Euro zone woes dent shares, pull euro to four-month low

Wed Mar 27, 2013 7:01am EDT
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By Marc Jones

LONDON (Reuters) - 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.

The concerns, which come as failing growth and political uncertainty increase pressure on the region's strained members, pulled the euro to a four-month low of $1.27930 and pushed up the dollar .DXY.

"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 likely."

The first fall in euro zone economic confidence after four months of gains added to the downbeat mood. If struggling countries cannot sustain healthy growth rates in the coming years there will be little chance of them cutting their debts.

German government Bund futures, an asset that investors value in times of increased tension, rose 50 ticks to their highest since March 4.   Continued...

A trader looks at his screen on the IG Group trading floor in London March 18, 2013. REUTERS/Neil Hall