diplomatic solution
to end almost six weeks of NATO bombing.
But after a Yugoslav foreign ministry spokeman insisted
later that such a mission must be unarmed, the euro came under
renewed pressure and sank back to touch new lows below $1.0550.
"The dollar rose after growth data showed the U.S. economy
continued to defy expectations of a slowdown," said Claudio
Piron, treasury economist at Standard Chartered.
Kosovo apart, the real problem for the euro is the bleak
outlook for the euro zone economy and the credibility of the
European Central Bank, analysts said.
Europe's big three bourses London, Paris and Frakfurt
ended around 0.8 percent higher after starting firmer on the
back of Wall Street's overnight record close.
They got another lift from the world's most closely watched
share benchmark when U.S. shares rose as cyclical and financial
stocks joined the bull run toward 11,000, traders said.
"I think before the day is over we could go to 11,000,"
said U.S.-based Larry Wachtel, analyst at Prudential Securities.
Wall Street shrugged off fears that unexpectedly strong U.S.
economic growth data might lead to a rise in interest rates.
It was up around 70 points shortly after London closed,
about 50 points shy of the 11,000 landmark.
The U.S. Commerce Department said gross domestic product
expanded at an annualized rate of 4.5 percent in the first three
months of 1999, outpacing Wall Street's 3.3 percent forecast.
European government bonds were off their highs after the
buoyant U.S. figures, but remained positive.
London, Europe's biggest stock market, ended 0.84 percent
higher, with oil and bank stocks boosting the index.
"The market feels okay. We were down yesterday on the drug
stocks and it's as simple as that. There's no volume around but
we're seeing a reversal of sentiment," said one dealer earlier.
The UK blue-chip index finished at 6,552.2 and was within
some 47 points of its closing high of 6,598.8 set on Wednesday.
Despite a 101 point slump on Thursday, the leading index
ended the week with a net gain of 124 points.
In Paris, the CAC-40 index rose 0.77 percent to a new
closing record at 4,405.35, boosted by Wall Street's gains and
the stronger dollar which benefited shares in oil firms and
cyclicals, traders said.
The CAC-40's previous closing record was 4,390.92 earlier
In Frankfurt, Germany's Xetra DAX rose 0.7 percent with
chemicals stocks the focus of attention amid steady sector
expectations, but traders said the share index could shy away
from resistance next week.
"Volume hasn't been brilliant today," one trader said.
"It looks like there could be some resistance. The market is
probably a little bit overbought at the moment."
He said a bare-looking earnings calender along with a public
holiday in Britain on Monday pointed to a quiet week ahead.
The DAX could bounce off resistance at this year's high of
around 5,440 points and head down to support at 5,200, traders
said, although some said 5,500 points was still reachable in the
Weakness in the euro was also discouraging investment in the
DAX as it was seen as reflecting sluggishness in the euro-zone,
within which Germany is the largest economy.
Reflecting concerns about the overall economy, chemicals
group Bayer reported a fall in first quarter pre-tax profit to
659 million euros ($698.3 million) from 739 million. Sales fell
to 6.994 billion euros from 7.332 billion.