The euro has got off to a strong start, rising against both sterling and the dollar, as the currency sailed through its debut without any apparent hitches.
Meanwhile "euro-phoria" appeared to grip stock and bond markets, with European share and government bond markets up strongly, and particularly sharp rises in continental EU markets. German and French stocks surged to close around 5 per cent higher and Wall Street was up a bullish 1.7 per cent, although the London market ended flat. The rationale for the strong rises in euro-zone markets appeared to be confidence in the economic outlook inside the new single currency area, with investors backing the outlook for corporate earnings growth and low interest rates. However, some analysts warned that the jump may be short-lived, with fears still lingering that growth could slow across continental Europe.
The euro was also welcomed on the currency markets, strengthening from its early position around $1.1755 to trade around $1.1813 at the close of European trading, well above the $1.1687 level at which its precursor, the European Currency Unit, ended its life last Thursday.
It also rose from £0.7008 sterling yesterday morning to close at £0.7120 sterling , leaving the pound trading at about 90.4p sterling.
The euro itself ended the European trading session with its gains on the dollar largely intact but under pressure against a strengthening yen.
Analysts expect the generally positive euro trend to continue. However, they believe that investors are unlikely to push the new currency higher too quickly at the beginning as there are rumours that the European Central Bank could intervene to stop any sharp jumps. According to Mr Jim Power, chief economist at Bank of Ireland, the group saw no euro transactions, as all customers continued to transact in pounds.
But volumes were very low. According to Mr Power, businesses were behind all activity and all deals were being hand-checked to ensure there were no mistakes.
"People are only engaging in very small experimental trades to check the system," he added.
"The slow start will last for at least a week and it could be two to three weeks before it takes off."
He added that there will now be increased pressure to introduce notes and coins much more quickly than planned.
"It has all gone so well, with so few glitches, that there is no real reason to wait until January 1st 2002 before introducing notes and coins," he added.
On equity markets, meanwhile, Frankfurt's blue-chip Xetra DAX stormed ahead as euro euphoria and telecommunication sector bulls took the index to four-month high, encouraged by a strong Wall Street in late afternoon.
The electronically traded Xetra DAX closed up 5.67 per cent at 5,290.36 points. The floor DAX rose 5 per cent to 5,252.36 points.
Paris was also bullish about the new money, and early gains were further boosted by Wall Street, pushing the CAC index up to a closing gain of 5.2 per cent, albeit in thin trade. The index closed up 204.8 points at 4,147.50.
Naturally, the positive trading pleased Europe's political leaders. European Commission President Jacques Santer said he was very satisfied with the euro's smooth debut.
"A new era has started," Mr Santer told Reuters Television.
