Euro Jumps 1% After Fed Limits Future Rate Hikes, Lufthansa Falls 6%

Lucy Stoeva
17 Mar, 2016
New York City

The euro rose and European markets eased after the U.S. Fed limited future rate hikes to two in the rest of 2016 citing global economic weakness. Lufthansa projected slower earnings improvements. Immofinanz posted a loss after a write-down of

[R]4:00 PM Frankfurt, Germany – The euro rose and European markets eased after the U.S. Fed limited future rate hikes to two in the rest of 2016 citing global economic weakness. Lufthansa projected slower earnings improvements. Immofinanz posted a loss after a write-down of €400 million its Russian portfolio.[/R]

European markets declined on Thursday, dragged down by exporters, as the euro rose against the dollar after the U.S. Federal Reserve limited the planned rate hikes for the year.

The dollar fell against all major currencies after the Federal Reserve left rates unchanged on Wednesday and downsized its planned rate hikes for 2016 to only two increases in 2016 from the four increases planned in December.

The Fed curtailed the future rate hikes and cited the downside risks to the U.S. economy from global economic jitters.

The euro surged 1.1% against the dollar to $1.1332, thus limiting the price competitiveness of exporting companies.

German automakers were worst hit and BMW fell 3.6% and Daimler lost 3.2%.

Banking stocks were also among the major losers and Unicredit declined 4.5%, Deutsche Bank shed 3.5%, Commerzbank fell 3.3%, and BNP Paribas erased 3%.

Resource stocks, however, benefited from the dollar weakness as most commodities are priced in the U.S. dollar. Copper and platinum producer Anglo American jumped 9.3% and Glencore soared 8%.

In London, FTSE 100 index fell 36.14, or 0.59%, to 6,176.11, while in Frankfurt, the DAX index declined 180.80, or 1.81%, to 9,802.61.

In Paris, the CAC 40 index dropped 60.69, or 1.36%, to 4,402.31.

Deutsche Lufthansa AG plunged 5.8% to €14.40 after the German airline projected slower earnings improvement, despite lower fuel costs.

Lufthansa forecasted only a slight increase in adjusted EBIT in 2016, despite an expected decrease of €1 billion in fuel costs.

The airline is undergoing restructuring in the face of increased competition from the low-cost airlines.

For 2015, the airline reported net profit of €55 million swinging from the loss of €1.65 billion in the previous year.

Adjusted EBIT jumped 55.2% to €1.82 billion, while sales increased 6.8% to €32.1 billion.

Immofinanz plunged 11.2% to €1.83 after the Austrian real-estate company reported a net loss of €146 million for the nine-month period in fiscal 2016, compared to a profit of €123.8 million in the same period a year ago.

The loss was primarily due to a write-down on its Russian portfolio of €400 million, combined with declining rental income.

Also in Austria, Vienna Insurance Group AG dropped 17.7% to €18.76 after the insurer posted a bleaker outlook.

Pre-tax profit fell 67% to €172 million in 2015 due to earlier impairments of computer systems and write-downs in Romania and Poland.

The company will propose to reduce dividend to €0.60 a share from €1.40 in 2014.