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Europe Stocks Drop With Euro; Bonds Rise Before U.S. Payrolls

(Bloomberg) — European stocks fell and the euro pared its biggest weekly gain since December while Treasuries rose before U.S. payrolls data. Russia’s ruble strengthened for a second day as oil headed for its best week in four years.

The Stoxx Europe 600 Index slipped 0.4 percent by 6 a.m. in New York and the euro weakened 0.4 percent to $ 1.1433, trimming its weekly advance to 1.3 percent. Standard & Poor’s 500 Index futures were little changed while the yield on 10-year U.S. notes fell one basis point to 1.81 percent. The rate on German bunds declined two basis points to 0.34 percent. The ruble advanced 0.7 percent and oil jumped 3.8 percent in New York, extending this week’s rally to 8.6 percent.

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Investors will be watching the U.S. monthly employment report for clues on the strength of the economy and the timing of increases in interest rates. Greek Prime Minister Alexis Tsipras will lay out his plans for debt relief on Sunday after the European Central Bank cut off preferential funding for the nation’s lenders and initial talks with Germany failed.

“I’m constructive on the U.S. economy — the recovery had been so slow for many years and now we’re seeing a real improvement,” said Konstantin Giantiroglou, head of investment advisory and research at Neue Aargauer Bank AG in Brugg, Switzerland, which oversees about $ 25 billion. “Monetary policy will remain quite expansionary even if interest rates increase.”

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Nonfarm payrolls probably rose by 230,000 last month, after a 252,000 gain in December, according to the median of 97 estimates in a Bloomberg survey of economists. Another poll indicated the unemployment rate remained at 5.6 percent.

Cutting Forecast

The Stoxx 600 fell for the first time in five days, trimming its weekly advance to 1.2 percent.

Tate & Lyle Plc dropped 13 percent after saying full-year profit will be lower than forecast. Statoil ASA rose 2.6 percent after Norway’s biggest energy company deepened cost cuts and halted dividend growth.

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Twitter Inc. rallied 8.2 percent in early New York trading after posting quarterly revenue that topped estimates while forecasting more new users. GoPro Inc. tumbled 14 percent after projecting a profit range for the current quarter that trailed estimates and saying sales will fall.

Pandora Media Inc. sank 17 percent after fourth-quarter results fell short of analysts’ estimates. Moody’s Corp. is among seven S&P 500 companies reporting earnings. About 77 percent of the gauge’s companies that have posted earnings this season have beaten analyst estimates, while 56 percent have topped sales projections, data compiled by Bloomberg show.

Ruble Gains

The ruble headed for a 4 percent gain this week, the strongest among 174 global currencies. The dollar-denominated RTS Index of stocks climbed 2.9 percent and rallied 12 percent over five days, the best performer worldwide after Greece. The Micex Index rose 2.3 percent, up 5.1 percent in five days to the highest level since August 2011.

Credit-default swaps on Russia’s government debt fell 16 basis points to 523 basis points, the lowest level since Jan. 2. The contracts are heading for the biggest weekly decline since 2011 after reaching an almost six-year high of 629 basis points Jan. 30.

German Chancellor Angela Merkel and French President Francois Hollande are set to meet with President Vladimir Putin today in Moscow to discuss a peace plan for Ukraine.

China Slowdown

China’s stocks fell, dragging the benchmark index to its longest weekly losing streak since May. The Shanghai Composite Index slumped 1.9 percent, slipping 4.2 percent this week. The gauge’s third straight weekly decline came after manufacturing and services gauges signaled a worsening outlook for the economy and as 24 companies prepared to sell shares in initial public offerings next week. Chinese stocks failed to sustain gains on Thursday following an across-the-board cut in banks’ reserve ratio.

The yuan strengthened the most this year after the People’s Bank of China raised its reference rate for the yuan to a level that forced appreciation, the second time it’s done so this week. It climbed as much as 0.24 percent to 6.2370 per dollar.

West Texas Intermediate crude rose at $ 52.42 a barrel after climbing 4.2 percent on Thursday, following an 8.7 percent drop the day before. The Chicago Board Options Exchange Crude Oil Volatility Index, which measures price fluctuations using options of the U.S. Oil Fund, ended the day at the highest since April 2009.

Crude Climbs

Brent crude rose 2.7 percent to $ 58.10 and is up 9.6 percent this week, the most for the period since October 2009.

German 10-year bund yields this week dropped below Japan’s for the first time before the ECB begins its expanded asset purchases next month.

Japanese bonds climbed on Friday, with the 10-year yield falling 1.5 basis points to 0.34 percent. The rate on the benchmark security jumped seven basis points this week, the most since December 2013.

Treasury 10-year note yields slipped two basis points to 1.81 percent, having climbed from 1.64 percent on Jan. 30.

The so-called Aussie dollar strengthened 0.5 percent to 78.37 U.S. cents, set for its biggest weekly gain a month. Downside revisions from the central bank were less than market expectations, reducing the chances of a rate cut in May, Elias Haddad, a senior currency strategist at Commonwealth Bank, said in an interview.

To contact the reporters on this story: Nick Gentle in Hong Kong at [email protected]; Stephen Kirkland in London at [email protected]

To contact the editors responsible for this story: Stephen Kirkland at [email protected]; Stuart Wallace at [email protected] Cecile Vannucci

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