Euro Weakens, Bonds Rise on Trichet Austerity Comments; Stocks Fluctuate

The euro ended a three-day winning streak and bonds rose after European Central Bank President Jean-Claude Trichet urged “austerity” measures to contain budget deficits. Oil and stocks in Brazil and Canada declined.

The euro weakened 0.3 percent to $1.2531 at 11:26 a.m. in New York. The yield on 10-year German bunds fell four basis points to 2.55 percent. Crude futures slipped 0.8 percent. Brazil’s Bovespa Index slumped 0.5 percent, and Canada’s S&P/TSX Composite Index dropped 0.7 percent. The Stoxx Europe 600 Index lost 0.1 percent. September futures on the Standard & Poor’s 500 Index fell 0.2 percent during the U.S. holiday. Copper increased for a second day.

Trichet said yesterday he has “no problem with austerity, rigor” as “good budgetary management,” following reports last week that showed U.S. payrolls dropped for the first time this year and factory orders slumped. China’s Premier Wen Jiabao said on July 3 policy makers face increasing “dilemmas” and the government will ensure “steady and relatively fast” growth.

“The outlook for growth around the world is certainly not as optimistic as it was a few months ago,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. “There will be the longer-term participants in the market who are viewing this decline in price as a good time to get long.”

Photographer: Tomohiro Ohsumi/Bloomberg

The MSCI Asia Pacific Index gained 0.2 percent to 111.90 as of 11:30 a.m. in Tokyo. Close

The MSCI Asia Pacific Index gained 0.2 percent to 111.90 as of 11:30 a.m. in Tokyo.

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Photographer: Tomohiro Ohsumi/Bloomberg

The MSCI Asia Pacific Index gained 0.2 percent to 111.90 as of 11:30 a.m. in Tokyo.

The euro slipped 0.4 percent to 109.79 yen. The Swiss franc strengthened 0.1 percent to 1.3340 per euro. The Swiss National Bank has been “closely monitoring” the franc in recent weeks, central bank President Philipp Hildebrand said, Blick reported yesterday. South Korea’s won gained against its 16 most-active counterparts after Goldman Sachs Group Inc. raised its 2010 growth forecast for the nation and predicted the Bank of Korea will lift its benchmark interest rate this quarter.

Poland’s Election

The zloty strengthened 1 percent against the euro, heading for its biggest daily gain since June 10, as investors bet Bronislaw Komorowski’s presidential election victory will help Poland cut its deficit and adopt the euro in 2015.

The German two-year note yield declined for a second day, dropping four basis points to 0.63 percent. Nouriel Roubini, the New York University economist who predicted the financial crisis, said that government bonds of countries such as Germany, Canada and the U.S. will represent a haven from increasingly volatile markets in coming months.

Oil futures for August delivery lost 0.8 percent to $71.57 a barrel in New York, decreasing for a sixth straight day.

Vale, Petrobras

Brazilian equities were driven lower by Vale SA and Petroleo Brasileiro SA, which fell more than 0.5 percent. The MSCI Emerging Markets Index rose less than 0.1 percent. Taiwan’s HTC Corp., the maker of Google Inc.’s Nexus One mobile phone, surged the most in 14 months after Citigroup Inc. raised the stock to “buy” from “sell.”

The MSCI World Index of stocks in 24 developed nations declined 0.3 percent. The S&P/TSX slumped as all eight of Canada’s public traded banks retreated.

BP Plc gained 4 percent in London. The company, which has lost about half of its market value since April following the Gulf of Mexico oil spill, is seeking an investor to thwart takeover bids, the Sunday Times said. Iberdrola Renovables SA, Spain’s biggest operator of wind-energy plants, rallied 5.3 percent in Madrid after the Spanish government agreed on subsidies. Rio Tinto Group, the world’s third-biggest mining company, fell 1.8 percent to lead metal producers lower.

Seven-Day Slump

U.S. stocks plunged last week, with the S&P 500 falling 5 percent to the lowest level since Sept. 4, while the Dow Jones Industrial Average recorded its first seven-day loss since 2008, after reports showing slower-than-estimated growth in jobs and factory orders. The Nasdaq-100 Index, which gets 63 percent of its value from technology shares, has fallen a record 10 consecutive days as Apple Inc. and Microsoft Corp. slump.

Concern governments around the world are curtailing stimulus measures too soon spurred Barton Biggs to sell about half of his stock investments last week. Biggs, whose Traxis Partners LLC gained 38 percent in 2009 when he bought equities after the S&P 500 fell to a 12-year low, sold most of his U.S. technology holdings, he told Bloomberg Television.

Copper for delivery in three months increased 0.8 percent on the London Metal Exchange. Inventories of copper in warehouses monitored by the LME dropped to 444,500 tons, the lowest since May 5, and are down 12 percent this year.

The MSCI Asia Pacific Index gained 0.2 percent today. Centennial Coal Co. surged 32 percent in Sydney after Banpu Pcl agreed to buy the 80 percent stake it doesn’t own already own. Reliance Natural Resources Ltd., the natural gas supplier owned by Anil Ambani, plunged a record 28 percent in Mumbai after the billionaire arranged to sell the company to his Reliance Power Ltd. at a discount to speed construction of power plants.

To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net

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