Euro hits 2-year low, Wall Street hit by profit warnings

Tue Jul 10, 2012 7:59pm EDT
 
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By Leah Schnurr

NEW YORK (Reuters) - The euro fell to a two-year low against the dollar on Tuesday as investors were wary that a German court could delay Europe's new bailout fund, while a series of profit warnings from U.S. companies took Wall Street lower.

Oil prices extended losses in the afternoon, with Brent crude falling back below $100 a barrel after data showed China imported less crude oil last month, while Norway's government ordered an end to an oil workers' strike that had threatened production.

European stock markets, however, rose after euro zone finance ministers agreed to release the first 30 billion euros ($37 billion) of bailout funds for Spain's troubled lenders by the end of July.

Separately, Germany's top court began a hearing on whether the euro zone's fund, known as the European Stability Mechanism, and planned changes to the region's budget rules are compatible with German law.

German Finance Minister Wolfgang Schaeuble told the court that any significant delay in approving the measures could fuel financial market turbulence. Spanish and Italian government bond yields eased, while European stocks ended up nearly 1 percent.

Approval would pave the way for funds to be used more flexibly to ease the European debt crisis. But a delay of more than a few weeks would slow an already protracted process of implementation of the bailout fund, and possibly pressure the euro and equities.

"It's almost like we're drilling for oil - we're going down slowly in the euro," said Matthew Lifson, senior trader and market analyst at Cambridge Mercantile Group in Princeton, New Jersey. "There's no backbone to the euro at the moment. The market is just plodding it lower."

The common currency fell as low as $1.2233, its lowest since July 1, 2010. It last traded at $1.2253, down 0.5 percent. The euro fell to 97.20 yen and last traded down 0.7 percent at 97.31, according to Reuters data.   Continued...

 
Traders talk as the IBEX 35 session is displayed on an electronic board at Madrid's stock exchange June 29, 2012. REUTERS/Susana Vera