Bloomberg News

Euro Drops, Global Stocks Pare Gains on Greece Bailout Concerns

February 15, 2012

Feb. 15 (Bloomberg) -- The euro fell while global stocks and commodities trimmed gains amid concern European officials will delay Greece’s second bailout, tempering optimism that China will get more involved in the region’s rescue efforts.

The euro slipped for a fourth day against the dollar, losing 0.5 percent to $1.3066, and weakened against 15 of 16 major peers as of 11:15 a.m. in New York. The MSCI All-Country World Index added 0.4 percent, erasing yesterday’s 0.4 percent drop. The Standard & Poor’s 500 Index was little changed near the 1,351 level. The cost of insuring against default on European government bonds gained for a sixth day. The S&P GSCI Index rose 0.7 percent, paring an earlier 1.4 percent advance.

Greek Finance Minister Evangelos Venizelos said that Europe’s wealthier countries are “playing with fire” by considering expelling the nation from the 17-nation euro currency as talks over a second aid program ran into new obstacles. A decision slated for tonight on aid totaling 130 billion euros ($171 billion) was postponed until at least Feb. 20 and possibly until after a full-time Greek government emerges from elections later in the year.

“It’s all about headlines whipping price action around,” said Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York. “It’s lack of details from China’s pledge and lack of details with regards to Greece and if they’re going to be able to secure the next round of aid weighing on the euro.”

The euro weakened the most against the currencies of Brazil, New Zealand, Taiwan and Australia and reversed a 0.5 percent gain versus the yen. The shared currency rallied earlier as China said it will get more involved in Europe’s bailout efforts and sustain its holdings of euro assets.

‘Principle of Security’

“Yesterday Premier Wen Jiabao, during the China-EU summit, said explicitly that China will continue to, under the principle of security, liquidity and increasing value, invest in European government debt, and will get more involved in efforts to help resolve the European debt crisis via all possible channels,” People’s Bank of China Governor Zhou Xiaochuan said in Beijing today.

At stake for China is helping to stabilize the economy of its largest market amid a global slowdown that has curtailed export growth.

“It’s very clear that China realized the costs of a possible European recession that spreads to the rest of the world,” James Swanson, who oversees about $200 billion as chief investment strategist at Boston-based MFS Investment Management, said in a telephone interview. “Yet they haven’t fixed their problems and China can’t fix their problems.”

U.S. Stocks

Among U.S. stocks, Comcast Corp. rallied 5.6 percent after the largest U.S. cable company authorized a $6.5 billion buyback as profit jumped 26 percent. Kellogg Co. advanced 5.4 percent after agreeing to acquire Procter & Gamble Co.’s Pringles potato chip business for about $2.7 billion in cash. Hartford Financial Services Group Inc. climbed 4.1 percent as billionaire John Paulson filed a document with regulators so he can approach other investors about his plan to break up the insurer.

Technology, consumer-discretionary and financial companies climbed at least 0.3 percent as a group to lead gains among six of the 10 main industries in the S&P 500. Industrial and telephone companies fell the most.

Economic Data

Federal Reserve data showed production at U.S. factories increased in January, reflecting gains in demand for automobiles and business equipment that may keep manufacturing at the forefront of the expansion. Output at factories rose 0.7 percent after a revised 1.5 percent gain in December that was the largest in five years, the figures showed. A 2.5 percent decline in utility output prompted by the fourth-warmest January on record caused total industrial output to be little changed, trailing forecasts for a 0.7 percent increase.

A separate report showed manufacturing in the New York region expanded in February at the fastest pace since June 2010.

European stocks climbed, sending the Stoxx Europe 600 Index up 0.6 percent, after China’s comments and better-than-estimated earnings from companies including BNP Paribas SA to Heineken NV. BNP Paribas, France’s largest bank, and Heineken, the world’s third-biggest brewer, rose more than 3 percent. Clariant AG advanced 5.3 percent after earnings exceeded projections and the chemical maker said it may sell its textile and paper units.

Europe’s economy shrank less than economists forecast in the fourth quarter as a better-than-predicted performance in Germany and France helped mitigate the region’s first contraction since 2009. Gross domestic product in the 17-nation euro area fell 0.3 percent from the prior three months, the first drop since the second quarter of 2009, the EU’s statistics office said today.

In European bond markets, yields climbed at least 12 basis points on Italian, Spanish and Greek 10-year debt. Germany’s 10- year bund yield fell four basis points to 1.86 percent, the lowest in almost two weeks.

--With assistance from James G. Neuger in Brussels, Tom Stoukas in Athens and Allison Bennett in New York. Editors: Michael P. Regan, Jeff Sutherland

To contact the reporter on this story: Rita Nazareth in New York at

To contact the editor responsible for this story: Nick Baker at

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