New York/London - A European Union agreement to ban Iranian oil imports boosted crude futures Wednesday, and stocks and the euro fell after a muted German bond sale and a discounted Italian bank rights issue stoked fears about the region’s debt crisis.
Diplomats said that EU envoys held talks on banning Iranian oil in the last days of December and that any objections to the idea, notably from Greece, were dropped. There is no date set for the start of the embargo.
Iran on Tuesday threatened to take action if the U.S. Navy moves an aircraft carrier into the Gulf, which sent crude prices up more than 4 percent to settle at their highest since November 15.
Brent February crude rose 0.7 percent to $112.91 a barrel on Wednesday. U.S. February crude rose to as high as $103.74 before trading nearly flat at $102.94 per barrel.
Stocks and the euro struggled as the euro-zone sovereign debt crisis moved to the fore after Italy’s biggest bank, UniCredit, priced a 7.5 billion euro capital hike at a massive discount. That level, in turn, could discourage other lenders from tapping the market to raise money.
Data also suggested the region’s banks remain wary of lending to each other, with commercial lenders’ overnight deposits at the European Central Bank hitting a new record high of 453 billion euros.
“The market is pressured by European banks today, but this could change once again once we get a good set of economic data,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
Analysts expect euro-zone funding pressures to intensify this year, with 230 billion euros of bank bonds, up to 300 billion euros in government bonds, and more than 200 billion euros in collateralized debt maturing in the first quarter.
A subdued German bond auction underscored those worries. The euro zone’s largest economy found adequate but underwhelming demand for its sovereign debt.
The FTSEurofirst 300 index of top European shares fell 0.71 percent after hitting a five-month high on Tuesday, boosted by manufacturing data from the United States and China.
The STOXX Europe 600 Banking euro zone index, which has many constituents exposed to the euro-zone debt crisis, fell 3.43 percent.
U.S. stocks also fell shortly after opening, with the Dow Jones industrial average off 0.3 percent, the Nasdaq Composite Index down 0.66 percent and the Standard & Poor’s 500 Index sliding 0.53 percent.
German debt sale underwhelms
Germany sold 4.057 billion euros of 10-year government bonds, its first auction of the benchmark maturity since November, that raised fears Europe’s debt crisis had begun to threaten its biggest economy.
Bids for the Bunds amounted to 1.3 times the amount offered and were improvement over the previous sale, one of the country’s least successful debt sales since the introduction of the euro.
The debt sold at an average yield of 1.93 percent, lower than the 1.98 percent from November.
The sale was “much better than November’s auction, but not particularly great either,” added Peter Chatwell, rate strategist at Credit Agricole.
The auction kicked off a huge sovereign refinancing cycle in the euro zone, with traders worried that debt-laden countries such as Italy and Spain may have to pay unsustainably high prices to meet their needs.
The single currency slipped 0.86 percent to $1.2938, within striking distance of its 2011 trough of $1.2858, hit in the last week of December.
The falls came after a sharp rally on Tuesday in the wake of a better-than-expected U.S. manufacturing report that saw the single currency reach its highest in a week at $1.3077.
Diplomats said that EU envoys held talks on banning Iranian oil in the last days of December and that any objections to the idea, notably from Greece, were dropped. There is no date set for the start of the embargo.
Iran on Tuesday threatened to take action if the U.S. Navy moves an aircraft carrier into the Gulf, which sent crude prices up more than 4 percent to settle at their highest since November 15.
Brent February crude rose 0.7 percent to $112.91 a barrel on Wednesday. U.S. February crude rose to as high as $103.74 before trading nearly flat at $102.94 per barrel.
Stocks and the euro struggled as the euro-zone sovereign debt crisis moved to the fore after Italy’s biggest bank, UniCredit, priced a 7.5 billion euro capital hike at a massive discount. That level, in turn, could discourage other lenders from tapping the market to raise money.
Data also suggested the region’s banks remain wary of lending to each other, with commercial lenders’ overnight deposits at the European Central Bank hitting a new record high of 453 billion euros.
“The market is pressured by European banks today, but this could change once again once we get a good set of economic data,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
Analysts expect euro-zone funding pressures to intensify this year, with 230 billion euros of bank bonds, up to 300 billion euros in government bonds, and more than 200 billion euros in collateralized debt maturing in the first quarter.
A subdued German bond auction underscored those worries. The euro zone’s largest economy found adequate but underwhelming demand for its sovereign debt.
The FTSEurofirst 300 index of top European shares fell 0.71 percent after hitting a five-month high on Tuesday, boosted by manufacturing data from the United States and China.
The STOXX Europe 600 Banking euro zone index, which has many constituents exposed to the euro-zone debt crisis, fell 3.43 percent.
U.S. stocks also fell shortly after opening, with the Dow Jones industrial average off 0.3 percent, the Nasdaq Composite Index down 0.66 percent and the Standard & Poor’s 500 Index sliding 0.53 percent.
German debt sale underwhelms
Germany sold 4.057 billion euros of 10-year government bonds, its first auction of the benchmark maturity since November, that raised fears Europe’s debt crisis had begun to threaten its biggest economy.
Bids for the Bunds amounted to 1.3 times the amount offered and were improvement over the previous sale, one of the country’s least successful debt sales since the introduction of the euro.
The debt sold at an average yield of 1.93 percent, lower than the 1.98 percent from November.
The sale was “much better than November’s auction, but not particularly great either,” added Peter Chatwell, rate strategist at Credit Agricole.
The auction kicked off a huge sovereign refinancing cycle in the euro zone, with traders worried that debt-laden countries such as Italy and Spain may have to pay unsustainably high prices to meet their needs.
The single currency slipped 0.86 percent to $1.2938, within striking distance of its 2011 trough of $1.2858, hit in the last week of December.
The falls came after a sharp rally on Tuesday in the wake of a better-than-expected U.S. manufacturing report that saw the single currency reach its highest in a week at $1.3077.