Euro, Greek Bonds Drop on Rescue Concern; U.S. Stocks Fluctuate
By Michael P. Regan and Jeff Kearns
April 6 (Bloomberg) -- The euro weakened and Greek bonds plunged as the 10-year yield premium to German debt widened to the most since the euro’s introduction a decade ago, reaching about 4 percentage points, on concern the European Union’s rescue plan for the nation may unravel. U.S. stocks fluctuated.
The euro dropped against all 16 most-traded peers at 12:40 p.m. in New York, while the U.K. currency declined against 11. Greek 10-year bond yields climbed above 7 percent for the first time in 10 weeks before retreating back below. Australia’s dollar advanced after the central bank raised its target rate for overnight borrowing. The Standard & Poor’s 500 Index swung between gains and losses as advances in financial shares helped wipe out an early slump.
The euro slid after Market News International said Greece may want to bypass International Monetary Fund involvement in a rescue. Greek bonds trimmed losses as the nation’s Finance Minister George Papaconstantinou said the government has not tried to modify the terms of the package to exclude the IMF.
“At times you get a bit of worry that the Greece situation may derail the global recovery,” said E. William Stone, who oversees $102 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “We’ve had such good news across the spectrum that you’re bound to get something that’ll take the punch bowl away.”
The euro lost 1.4 percent against the yen and 0.8 percent compared with the dollar after Market News cited unidentified officials as saying Greece may seek a rescue package that doesn’t involve the IMF.
Greek Aid
Finance Minister Papaconstantinou said in an e-mailed statement that the EU aid plan is “important” for Greece and Europe, and the nation has not sought to activate the aid plan.
“There has never been any move on the part of our country to change the conditions of the recent agreement of the European Council on the support mechanism,” Papaconstantinou said in the e-mailed statement today.
Greek bonds fell for a third day, with the yield on the two-year note rising 1 percentage point to 6.11 percent. Credit- default swaps on Greek debt rose 37 basis points to 383, the highest level since Feb. 25, according to CMA DataVision prices.
Yields on 10-year German bunds increased 0.06 percentage points to 3.15 percent, compared with 7 percent for comparable Greek debt. The 10-year Greek yield had climbed to as high as 7.2 percent, sending the yield premium over German debt to the widest since 1998, before paring gains after Papaconstantinou’s statement.
Germany is Europe’s biggest economy, and a wider yield gap indicates a higher perception of risk for Greece.
Australian, Canadian Dollars
The Australian dollar strengthened 1.3 percent versus the euro and 0.4 percent against the U.S. dollar after central bank Governor Glenn Stevens increased the overnight cash rate target to 4.25 percent from 4 percent. The Canadian dollar traded at parity with the U.S. currency for the first time since July 2008 before paring gains to trade just below $1.
The pound weakened 0.4 percent versus the dollar, and the yield on the 10-year gilt climbed 9 basis points to 4 percent on concern the election, which U.K. Prime Minister Gordon Brown announced today will be held May 6, won’t produce a clear winner.
Treasuries rose for the first time in four days as the 10- year note yield’s increase to above 4 percent yesterday lured buyers the Greece situation stoked demand for safety. The 10- year Treasury yield fell 3 basis points to 3.96 percent.
U.S. Equities Fluctuate
U.S. equities fluctuated after a year-long rally drove the S&P 500 to an 18-month high, pushing the benchmark gauge to the most expensive level this year at about 19 times reported operating earnings of its companies. Figures yesterday showed growth in U.S. service industries and home sales, adding to evidence the economy is strengthening after the government last week reported the biggest monthly jobs growth in three years.
SunTrust Banks Inc. rallied 3 percent after Credit Suisse Group AG analysts said the lender may be a takeover target, while Regions Financial Corp. jumped 5 percent as Credit Suisse lifted its share-price estimate.
European stocks gained, pushing the Stoxx Europe 600 Index to the highest since September 2008, as the biggest rise in U.S. jobs in three years and growth in services and home sales indicated the global economy is strengthening. European markets were closed for holidays on April 2 and April 5, when the U.S. data was released.
The MSCI Asia Pacific Index rose 0.3 percent, climbing for a fourth day.
The MSCI Emerging Markets advanced for an 8th day, the longest streak since October 2009. Kazakhstan’s KASE Stock Index and Ukraine’s PFTS Index rose at least 1.7 percent.
Copper for delivery in three months slipped 0.6 percent to $3.611 a pound in New York, retreating from a 20-month high. Oil was little changed near its highest level in 17 months before a report forecast to show U.S. crude inventories increased last week while gasoline supplies fell. Crude for May delivery was at $86.63 a barrel, up 1 cent on the New York Mercantile Exchange.
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