Greek deal breaking down

February 16, 2015 08:58 AM

Greek stocks and bonds declined as Germany’s finance minister voiced skepticism a funding deal was within reach. Russia’s ruble strengthened in the second day of a cease- fire in Ukraine and Brent crude rose to the highest level in almost two months.

Greece’s ASE Index fell 4.4% at 8:48 a.m. in New York and three-year notes retreated for the first time in three days. The Stoxx Europe 600 Index slipped less than 0.1 after closing at a seven-year high on Friday. The ruble advanced to a one-month high against the dollar and Brent climbed as much as 1.7% to $62.57 a barrel. U.S. markets are closed for a holiday.

Weekend discussions aimed at finding common ground between Greece and its creditors failed to make enough progress to break an impasse, Wolfgang Schaeuble said in an interview with Deutschlandradio, as euro-area finance chiefs prepared to meet in Brussels. While the first day of a cease-fire in Ukraine brought a decrease in violence, the government in Kiev and pro- Russian militants accused each other of violations.

“All eyes are on the meeting between Greece and Europe,” said Ramiro Loureiro, a Lisbon-based market analyst at Banco Comercial Portugues SA’s Millennium unit. “Investors are proving to be cautious regarding the outcome.”

Greek three-year note yields rose 123 basis points, or 1.23%age points, to 17.08%, having tumbled 220 basis points on Friday. Ten-year yields increased 24 basis points to 9.50%. Greece’s bonds rallied last week as officials negotiating the future of the nation’s bailout program signaled a willingness to compromise.

‘Very Skeptical’

Germany’s 10-year bunds, Europe’s benchmark sovereign securities, were little changed with the yield at 0.35%.

“From what I’ve heard about the technical discussions at the weekend, I’m very skeptical,” Germany’s Schaeuble said. “But we’ll get a report today and then we’ll see.”

The Stoxx 600 declined after a second week of gains, with trading volume 17% lower than the 30-day average, according to data compiled by Bloomberg.

Europe’s benchmark equity gauge has climbed 10% this year, compared with a 1.9% advance in the Standard & Poor’s 500 Index and a 2.6% gain for the MSCI All-Country World Index.

Altice SA rose 3.4% and Bouygues SA added 3.3% after people familiar with the matter said Patrick Drahi’s company is stepping up plans for a potential takeover of mobile carrier Bouygues Telecom. SABMiller Plc added 2.1% after a report that a consortium led by 3G Capital Partners is considering a bid for the brewer.


Takeover Bid


Conwert Immobilien Invest SE jumped 9.5% after Deutsche Wohnen AG, Germany’s second-largest residential landlord, said it will bid for its Austrian competitor.

The ruble advanced 1.8% and the five-year bond yield dropped 41 basis points to 12.94%. The Micex Index slid 2.6%, dropping from the highest close since 2011.

Ukraine’s hryvnia slipped 1.1% and the government’s 2017 Eurobond dropped 0.16 cent to 53.97 cents on the dollar.

Fighting subsided along most of the front line of about 400 kilometers (250 miles) as world leaders urged the sides to adhere to the agreement signed last week in Minsk, Belarus. While the cease-fire showed signs of holding, the European Union went ahead with plans announced last week to impose restrictions on an additional 19 people and nine organizations. Russian Deputy Defense Minister Anatoly Antonov is the highest-ranking official on the expanded blacklist.


Rating Cut


Ukraine’s sovereign credit grade was cut to the lowest- grade sovereign that isn’t in default by Fitch Ratings, which said a debt restructuring is “increasingly probable” after the country agreed on a $17.5 billion bailout from the International Monetary Fund.

The Shanghai Composite Index rose for a sixth day, climbing 0.6%, with trading volume 28% below the 30-day average before Lunar New Year holidays that start on Feb. 18. China’s broadest measure of new credit rose for a third straight month, data showed on Friday, suggesting stimulus measures are cushioning the nation’s economic slowdown.

West Texas Intermediate added 0.2% to $52.89 in New York. Both Brent and WTI rallied for the previous three weeks as U.S. oil drillers cut the number of rigs in service to the fewest since August 2011, according to data from Baker Hughes Inc. The slowdown in U.S. drilling is still not sufficient to achieve the slowdown in production growth required to balance the oil market, Goldman Sachs Group Inc. said in an e-mailed report Monday.


Euro Gains


The euro gained 0.2% to $1.1412 and the Bloomberg Dollar Spot Index slipped less than 0.1%.

The yen appreciated 0.1% to 118.58 per dollar. The currency rallied at the end of last week after people familiar with the matter said some Bank of Japan policy makers viewed further monetary easing as counterproductive for now. More stimulus could trigger losses in the currency that would damage confidence, people familiar with the central bank’s discussions said last week.

Japan’s gross domestic product grew at an annualized 2.2% in the fourth quarter, less than a median forecast of economists for a 3.7% increase. Nominal GDP, which isn’t adjusted for price changes, climbed an annualized 4.5% from the previous quarter.

The kiwi added 0.8% to 75.20 U.S. cents after New Zealand retail-sales growth accelerated. It strengthened to a record 1.0333 versus the Aussie dollar.

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