Euro Weakens as Greek Aid Plan Falters; Stocks, Crude Decline
By David Merritt
March 18 (Bloomberg) -- The euro weakened and Greek stocks and bonds fell on concern a bailout plan for the region’s most indebted country is unravelling. The yen and dollar appreciated while oil declined.
The euro slipped against 14 of its 16 most traded counterparts, depreciating 0.6 percent against the yen at 11:25 a.m. in London. Greece’s ASE Index of stocks slid 3.1 percent and the extra yield investors demand to hold the nation’s debt instead of German bunds increased. Oil fell as much as 1 percent. Futures on the Standard & Poor’s 500 Index declined 0.1 percent.
Greece should turn to the International Monetary Fund if it needs aid, Michael Meister, a lawmaker with Chancellor Angela Merkel’s Christian Democratic Union, said in an interview in Berlin. That contradicts comments from leaders including Jean- Claude Trichet, Jean-Claude Juncker and Nicolas Sarkozy, who have said the region should solve its own financial problems as officials contemplate establishing a European Monetary Fund.
“It appears that the rift between Greece and Germany is much deeper than assumed and Greece could be much closer to turning to the IMF than previously assumed by the market,” a team led by Hans Guenter Redeker, global head of foreign- exchange strategy at BNP Paribas SA in London, wrote in a report today. “This brings the recent optimism regarding the euro to an abrupt halt.”
Greek Spread
The 16-nation currency dropped 0.5 percent to $1.3667. The euro has weakened 4.8 percent this year and the ASE declined 7.8 percent as Greece struggled to finance its budget deficit, which at 12.7 percent of gross domestic product is the biggest in the EU. The difference in yield, or spread, between 10-year Greek bonds and bunds widened to 396 basis points in January, the most since before the euro’s introduction in 1999. The gap widened 13 basis points today, to 313.
The yen climbed 0.5 percent to 123.36 per euro and less than 0.1 percent to 90.26 against the dollar, strengthening against 15 out of 16 of its most-traded peers.
The MSCI World Index of 23 developed nations’ stocks fell 0.2 percent. In Asian trading, Canon Inc., which counts Europe as its biggest market, lost 2.8 percent in Tokyo. Mitsui Fudosan Co., Japan’s largest developer, dropped 2.4 percent after Morgan Stanley downgraded the stock.
Three stocks declined for every two that advanced on the Stoxx Europe 600 Index, which was little changed. Total SA, the third-largest European oil company, fell 0.8 percent in Paris after Goldman Sachs Group Inc. recommended selling the shares. National Bank of Greece SA, the nation’s biggest lender, plunged 5.1 percent in Athens, its biggest drop in three weeks.
Glaxo Gains
Declines were limited as GlaxoSmithKline Plc, Britain’s biggest drugmaker, jumped 2.6 percent. Novartis AG abandoned the U.S. rights to an asthma drug that would rival Glaxo’s Advair.
U.S. futures were little changed after the S&P 500 yesterday reached its highest level since September 2008. A report from the Labor Department at 8:30 a.m. in Washington may show that the cost of living in the U.S. rose at a slower pace in February, restrained by lower gasoline prices and a stagnant home-rental market. The consumer price index may have climbed 0.1 percent after a 0.2 percent increase in January, according to the median forecast of 79 economists in a Bloomberg survey.
Another report from the Labor Department, also set for 8:30 a.m., may show initial claims for unemployment insurance benefits dropped to 455,000 last week, the fewest in two months, from 462,000 the prior week, according to the survey median.
Emerging Markets
The MSCI Emerging Markets Index fell 0.1 percent, snapping a two-day advance. Turkish bonds dropped for the first time in six days and the lira weakened for the first day in five after the Taraf newspaper reported prosecutors are ready to file a second attempt to outlaw Prime Minister Recep Tayyip Erdogan’s governing party. Turkey’s ISE National 100 index of stocks fell 1.3 percent.
Teva Pharmaceutical Industries Ltd. rose 1.5 percent in Tel Aviv. The Israeli drugmaker is close to an agreement to buy Ratiopharm GmbH for about 3.5 billion euros ($4.78 billion), ending a nine-month battle for Germany’s second-biggest maker of generic medicines, two people with knowledge of the sale said.
Oil prices retreated from a 10-week high after the dollar gained and a government report yesterday showed rising U.S. crude inventories. Crude oil for April delivery dropped 52 cents, or 0.6 percent, to $82.41 a barrel in electronic trading on the New York Mercantile Exchange.
Copper for delivery in three months fell 0.4 percent to $7,502 a metric ton on the London Metal Exchange. Aluminum, zinc and tin also declined. Wheat dropped 1.4 percent to $4.8875 a bushel in Chicago and corn retreated 1 percent to $3.7025 a bushel.
To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net.
Last Updated: March 18, 2010 07:27 EDT
