Euro weakens as US stocks retreat and Treasuries advance

May 7 (Bloomberg) -- The euro slid for a sixth day against the dollar and U.S. stocks fell, while Treasuries gained, after French Socialist Francois Hollande was elected president and Greek voters picked anti-bailout parties. European stocks erased earlier losses as German factory orders topped estimates.

The euro lost 0.3 percent to $1.3046 as of 9:54 a.m. in New York. The Standard & Poor’s 500 Index fell 0.2 percent. Ten-year Treasury yields fell one basis point to 1.87 percent after losing six points earlier. Ten-year French yields slipped two points to 2.80 percent. The Stoxx Europe 600 Index erased a 0.8 percent drop to climb 0.3 percent, even as Greece’s ASE Index plunged as much as 8.3 percent in its worst drop since 2008. The S&P GSCI Index of commodities fell for a fourth day.

Hollande, the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity. His platform calls for policies German Chancellor Angela Merkel opposes, including increased spending and a delayed deficit-reduction effort. The Greek parliament will have three new anti-bailout parties represented. German factory orders jumped 2.2 percent in March. Economists surveyed by Bloomberg News forecast an increase of 0.5 percent.

“Incumbents took a beating across Europe this weekend in what has been widely interpreted as a backlash against austerity,” Michala Marcussen, global head of economics at Societe Generale SA in Paris, wrote in a report today. “Failure to secure a political majority to meet the terms of the second Greek program could see the country inch towards euro exit. This would in our opinion be seen as a negative event, even beyond Greece’s borders.”

Euro Weakens

The shared European currency weakened against 13 of 16 major peers. The euro dipped below $1.30 for the first time since April 16, and slid 0.4 percent versus the pound. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.2 percent, rising for a sixth day in the longest streak since September.

In other European elections, Merkel’s party had its worst election result in more than half a century in the state of Schleswig-Holstein. Austerity measures aimed at stemming Europe’s turmoil have driven economies from the Netherlands to Spain back into recession, emboldening politicians campaigning for growth.

Fourth Straight Drop

U.S. stocks retreated for a fourth straight day. The S&P 500 tumbled 2.4 percent last week, its biggest drop of the year, as data on American and European labor markets boosted concern the global economy is weakening. The benchmark gauge of U.S. stocks retreated 3.5 percent from an almost four-year high on April 2 through the end of last week amid concern global economic growth was weakening.

Chevron Corp. and Freeport-McMoRan Copper & Gold Inc. paced losses that sent commodity producers to the biggest declines among the 10 main groups in the S&P 500. Fifth Third Bancorp and Bank of America Corp. helped lead financial shares higher after billionaire investor Warren Buffett said U.S. lenders are in “fine shape” and have “liquidity coming out of their ears.

American International Group Inc. dropped 5.8 percent as the U.S. Treasury Department agreed to sell $5 billion of shares, with the bailed-out insurer buying $2 billion of the total.

Risk perceptions among U.S. equity and credit investors are diverging by the most since 2009 as signs of an economic slowdown spur bigger increases in prices to protect against losses in bonds than stocks. The VIX, the benchmark gauge of U.S. equity derivatives that usually rises when shares fall, closed last week at 0.032 times the level of the Markit CDX North America High Yield Index, which increases when confidence in debt issuers deteriorates, according to data compiled by Bloomberg. That’s near the 2 1/2-year low of 0.027 times reached in March.

Among European stocks, National Bank of Greece SA tumbled 9.5 percent. Roche Holding AG fell 3.8 percent, the most in two months on an intraday basis, after abandoning development of an experimental cholesterol drug. CSM NV, the world’s biggest maker of bakery ingredients, jumped 15 percent after saying it will sell its U.S. and European bakery-supply units.

Bloomberg News

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