U.S. Stocks Drop as Oil Slides; Europe Equities Gain

NEW YORK (Bloomberg) - U.S. stocks fell from records as oil dropped below $50 a barrel, while the dollar strengthened against emerging-market currencies. European equities advanced with bonds from Italy to Portugal as investors reacted to the extension of Greece’s bailout.

Date: 23 February 2015 - 21:15

News ID: ۱۱۳۱۵

The Standard & Poor’s 500 Index slid 0.3 percent at 10:03 a.m. in New York after closing at an all-time high on Friday. The Stoxx Europe 600 Index added 0.6 percent, while Portugal’s 10-year rate reached 2.118 percent, below its U.S. equivalent. The dollar strengthened before Federal Reserve Chair Janet Yellen addresses Congress this week. The ruble slid 3.6 percent in offshore trading after Moody’s Investors Service downgraded Russia to junk. Oil lost 2.6 percent in New York.
The government in Athens has until the end of Monday to complete a list of policies in return for the continued funding after talks concluded late on Feb. 20. Moody’s joined S&P in ranking Russia’s debt as non-investment grade, citing the conflict in Ukraine and plunging oil prices. Sales of existing U.S. homes fell more than forecast last month.
"We have indexes at all-time highs, the Nasdaq is close to breaking 5,000, and we’re in an environment where central bank liquidity is plentiful across the globe,” said Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich. "It’s difficult to call an end to the bull market. News about a deal on Greece is decent.”
U.S. stocks posted their longest streak of weekly gains since the beginning of December as Greece reached a deal to extend its bailout program and investors speculated the Fed will keep rates lower for longer.
The Nasdaq Composite Index ended last week on an eight-day winning streak that took the gauge to 4,955.97, less than 2 percent away from a record. The S&P 500 climbed 0.6 percent last week and the Dow rose to its first record of the year.
Investors are waiting for economic data to gauge the strength of the economy. Sales of previously owned U.S. homes probably fell 4.9 percent in January, more than the 1.8 percent economists projected. They will get further clues this week as Yellen testifies before Congress.
They’re also watching the situation in Greece after its Feb. 20 agreement with creditors. The Greek reform measures are still subject to validation by the International Monetary Fund, the European Central Bank and the European Commission, the institutions collectively known as the troika which Prime Minister Alexis Tsipras vowed not to recognize.
"Markets have reacted positively in terms of risk sentiment and we’re seeing the periphery doing very well” because of the Greek deal, said Owen Callan, a fixed-income strategist at Cantor Fitzgerald LP in Dublin. "It takes away the big short-term event risk, even if a medium-term risk is still there.”
Spanish bonds advanced with their counterparts among Europe’s higher-yielding government bonds, pushing the 10-year yield 10 basis points lower to 1.40 percent.
The Stoxx 600 advanced for a fifth day to extend the highest level since 2007. The U.K.’s FTSE 100 Index surpassed a record close in intraday trading before slipping 0.3 percent as lower-than-projected profit at HSBC Holdings Plc pushed the stock lower.
Greece’s ASE Index slipped 4.5 percent last week. The market was closed on Monday for a holiday. Spain’s IBEX 35 Index climbed 0.8 percent for one of the biggest rallies among 18 western-European markets.
Greek government bonds rose for a fourth day, with the three-year note yield dropping 180 basis points, or 1.80 percentage point, to 14.819 percent, the lowest since Jan. 28.
"Greece will still be an issue for the market for some time,” said Kevin Lilley, who helps manage 15 billion pounds ($23 billion) as head of European equities at Old Mutual Global Investors U.K. in London. "If we can get the agreement made in the next couple of days, which is necessary for this extension, then hopefully the market can pop that to one side for a few months and focus on the underlying economy, which is steadily improving.”
The Swiss franc weakened with core government bonds on reduced demand for haven assets, depreciating 0.4 percent to 1.07273 per euro. The dollar strengthened 0.5 percent to $1.1321 per euro and the Bloomberg Dollar Spot Index advanced 0.2 percent.
Russia’s $3 billion of 4.875 percent bonds due September 2023 fell for a third day, sending the yield 30 basis points higher to 6.70 percent. Credit-default swaps on government debt rose, signaling a 30 percent chance of default within five years, according to data compiled by Bloomberg. Local markets are closed in Russia for a holiday.
Moody’s cut Russia’s rating one step to Ba1, the highest non-investment level and in line with countries including Hungary and Portugal. Downgrades to junk from at least two rating companies may force money managers whose guidelines prohibit them from holding debt rated below investment grade to sell as much as $5.8 billion of Russian dollar and local bonds, according to a January report from JPMorgan Chase & Co.