European Stocks Drop After Greece as Euro Weakens, U.S. Futures Pare Gains

By Stephen Kirkland and Lynn Thomasson - Feb 21, 2012 8:46 PM GMT+0700

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Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi talks with reporters in Brussels about the agreement reached on a second bailout for Greece. (Source: Bloomberg)

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Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde and European Union Economic and Monetary Affairs Commissioner Olli Rehn talk about the second bailout program for Greece, which received 130 billion euros ($173 billion) in additional aid. This report also contains comments from Luxembourg Prime Minister and Eurogroup Chairman Jean-Claude Juncker, French Finance Minister Francois Baroin and Belgian Finance Minister Steven Vanackere. (Source: Bloomberg/Europe by Satellite)

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Feb. 21 (Bloomberg) -- Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. David Tweed reports from Brussels on Bloomberg Television's "Countdown" with Linzie Janis and Owen Thomas. (Source: Bloomberg)

European stocks declined from a six- month high and the euro weakened against the dollar on concern that Greece’s debt crisis will persist even after a second bailout. U.S. equity futures pared gains while Treasuries fell.

The Stoxx Europe 600 Index lost 0.6 percent at 8:45 a.m. in New York. Standard & Poor’s 500 Index (SPX) futures added 0.2 percent, after gaining as much as 0.7 percent. The euro depreciated 0.2 percent to $1.3212, reversing a 0.4 percent advance. Spanish bonds rose as the government met its maximum target at a bill auction. The 10-year U.S. Treasury yield jumped two basis points to 2.03 percent. Copper increased for a second day.

European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicated.

“You can’t really go out and say that we’ve solved the whole euro-zone debt crisis and this won’t come back to bother us again,” Manpreet Gill, a senior investment strategist at Standard Chartered Plc, said in a Bloomberg Television interview from Singapore. “These issues will still simmer over time.”

Five shares fell for every one that advanced in the Stoxx 600. Segro Plc, the U.K.’s largest publicly traded owner of industrial properties, sank 2.3 percent after saying net asset value declined 9.8 percent.

Highest Since April

The S&P 500 climbed to the highest level since April on Feb. 17. The two-year Treasury yield was little changed at 0.30 percent before the government sells $35 billion of the securities, the first of three auctions this week totaling $99 billion.

The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, fell 0.2 percent. The Australian dollar weakened against its 16 major counterparts, losing 0.8 percent versus its U.S. currency after minutes of the nation’s central bank’s most recent policy meeting showed there is scope for monetary easing.

The yield on the Spanish two-year note declined three basis points as the government sold 2.5 billion euros of three- and six-month bills. The yield on the 10-year Italian bond dropped four basis points, driving the extra yield investors demand to hold the securities instead of bunds three basis points lower.

Copper advanced 2 percent after rising 0.7 percent yesterday. Gold climbed 0.6 percent to $1,745.71 an ounce and silver advanced 0.7 percent.

The MSCI Emerging Markets Index (MXEF) lost 0.3 percent. Russia’s Micex Index (MICEX) slid 1.2 percent as Ural crude, the country’s main export blend, declined. The Turkish lira slipped 0.6 percent after the central bank cut its highest lending rates. India’s Sensex (SENSEX) rose 0.8 percent after trading resumed following yesterday’s holiday.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

To contact the editor responsible for this story: Mark Gilbert at magilbert@bloomberg.net