BL: Euro Weakens on Greece, Portugal Debt Concern; Commodities Drop
By Stuart Wallace
March 24 (Bloomberg) -- The euro fell to a 10-month low against the dollar after government officials said the European Union may need International Monetary Fund help to bail out Greece and Portugal’s debt was downgraded by Fitch Ratings. Crude oil and industrial metals declined.
The euro weakened against all but one of its 16 most-traded peers at 11:01 a.m. in London. Oil slid 1.5 percent, copper dropped 1.1 percent and lead tumbled 2.7 percent. The Stoxx Europe 600 Index declined 0.4 percent and futures on the Standard & Poor’s 500 Index fell 0.5 percent.
France and Germany are nearing agreement on IMF involvement in any aid package for Greece, burdened by the EU’s biggest deficit, according to a finance ministry official in Berlin. The Portugal downgrade overshadowed government and industry reports that showed European services and manufacturing grew at the fastest pace since August 2007 and German business confidence increased.
Greece “is going to default at some point,” and Europe’s failure to answer that challenge will hurt the common currency, UBS Investment Bank’s London-based deputy head of global economics, Paul Donovan, said in an interview on Bloomberg Radio. “If Europe can’t solve a small problem like this, how on earth is it going to solve the larger problem, which is the euro doesn’t work,” he said.
Swiss Franc
The euro declined as much as 1.1 percent to $1.3345, the lowest level since May 2009. The Swiss franc earlier traded near a record high versus the euro on speculation the nation’s central bank is becoming less resistant to currency gains.
Copper fell for a second day and lead posted a fifth retreat on the London Metal Exchange as the stronger dollar increased costs for investors holding other currencies. Gold dropped 0.8 percent to $1,096.50 an ounce. Raw sugar declined 1.1 percent to 16.39 cents a pound in New York trading, taking its four-day slump to 14 percent. Crude oil slid to $80.66 a barrel after a 7.5 million-barrel increase in U.S. inventories reported yesterday by the American Petroleum Institute.
While most European stock gauges declined, Greece’s ASE Index rose 0.3 percent. Portugal’s PSI-20 Index slumped 2.1 percent, the most in seven weeks. Commerzbank AG climbed 1.5 percent in Frankfurt after Chief Financial Officer Eric Strutz said in an interview that Germany’s second-largest bank expects to post a pretax profit in the first quarter.
Asian Stocks
Five stocks advanced for every four that dropped in the MSCI Asia Pacific Index, which fell 0.2 percent. Samsung Electronics Co., the world’s largest memory-chip maker, gained 1.2 percent in Seoul after chip prices jumped. Nintendo Co. surged 8.7 percent in Osaka after saying it will sell a 3-D version of its DS handheld player.
The decline in U.S. futures indicated the S&P 500 may retreat from an 18-month high. Orders for long-lasting goods probably climbed in February for a third month, advancing 0.6 percent following a 2.6 percent January increase, economists said before a Commerce Department report due at 8:30 a.m. in Washington. A separate report at 10 a.m. may show sales of new homes rose from a record low.
The MSCI Emerging Markets Index was little changed. The Budapest Stock Exchange Index gained 0.4 percent.
U.K. gilts were little changed, with the yield on the benchmark 10-year note within 2 basis points of a six-week low, on speculation the government will announce a reduction in bond sales in its budget statement today.
Treasuries were also little changed, with the five-year note yield at 2.43 percent, before the U.S. government auctions $42 billion of the securities today.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
Last Updated: March 24, 2010 07:06 EDT
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