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Euro Strengthens as European Stocks Erase Advance

The euro strengthened, rebounding from a four-day losing streak, as polls showed Greece’s pro- bailout parties gained ground. European stocks erased gains, Spanish bonds declined and yields on German two-year notes fell to a record low.

The euro rose 0.2 percent to $1.2538 at 4 p.m. New York time. The Stoxx Europe 600 Index lost less than 0.1 percent, moving lower after gaining as much as 0.9 percent, as banks slumped. Spain’s IBEX 35 dropped 2.2 percent while Germany’s DAX Index retreated 0.3 percent after adding 1.4 percent. Yields on two-year bunds slipped to 0.027 percent. Spanish bonds fell, pushing 10-year yields to the most relative to benchmark German bunds since the euro was created.

European stocks reversed course and Spanish debt fell amid concern the nation’s lenders will need more financial support to weather Europe’s debt crisis. Spanish Prime Minister Mariano Rajoy said the euro region’s rescue fund should be able to bypass national governments and recapitalize distressed lenders directly, even as he argued his country’s banks won’t need external help. U.S. stock markets were shut for Memorial Day.

“Investor sentiment is very cautious and there is likely to be a lot of volatility with the Greek elections looming over the market,” said Keith Bowman, an equity analyst at Hargreaves Lansdown Plc in London. “A lot of people are sitting on the sidelines.”

Crude oil futures advanced 0.3 percent to $91.14 a barrel. Gold futures added 0.3 percent to $1,575.60 an ounce. Copper rose 0.6 percent to $3.467 a pound.

Canada, Emerging Markets

Canadian stocks erased gains as the commodities rally failed to give the Standard & Poor’s/TSX Composite Index its fifth straight advance. Trading volume was 61 percent less than the 10-day average amid the U.S. market holiday. The gauge lost 0.1 percent.

Emerging-market stocks rose for a third day as opinion polls of Greek voters eased concern the country will exit the euro area and speculation mounted China will take steps to boost its economy.

The MSCI Emerging Markets Index rose 0.9 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong climbed 1.1 percent. The Micex Index rose 0.8 percent in Moscow as OAO Lukoil, Russia’s second-largest oil producer, added 2 percent after first-quarter profit increased 7.7 percent. Brazil’s Bovespa Index gained 1.2 percent.

Futures on the S&P 500 added 0.5 percent.

Bankia

Bankia (BKIA) tumbled 13 percent as the lender nationalized by Spain this month seeks 19 billion euros ($23.8 billion) of state funds. Banco Popular Espanol SA dropped 7.5 percent for the second-biggest loss among banks in the Stoxx Europe 600.

Photographer: Angel Navarrete/Bloomberg

Bankia plunged 23 percent. Close

Bankia plunged 23 percent.

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Open
Photographer: Angel Navarrete/Bloomberg

Bankia plunged 23 percent.

Spanish bonds fell, pushing 10-year yields to the most relative to benchmark German bunds since the euro was created, amid concern the nation’s lenders will need additional financial support to weather Europe’s debt crisis.

Spain’s two-year note yield climbed to the highest since December after nationalized lender Bankia group said it will seek 19 billion euros ($23.8 billion) of state support. German two-year note yields dropped to a record even as opinion polls showed greater backing for Greece’s pro-bailout political parties. Italian bonds declined as business confidence slid more than economists forecast and borrowing costs rose at a sale of zero-coupon notes.

The yield on Spain’s 10-year bond climbed 16 basis points, or 0.16 percentage point, to 6.47 percent. The extra yield investors demand to hold the securities instead of their German counterparts expanded by 17 basis points to 511 basis points after reaching 514 basis points, the most since the euro’s introduction in 1999.

To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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