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GLOBAL MARKETS-Dollar gains, stocks slip, Greece the biggest risk

Published 06/26/2011, 09:13 PM
Updated 06/26/2011, 09:16 PM
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* Athens vote on austerity package in focus

* Risk taking takes a backseat, US factory data due as well

* Dollar index is breaking above downward trendline

* Oil futures falling toward $90.00 a barrel

By Kevin Plumberg

SINGAPORE, June 27 (Reuters) - The U.S. dollar rose and Asian equities slipped on Monday, with investors positioning their portfolios ahead of a Greek vote on unpopular fiscal austerity measures this week and a gauge of U.S. factory activity that is expected to show slowing growth.

Athens will vote on a package of measures to increase taxes and cut spending on Wednesday and then on specific steps on Thursday. Passage is critical for international lenders to push through a new round of funding for Greece so it will avert a default that could propel volatility in global financial markets.

The black swan event that traders and investors are grappling with at this point is what if Greece votes no.

"A 'No' would block the much needed next tranche of the EU/IMF loan of 12 billion euros, leaving big question marks as to how Greece would fund coupon payments and bond redemptions in July and August," Societe Generale economists said in a note.

"Any help from the EU/IMF would come reluctantly, and there is a non-negligible risk that a No vote could put Greece in default."

The world's major economies are at a vulnerable stage, when growth is slowing but inflation remains high or even accelerating in some places, eroding returns on investments and leaving investors unwilling to take many risks.

The U.S. ISM index of factory activity due on Friday may show to what extend the slowdown is temporary.

The U.S. dollar index, which measures its value against six other major currencies, was trading above a downward trendline that began a year ago. It was up 0.4 percent on the day to 75.96 , having risen 4 percent since May.

The euro slid to $1.4112, down a half a percent and within striking distance of the June low of $1.4070 .

Japan's Nikkei share average fell 0.9 percent in early trade, with technology equipment makers the biggest drag on the index.

The MSCI index of Asia Pacific stocks outside Japan was down 0.9 percent , with commodity-related shares the biggest losers.

U.S. crude kept a bearish trend in place, with the August futures falling 0.7 percent to $90.57 a barrel , near last Thursday's four-month low of $89.69.

Commodities have been the weakest link among asset classes vulnerable to a selloff in the face of slowing in industrial activity globally. Oil prices have been slashed by a fifth since May.

(Editing by Kim Coghill)

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