Stocks in Europe Drop as Euro Weakens Before Deadline for Greek Agreement

By Stephen Kirkland and Lynn Thomasson - Feb 6, 2012 6:16 PM GMT+0700

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Feb. 6 (Bloomberg) -- Michael Kurtz, chief Asian equity strategist at Nomura Holdings Inc., talks about the outlook for China's stocks, central bank monetary policy, and his investment strategy for the region. Kurtz speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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Feb. 6 (Bloomberg) -- Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA, discusses the outlook for the euro, dollar and Swiss franc. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

European stocks fell from a six-month high and the euro declined the most in three weeks as Greek leaders wrestled with spending cuts to get aid and avert default. German bonds rose and commodities dropped.

The Stoxx Europe 600 Index lost 0.6 percent at 6:15 a.m. in New York. Standard & Poor’s 500 Index futures slid 0.5 percent, and the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 0.4 percent. The euro weakened 0.8 percent to $1.3049. Yields on 10-year German bonds declined five basis points. Oil fell 1.1 percent and copper sank 0.9 percent.

Greek Prime Minister Lucas Papademos struck a tentative deal with party leaders to extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro ($170 billion) aid package wasn’t forthcoming. Chiefs of the three parties supporting Papademos’s government meet again today to work on details of an agreement. China’s economic growth would be cut almost in half if Europe’s debt crisis worsens, the International Monetary Fund said.

“We are entering into a fairly critical 24 hours for Greece,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a report. “The focus has shifted from the private sector involvement negotiations toward the lack of political consensus and whether the interim coalition government will accept the conditions” for its second bailout package, he said.

Glencore Offer

The Stoxx 600 fell for the first time in five days as mining companies and banks led the retreat. Glencore International Plc (GLEN) slid 4.1 percent as the Financial Times reported that the commodities trader may offer 2.8 shares for each Xstrata Plc share as it attempts to buy the mining company. Vestas Wind Systems A/S, the world’s biggest maker of wind turbines, sank 4.8 percent as ING Groep NV downgraded its price estimate on the shares and Berlingske reported that Chairman Bent Carlsen has no plans to step down or change the management.

The S&P 500 closed at a six-month high on Feb. 3 after three days of gains. The 10-year Treasury yield was little changed at 1.93 percent today.

The euro declined against 13 of 16 major peers tracked by Bloomberg, weakening the most against the dollar since Jan. 13 on a closing basis. The euro depreciated 0.8 percent against the yen to 100. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, jumped 0.6 percent.

Debt Sales

The French 10-year bond yield fell five basis points to 2.85 percent before the government sells as much as 8.5 billion euros of bills. The Netherlands sold 2.2 billion euros of three- and six-month bills.

The Greek 10-year yield rose four basis points to 34.26 percent, with the price of the October 2022 bond falling to 20.58 percent of face value.

The cost of insuring European sovereign debt rose for the first time in four days with the Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments rising three basis points to 322 basis points.

Natural gas led declines in commodities, falling 1.2 percent. Oil in New York dropped to $96.73 a barrel. Copper was down to $8,483 a metric ton. China is the biggest buyer of the metal.

The MSCI Emerging Markets Index (MXEF) fell 0.4 percent. Romania’s BET Index tumbled 2.2 percent, the most in more than four months on a closing basis, after Prime Minister Emil Boc said he will resign following protests against cuts in spending and wages. The Philippine Stock Exchange Index (PCOMP) jumped 1.2 percent after the central bank cut lenders’ reserve-requirement ratios, while India’s benchmark index rose 0.6 percent.

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: Stuart Wallace at Swallace6@bloomberg.net