* Euro hits four-month lows vs dollar
* German bunds up on fear of Cyprus bailout implications
* European shares tumble as euro zone data offsets U.S. lift
By Marc Jones
LONDON, March 27 The euro hit a four-month low,
shares fell and safe-haven German government bonds climbed to
their highest in three weeks on Wednesday, as poor data added to
euro zone worries following its controversial bailout of Cyprus.
Cyprus is expected to complete capital control measures on
Wednesday to prevent a run on banks by depositors after the
country agreed a bailout deal that will wipe out some senior
bank bondholders and impose losses on large depositors.
The worry among investors and economists is that despite
attempts by some officials to dismiss the idea, the plan could
become a blueprint for any future euro zone bailout.
It pulled the euro to a four-month low of $1.2763
and the dollar rose to a seven-month high versus a
range of currencies.
"After the deal for Cyprus there is concern about what would
happen if another country were to ask for financial help," said
Niels Christensen, currency strategist at Nordea.
"It is difficult to point at positive factors for the euro
... We need good economic data from the euro zone to support the
euro going forwards, and people fear that this is not very
The concerns were amplified by a wave of bleak data that
painted a stark picture of the region's troubles.
The first fall in euro zone economic confidence after four
months of gains in March stacked on top of an ongoing slump in
Italian manufacturing and retail sales and a confirmation that
France's economy contracted at the end of last
German government Bund futures, an asset that
investors value in times of increased tension, rose 75 ticks,
their biggest jump since inconclusive Italian elections last
month rattled markets.
In an interview with Reuters, rating agency Moody's warned
the euro zone's problems and the political stalemate in Rome
were providing a headwind to the growth Italy needs to keep its
Despite the current turbulence, Italy became the first of
the euro zone's big debt-laden Mediterranean members to
seriously test the bond market since the Cyprus deal.
It cleared the test, but the rising tensions saw it pay the
highest interest rate on its five-year bonds since October last
year, though longer-term 10-year costs were slightly lower.
Wall Street was also expected to be dragged lower by the
euro zone concerns when trading resumes.
U.S. data published on Tuesday, which signalled the world's
largest economy remains in recovery mode, had helped stock
markets early in the day, but euro zone worries quickly sent
them into reverse.
Separate reports showed demand for durable U.S. manufactured
goods surged in February, while U.S. single-family home prices
started the year with the biggest annual increase since June
Ahead of the Wall Street restart, the FTSEurofirst 300
index of top European shares was down 0.7 percent and
heading for its worst day since the Italian elections.
Spain had added to the gloom after it revised up its 2012
budget deficit to almost 7 percent. The IBEX in Madrid
was 1.5 percent lower by 1245 GMT, Paris's CAC-40 was
down by the same amount, and Frankfurt's DAX was 1
The falls in Europe left MSCI's index of world shares
, which tracks 6000 stocks in 45 countries, down
Meanwhile, commodity markets were more mixed as investors
weighed the euro zone worries against Tuesday's broadly
encouraging U.S. data.
Growth-sensitive copper fell 0.6 percent, but oil
rose towards $110 a barrel as it extended Tuesday's gains on
hopes demand in the world's biggest oil consumer will pick up.
Having risen during the Cyprus turmoil, gold was on
course for its fourth session of losses as it dipped to
$1,592.44 an ounce.
"The focus will remain on Cyprus and its developments in
coming sessions," Danske Bank analyst Christin Tuxen said.
"The U.S. data was fairly strong yesterday, and there is a
picture now that the United States is leading the global
economic recovery, alongside China of course, which is
comforting for investors who would otherwise be looking for the
safe havens like gold."