European stocks fell, the euro erased gains and Spain’s 10-year bond yield climbed above 7 percent as a report showed Germany’s unemployment rose and leaders began a two-day summit on the debt crisis. Italian five- year notes erased losses after an auction. The Stoxx Europe 600 Index (SXXP) retreated 0.6 percent at 10:25 a.m. in London, reversing an advance of as much as 0.3 percent. Standard & Poor’s 500 Index futures lost 0.5 percent. The euro depreciated 0.4 percent to $1.2417, after strengthening 0.5 percent climb. The Spanish 10-year bond yield breached 7 percent for the first time since June 20, before trading at 6.98 percent. The rate on the five-year Italian note fell one basis point to 5.94 percent. Natural gas and corn futures increased about 1 percent as a heat wave swept the U.S. German unemployment climbed in June for the fourth month this year, the Bundesbank said. Italy sold 2.5 billion euros ($3.1 billion) of bonds due in 2017 at a yield of 5.84 percent. Europe’s leaders begin their 19th summit in an effort to contain the financial crisis. “Who knows what they will come up with but there has to be something or they risk a bloodbath in the bond market next week,� said Gary Jenkins, former head of fundamental credit strategy at Deutsche Bank AG who now runs Swordfish Research Ltd. in Amersham, England. “The good news is that this time around expectations are very low; the bad news is that the main players seem to be diametrically opposed when it comes to a strategy for ending the crisis.� The Stoxx 600 declined for the fifth time in six days as banks and mining companies led losses. Ladbrokes Plc (LAD) sank 9.1 percent, the most since May 2010, as the bookmaker cut the forecast for first-half profit at its digital unit. Commerzbank AG tumbled 5.4 percent as Germany’s second-largest lender sold 128 million new shares. Jobless Claims The drop in S&P 500 futures indicated the benchmark gauge for U.S. stocks will snap a two-day advance. A report at 8:30 a.m. in Washington may show initial claims for jobless benefits were little changed at 385,000 last week, according to a Bloomberg survey of economists. The German 10-year bond yield declined six basis points to 1.50 percent, leaving the difference in yield between Europe’s benchmark government security and the Spanish bond 14 basis points higher at 550 basis points, or 5.50 percentage points. The number of Germans out of work rose a seasonally adjusted 7,000 to 2.88 million, the Nuremberg-based Federal Labor Agency said. Economists forecast an increase of 3,000, the median of 30 estimates in a Bloomberg News survey showed. Europe’s sovereign debt crisis will damp the German economy’s performance this year, the Ifo economic research institute said. To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

Source