The euro weakened and the cost of insuring Greek and Portuguese debt rose to records as European officials failed to agree on a rescue plan for Greece. Stocks, U.S. index futures and commodities fell.
The euro depreciated 0.7 percent to $1.4333 at 10:22 a.m. in London, while the Australian dollar strengthened against all 16 of its major peers. Credit swaps on Greek bonds signaled a 74 percent chance of default within five years. The Portuguese two- year note yield advanced seven basis points before a bill auction. Standard & Poor’s 500 Index futures fell 0.6 percent and the Stoxx Europe 600 Index slipped 0.4 percent. Oil sank 1 percent and silver dropped 0.7 percent.
An emergency session of finance ministers ended with no progress on a new aid package for Greece, German Finance Minister Wolfgang Schaeuble told reporters yesterday. BNP Paribas SA, Societe Generale SA and Credit Agricole SA may have their debt ratings cut because of their investments in Greece, Moody’s Investors Service said today. U.S. inflation probably rose and industrial output picked up, economists said before reports from the Labor Department and Federal Reserve.
“We are no closer to solving the crises,” Gary Jenkins, head of credit strategy at Evolution Securities Ltd. in London, wrote in a report today. “It may well be that ultimately the only real option is some kind of fiscal union as that would buy the peripheral countries time and may act as a firebreak against contagion from the Greek situation.”
Aid Talks
The euro fell against all but two of its 16 most-traded counterparts, slipping 0.3 percent versus the yen. EU finance ministers meeting in Brussels yesterday agreed to convene again on June 19, a day earlier than planned. Talks may drag on into July, Luxembourg’s Finance Minister Luc Frieden said.
The Australian dollar rose 0.3 percent versus the yen and 0.7 percent against the euro. Reserve Bank of Australia Governor Glenn Stevens reiterated that policy makers will need to raise interest rates at some stage and signaled inflation data next month may be key for such a decision. The pound fell 0.3 percent against the dollar after U.K. jobless claims jumped more than economists expected in May and wage growth slowed.
The yield on the Greek 10-year bond climbed 22 basis points, rising for the seventh day, as protesters in Athens threatened to surround Parliament, where lawmakers began to debate budget cuts and asset sales that are conditions for aid. The extra yield investors demand to hold the securities instead of benchmark German bunds rose to a record 1,461 basis points.
Portugal Auction
The Portuguese 10-year yield snapped six days of increases as the government prepared to sell as much as 1 billion euros ($1.4 billion) of three- and six-month bills. Germany auctions two-year notes. The cost of insuring sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments increasing four basis points to 216. Greek swaps jumped 32 basis points to 1,637. Portugal’s advanced 14 to 768 basis points.
Three stocks fell for every one that gained in the Stoxx 600, with banks leading losses. National Bank of Greece SA slid 7.2 percent and Banco Comercial Portugues SA (BCP) sank 4.3 percent. BNP Paribas, Societe Generale and Credit Agricole each slipped at least 1.7 percent.
The drop in S&P 500 futures indicated the benchmark gauge for U.S. equities will snap a two-day advance. Reports today may show the cost of living rose in May at the slowest pace in six months, while industrial production increased 0.2 percent, according to Bloomberg surveys of economists.
The S&P GSCI index of 24 raw materials declined 0.7 percent. Oil sank $1.03 cents at $98.34 a barrel in New York.
The MSCI Emerging Markets Index lost 0.3 percent. The Shanghai Composite Index fell 0.9 percent after the central bank ordered domestic lenders yesterday to hold more cash in reserve. The Bombay Stock Exchange Sensitive Index slipped 1 percent before an interest-rate decision tomorrow. Turkey’s ISE 100 Index slid 1.3 percent after Haberturk newspaper reported savings-deposit insurance may increase.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net.
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
