at three-month high on Iraq anxiety, stocks steady
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[June 12, 2014]
LONDON (Reuters) - European shares held
steady near 6-1/2-month highs on Thursday, with gains
limited by concerns over the pace of global growth,
while oil prices hit a three-month peak on escalating
violence in Iraq.
A cut in the World Bank's global growth forecast prompted investors
to book profits from recent gains which propelled European, U.S. and
Asian shares to multi-year and record peaks.
The FTSEurofirst 300 .FTEU3 index of top European shares was flat at
1,392.07 points, hamstrung by a dip in miners Rio Tinto RIO.L and
BHP Billiton BLT.L. The index was still within sight of the 1,398.65
peak hit earlier this week.
"After such a good rally, it's not the time to buy right now, it's
better just to sit on your gains. The market is quite vulnerable to
negative news at the moment," said Philippe de Vandiere, analyst at
Altedia Investment Consulting, in Paris.
"On the longer-term however, earnings in Europe will start to
recover in the next few months, which should lift stocks going
Some analysts said anxiety about the violence in Iraq was also
undermining investors' appetite for riskier assets.
Fighting in Iraq also prompted concerns about the oil supply
outlook, lifting U.S. crude futures CLc1 0.8 percent to $105.19 a
barrel, their highest since early March.
Militants from an al-Qaeda splinter group captured Mosul, the
country's second largest city, and closed in on the biggest oil
refinery in Iraq.
The insurgency has also hurt financial markets in neighbouring
Turkey, where stocks .XU100 fell 3.3 percent and the lira TRY=
tumbled 1.7 percent on Wednesday as the militants took 80 Turkish
Among major currencies, the New Zealand dollar jumped 1.3 percent
after the country's central bank raised interest rates and retained
a hawkish bias, surprising some investors who had bet on a slower
pace of rate hikes.
The kiwi surged more than one percent to $0.8670 NZD=D4.
Other major currencies were little changed with the euro still stuck
near the four-month low hit after the European Central Bank cut
rates last week.
The euro traded at $1.3530 EUR=, compared with a low of $1.3503 hit
on Thursday. The euro has fallen almost 1 percent this week as the
effects of the ECB's easing policies spread through markets but the
jury remains firmly out on whether the bank has managed to turn the
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A stronger dollar on the basis of improvement in the U.S. economy
and a resulting rise in Treasury yields was many banks' base
scenario for 2014 at the start of the year.
"It does feel like lower yields are starting to weigh on the euro,"
said Paul Robson, a currency strategist at RBS in London.
"I don't quite want to jump on the bandwagon yet - the reasons for
the euro's strength this year have not quite gone away. Yes it may
go through $1.35, but I don't think it will go much beyond that."
In fixed income, peripheral euro zone bond yields retreated further
from record lows as investors made way in their portfolios to take
down bond sales from Italy and Spain.
Spanish 10-year bond yields ES10YT=TWEB were up 4 basis points at
2.67 percent as Madrid also prepared to ease its hefty upcoming debt
repayments by switching expensive debt issued at the height of the
crisis for a new 10-year bond.
Equivalent Italian yields IT10YT=TWEB were up a similar amount at
2.83 percent before an auction of up to 8.5 billion euros of three-,
seven-, and 30-year bonds.
(Additional reporting by Blaise Robinson in Paris and Patrick
Graham; Editing by Catherine Evans)
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