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GLOBAL MARKETS-Euro slips, shares stabilise as Greek deal proves elusive

by on November 21, 2012 12:35 pm GMT
 

Wed Nov 21, 2012 7:35am EST

* Lack of a Greek aid payment sends euro down 0.1 pct

* European shares pare losses on hopes a Greek deal will
emerge

* Yen hits 7-month low vs dollar as economy weakens

* Brent oil jumps $1/brl on clashes between Gaza and Israel

By Richard Hubbard

LONDON, Nov 21 (Reuters) – World shares and the euro were
rocked on Wednesday by the failure of Greece’s international
lenders to reach agreement on releasing emergency aid, though
prices stabilised on efforts by politicians to reassure markets
that a deal was close.

Euro zone finance ministers, the International Monetary Fund
and the European Central Bank will gather again on Monday after
nearly 12 hours of talks through the night failed to reach a
consensus on how to bring Greece’s debts down.

After the meeting ended, French Finance Minister Pierre
Moscovici said a deal was just “a whisker away”, while European
paymaster Germany said a plan to provide Greece with funding
until 2016 was being developed.

The euro area’s blue chip stock index, the Euro STOXX 50
, which fell 0.3 percent in early trading, recovered
to be up 0.1 percent at 2,511.50 points.

“The old worries about the euro zone show investor sentiment
remains on a knife edge”, said Richard Hunter, head of UK
equities at Hargreaves Lansdown.

In the main European centres the German DAX and
France’s CAC-40 indexes were up around 0.2 percent while
London’s FTSE 100 was unchanged.

Stock index futures pointed to a flat-to-higher open on Wall
Street for its last session before the Thanksgiving holiday.

“Until such time as we get a little bit of clarity on when
this Greek aid is released … I think markets, especially since
we’re heading into Thanksgiving tomorrow, will trade fairly
quietly”, Michael Hewson, senior markets analyst at CMC Markets,
said.

The euro followed a similar path, initially falling 0.5
percent when the meeting on Greece broke up without a deal, only
to recover to be little changed at around $1.2810.

Prices for German debt, the safest in the euro zone, had
eased slightly, sending 10-year yields down 0.6 basis points to
1.41 percent.

However, a sale of 3.25 billion euros ($4.2 billion) of new
German 10-year debt, which paid an interest rate of 1.5 percent,
drew solid demand from investors worried about the outlook.

FED WARNING

World equity markets had come under pressure before the Greek
delay by a warning from Federal Reserve Chairman Ben Bernanke on
Tuesday that the central bank lacked the tools to cushion the
impact of a potential U.S. fiscal crisis.

The Fed chief said worries over how the current budget
negotiations, aimed at preventing a series of mandatory tax
increases and spending cuts early next year, had already damaged
growth in the world’s largest economy.

Bernanke’s comments snapped a two-day rally on Wall Street,
but gains in Asian markets and the recovery in European shares
left MSCI world equity index unchanged at around
324.1 points.

Asian shares had initially fallen in reaction to the Greek
aid payment delay but recovered to close with small gains due to
a rise in mainland Chinese markets and in Tokyo.

MSCI’s broadest index of Asia-Pacific shares outside Japan
gained 0.3 percent, while Japan’s Nikkei stock
average closed up 0.9 percent at a two month-high.

YEN WEAKNESS

The Nikkei’s gains came as shares in exporters rose after
the yen hit a seven-month low against the dollar on expectations
that a new government will aggressively push the Bank of Japan
to expand monetary stimulus.

Japan’s opposition Liberal Democratic Party, tipped to win
next month’s general election also promised to boost spending as
it emerged that exports had fallen in annual terms for a fifth
straight month in October.

The yen hit a low of 82.30 to the dollar, its weakest
level since early April.

The euro’s softness and the weaker Japanese yen lifted the
dollar by 0.1 percent against a basket of key currencies,
which weighed on commodities such as gold, which fell
0.15 percent to $1,725.50 an ounce.

In the oil market Brent crude rose more than $1 a barrel as
concern about the lack of aid to Greece was offset by fears of
supply disruption from the Middle East, after an explosion on a
Tel Aviv bus in Israel intensified fears of the conflict with
Gaza worsening.

“There are opposing forces where the uncertainty in Europe
and the United States meets with the bullish uncertainty in the
Middle East … so I think we’re going to see a volatile
market,” said Jeremy Friesen, commodity strategist at Societe
Generale in Hong Kong.

Brent crude futures were up $1.07 cents at $110.90 a
barrel, off an earlier session-high of $111.08. U.S. crude
rose 71 cents to $87.46.