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GLOBAL MARKETS-Shares, euro fall as Greek deal proves elusive

by on November 21, 2012 10:20 am BST
 

Wed Nov 21, 2012 5:20am EST

* Elusive Greek deal sends euro down 0.3 pct

* European shares recover some losses on hopes a Greek aid
deal

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

* Fed warning on fiscal cliff keeps U.S. shares under
pressure

By Richard Hubbard

LONDON, Nov 21 (Reuters) – European shares and the euro fell
on Wednesday after Greece’s international lenders failed to
reached an agreement needed to provide it with emergency aid,
though some of the losses were recouped on talk 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 debt down.

Since 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, which initially fell 0.5 percent after the meeting
on Greece broke up, recovered slightly to be down 0.3 percent at
$1.2775.

“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.

The euro area’s blue chip stock index, the Euro STOXX 50
, fell 0.3 percent at the start of trading, but
recovered some of the losses to stand down 0.2 percent at
2,504.57 points.

In the main European centres the German DAX was
down 0.1 percent, while France’s CAC-40 and London’s
FTSE 100 were down 0.2 percent.

Efforts by politicians to convince markets a deal was
possible on Monday also led to a reversal in demand for
safe-haven German bonds, and the main Bund futures contract
erased all its gains to be down 3 ticks at 142.35.

FED WARNING

World equity markets had already been rocked 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 points.

U.S. stock futures were down 0.2 percent, pointing to
another weak day on Wall Street when it opens for its last
session before the Thanksgiving holiday.

Asian shares had initially fallen in reaction to the Greek
news 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.

The yen hit a low of 82.12 to the dollar, its weakest
level since early April.

The euro’s decline and the weaker Japanese yen lifted the
dollar by 0.3 percent against a basket of key currencies,
which weighed on commodities such as gold, which fell
0.25 percent to $1,723.40 an ounce.

In the oil market Brent crude was steady near $110 per
barrel as any concerns about the lack of aid to Greece were
offset by fears of supply disruption from the Middle East, where
Palestinians and Israelis continued to trade rockets and air
strikes despite overnight truce talks.

“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 15 cents at $109.98 a
barrel, off an earlier session-high of $110.55. U.S. crude
rose 19 cents to $86.94.