European and US stocks close mixed as dollar tumbles

European stocks were mixed at the close of trade yesterday, with the London FTSE 100 Index shedding 0.42 per cent to end the week at 5,703.37.

But in Paris the CAC 40 gained 0.21 per cent to finish at 3,827.37 while in Frankfurt the DAX added 0.57 per cent to close at 6,492.30.

Elsewhere there were gains of 0.17 per cent in Madrid and 0.03 per cent on the Swiss Market Index. Milan lost 0.15 per cent on the day.

Trade on Wall Street was also mixed yesterday, with the Dow Jones Industrial Average down 0.10 per cent at 11,083.90 at mid-day, when the tech-heavy Nasdaq had risen 1.11 per cent to 2,462.41.

Earlier in the day Asian stocks closed generally weaker on renewed banking and employment worries in the United States.

Tokyo’s Nikkei Index ended down 0.87 per cent, Sydney lost 0.21 per cent and Hong Kong shed 0.40 per cent.

The dollar fell hard against the euro and the yen yesterday after the Federal Reserve left little doubt it would step in to prop up the US recovery, a prospect that leant some support to equities.

Tension had been building on currency markets even before the comments by Fed chairman Ben Bernanke, with Japan hinting it might intervene again to check the rise of the yen and China warning the US against using the yuan as a scapegoat for US economic weakness.

Mr Bernanke, speaking in Boston, said the US central bank was ready to undertake extraordinary measures to shore up an economy struggling with stubbornly high unemployment and the risk of crippling deflation.

Ahead of a key meeting of the Fed’s policy-setting panel next month, Mr Bernanke set out the case for intervention, saying “there would appear – all else being equal – to be a case for further action”.

The comments raised already elevated expectations the Fed was preparing to pump billions of dollars into the economy, notably through the purchase of bonds and other assets.

So massive an introduction of fresh funds would tend to dilute the stature of the dollar and devalue it further against the euro and the yen.

In the aftermath of the Bernanke speech, the dollar tumbled to a 80.88 yen, a 15-year low. The euro shot up to $1.4159, its strongest reading since late January.

The Australian dollar meanwhile hit parity with its US counterpart, soaring as high as US$1.0003 before pulling back.

The euro later suffered a bout of profit-taking and was trading at $1.4019 against €1.4083 late Thursday in New York.

The dollar in late-day deals had regained some ground against the Japanese currency, trading at 81.31 yen against 81.44 p.m. Thursday.

The Bernanke remarks gave some support to equities, although trading sentiment was fragile after US conglomerate General Electric reported an 18 per cent fall in third quarter net earnings.