Euro Gains as Bonds Decline With Stocks on Inflation Data

Frankfurt (Feb 28)  The euro strengthened and European bonds fell after faster-than-estimate inflation hampered the case for expanding stimulus. Europe stocks fell along with Standard & Poor’s 500 Index futures, signaling the gauge will drop from a record high.

Europe’s shared currency jumped 0.7 percent to $1.3800 at 7:30 a.m. in New York. Germany’s 10-year bund yield rose five basis points to 1.61 percent. Sweden’s krona surged after gross domestic product expanded more than economists estimated. The Stoxx Europe 600 Index slid 0.4 percent. S&P 500 futures lost 0.1 percent. Wheat rose in its biggest monthly gain since July 2012, while U.S natural gas fell.

Consumer prices grew an annual 0.8 percent, more than the 0.7 percent median estimate in a Bloomberg survey, the European Union’s statistics office said. The European Central Bank meets next week to set policy. In the U.S., a report will probably show the economy grew less than initially estimated in the fourth quarter, according to a Bloomberg survey of analysts.

“Relatively stable inflation is probably enough cover for the ECB to hold fire on policy,” said Paul Robson, a currency strategist at Royal Bank of Scotland Group Plc in London.

The euro gained against 13 of its 16 main peers, climbing 0.4 percent versus the yen. Sweden’s krona rose at least 0.8 percent against all of its 16 major peers, strengthening 0.9 percent per euro. Gross domestic product rose 1.7 percent from the third quarter, more than double the 0.6 percent seen in a Bloomberg survey of 14 analysts.

Yields on securities from France, the Netherlands and Belgium increased. The rate on 10-year Treasuries rose two basis points to 2.66 percent.

Source:  Bloomberg