The euro rose early in the session to US$1.3290, its highest level since December 12, before paring gains. It was last unchanged against the dollar.
The reforms, subject of marathon negotiations between Greece and its creditors, aim at securing a €130-billion (RM520 billion) rescue from the International Monetary Fund and European Union to avoid an unruly default. It would be a second bailout package for Greece.
Prospects of a deal increased when euro zone finance ministers were summoned to talks in Brussels, even as leaders of the three Greek coalition parties were still discussing with Prime Minister Lucas Papademos the terms of a rescue package.
Repeated delays in talks over a plan for Greece have prompted warnings that the euro can live without Athens, while a messy Greek default could put further strain on the region as well as the global economy.
“The question is whether the Greek government can reach agreement on the conditions required to get the second bailout,” said James Keegan, chief investment officer of Seix Investment Advisors and portfolio manager of the RidgeWorth Total Return Bond Fund SAMFX. “Greece has too much debt, but it can’t grow because the austerity measures are killing them.”
MSCI’s all-country world index, a leading indicator for global equity portfolios, was last up 0.3 per cent, having cut most of the day’s earlier gains.
US stocks ended flat to higher, with the Dow hovering at its highest level in nearly four years.
The Dow Jones industrial average gained 5.75 points, or 0.04 per cent, at 12,883.95. The Standard & Poor’s 500 Index was up 2.91 points, or 0.22 per cent, at 1,349.96. The Nasdaq Composite Index was up 11.78 points, or 0.41 per cent, at 2,915.86.
Randy Frederick, director of trading for Charles Schwab in Austin, Texas, said he would use any pullback on Greece as a buying opportunity for stocks. “And if the situation there gets resolved, we’ll move higher even faster.”
Euro zone officials say the full bailout package must be agreed to by Greece and approved by the euro zone, the European Central Bank and IMF before February 15.
Investors are keen to move past Greece and focus on signs from the world’s major central banks they will retain easier monetary policy stances, which should support riskier assets.
The ECB’s provision of nearly half a trillion euros in low-rate, long-term funds to banks in December helped prop up risk appetite with a second tender, expected to be similar in size, due at the end of the month.
The ECB and the Bank of England both hold policy meetings today, with the UK central bank expected to add an extra £50 billion (RM250 billion) of stimulus via bond purchases.
European shares ended lower. The FTSEurofirst 300 index of top European shares was down 0.2 per cent.
An Italian government source told Reuters Italy’s gross domestic product may have fallen in the fourth quarter of last year, likely more steeply than the 0.2 per cent decline posted in the third. That also put pressure on the euro.
Also discouraging on the economic front, Germany reported the steepest drop in exports in nearly three years for December, and the Bank of France said its economy would not grow at all in the first quarter of 2012.
The German data suggested Europe’s dominant economy may have contracted more than thought in the fourth quarter of last year, but recent sentiment surveys pointed to only a brief dip.
Brent crude ended higher as hopes for a deal on Greece’s debt and tensions between Iran and the West offset data showing rising US stockpiles.
Brent March crude rose 97 cents to settle at US$117.20 a barrel, a seventh straight gain. US March crude settled at US$98.71, edging up 30 cents.
US Treasuries prices fell slightly after a US$24 billion sale of 10-year US government debt – offering a yield above two per cent – attracted good demand.
The US Treasury Department said it sold the 10-year notes at a high yield of 2.02 per cent, with nearly a third of the bids awarded at the high. The benchmark 10-year US Treasury note slipped 1/32, the yield at 1.9804 per cent.
Gold fell as investors took profits after the previous session’s rally. Spot gold was down 0.7 per cent at US$1,732.49 an ounce. Gold remained up 11 per cent for the year, boosted by the Federal Reserve’s commitment to near-zero interest rates. — Reuters
