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GLOBAL MARKETS-Stocks, euro falter as Greece plan assessed

Published 02/11/2010, 10:38 AM
Updated 02/11/2010, 10:42 AM
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* Global stocks falter as investors seek rescue details

* Euro falls on worries about details of Greece rescue

* Oil rises toward $75 a barrel as EU agrees Greek rescue (Updates with U.S. markets, adds byline; dateline)

By Herbert Lash and Natsuko Waki

NEW YORK/LONDON, Feb 11 (Reuters) - World stocks and the euro faltered on Thursday, paring initial gains after a deal emerged to help Greece tackle its debt woes, as fears festered about the rescue plan's repercussions on the euro zone.

Reflecting renewed jitters on Greek debt, the spread between Greek and German government bond yields widened as investors sought details of the European Union support package for debt-ridden Greece. For details see: [ID:nLDE61A1XQ]

European shares slumped to a session low, with banks extending losses, snapping earlier gains that had put the pan-European FTSEurofirst 300 index <.FTEU3> on track to post a four-day winning streak. [ID:nLDE61A1YH]

U.S. stocks also slipped amid the scant details of a Greece rescue plans. But declines were offset by a drop last week in U.S. claims for first-time jobless benefits. [ID:nN11241239]

The number of U.S. workers filing new applications for jobless benefits tumbled, a government report showed, reversing a recent spike that had raised concerns about renewed labor market weakness and the strength of recovery. [ID:nN11235724]

Globally, news of a Greece rescue plan drove market sentiment, yet the lack of details, which were not expected to be finalized until early next week when EU finance ministers meet, gave investors pause. [ID:nLDE61A0W2]

EU leaders suggested the plan could include some form of loans to Greece to help it service its debt and avoid a damaging default.

An EU source said purchases of Greek bonds by euro zone state-owned banks was one option being considered. But the source added an obstacle to a more detailed agreement was a lack of consent from Germany's junior coalition partner [ID:nWEB9761].

"The EU news on Greece wasn't all that outstanding, there wasn't a firm plan announced," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois. "I would put that in the jawboning category."

At 1516 GMT the pan-European FTSEurofirst 300 index <.FTEU3> edged down 0.09 percent at 986.24 points.

The Dow Jones industrial average <.DJI> was up 7.86 points, or 0.08 percent, at 10,046.24. The Standard & Poor's 500 Index <.SPX> was up 0.01 points, or 0.00 percent, at 1,068.14. The Nasdaq Composite Index <.IXIC> was down 0.22 points, or 0.01 percent, at 2,147.65.

The EU agreement initially calmed investors worried about Greek contagion spreading throughout Europe. Some analysts expressed concern the deal could prompt other similarly debt-laden countries to seek financial aid as well.

"The EU deal creates a whole new set of problems from a cost perspective," said Boris Schlossberg, director of FX strategy at GFT in New York.

"The idea here is that if Greece is rescued, then Portugal, Spain and all the other problem economies should also be rescued and that just opens up a nasty can of worms. The cost of rescuing these economies would be far greater than anyone could imagine."

Oil climbed toward $75 a barrel as European leaders reached a deal to rescue the beleaguered Greek economy and after upbeat predictions of oil demand growth by two major forecasters. [ID:n

U.S. light sweet crude oil rose 12 cents to $74.64 a barrel.

Spot gold prices rose $6.30 to $1078.70.

The benchmark 10-year U.S. Treasury note rose 57/32 in price to yield 3.72 percent. (Reporting by Leah Schnurr and Gertrude Chavez-Dreyfuss in New York; Kirsten Donovan, George Matlock, Brian Gorman, Christopher Johnson and Jan Harvey in London; writing by Herbert Lash, editing by W Simon )

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