Bloomberg News

U.S. Stocks, Euro Fall on Greece Concern as Oil Gains on Iran

February 21, 2012

Feb. 15 (Bloomberg) -- U.S. stocks and the euro fell as concern grew that Greece was moving closer to default and Federal Reserve minutes showed policy makers were divided on buying more assets. Oil led gains in commodities on reports that Iran halted shipments to Europe.

The Standard & Poor’s 500 lost 0.5 percent to 1,343.23 at 4 p.m. in New York and the Dow Jones Industrial Average slid 97.33 points, or 0.8 percent, to 12,780.95. The euro lost 0.5 percent to $1.3068 and weakened versus 13 of 16 major peers. The S&P GSCI Index rose 0.6 percent as oil jumped to a one-month high. Ten-year Treasury yields fell less than one basis point to 1.93 percent, trimming a drop of as much as four points.

Concern that Greece will miss a debt payment next month grew as a decision slated for tonight on 130 billion euros ($171 billion) of aid was postponed until at least Feb. 20 and possibly until after a full-time Greek government emerges from elections later in the year. Minutes of the Fed’s last meeting showed a few policy makers said the central bank may have to consider purchasing more securities soon, while others said the economic outlook would have to worsen.

“I don’t think we’re anywhere near the end of the crisis in Europe,” Howard Ward, who helps oversee $36 billion at Mario Gabelli’s Gamco Investors Inc. in Rye, New York, said in a telephone interview. In the U.S., “after better-than- expected economic data and with GDP forecasts being revised higher, the chances of QE3 are not as good as they were previously,” he said, referring to a potential third round of quantitative easing by the Federal Reserve.

Juncker’s Confidence

Luxembourg Prime Minister Jean-Claude Juncker said he’s confident euro-area finance ministers will make a decision on a bailout for Greece at their next meeting on Feb. 20. Juncker, chairman of the group, issued a statement after the ministers held a conference call today on the Greek package.

Apple Inc. lost 2.3 percent to halt an eight-day rally, its longest since July, and helped lead the market lower after an early gain. Marbridge Consulting said the company asked Amazon.com Inc.’s China website to stop selling the iPad amid a patent dispute, while traders speculated the stock’s recent surge may cause Nasdaq OMX Group Inc. to cut its weighting in the Nasdaq-100 Index. The shares make up 16.5 percent of the index, almost twice as much as Microsoft Corp., the gauge’s next biggest stock, according to data compiled by Bloomberg.

United Technologies Corp., Chevron Corp. and Caterpillar Inc. lost at least 1.4 percent to lead declines in the Dow. Deere & Co. slumped 5.4 percent after the largest maker of agricultural equipment lowered its forecast for revenue from U.S. farmers. Industrial, financial and technology companies were the biggest drag on the S&P 500 as nine of the 10 main groups retreated.

Fed Minutes

The Fed minutes showed that a few members said economic conditions “could warrant the initiation of additional securities purchases before long,” while “other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain” below 2 percent in the medium run.

Fed data earlier in the day 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.

Oil, Iran

Oil for March delivery rose $1.06 to $101.80 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 10. Brent oil for April settlement increased $1.58, or 1.3 percent, to end the session at $118.93 a barrel on the London- based ICE Futures Europe exchange.

Iran stopped crude exports to France and the Netherlands and threatened to end shipments to four other European countries, state-run Mehr news agency reported, citing an unidentified official at the National Iranian Oil Co. U.S. oil supplies unexpectedly decreased in the week ended Feb. 10, an Energy Department report showed.

Half of the 24 commodities tracked by the S&P GSCI Index advanced, while half fell. Natural gas dropped the most in two weeks, dropping 4.2 percent to $2.425 per million British thermal units, amid forecasts for warmer-than-normal weather in the eastern U.S.

European Stocks

The Stoxx Europe 600 Index closed 0.6 percent higher 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 3.6 percent. Clariant AG advanced 5.7 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.

The MSCI Emerging Markets Index climbed 0.9 percent as benchmark gauges in India, Taiwan and Russia rose more than 1 percent.

In European bond markets, yields climbed at least 15 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.

The euro weakened the most against the currencies of Taiwan and South Korea and reversed an early 0.5 percent gain versus the yen.

‘Playing With Fire’

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. Greek President Karolos Papoulias slammed Germany’s finance minister for recent comments about his country as stalled bailout talks stoked tensions between Greece and the northern European countries funding its rescue

Stocks and the euro climbed earlier after People’s Bank of China Governor Zhou Xiaochuan said in Beijing today that his nation will continue to buy European debt and participate more in the region’s rescue efforts.

‘More Involved’

“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.”

--With assistance from James G. Neuger in Brussels. Editors: Michael P. Regan, Jeff Sutherland

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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