BLBG: Euro Drops for Third Day as Copper, Oil Fall on China Reserves
By Justin Carrigan
Feb. 12 (Bloomberg) -- The euro weakened for a third day against the dollar on concern European Union efforts to avoid a default by Greece will undermine the currency region. Commodities and emerging-market stocks fell after China unexpectedly increased bank reserve requirements.
The euro slipped as much as 1 percent against the dollar at 12:40 p.m. in London after European leaders pledged yesterday to take “determined and coordinated action” to support the nation. Oil and copper dropped. Futures on the Standard & Poor’s 500 Index retreated 0.7 percent and the MSCI Emerging Markets Index was little changed as stocks pared a fourth day of gains.
Pressure is building on European governments to show how they will back up promises to assist Greece with action as investors turn their attention to a meeting of finance ministers in Brussels next week. China, the world’s fastest-growing economy, ordered banks to set aside more deposits as reserves for the second time in a month after loan growth accelerated and property prices surged.
The euro is falling “first on the continuing concern on the lack of specifics on the Greece bailout package, and second on China’s reserve-requirement increase, which hit risk appetite across the board,” Adam Cole, the London-based global head of currency strategy at RBC Capital Markets Inc., wrote in a research report.
Sluggish Expansion
The euro weakened against 12 of its 16 most-traded counterparts, and declines accelerated after an EU report showed the euro region’s gross domestic product grew 0.1 percent in the fourth quarter from the third. The average forecast of economists in a Bloomberg survey was for 0.3 percent expansion.
The Swiss franc fell as much as 0.3 percent against the euro amid speculation the central bank sold the currency to curb its strength. The Dollar Index, which tracks the U.S. currency against six major trading partners, rose 0.4 percent.
Yields on Greek two-year notes rose 17 basis points, reversing a decline of about 160 basis points, or 1.6 percentage points, in the past four days.
Crude oil and copper led the worst decline in commodities in a week as China, the world’s fastest-growing major economy, sought to cool growth. The S&P GSCI Index of 24 raw materials retreated 1.7 percent to 493.2, the biggest drop since Feb. 5. Oil fell 2.1 percent in New York trading and copper slid 2.6 percent in London. Aluminum, wheat, gold and platinum also declined.
Economy, Earnings
Europe’s Dow Jones Stoxx 600 Index was little changed as the economic reports from the EU and China offset better-than- estimated earnings from ThyssenKrupp AG, Germany’s largest steelmaker, and Eni SpA, Italy’s biggest oil company.
The MSCI Asia Pacific Index gained 0.5 percent. Japan’s Asahi Glass Co. surged 6.9 percent in Tokyo after forecasting in increase in profit. Pacific Metals, the country’s top ferro- nickel producer, and GS Yuasa Corp. gained at least 7.3 percent after boosting their projections.
The decline in U.S. futures indicated the S&P 500 may pare some of yesterday’s 1 percent rally. More than 350 companies in the S&P 500 have reported fourth-quarter earnings since Jan. 11, with about 76 percent beating analysts’ estimates, according to data compiled by Bloomberg. Duke Energy Corp. and Agilent Technologies Inc. are among companies announcing results today.
U.S. Retail Sales
Sales at U.S. retailers probably climbed in January for the third time in four months, signaling the consumer spending recovery that began in late 2009 will be sustained this year. Purchases rose 0.3 percent after dropping 0.3 percent in December, according to the median forecast of 82 economists surveyed by Bloomberg News before a Commerce Department report due at 8:30 a.m. The Reuters/University of Michigan preliminary confidence index, set for about 10 a.m. in New York, may show consumer sentiment rose for a third month in February.
The MSCI Emerging Markets Index was little changed, erasing gains after China’s policy makers increased reserve requirements by 50 basis points, requiring the nation’s biggest banks to set aside 16.5 percent of their deposits starting Feb. 25. East European shares rose.
Credit-default swaps on the Markit iTraxx Crossover Index of 50 mostly high-yield European companies climbed 9.5 basis points to 485.5, according to JPMorgan Chase & Co. prices at 9:22 a.m. in London. Contracts tied to Greek government debt were unchanged at 353.5 basis points, after soaring to a record 428 on Feb. 4, according to CMA DataVision prices.
To contact the reporter on this story: Justin Carrigan in London on jcarrigan@bloomberg.net
