World Stocks: Euro fall hits US profit

Fast-food chain McDonald's is one of a growing number of US corporations whose profits are being bruised by the weakness of the euro.

In recent weeks more than a dozen firms had warned of disappointing earnings and cited the weak euro, which fell to as low as US84.38c during the week.

Among them were razor and battery-maker Gillette, chemical firm DuPont, consumer goods maker Colgate-Palmolive, appliance manufacturer Whirlpool and textile firm Burlington Industries.

McDonald's rose US43.8c to $US28.69 a share on Friday when the European central bank and its counterparts in the US and Japan launched a joint bid to shore up the euro.

Despite the euro's brief rise of US2c against the dollar on Friday to US87.87c, opinion is mixed as to whether the intervention will prevent the euro falling further.

With an increasing amount of US business carried out overseas, the euro's fall was worth noting. But analysts said for the most part shareholders should not worry.

The major issue for investors is earnings. Analyst Arthur Hogan said the euro's freefall would not be on US investors' minds were it not for the third-quarter earnings' season only a few weeks away.

And while the likes of McDonald's and Gillette - which sell in Europe and convert the profits back to dollars - would see less revenue, more US firms would benefit than be hurt, said Gary Thayer, chief economist at AG Edwards.

"A weaker euro is good for the US in the sense that it makes our investment opportunities more attractive," Thayer said.

Robert Hodrick, international finance professor at Columbia Business School, said far more significant for US markets were the Federal Reserve's efforts to prevent inflation by slowing the economy to what it deemed a more sustainable level of growth.

To this end, the central bank had raised interest rates six times in the past 15 months.

Over the past week the Dow Jones average index of 30 industrials fell 79.63 points to close at 10,847.37 after an 81.85 point gain on Friday. The tech-rich Nasdaq composite index fell 31.47, after falling 25.11 points on Friday to 3803.76.

The Standard and Poor's 500 composite index fell 17.09 points for the week, after a fall of 0.33 of a point on Friday to 1448.72.

The Russell-2000 index, reflecting the performance of smaller firms' shares, closed the week 12.06 lower, after a close at 518.82 on a rise of 4.47 points on Friday.

The Wilshire Associates' equity index, representing the combined market value of all NYSE, US and Nasdaq issues, closed the week at $US13.678 trillion, down $US135.4 billion from the week before.

In London shares had another volatile week after investors seized on profit warnings from US technology heavyweights as proof that third-quarter corporate profits would be hit hard by high oil prices.

Telecom, media and technology stocks bore the brunt of a shift into safer assets. The FTSE-100 index lost ground for a third week and shed 3.3 per cent from the close the week before to 6205.9, a similar level to May.