NEW YORK (Reuters) - The euro tumbled on Thursday as odds for a near-term interest rate rise in Europe diminished, while violence in Egypt kept investors on edge, weighing on global equities ahead of Friday’s key U.S. employment report.
Global share prices slipped from Wednesday’s 29-month highs as deadly fighting between demonstrators and those loyal to Egyptian President Hosni Mubarak diminished risk appetite, though U.S. equities managed to gain after data on chain-store sales added to evidence of an economic rebound.
The European Central Bank held interest rates unchanged at 1 percent, as expected, but remarks from ECB President Jean-Claude Trichet on inflation threw cold water on market expectations that interest rates would rise anytime soon.
Trichet said inflation is likely to climb further and could exceed the bank’s 2 percent target for most of the year, but there is no threat to medium-term price stability.
“Trichet failed to deliver on expectations for a hawkish statement,” said Richard Franulovich, senior currency strategist at Westpac in New York.
The euro dropped 1.21 percent to $1.3636 and 1.20 percent to 111.23 against the yen. The greenback traded slightly higher against the yen, to 81.59 yen..
The violence in Egypt early on Thursday drove oil to a 28-month high above $103 a barrel on fears of supply disruptions, but the gains in the dollar dented investors’ appetite for commodities and oil prices eased. Stronger economic data in Europe and the United States helped lift copper to a record high of $10,000 a tonne, but the metal, which has extensive use in construction and power industries, lost ground with the stronger dollar.
Copper closed down $15 at $9,930 a tonne on the London Metal Exchange.
Brent crude closed down 58 cents to settle at $101.76. U.S. light sweet crude fell 0.35 percent, or 32 cents, to settle at $90.54 a barrel.
Grain prices were slightly weaker.
Global food prices measured by the U.N. Food and Agriculture Organization hit their highest level since records began in 1990. Rising food costs have been seen as a key driver of the turmoil in Egypt and Tunisia, which is threatening to spill over to other countries. For details, see
On Wall Street share prices ended modestly higher.
“The strength in the retail sector is probably the standout feature today and it might be causing repositioning out of the materials into the retail stocks,” said Nick Kalivas, an analyst at MF Global in Chicago.
At the close, the Dow Jones industrial average .DJI rose 20.29 points, or 0.17 percent, to 12,062.26. The Standard & Poor's 500 Index .SPX gained 3.07 points, or 0.24 percent, to 1,307.10. The Nasdaq Composite Index .IXIC climbed 4.32 points, or 0.16 percent, to 2,753.88.
In Europe, the FTSEurofirst 300 .FTEU3 index of leading shares closed up just 0.02 percent at 1,162.39 points.
The MSCI All-Country World index .MIWD00000PUS fell 0.21 percent from Wednesday’s 29-month peak.
Heading into Friday’s trading activity in Tokyo, March Nikkei stock futures pointed to a stronger open with contracts traded in Chicago up 50 points to 10,510.
Friday’s U.S. jobs figures will drive much of the early trading on Wall Street. The latest Reuters poll showed a median forecast of 145,000 jobs added in January after an increase of 103,000 jobs in December. It also predicted the jobless rate edged up to 9.5 percent from 9.4 percent.
Data showed vibrant growth in the euro zone and British services sector, giving more evidence of inflationary pressures and the likelihood they will not ease anytime soon.
Anxiety over inflation hammered prices of U.S. Treasuries for a fourth straight session on Thursday. Benchmark 10-year U.S. Treasury yields reached a seven-week peak of 3.55 percent as prices sank 18/32 of a point in price.
Federal Reserve Chairman Ben Bernanke said the economy still needs help from the U.S. central bank despite signs of improvement. While acknowledging the spike in commodity prices, he said domestic inflation remained tame.
Spot gold prices rose $18.10 to $1,354.50 on strong buying from exchange traded funds and safe-haven demand as the unrest in Egypt escalated, traders said.
Additional reporting by Richard Leong, Wanfeng Zhou, Frank Tang, Angela Moon, Natsuko Waki, Alex Lawler, Silvia Antonioli and Rebekah Curtis; Editing by Leslie Adler