The euro weakened and European stocks fell for a third day, while Italian bonds dropped as the government sold debt. U.S. index futures declined and German bund yields slid to a record low. The euro depreciated 0.3 percent to $1.3632 at 6:15 a.m. in New York. The yield on the 10-year Italian bond jumped 17 basis points to 5.74 percent. Ten-year bund yields slipped to 1.679 percent. The cost of insuring against a default by European governments rose to an all-time high. The Stoxx Europe 600 Index sank 1.2 percent, after declining as much as 1.5 percent. Standard & Poor’s 500 Index futures lost 1.4 percent. German Chancellor Angela Merkel said she won’t let Greece go into an “uncontrolled insolvency” because of the risk of contagion for other countries, according to an interview with Inforadio. Italy sold 3.9 billion euros ($5.3 billion) of a new five-year benchmark bond as borrowing costs rose and demand declined. A government official said yesterday the nation held talks with China about potential investments in the euro area’s third-largest economy. “We can’t help remembering similar headlines for the other peripherals throughout this sovereign crisis, all of which have failed to arrest the huge ongoing funding problems across the region,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a research note. The euro depreciated against 12 of its 16 major peers, sliding 0.7 percent versus the yen. The Japanese currency strengthened 0.2 percent against the dollar. Norway’s krone fell against all its most actively traded counterparts, weakening 1 percent against the dollar. Italy Auction The yield on the 10-year bund fell as much as six basis points, driving the difference in yield with similar-maturity Italian securities to more than 400 basis points for the first time since Aug. 5. Italy’s five-year bond was priced to yield 5.6 percent, compared with 4.93 percent at the previous auction and demand was 1.28 times the amount on offer, down from 1.93 times earlier. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed three basis points to 356 basis points, an all-time high based on closing prices. Three stocks declined for every one that gained in the Stoxx 600. BNP Paribas (BNP) SA fell 7.8 percent, paring earlier declines of as much as 12 percent after denying a Wall Street Journal report today that it has problems obtaining funding in U.S. dollars. Cairn Energy Plc, the Scottish oil company focusing on Greenland, fell 9.7 percent after abandoning its second well in less than two months. Treasury Sale The drop in S&P 500 futures indicated the benchmark gauge for U.S. equities will decline for the third time in four days. The yield on the 10-year Treasury note fell one basis point to 1.94 percent before the government sells $21 billion of the securities today. The MSCI Emerging Markets Index dropped 0.8 percent, set for the lowest close since July 2010. The Shanghai Composite Index fell 1.1 percent and the Taiwan’s Taiex Index slid 2.9 percent as trading resumed after holidays. The S&P GSCI Index of raw materials fell 0.2 percent to 654.97, declining for a fourth day. Copper for three month delivery was little changed on the London Metal Exchange, after earlier climbing as much as 1.4 percent. Gold fell 0.2 percent to $1,811.57 an ounce in London, having risen as much as 1.1 percent. Wheat for December delivery retreated 0.9 percent on the Chicago Board of Trade. To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

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