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Pound hits 15-month high vs euro as debt woes slap markets
European banks park record level of funds at ECB overnight; oil gains as EU reaches preliminary deal to ban imports of Iranian crude.
The pound surged against the euro and global stock markets fell back on Wednesday, on renewed fears over the health of the eurozone’s banking system.
Sterling jumped 0.73% versus the single currency to €1.208, after hitting a €1.21, its highest since September 2010. The euro also slumped 0.95% against the dollar to $1.293.
The euro’s losses came after a deeply discounted rights issue from Italian bank UniCredit. Meanwhile, European banks parked a record €453 billion (£375 billion) in funds at the European Central Bank (ECB)'s overnight deposit facility, highlighting fears banks have about lending to one another in the debt crisis.
‘If banks aren’t willing to use the massive boost in cash that the ECB lent them just before Christmas to either buy peripheral debt or deposit with other institutions earning more interest, then that tells you something worrying about the state of the sector,’ said Angus Campbell at Capital Spreads.
Elsewhere, Britain’s FTSE 100 index of blue-chip shares slipped 0.55%, or 32 points, to 5,668 – pulling back from Tuesday’s 10-week high – and the All Share index faded 0.59%, or 17 points, to 2,906. See the FTSE’s performance and the index’s top winners and losers
Campbell said: ‘For at least 48 hours though investors focused on something different which had been the improvement in economic data providing an excuse to buy equities, but the party seems to now be over as sovereign debt concerns remerged today.’
Next (NXT.L) topped the loser board on the FTSE 100, giving up 85p to £25.56, in the wake of disappointing results from the retailer. Rivals Marks & Spencer (MKS.L) and Wm Morrison (MRW.L) lost 8p to 309p and 6p to 322p respectively.
Oil climbs higher
Stock markets elsewhere in Europe dropped: Germany’s DAX index was 0.89% lower at 6,112, France's CAC 40 index fell 1.59% to 3,194, and the FTSEurofirst 300 index of top European shares weakened 0.62% to 1,022.
Meanwhile, Brent crude for delivery in February rose 0.33% to $112.50 per barrel, extending the previous session’s gains, after the European Union reached a preliminary deal to ban imports of Iranian oil.
Across the Atlantic, Wall Street also suffered, even as a report showed that orders to US factories rose in November by the most in four months.
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- Next PLC
- Marks And Spencer Group PLC
- Standard Life PLC
- WM Morrison Supermarkets PLC
- Glencore International PLC
- Antofagasta PLC
- United Utilities Group PLC
- Severn Trent PLC
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- Next shares slide on ‘disappointing’ Christmas sales
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