ECONOMY

Greece leads drop in European stocks on debt talks; ruble slips

Greece led declines in European stocks and bonds fell as the nation headed for a showdown with its creditors. Treasuries rose, while Russia’s ruble weakened.

The Stoxx Europe 600 Index slipped 0.2 percent, with Greece’s ASE Index down 3.5 percent at 10 a.m. in London. Futures on the Standard & Poor’s 500 Index dropped 0.1 percent. Greece’s three-year note yield climbed 148 basis points to 20.99 percent and Treasury 10-year notes ended a four-day losing streak. The ruble fell for the first time in three days.

Germany is maintaining Greece must comply with the terms of its bailout heading into an emergency creditor meeting in Brussels, dousing expectations that a funding compromise will be reached. Negotiations over a cease-fire in Ukraine are likely to take place in Minsk as officials wrestle over the degree of autonomy to give rebel-held eastern regions, French Foreign Minister Laurent Fabius said.

“At the moment, it’s still about the Greek story,” said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland. “There will likely be some compromise but investors are waiting until there’s a solution. There are still risks out there for equity investors, but they should be buying on the dips.”

Greek talks

Greece is trying to drum up support for a 10 billion-euro ($11.3 billion) bridge plan to stave off a funding crunch and buy time to win an easing in austerity terms from creditors. Any deal would require a softening of Germany’s stance. German Finance Minister Wolfgang Schaeuble said there were no plans to discuss a new accord or to give the country more time.

Greece’s new Prime Minister Alexis Tsipras was defiant, saying there is “no way back” for his government, and that he can’t condemn his people to more pain.

Greek equities fell for the fourth time in five days. Spain’s IBEX 35 Index and Portugal’s PSI 20 Index dropped more than 0.5 percent.

Energy producers in the Stoxx 600 fell the most, with Seadrill Ltd. and Tullow Oil Plc sliding more than 2.5 percent. Telenor ASA declined 5.4 percent after the Nordic region’s largest phone operator gave a margin forecast lower than its 2014 figure.

European stocks

Sky Plc lost 3.4 percent after after agreeing to pay the bulk of a record 5.14 billion pounds ($7.8 billion) for the UK rights to broadcast live English Premier League soccer. BT Group Plc, which is paying 320 million pounds a season, rose 3.1 percent.

Reckitt Benckiser Group Plc climbed 3.7 percent after saying it will cut costs further. ING Groep NV gained 2.1 percent as it will pay a dividend for the first time in almost seven years. ARM Holdings Plc advanced 4 percent as the chip designer whose technology is in more than 95 percent of smartphones reported accelerating royalty revenue growth.

S&P 500 futures expiring in March were little changed after the index climbed on Tuesday, closing 1.1 percent away from a record. First Solar Inc. advanced 3.2 percent in early New York trading as it’s investing $848 million in a solar farm with Apple Inc. to harvest electricity.

PepsiCo Inc., Cisco Systems Inc. and MetLife Inc. are among 19 S&P 500 companies reporting earnings today. About 77 percent of those that have posted results this season have beaten analysts’ profit estimates and 56 percent topped sales projections, data compiled by Bloomberg show.

Greek bonds

Greek 10-year bond yields rose 29 basis points to 10.53 percent. They’re up from 8.41 percent before Jan. 25 elections handed power to the Syriza party, which pledged to backtrack on austerity measures and lower Greece’s debt.

With debates over Greece’s funding ongoing, the premium to protect against declines in the euro versus the dollar over gains rose as high as 1.78 percentage points, the most since Jan. 23, according to one-month risk reversals.

The Swiss franc added 0.2 percent to 1.047 per euro. The JPMorgan Global FX Volatility Index was at its highest level in almost a month on a closing-market basis, at 11.24 percent.

Treasury 10-year yields fell one basis point to 1.99 percent, having climbed from this year’s low of 1.64 percent set on Jan. 30. The Federal Reserve should raise interest rates in June on the basis of stronger U.S. data, Fed Bank of Richmond President Jeffrey Lacker said yesterday.

Ukraine summit

Russia’s Micex Index gained 1.5 percent, advancing for the first time in three days, led by energy producers.

The ruble weakened 0.6 percent against the dollar. The currency has dropped 7.7 percent this year, extending its 46 percent slide in 2014, as sanctions over Ukraine and a slump in oil prices dragged the economy to the brink of recession.

Ukraine’s July 2017 Eurobond added 0.11 cent to 54.53 cents on the dollar, sending the yield eight basis points lower to 40.06 percent.

French President Francois Hollande and German Chancellor Angela Merkel will speak this morning about the summit, which is “looking as if it will go ahead,” Fabius told France Inter radio on Wednesday.

Ukrainian President Petro Poroshenko will seek “an immediate, absolute, and entirely unconditional cease-fire and to start a political dialogue” at the summit, according to the presidential website on Wednesday. Russia indicated President Vladimir Putin will attend and that a deal is likely.

U.S. President Barack Obama called Putin Tuesday to reaffirm American support for Ukraine’s territorial integrity and address Russia’s support for the separatists, according to the White House.

Bullion for immediate delivery added 0.3 percent to $1,237.29 an ounce. Copper on the London Metal Exchange increased 1 percent to $5,648 a ton.

Oil advanced after investors weighed forecasts for slowing U.S. crude output against signs that the market is oversupplied. The Energy Information Administration reduced its US production outlook as the market’s slump curbed drilling activity. West Texas Intermediate climbed 1.1 percent to $50.55 a barrel. [Bloomberg]