Euro Falls on Merkel Comments as Europe Stocks Rise; Oil Drops

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Angela Merkel
German Chancellor Angela Merkel. Photographer: Krisztian Bocsi/Bloomberg

U.S. equities retreated, almost erasing a gain for the week, while European stocks tumbled with the region’s higher-yielding bonds amid growing concern Greece will run out of time for reaching a deal to stave off default.

The Standard & Poor’s 500 Index lost 0.8 percent at 4 p.m. in New York, leaving it little changed for the week. The Stoxx Europe 600 Index dropped 0.9 percent, paring an advance in the five days. The euro traded at $1.12575 after earlier weakening. Yields on 10-year Spanish and Portuguese bonds surged more than 10 basis points, while rates on German bunds slipped. Oil fell 1.3 percent in New York.

European officials are preparing for the worst as Prime Minister Alexis Tsipras’s brinkmanship pushes Greece’s finances to the limit, while German Chancellor Angela Merkel urged him to accept the framework for financial aid. Euro-area officials demanded a proposal for stabilizing the country’s debt by the end of Friday, after IMF negotiators left a meeting earlier this week without a compromise.

“Every time we think we’re close to a deal with Greece there’s some kind of monkey wrench,” said Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management LLC. Voya oversees $215 billion. “The more opaque the picture becomes with Greece the more people opine on what the potential repercussions would be and it’s a little touch and go.”

The Greek crisis overshadowed data showing the U.S. economy continues to gain speed. Wholesale prices in the U.S. rose in May, giving the figure gains in two of the past three months that may eventually filter through to consumers, helping reassure Federal Reserve policy makers that inflation is progressing toward their target.

Fed Meeting

A separate report showed consumer confidence rose more than forecast in June as Americans were the most upbeat about their wage prospects in seven years.

Federal Reserve policy makers are counting on a rebound in growth to justify an increase this year in the benchmark interest rate for the first time since 2006. The central bankers next meet June 16-17 in Washington and will release updated economic projections.

Among stocks moving Friday, energy and health-care shares led losses as all 10 groups in the S&P 500 fell. Cisco Systems Inc. lost 1.2 percent to pace a slide among technology companies.

Europe Assets

Spanish 10-year bond yields climbed 13 basis points to 2.26 percent. The yield on similar-maturity Portuguese debt rose 15 basis points to 3.05 percent. Italian yields increased eight basis points to 2.22 percent.

The Stoxx 600’s slump Friday left it higher by 0.1 percent for the week. Greek shares fell 5.9 percent on Friday after surging the most since February yesterday.

The MSCI Emerging Markets Index added 0.4 percent, trimming its loss in the week to 0.2 percent. Hong Kong’s Hang Seng China Enterprises Index rose 1.8 percent and the Shanghai Composite Index climbed 0.9 percent to a 2008 high.

The People’s Bank of China may cut reserve-requirement ratios, according to China Merchants Bank, after data this week showed declines in exports and producer prices in May. Factory output accelerated.

Oil fell for a second day, paring a weekly advance as investors weighed signs of a slowdown in U.S. drilling against data showing OPEC’s biggest members were pumping crude at a record pace.

West Texas Intermediate dropped 1.3 percent to settle at $59.56 a barrel. Brent for July settlement slid $1.24 to end at $63.87, up 0.9 percent for the week.

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