Europe stocks swing before Greek talks as oil heads to weekly loss

Europe’s benchmark equity index traded near a seven-year high and the euro fell before talks on further funding for Greece resume, while oil headed for its first weekly loss in a month as record US supplies reinforced concern over a glut. Japanese stocks extended a 15-year high.

The Stoxx Europe 600 Index was little changed by 8:17 a.m. in London, as the euro weakened 0.4 percent versus the dollar. The Nikkei 225 Stock Average added 0.4 percent, while US index futures were little changed. Oil in New York headed for a 2.4 percent loss for the week. Gold was set for a fourth weekly drop and nickel traded at a one-year low.

Euro-area finance ministers hold emergency talks with Greek officials on Friday amid increasing pressure to find a compromise on maintaining funding to the indebted country. German producer prices fell more than projected in January while preliminary gauges of European and US manufacturing are due. Rebels attacked Ukrainian positions 49 times in the past 24 hours, the Ukrainian Security and Defense Council said in a statement on Facebook.

“We’ve been worrying about Greece and Ukraine for a long time and nothing has surfaced yet, so if it does, there could be a big shock to the market,” said Tomomi Yamashita, who helps oversee the equivalent of $6.3 billion at Shinkin Asset Management Co. in Tokyo. “At least here in Japan it seems we’re managing to overcome that thanks to a stronger economic outlook, confidence in earnings, and expectations of higher wages for workers at big companies.”

Europe Stocks

The euro bought $1.1323 on Friday. It seems premature to look for a deal at Friday’s talks, with negotiations likely for at least another week, currency strategists at BNP Paribas including Steven Saywell said in a client note. They recommended remaining short euro.

Wrangling over Greece’s debt crisis hasn’t stopped the Stoxx 600 from reaching its highest levels since November 2007, with all 19 groups registering gains this year. About half the industries increased on Friday.

Danone SA fell 1.3 percent. The world’s biggest yogurt maker set a lower sales forecast for 2015 than last year’s amid deflationary pressure in Europe and weakening currencies in emerging markets.

European stocks were whipsawed Thursday, gaining after the European Commission said Greece’s request for an extension of loan facilities could pave the way for compromise.

Stocks then pared gains on news Germany had rejected the plan, before rising again as a German official, who asked not to be named because the talks are private, said his government regarded a Greek proposal as a basis for negotiations.

MOVE Jumps

The yield on 10-year US Treasuries fell two basis points today after climbing three basis points to 2.12 percent on Thursday. The benchmark US bond is heading for a third straight weekly decline, even as prices fluctuate by the most in four months amid speculation as to the timing of any interest- rate increase by the Federal Reserve.

The Merrill Lynch Option Volatility Estimate Index of implied price swings in 1-month Treasury futures rose to 98.47 on Thursday, the highest level since October 15.

The Nasdaq Composite Index capped its longest rally in a year, as Priceline Group Inc. jumped 8.5 percent to lead a rally in Internet stocks after reporting better-than-estimated fourth- quarter earnings. The Standard & Poor’s 500 Index and Dow Jones Industrial Average were dragged lower by energy companies and Wal-Mart Stores Inc., which lost 3.2 percent after saying wage increases and other spending initiatives will boost expenses.

West Texas Intermediate crude added 0.7 percent to $51.50 a barrel after sliding more than 4 percent the previous two days. WTI is heading for its first decline since losing 6.4 percent in the week to January 23. Brent climbed 0.6 percent to $60.56 a barrel in London and is down 1.6 percent for the week.

Oil Stockpiles

US crude inventories rose by 7.7 million barrels to 425.6 million through February 13, the Energy Information Administration said Thursday. The amount is the highest level in weekly records compiled by the EIA since August 1982 and enough to supply the country’s refineries for about 28 days, based on the latest input data of 15.4 million barrels a day.

The American Petroleum Institute reported stockpiles rose by 14.3 million barrels. Analysts surveyed by Bloomberg had predicted a median increase of 3 million barrels. Energy explorers are paring drilling rates and investments in response to the slump. Marathon Oil Corp. said Wednesday that it will cut an additional 20 percent from its spending plan for this year.

Gold, Nickel

Gold traded at $1,207.90 an ounce in the spot market, after retreating 0.5 percent on Thursday. The precious metal, often viewed as a store of value and haven investment, has lost 1.8 percent this week, on track for its fourth straight weekly loss and the longest slump since September 2013.

Nickel for delivery in three months on the London Metal Exchange fell 0.8 percent to $13,880 a ton. Prices dropped 1.9 percent on Thursday to close at $13,985 a ton, the lowest since February 6, 2014. The metal was in a surplus of 12,700 metric tons in December, widening from 6,500 tons the previous month, according to International Nickel Study Group data released Friday.

Record stimulus from the Bank of Japan is helping drive local stocks as the Government Pension Investment Fund increases its allocation to equities. The Topix rose 0.4 percent in a fifth day of gains, its longest rally this year. The gauge’s best streak of weekly gains since June has been supported by gains from Japan’s biggest lenders and exporters.

Banks Rally

The Topix Banks index rallied 11 percent this year amid optimism Prime Minister Shinzo Abe’s reflation policy will boost earnings for lenders. Toyota Motor Corp., Japan’s biggest company, gained 6.9 percent in the period on optimism the yen’s decline against the dollar will boost profit when overseas earnings are repatriated.

Markets in most of Asia remained closed for Lunar New Year holidays Friday.

Australia’s S&P/ASX 200 Index fell 0.4 percent, paring a fifth straight weekly advance to 0.1 percent and capping the longest winning streak since April. Energy stocks led declines as Santos Ltd., the country’s third-largest oil and gas producer, posted a loss for 2014 after the rout in crude prices forced it to write down assets. Shares slipped 2.6 percent, the most in more than a month.

The NZX 50 Index rose 0.4 percent in Wellington, its first gain this week. The measure is vying with benchmark indexes in Canada and Norway for the biggest decline after Greece’s ASE Index among 24 developed markets tracked by Bloomberg. The ASE has slumped 4.2 percent this week.

[Bloomberg]