Europe close: Single currency slips as Credit Suisse warns of falling liquidity
Worries of Yuan weakness seen as trigger for selling in commodities
Credit Suisse:Mind the falling market liquidity as year-end approaches
Euro/dollar nears 1.06
European stocks saw some profit-taking on Monday as weakness in the commodity space weighed on benchmarks, with hawkish remarks over the weekend from a US Fed official also serving to limit gains.
That came in the run-up to the US Thanksgiving Day holiday, which would likely see trading volumes recede as the week progressed.
On Monday Credit Suisse cautioned clients that falling levels of market liquidity heading into year-end, just as the ECB and US Federal Reserve took different paths on rates, left a lot of scope for volatility in markets.
The benchmark DJ Stoxx 600 finished the session 0.37% lower at 380.37, with Germany´s Dax to be seen 0.25% lower and Paris´s Cac-40 down by 0.44%.
As if on cue, the euro/dollar retreated another 0.30% to 1.0610.
Acting as a backdrop, the Bloomberg Commodity Index hit a 1999-low as three-month copper ended with losses of 2.9% at $4,478.00 in LME trading.
On Thursday and Friday of last week, Goldman Sachs and Bank of America-Merrill Lynch referenced the risk of a larger-than-expected Yuan devaluation in 2016, which would weigh on commodity prices.
"The data I think have been overall encouraging, especially on the labor market. Assuming that we continue to get good data on the economy, continue to get signs that we are moving closer to achieving our goals" and gaining confidence of getting back to 2% inflation, then "there´s a strong case that can be made in December to raise rates," John Williams, the president of the US Federal Reserve bank of San Francisco said on Saturday.
"Increased security tensions across Europe and a continued downward spiral of commodity prices means…sentiment is likely to be tested further with a very quiet week ahead on both the economic and corporate data front, culminating in the-two day Thanksgiving celebrations in the US," said Simon Smith, chief economist at FXPro.
Credit Suisse slid 3% after the bank said it has raised 1.32bn Swiss francs from the first phase of a CHF6bn capital increase.
AstraZeneca nudged lower after announcing that it has sold the US rights to Crohn's disease medicine Entocort to Perrigo Company for $380m(£250.8m).
Elsewhere, shares in Standard Chartered tumbled as the stock began trading ex-rights.
Figures released by Markit showed output in the Eurozone expanded at its fastest pace in over four years in November, although the terrorist attacks left their mark on French services sector activity.
Markit's Eurozone composite purchasing managers’ index rose from 53.9 in October to 54.4, according to the preliminary ‘flash’ reading, indicating the fastest rate of expansion of output in manufacturing and services since May 2011 and beating analysts’ expectations for a 54.0 reading.
Growth in Germany accelerated to a three-month high on the back of the biggest monthly improvement in new business for two years, but business activity in France rose at the slowest rate in three months.
Aside from corporate and macroeconomic news flow, investors were also keeping an eye on developments in Europe after Belgian police made 16 arrests in late-night raids related to the Paris terrorist attacks, but failed to find a prime suspect.
Brussels was on lockdown for the third day in a row on Monday due to a “serious and imminent” threat of attack.
Meanwhile, in the UK, the government said it will make the case to parliament to join air strikes against the Islamic State in Syria, as prime minister David Cameron announced a £12bn increase to the defence budget.