Europe: Stocks drop on Greece as UK gilts rally

[LONDON] European stocks slid and UK bonds climbed with Treasuries as pressure mounts for Greece to reach a deal with creditors. Oil retreated before US stockpiles data, while Japan's Nikkei 225 Stock Average closed at its highest since 2000.

The Stoxx Europe 600 Index fell 0.4 per cent by 8:20 am in London, while Standard & Poor's 500 Index futures retreated 0.3 per cent. The Nikkei 225 rose 0.4 per cent. US oil slid 3.4 per cent. Yields on 10-year UK gilts fell five basis points and Treasuries extended gains amid speculation the Federal Reserve will delay raising rates. The euro was 0.2 per cent stronger and gold gained.

Greece plans to submit a request to the euro area for a six-month loan extension on Thursday, according to a government official. Fed officials signalled an inclination to keep rates on hold "for a longer time," in minutes of their January meeting published Wednesday. Markets from China to Korea and Hong Kong remained closed Thursday for holidays. A report today may show US oil stockpiles reached a fresh record last week.

Greece has been at odds with other euro-area governments over the formula needed to extend the country's 240 billion-euro rescue beyond its expiry at the end of February.

European Central Bank policy makers on Wednesday set Emergency Liquidity Assistance for Greek banks at 68.3 billion euros (US$77.9 billion), up from 65 billion euros, a euro-area central-bank official said. The ECB Governing Council and bank regulators would "feel better" if Greece introduced capital controls to prevent banks haemorrhaging, FAZ reported, citing unidentified central bank sources.

Oil and gas companies led declines among 18 of the 19 industry groups on the Stoxx 600 on Thursday. The gauge closed Wednesday at the highest level since November 2007.

The yield on German bunds due in a decade slipped to 0.36 per cent while similar-maturity UK gilts paid 1.8 per cent. The euro bought US$1.1421 on Thursday.

The Bloomberg Dollar Spot Index, which measures the US currency against 10 of its most-traded peers, has retreated about one per cent since hitting a 10-year high on Feb 11.

The dollar's strength, turmoil in Greece and Ukraine as well as slow wage growth were cited as arguments to put off what would be the Fed's first US rate rise since 2006. The central bank is weighing encouraging news on growth and the labour market with below-target inflation in assessing the correct moment to raise rates, the minutes showed.

Policy makers suggested the "balance of risks" associated with the timeline for rates had inclined them toward staying on hold for a longer time. Investors will now look to congressional testimony from Chair Janet Yellen next week for clues.

Yields on two-year Treasury notes slipped two basis points to 0.58 per cent after sliding six basis points, or 0.06 percentage point, after the Fed minutes. Rates on the note, which is regarded as more sensitive to expectations of changes in Fed policy than its longer-term peers, were as low as 0.40 per cent last month. Ten-year securities paid 2.06 per cent.

Japan's Topix added 0.8 per cent in a fourth day of gains, while the yen climbed 0.1 per cent to 118.72 per dollar following a 0.4 per cent advance on Wednesday. Export growth in Asia's second-largest economy accelerated to the fastest pace in more than a year last month, data on Thursday showed.

BHP, AMP In Australia, the S&P/ASX 200 Index slipped 0.2 per cent, dragged lower by BHP Billiton Ltd., the country's biggest oil producer. AMP Ltd. touched its highest level since 2009 after the insurer reported an increase in profit. The NZX 50 Index was down 0.3 per cent in Wellington.

The Aussie slipped 0.3 per cent to 77.85 US cents after rising as much as 0.3 per cent to 78.43 U.S. cents. Australia's budget outlook has weakened sharply in the last six months as commodity prices have plunged, Wall Street Journal cited S&P sovereign analyst Craig Michaels as saying.

Markets in Hong Kong, mainland China, South Korea, Taiwan, Singapore, Indonesia and the Philippines are shut Thursday for holidays, and there is no settlement of trades in India.

West Texas Intermediate crude for March delivery slid to US$50.45 a barrel, extending Wednesday's 2.6 per cent drop. The American Petroleum Institute said US oil supplies rose by 14.3 million barrels last week, according to reports on Twitter.

Official data on stockpiles is due Thursday from the US government's Energy Information Administration, with analysts surveyed by Bloomberg predicting the report will show an increase of 3 million barrels in the week through Feb. 13. Supplies increased the prior five straight weeks to 417.9 million barrels, the most in weekly records that begun 1982.

Brent crude, the benchmark for more than half the world's oil, fell 2 per cent to US$59.32 a barrel in London.

Gold for immediate delivery climbed to US$1,216.78 an ounce. Silver rose 0.9 per cent to US$16.6550 an ounce and platinum was 0.3 per cent higher at US$1,178.25.

BLOOMBERG