BLBG: Europe Stocks Rise With Italy Bonds on Greece; Oil Falls
(Bloomberg) -- European stocks rose and gains in bonds sent Italian and Portuguese yields to record lows as Greece received a four-month extension on its bailout. Oil fell, and the ruble weakened after Moody’s Investors Service became the second rating agency to downgrade Russia to junk.
The Stoxx Europe 600 Index climbed 0.3 percent at 6:45 a.m. in New York. Standard & Poor’s 500 Index futures slipped 0.2 percent after the gauge closed last week at an all-time high. Italy’s five-year note yield dropped as low as 0.601 percent and Portugal’s 10-year rate reached 2.118 percent, below its U.S. equivalent. The dollar strengthened before Federal Reserve Chair Janet Yellen addresses Congress this week. The ruble slid 3.5 percent in offshore trading. Oil fell 2.3 percent in New York.
The government in Athens has until the end of Monday to complete a list of policies in return for the continued funding after talks concluded late on Feb. 20. Moody’s joined S&P in ranking Russia’s debt as junk, citing the conflict in Ukraine and plunging oil prices. Sales of existing U.S. homes probably slipped in January, economists said before a National Association of Realtors report.
“Markets have reacted positively in terms of risk sentiment and we’re seeing the periphery doing very well” because of the Greek deal, said Owen Callan, a fixed-income strategist at Cantor Fitzgerald LP in Dublin. “It takes away the big short-term event risk, even if a medium-term risk is still there.”
Greek Policies
Greek government bonds rose for a fourth day, with the three-year note yield dropping 203 basis points, or 2.03 percentage point, to 14.59 percent, reaching the lowest since Jan. 28. Credit-default swaps insuring $10 million of the government’s debt for five years cost $4 million upfront and $100,000 annually, according to CMA. That signals a 67 percent probability of default within that time, down from 70 percent on Friday. Local markets are closed for a holiday.
The Greek reform measures are still subject to validation by the International Monetary Fund, the European Central Bank and the European Commission, the institutions collectively known as the troika which Prime Minister Alexis Tsipras vowed not to recognize.
“Greece will still be an issue for the market for some time,” said Kevin Lilley, who helps manage 15 billion pounds ($23 billion) as head of European equities at Old Mutual Global Investors U.K. in London. “If we can get the agreement made in the next couple of days, which is necessary for this extension, then hopefully the market can pop that to one side for a few months and focus on the underlying economy, which is steadily improving.”
HSBC Slides
HSBC Holdings Plc lost 5.5 percent after saying full-year profit fell more than analysts projected as costs increased and Europe’s largest bank made provisions for fines and settlements. Ladbrokes Plc dropped 6.7 percent after the Sunday Times reported it is closing about 50 betting shops.
PostNL NV climbed 9.2 percent after the Dutch company reported 2014 revenue was 4.25 billion euros ($4.83 billion), exceeding the 4.02 billion euros that analysts had estimated. Lloyds Banking Group Plc gained 1.4 percent after the U.K. government sold a further 500 million pounds ($769 million) of shares, reducing its stake in the country’s largest mortgage lender before a general election.
Valeant Pharmaceuticals International Inc. added 1.2 percent in early New York trading after agreeing to buy Salix Pharmaceuticals Ltd. and reporting fourth-quarter earnings that exceeded projections. Salix slipped 0.5 percent following a 4.7 percent gain on Feb. 20.
Polypore Bid
Polypore International Inc. jumped 13 percent after Japan’s Asahi Kasei Corp. agreed to purchase the maker of battery components in a deal that values the company at $3.2 billion.
Russia’s $3 billion of 4.875 percent bonds due September 2023 fell for a third day, sending the yield 16 basis points higher to 6.57 percent. Credit-default swaps on government debt rose, signaling a 30 percent chance of default within five years, according to data compiled by Bloomberg. Local markets are closed in Russia for a holiday.
Moody’s cut Russia’s rating one step to Ba1, the highest non-investment level and in line with countries including Hungary and Portugal. Downgrades to junk from at least two rating companies may force money managers whose investment guidelines prohibit them from holding debt rated below investment grade to sell as much as $5.8 billion of Russian dollar and local bonds, according to a January report from JPMorgan Chase & Co.
Pro-Russia rebels attacked Ukrainian positions with artillery, mortars and automatic weapons, the Defense Ministry in Kiev said, as a bomb killed two people at a pro-Ukraine rally in the eastern city of Kharkiv.
Turkey Rates
Ukraine’s hryvnia weakened 9.7 percent and the government’s $2.6 billion of 9.25 percent bonds maturing in July 2017 fell for a seventh day, dropping 2.38 cents to 41.68 cents on the dollar.
The central bank is imposing foreign-exchange limits on importers aimed curbing outflows, Governor Valeriya Gontareva said in Kiev.
Turkey’s lira slid 1.2 percent against the dollar amid speculation the central bank will cut interest rates on Tuesday.
Azerbaijan, the third-largest oil producer in the former Soviet Union, devalued the manat at 1.05 against the dollar, compared with 0.78 earlier, as falling oil pressured the country’s finances.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 0.2 percent as trading resumed following Lunar New Year holidays.
Peripherals Rally
Spanish bonds advanced with their counterparts among Europe’s higher-yielding government bonds, pushing the 10-year yield seven basis points lower to 1.43 percent.
The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies fell 1.5 basis points to 52 basis points, the lowest level in more than seven years, according to data compiled by Bloomberg. Average yields on high-grade bonds in euros dropped to a record low of 0.92 percent, Bank of America Merrill Lynch index data show.
The Swiss franc weakened with core government bonds on reduced demand for haven assets, depreciating 0.6 percent to 1.07434 per euro. The dollar strengthened 0.7 percent to $1.1303 per euro and the Bloomberg Dollar Spot Index advanced 0.4 percent.
The Treasury 10-year yield increased two basis points to 2.14 percent, Germany’s rate rose two basis points to 0.39 percent and U.K. gilt yields jumped five basis points to 1.82 percent.
West Texas Intermediate crude oil for April delivery traded $1.19 lower at $49.62 a barrel. Brent was down 1.9 percent at $59.05 in London.
Libya Pipelines
Oil fell as fields in eastern Libya resumed pumping to Hariga port after a pipeline was repaired, according to state-run National Oil Corp. Oman, the biggest Middle Eastern oil producer that’s not a member of OPEC, is boosting crude output to as much as possible with the global price rout over, said Salim Al Aufi, undersecretary of the oil and gas ministry.
U.S. natural gas futures rose 2.7 percent to the highest since Jan. 22 amid predictions for cold weather persisting through March. Chicago’s low temperature for Feb. 26 is forecast at 3 degrees Fahrenheit (-16 Celsius), or 22 degrees below the historical average, according to AccuWeather.
Gold for immediate delivery fell below $1,200 an ounce in London, after dropping for a fourth straight week through Friday, the longest such streak since September 2013. The net-long position in gold tumbled 18 percent to 110,164 futures and options contracts in the week ended Feb. 17, according to U.S. Commodity Futures Trading Commission data.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net; Stephen Kirkland at skirkland@bloomberg.net Stephen Kirkland
