Bloomberg News

Euro Gains Before Debt Talks as Oil Rises; Copper Falls on China

August 20, 2012

China’s Stocks Drop on Monetary Policy Concern

Apartment buildings stand in Beijing. The central government asked local administrations to reverse any relaxation of housing curbs, CCTV said, citing inspection teams from the country’s State Council. Photographer: Nelson Ching/Bloomberg

The euro strengthened and oil climbed to a three-month high before leaders meet this week to discuss the region’s debt crisis. European equities and U.S. stock-index futures were little changed, while copper fell on concern China will hold off from easing monetary policy.

The currency gained against 14 of its 16 major peers at 8:20 a.m. in London. The Stoxx Europe 600 Index dropped 0.1 percent after reaching a 13-month high last week. Futures for the Standard & Poor’s 500 Index added 0.1 percent, while the MSCI Asia Pacific Index slipped 0.1 percent. Italian and Spanish 10-year bond yields fell to the lowest levels since July 4. Oil advanced 0.5 percent in New York as copper lost 0.5 percent.

Europe’s leaders plan a week of intensive shuttle diplomacy to help defuse the continent’s debt crisis, amid dissension over the European Central Bank’s role and how to help Greece. The People’s Bank of China has no plan to cut lenders’ reserve- requirement ratios in the short term, the central bank’s Financial News said in a commentary after data showed new-home prices rose in 49 of the 70 cities tracked by the government.

“We’ve got a slightly positive bias for the euro over the next couple of months,” said Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd., which predicts the euro will be at $1.33 by year-end.

The euro rose 0.2 percent to $1.2361 after climbing 0.4 percent last week. The Australian dollar rose 0.3 percent to $1.0447.

Leaders Meet

The yield on Italian 10-year bonds fell seven basis points to 5.71 percent. The rate on similar-maturity Spanish debt fell eight basis points to 6.36 percent.

Jean-Claude Juncker, the Luxembourg premier who heads the group of euro-area finance ministers, is expected in Athens on Aug. 22 to discuss Greek Prime Minister Antonis Samaras’ request of a two-year extension for the country’s fiscal adjustment program. Samaras travels to Berlin and Paris on Aug. 24 and Aug. 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

Europe’s leaders are returning from vacation with agreement still elusive on measures to support Greece and to prevent Spain and Italy being shut out of sovereign debt markets. Spain urged unlimited ECB support after its 10-year bonds advanced last week for the first time this month, as Merkel signaled conditional support for the ECB’s plan to help reduce indebted countries’ borrowing costs.

Spiegel Report

The ECB’s governing council may decide at its next meeting in early September to set yield limits on the debt of each country, Spiegel reported yesterday, without saying where it got the information.

About four stocks fell for every three that rose in MSCI’s Asia Pacific gauge, which has rallied 11 percent from this year’s June 4 low. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong slid 0.4 percent and the Shanghai Composite Index lost 0.4 percent. Thailand’s SET Index (SET) dropped 0.3 percent after the government cut its economic growth estimate. Markets in India, Singapore, Indonesia, Malaysia and the Philippines are shut today for holidays.

A gauge tracking property stocks in Shanghai dropped 1.5 percent to its lowest level since March 29, after data showed new home-prices rose in the largest number of cities in 14 months in July.

China faces “bigger pressure” to cool the property market after the increase in home prices, China Central Television reported yesterday. The central government asked local administrations to reverse any relaxation of housing curbs, CCTV said, citing inspection teams from the country’s State Council.

‘Animal Spirits’

Cutting the amount of reserves Chinese banks must set aside may increase the risk of investment overheating and raise inflation expectations, the Financial News reported on Aug. 18.

The Chinese data “shows how very complicated it is to stimulate the growth while simultaneously damping speculation in the property market,” John Woods, the Hong Kong-based chief Asian strategist at Citigroup Inc.’s private bank, said in a Bloomberg Television interview. “The last thing they want to see is to unleash the animal spirits yet again in the property sector.”

Oil for September delivery rose to $96.30 amid signs of a strengthening U.S. economy and speculation that higher Saudi Arabian crude output indicates increasing demand for fuel.

U.S. home sales and orders for durable goods probably climbed in July, signaling the world’s largest economy is starting to strengthen after a second-quarter slowdown, economists said before reports this week. Combined purchases of new and existing houses increased to a 4.89 million annual rate from a 4.72 million pace in June, according to the median forecast in a Bloomberg survey. Bookings for long-lasting goods climbed the most this year, another report may show.

Saudi Arabia pumped crude at the highest level in more than three decades in June and monthly exports were the most since November 2005, according to the Joint Organization Data Initiative.

Copper for delivery in three months fell to $7,492 a metric ton on the London Metal Exchange. Aluminum slid 0.5 percent while nickel slumped 0.8 percent.

To contact the reporters on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Darren Boey at dboey@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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