European Markets Weighed by Greek Debt Standoff

Concern over the outcome of a standoff between Greece and its creditors continued to bear down on European stock markets Friday.

The Stoxx Europe 600--which has gained almost 9% year to date--edged 0.3% lower in early trade, mirroring similar moves on country indexes across the region.

On Thursday, Germany dismissed Greece's request for bridge funding that would give it three months to negotiate new bailout terms, insisting that the newly elected government implement the conditions tied to its agreed program. That comes after the European Central Bank said Wednesday evening that it would stop accepting Greek bonds as collateral for central bank loans, sending Greek markets into a tailspin.

Athens main stock index plummeted more than 11% at one point Thursday before ending the session 3.4% lower. In early trade Friday, it edged 0.3% higher.

Greek bank stocks, including Piraeus Bank SA, National Bank of Greece SA, Alpha Bank AE and Eurobank Ergasias SA, which dropped by as much as 15% Thursday, recovered marginally too, though remain sharply lower since the start of 2015.

"Compromise is a long way off and the renewed slump in the share prices of the Greek banks seems wholly logical," said Ian Williams, an economist and strategist at brokerage Peel Hunt.

Riccardo Barbieri, London-based chief European economist at Japanese bank Mizuho said that the negotiations are unlikely resolve Greece's problems any time soon. "Brinkmanship is likely to remain a constant," he said.

In debt markets, yields on two-year, five-year and 10-year Greek debt were trading around 16.63%, 13.24% and 9.77%, respectively. An inverted curve, where short-dated debt yields are higher than longer-dated paper, is generally an indication that investors see a greater chance of default.

The euro, which dropped against the dollar Wednesday before clawing back most of its losses on Thursday, was around 0.1% lower on the day Friday at around $1.145.

Later on Friday, the market will be eyeing key U.S. jobs data. The nonfarm payrolls report is expected to show the economy added 237,000 jobs in January, as the unemployment rate ticked down to 5.5% from 5.6%.

Jobless claims in the week ended Jan. 31 rose by 11,000 to 278,000, the Labor Department said Thursday. Economists polled by The Wall Street Journal had expected 290,000 new claims.

In commodity markets, oil prices continued their roller coaster ride, with Brent crude trading 2.7% higher in London at $58.10 per barrel.

The price of benchmark U.S. oil futures gained $2.03, or 4.2%, to $50.48 a barrel on the New York Mercantile Exchange Thursday--a move that came after an 8.7% slide on Wednesday, following data showing that U.S. crude supplies had climbed to their highest level in about 80 years.

That decline, in turn, had erased gains from Tuesday, which capped the biggest four-day winning streak in percentage terms since January 2009.

Gold prices were 0.2% higher in early London trade Friday at $1,265 per troy ounce.

Write to Josie Cox at [e-mail]

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