Euro Weakens as Ministers Debate Bailout; Oil, Copper Decline

By Stephen Kirkland
Jan. 17 (Bloomberg) -- The euro weakened, snapping a five- day rally against the dollar, and yields on interest-rate futures contracts declined as the region’s ministers wrangled over a bailout plan. Copper and oil fell and stocks fluctuated.
The euro slid 1 percent against the dollar at 10:05 a.m. in London. The rate on the December euro futures contract sank as many as four basis points. Spanish 10-year bonds dropped after the government canceled auctions on Jan. 20 in favor of selling debt through banks. Copper slid 0.7 percent and crude oil retreated 0.6 percent. The Stoxx Europe 600 Index slipped less than 0.1 percent, while China led declines in Asia, with the Shanghai Composite Index decreasing 3 percent. Standard & Poor’s 500 Index futures lost 0.3 percent. U.S. markets are closed for a public holiday.
Finance chiefs are due to meet in Brussels today to discuss a revamped debt-crisis strategy with Germany easing its opposition to an expanded arsenal. European Central Bank council member Athanasios Orphanides said the bank may be able to stop buying government bonds if Europe’s rescue fund is allowed to purchase debt. Chinese President Hu Jintao, who is set to meet President Barack Obama in Washington tomorrow, rejected U.S.
arguments that it needs a stronger yuan.
“There’s plenty of reasons to be circumspect on the euro after the rally last week,” said Jeremy Stretch , executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London.

Euro, Dollar

The euro weakened versus all but two of its most-traded counterparts, sliding 0.9 percent against the yen. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.4 percent, rising for the first time in six days. New Zealand’s dollar climbed 0.6 percent versus the U.S. currency before a government report this week that economists said will show inflation accelerated.
The December contract used by traders to speculate on where three-month euro rates will be by year-end jumped, driving the yield to 1.65 percent. That’s still up from 1.41 percent two weeks ago after ECB comments on accelerating inflation fueled speculation that borrowing costs will increase.
More than three stocks declined for every two that rose on the Stoxx Europe 600 as BHP Billiton Ltd. led mining companies lower. BP Plc climbed 1.7 percent and OAO Rosneft rallied 4.2 percent after the oil companies agreed to swap equity stakes as part of a drive to extract billions of barrels of Arctic petroleum.

Smiths Group

Smiths Group Plc, the world’s biggest maker of airport- security scanners, jumped 10 percent after spurning a $3.89 billion approach for its medical-equipment operation from private-equity firm Apax Partners LLP. Smith & Nephew Plc rose
5.6 percent after the Sunday Times reported that Johnson & Johnson, the largest maker of health-care products, is considering a new bid for the maker of knee and hip replacements.
The Shanghai Composite Index tumbled the most in two months. The MSCI Emerging Markets Index declined for a third day, retreating 0.5 percent. Russia’s Micex Index advanced 0.9 percent to the highest level on a closing basis since June 2008.