Euro Weakens on Greece as Emerging Market Stocks Slip With Gas

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The euro dropped after Greece asked creditors to compromise on demands that are holding up bailout funds. Emerging-market stocks fell amid the outlook for higher U.S. interest rates, while gold and natural gas declined.

The 19-nation euro lost 0.3 percent to $1.0978 by 5 p.m. in New York. The MSCI Emerging Markets Index fell 0.2 percent as Poland’s benchmark gauge sank the most since January after an opposition candidate won the presidency. Spanish shares retreated amid local elections and Chinese equities jumped to a seven-year high. Standard & Poor’s 500 Index futures slipped 0.1 percent with markets in the U.S., U.K., South Korea and Hong Kong closed Monday. Gold and gas lost at least 0.3 percent.

Greek Prime Minister Alexis Tsipras said at the weekend the country can’t absorb more austerity measures, while Interior Minister Nikos Voutsis, who has no economic decision-making powers, indicated Greece couldn’t and wouldn’t make a scheduled payment to the International Monetary Fund in June without a deal. Federal Reserve Chair Janet Yellen said on Friday she expected to raise interest rates this year after core inflation climbed more than was predicted in April.

“There is ongoing euro negativity in the light of the Greek comments about the June 5 payment, while markets consider the dollar in the light of the Yellen warnings on rates on Friday,” said Jeremy Stretch, the head of currency strategy at Canadian Imperial Bank of Commerce in London. “It should be relatively quiet in view of the lack of data and market liquidity.”

Austerity Pushback

The euro declined against 13 of its 16 major peers, sliding as much as 0.5 percent to 70.73 British pence, the weakest level since March 12. The currency touched $1.0959, its lowest since April 28 and lost 0.3 percent in a third day of declines to the Japanese yen.

Greek Finance Minister Yanis Varoufakis, also speaking at the weekend, said his government had met creditors three-quarters of the way with its austerity measures, and it was now up to them to “do their bit.” While Tsipras’ spokesman Gabriel Sakellaridis said Monday a deal can be reached by the end of May, he admitted that disagreements remain over areas such as budget targets, sales-tax rates, pension and labor market rules.

Bloomberg’s Dollar Spot Index, a gauge of the currency versus 10 major peers, rose 0.1 percent after rallying 2.6 percent last week. The U.S. currency was little changed at 121.56 yen after touching 121.78, its strongest level since since March 10.

Emerging Currencies

Accelerating inflation and strong employment growth are pushing the U.S. economy close to the point where it can support higher interest rates, Federal Reserve Bank of Cleveland President Loretta Mester said Monday in an interview in Reykjavik, Iceland.

Elsewhere in currency markets, the shekel climbed 0.3 percent, snapping a five-day slide after the Bank of Israel left key rates unchanged at a record low, in line with economists estimates. A Bloomberg gauge of 20 emerging-market currencies dropped for a sixth day, with Malaysia’s ringgit and the Hungarian forint leading declines, falling at least 0.7 percent.

The Stoxx Europe 600 Index lost 0.3 percent after its biggest weekly gain since mid-April. Trading volumes were 81 percent below the 30-day average, according to data compiled by Bloomberg. Greece’s ASE Index lost 3.1 percent.

Poland, Spain

The WIG20 Index slipped 1.7 percent in Warsaw, led by banking stocks, after opposition candidate Andrzej Duda defeated incumbent Bronislaw Komorowski in a presidential runoff, with a parliamentary election due in the fall. The zloty touched a two-month low against the euro.

Spain’s IBEX 35 Index fell 2 percent, the biggest drop among European developed markets after Greece and Italy. Prime Minister Mariano Rajoy’s People’s Party suffered its worst result in a municipal election in 24 years, with the anti-austerity party Podemos claiming its biggest victory in Barcelona.

The result “could be an early sign that efforts to ring fence the anti-austerity push in Europe have failed,” Matthew Sherwood, head of investment markets research in Sydney at Perpetual Ltd., which has about $21 billion under management, wrote in an e-mail to clients. “While some swings against the incumbent federal government were expected as voters fed up with austerity and corruption voiced their anger, the weak People’s Party results in Barcelona and Madrid were extremely surprising.”

Commodity Markets

The Shanghai Composite Index climbed 3.4 percent, rallying the most since January to extend last week’s 8.1 percent climb. China and Hong Kong will start cross-border sales of funds on July 1, widening access to financial markets and capital in the world’s second-largest economy, regulators said on Friday. Speculation over further economic stimulus in China also stoked equity gains.

West Texas Intermediate crude oil for July delivery climbed 0.2 percent to $59.82 a barrel in electronic trading on the New York Mercantile Exchange, following a 1.7 percent drop on Friday. Brent crude rose 0.2 percent to $65.52.

U.S. natural gas fell for a second day, dropping as much as 1.7 percent in electronic trading on the Nymex to the lowest level since May 12. Futures have been declining amid prospects mild weather in the U.S. will crimp demand for the power-plant fuel.

Gold for immediate delivery lost 0.3 percent to $1,202.80 an ounce, while palladium rose at least 0.4 percent with silver and platinum. Copper futures for July delivery added 0.6 percent to $2.8270 a pound on the Comex.