Euro Weakens for 3rd Day as Spanish Bonds, Chinese Shares Slide – Bloomberg

Italian and Spanish bonds fell with Greek stocks as the European Commission said the impasse over Greece's fiscal crisis is strangling the economy. U.S. equity futures dropped and Chinese shares slid the most in three months.

Yields on Italian 10-year bonds climbed 11 basis points to 1.64 percent, while similar-maturity Spanish bonds added 10 basis points to 1.61 percent as of 7:29 a.m. in New York. The euro weakened for a third day. Greece's ASE Index of shares sank 3.5 percent and U.S. stock-index futures retreated 0.2 percent. The Shanghai Composite Index tumbled 4.1 percent. Copper rose for an eighth day, the longest run since 2005.

The European Commission sees the Greek economy growing 0.5 percent this year, down from 2.5 percent in February. The forecast will make it harder for Greece to meet bailout goals as talks to ease its liquidity squeeze drag on. The International Monetary Fund told euro-zone creditors that it may reduce support to Greece unless European lenders write off "significant" amount of its sovereign debt, according to a Financial Times report.

"The IMF has warned euro-zone finance ministers over the sustainability of Greece's debt, which obviously raises the risk the IMF could withhold their next tranche of funding," said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

Emergency Funds

The euro weakened against most of its major peers. Some ECB officials have also signaled it might to be time to tighten Greece's access to emergency funds.

The European Commission raised its euro-area growth forecast as the impact of a weaker euro and unprecedented monetary stimulus help the economy overcome pressure on confidence from the continuing crisis in Greece. Gross domestic product is forecast to increase 1.5 percent this year, up from 1.3 percent in February, according to the commission.

Shares of UBS Group AG rallied 6.9 percent, reaching the highest price since the day the Swiss government came to its rescue in October 2008. The bank reported profit almost doubled in the first quarter and all of the key divisions beat forecasts.

Tesla Motors Inc. climbed 4.5 percent after Jefferies Group LLC rated the electric-car maker a buy. Walt Disney Co. and News Corp. are among U.S. companies reporting earnings.

Earnings Season

S&P 500 E-mini futures expiring in June retreated 0.2 percent. The index closed within 0.2 percent of a record on Monday. About 73 percent of the 377 S&P 500 companies that have reported earnings this season have beaten analysts' profit projections.

The Shanghai Composite fell the most since Jan. 19 amid concern the government will introduce measures to cool the market and speculation that new share sales will divert funds from existing equities. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 2.6 percent.

China's stocks will be hit by a 20 percent correction, Mark Mobius, who oversees about $ 40 billion as the executive chairman of Templeton Emerging Markets Group, said on Bloomberg Television in Hong Kong on Tuesday.

Copper advanced 0.3 percent as industrial metals in London advanced. Glencore Plc, the mining and commodities company led by billionaire Ivan Glasenberg, reported a 9 percent decline in copper production after ore grades fell and a Chilean mine shut for maintenance.

Australian Rates

The Australian dollar strengthened against all of its 16 major counterparts. The central bank cut interest rates to a record low and said there are signs of improving household spending, sending the currency and bond yields higher as markets bet policy makers won't ease further.

"The market is interpreting the statement as the RBA being on hold for the foreseeable future," said Sue Trinh, senior currency strategist at Royal Bank of Canada in Hong Kong. "There were further rate cuts built into the curve. With this statement there may be a bit of unwinding in those expectations."

Oil rose above $ 59 a barrel, ending two days of losses before U.S. government data forecast to show stockpiles expanded. Crude inventories probably increased by 1.2 million barrels through May 1, a 17th weekly gain, according to a Bloomberg survey before an Energy Information Administration report Wednesday.

Russian stocks advanced as climbing oil prices and declining tension over Ukraine lured investors to the cheapest equities in emerging markets. The Micex Index advanced 1.7 percent, led by industrials and power companies.

Investors added about $ 390 million this year, equivalent to about 20 percent of their assets, to U.S.-based exchange-traded funds investing in Russian stocks, data compiled by Bloomberg show. The ruble strengthened 0.5 percent to 51.45 per dollar.