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London - European stocks tumbled to a six-month low as renewed geopolitical risks from North Korea added to the drag from a strengthening euro.
The Stoxx Europe 600 Index plunged as much as 1.7%, the most since November, before trading 1.4% lower as of 12:18. Stocks around the world declined after North Korea sent an unidentified missile over Japan, about three weeks after US President Donald Trump warned that any aggression from the Asian country would be met with “fire and fury.”
Making matters worse for European investors, the region’s currency rose above $1.20 for the first time in more than two years, a level that fund managers and strategists have called the “pain threshold” at which the currency will damp a long-awaited earnings revival.
Germany’s exporter-heavy DAX Index fell the most among developed-market benchmarks, down 1.8%.
“With the break of this 1.20 psychological barrier, investors now have 1.25 in sight,” Pierre Martin, a trader at Saxo Bank in London, said in emailed comments, referring to the euro’s level against the US dollar.
“It means that traders will continue to worry about exporters. Companies that have a major part of their sales from abroad will struggle more and more.”
Earnings in Europe were showing signs of a long-awaited recovery before the euro’s gains began dragging on equities. The Stoxx 600 has fallen 7.4% since a May peak, with losses accelerating this month amid a standoff between the US and North Korea.
The benchmark is now up just 1.4% for the year, versus a 12% advance in the MSCI All-Country World Index.
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