Oct. 25, 2004
By Jeremy Gaunt, European Investment Correspondent
Rueters
LONDON, Oct 25 (Reuters) - Oil prices hit new record highs on Monday and the dollar slid against major currencies, piling up worries in financial markets about slower growth and thinner corporate profits.
European stocks were mired in losses -- down more than 1.5 percent -- and demand for bonds stayed relatively strong. Japanese shares closed down sharply.
U.S. stock index futures pointed to a poor start on Wall Street following Friday's falls that took the Dow Jones index to year lows.
Investors were being hit by dual concerns about high oil prices and a weak dollar.
Oil futures hit new highs on Monday as a strike by Norwegian rig workers that is threatening to choke off output added to general global supply concerns.
IPE Brent crude (LCOZ4: Quote, Profile, Research) was trading at $51.64 a barrel, up 42 cents and just off a new high of $51.90 touched earlier.
U.S. light sweet crude (CLZ4: Quote, Profile, Research) gained 38 cents to $55.55, just off a new peak of $55.67.
International Monetary Fund Managing Director Rodrigo Rato, speaking in Lebanon, said significant falls in the cost of crude were unlikely anytime soon.
"There is going to be some clear impact in developing and developed economies in the very quick increase in oil prices," he said.
Worries about pricey oil's impact on growth and costs were compounded by falls in the dollar against major currencies, which makes non-U.S. goods more expensive for U.S. consumers who drive the world economy.
The euro (EUR=: Quote, Profile, Research) was up three quarters of a percent against the dollar at $1.2784 and the dollar lost more than 0.8 percent against the yen (JPY=: Quote, Profile, Research) to 106.29 yen.
An unexpected rise in Germany's Ifo business sentiment index -- to 95.3 from 95.2 in September instead of a predicted fall -- kept up demand for euros.
STOCKS, BONDS
European shares fell to six-week lows with export-oriented sectors such as metals, chemicals and autos among the biggest losers as their goods become more expensive in dollar-denominated markets.
The FTSE Eurofirst 300 index was down 1.55 percent and the narrower DJ Euro Stoxx 50 index shed 1.76 percent.
Earlier, Japan's Nikkei fell 1.82 percent to a five-month closing low of 10,659.15. The broader TOPIX index lost 1.44 percent to 1,075.12.
A powerful earthquake that shook northern Japan at the weekend had limited impact on the market.
"Selling related to earthquake concerns has mostly ended, but investors are still worried about the yen's strength and oil prices," said Mizuho Investors Securities' strategist Motoyoshi Uchida.
Short-dated euro zone government bond yields hit a six-month low and 10-year Bunds touched a 16-month low as rising oil prices raised questions about global growth.
The two-year Schatz yield (EU2YT=RR: Quote, Profile, Research) was down 3.8 basis points at 2.374 percent. The 10-year Bund yield (EU10YT=RR: Quote, Profile, Research) was down 1.1 basis points at 3.827 percent.
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