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By Bloomberg

The euro tumbled and European stocks pared losses after German Chancellor Angela Merkel said a strong single currency makes it harder for nations like Spain and Portugal to benefit from reforms. Those nations’ bonds fell, while oil declined.

The euro sank 0.7 percent to $1.1180 at 7:24 a.m. in New York. The Stoxx Europe 600 Index fell 0.3 percent after earlier dropping as much as 0.5 percent and rising as much as 0.2 percent. Yields on 10-year Spanish and Portuguese bonds rose. Oil fell 1 percent. Emerging-market shares gained, paring a fourth weekly decline, and U.S. stocks futures declined.

Merkel said in a speech that a too-strong euro makes it harder for countries “especially Spain and Portugal” to reap rewards from economic reforms in terms of exports. The German government is also preparing for a Greek default, Bild newspaper said. China may cut banks’ reserve-requirement ratios as early as this weekend to spur economic growth, according to China Merchants Bank Co.

“When someone of Merkel’s stature comes out and makes a comment, clearly the market will stand up and listen,” said Jane Foley, a senior currency strategist at Rabobank International in London. “There’s been a fair amount of optimism about Greece, but I think today the market is becoming open to the fact that the Europeans won’t blink first.”

Greece didn’t concede any ground on European Union proposals at a two-hour meeting concluding after midnight, Bild newspaper said.

Euro Falls

The euro’s second day of decline cut its weekly advance versus the greenback to 0.6 percent. The U.S. currency strengthened against almost all major peers, rising 0.3 percent to 123.74 yen. Bloomberg’s dollar gauge gained 0.5 percent, paring its first weekly drop since May 15.

Spanish 10-year bond yields climbed seven basis points to 2.19 percent. The yield on similar-maturity Portuguese debt rose seven basis points to 2.94 percent. Italian yields increased five basis points to 2.18 percent.

The Stoxx 600’s weekly gain eased to 0.6 percent. Greek shares fell 3.1 percent on Friday. They’re still headed for a weekly advance after surging the most since February on Thursday.

U.S. Futures

S&P 500 E-mini futures expiring this month fell 0.3 percent after the index climbed for a third day. It’s heading for a 0.8 percent weekly gain, the most since April.

A preliminary reading of the University of Michigan’s sentiment index at 10 a.m. is expected to show an improvement in consumer sentiment.

Twitter Inc. rose more than 4 percent in early New York trading after saying Chief Executive Officer Dick Costolo will leave on July 1. Jack Dorsey will be interim CEO.

The cost of insuring corporate debt rose, with the Markit iTraxx Europe Index of credit-default swaps up about 1.7 basis points at 68.6 basis points, according to data compiled by Bloomberg. The gauge is heading for a fifth weekly increase after reaching the highest level since October on Wednesday.

The MSCI Emerging Markets Index added 0.5 percent, almost wiping out declines this week. Currencies fell, including the South African rand and Turkish lira. A Bloomberg gauge of 20 developing nations’ currencies trimmed its first weekly gain in a month. Russian markets were closed for a holiday.

Hong Kong’s Hang Seng China Enterprises Index rose 1.8 percent and the Shanghai Composite Index climbed 0.9 percent to a 2008 high.

The People’s Bank of China may cut reserve-requirement ratios, according to China Merchants Bank, after data this week showed declines in exports and producer prices in May. Factory output accelerated.

Oil fell for a second day, paring a weekly advance as investors weighed signs of a slowdown in U.S. drilling against data showing OPEC’s biggest members were pumping crude at a record pace.

West Texas Intermediate dropped to $60.23 a barrel. The U.S. benchmark has risen about 1.8 percent this week. Brent futures declined 0.5 percent on Friday.