BLBG:Euro Weakens as Spanish Bonds Decline, Oil Retreats
The euro weakened and Spanish bond yields climbed to a six-week high. Oil fell after the longest rally since 2004 while stocks and U.S. equity-index futures retreated before a report on factory orders.
The euro declined 0.6 percent to $1.3565 at 6:34 a.m. in New York. Spanish 10-year government yields jumped 17 basis points to 5.38 percent. The Stoxx Europe 600 Index slid 0.3 percent as Royal Imtech NV plunged 45 percent. Standard & Poor’s 500 Index (SPX) futures dropped 0.2 percent. The Shanghai Composite Index climbed to the highest since May after growth in the nation’s service industries accelerated. Oil retreated 0.9 percent.
Spanish Premier Mariano Rajoy, facing opposition calls to resign amid contested reports about illegal payments, travels to Berlin today as euro-area leaders hold meetings this week before a European Union summit. U.S. factory orders probably increased in December, economists said before Commerce Department data today.
“The market is realizing that there are still substantial risks out there, especially on the political front,” said Michael Leister, a fixed-income strategist at Commerzbank AG in London. “The dynamics in Spain are devastating because they have the potential to cause a lot of damage. If in the worst case we would get a new election in Spain, this would be a real shocker for the market.”
Yields Rise
The euro weakened against all but two of its 16 major peers, sliding 0.5 percent versus the yen, after completing an eighth consecutive weekly advance in the five days through Feb. 1. The yen declined less than 0.1 percent to 92.86 per dollar.
Spain’s 10-year yield climbed to the highest level since Dec. 18. Yields on similar-maturity Italian debt rose seven basis points to 4.40 percent. The nations’ bonds had positive returns for six straight months through the end of January, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
Strategists from Commerzbank recommend reducing holdings of Spain’s debt, while analysts at BNP Paribas SA, Deutsche Bank AG, Royal Bank of Scotland Group Plc and Morgan Stanley also said the rally in higher-yielding euro-area sovereign bonds may falter.
Treasuries fell, pushing 10-year yields two basis points higher to 2.04 percent, the highest since April.
The Stoxx 600 (SXXP) has still climbed 2.8 percent in 2013. Imtech tumbled 45 percent in Amsterdam today, the biggest drop since at least 1989, as the Dutch provider of infrastructure for stadiums in last year’s London Olympics forecast writedowns of at least 100 million euros ($136 million) because of alleged irregularities at its Polish business.
Swatch Earnings
Swatch Group AG (UHR), the largest maker of Swiss timepieces, climbed 2.3 percent after reporting profit that exceeded analysts’ estimates. Suez Environnement advanced 2.7 percent in Paris as HSBC Holdings Plc upgraded the world’s second-biggest water company to overweight.
Futures on the S&P 500 retreated after the U.S. equities gauge closed at the highest level since 2007 last week. Thirteen companies in the index are due to report results today, including Yum! Brands Inc.
Of the 254 companies to have released earnings since Jan. 8, 73 percent topped analysts’ profit projections, according to data compiled by Bloomberg.
Oil dropped to $96.90 a barrel after rallying 14 percent since Dec. 7 through last week. The eight-week advance was the longest streak since 2004. Zinc climbed as much as 0.6 percent to $2,190 a metric ton, the highest price since Jan. 27, 2012. Platinum jumped as much as 1.4 percent to $1,707.87 an ounce, the most since Oct. 9.
Emerging Markets
The MSCI Emerging Markets Index (MXEF) gained 0.2 percent. The Shanghai Composite Index added 0.4 percent after China’s service industries grew at the fastest pace since August. Russia’s Micex Index slipped 0.4 percent as oil declined. India’s Sensex gauge lost 0.2 percent.
South Korea’s won strengthened 1.2 percent against the dollar, rebounding from a three-month low. Moon Woo Sik, a Bank of Korea board member, sees no immediate need to alter benchmark interest rates and thinks it’s too early for any central-bank response to the yen’s slide against the won, according to an interview last week.
The yield on Turkey’s two-year notes jumped five basis points, the most in a month, to 5.85 percent as inflation accelerated by more than analysts estimated.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
