European shares hit two-week low as euro surges

MILAN (Reuters) – European shares fell on Monday in a broad sell-off as the euro strengthened after ECB chief Mario Draghi did not express concern about a strong currency in a closely watched speech.

While London was closed for a holiday, reducing activity, the broad STOXX index for euro zone stocks .STOXXE fell as much as 0.7 percent to a two-week low.

At 0749 GMT, the index was down 0.6 percent, while the export-oriented DAX .GDAXI index fell 0.7 percent and the broader pan-European STOXX 600 index slipped 0.5 percent.

In his speech at a symposium of central bankers at Jackson Hole, Draghi held back from talking down the currency, sending the euro to a 2-1/2-year high against the dollar.

“The Jackson Hole meeting has been explosive for the euro and the U.S. dollar traders,” London Capital Group analyst Ipek Ozkardeskaya said in a note.

“The strong euro is weighing on the European stock markets … Tapering talks could further demoralise stock traders on the run-up to the ECB verdict,” she said.

Euro zone shares hit their highest point in more than 2 years in May, as strong macro data and company results drew heavy inflows in the region, but the recent surge in the euro has weighed.

Almost all sectors suffered losses on Monday with materials the biggest drag to the region’s equities. Finnish paper maker Stora Enso fell 4.6 percent.

Reinsurance stocks suffered after flooding triggered by Tropical Storm Harvey devastated Houston. Shares in Hannover were down 1.3 percent and Munich fell 0.8 percent.

Among the very few gainers were shares in telecoms firm Altice, up 1 percent, as investors welcomed news of a 1 billion euro share buyback.