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GLOBAL MARKETS-Greek deal worries hit euro, Wall Street

Published 04/06/2010, 11:12 AM
Updated 04/06/2010, 11:16 AM
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* Euro hurt by reports Greece wants safety net renegotiated

* US stocks fall on Greek woes, outlook for higher rates

* Treasuries prices rise as higher yields draw investors

By Walter Brandimarte and Jeremy Gaunt

NEW YORK/LONDON, April 6 (Reuters) - The euro fell broadly on Tuesday and U.S. stocks opened lower on a report that Greece wants to renegotiate its financial aid package and prospects of higher interest rates in the United States.

European shares hit a fresh 18-month high, however, because regional markets reacted to recent U.S. economic data as they reopened after a long Easter weekend.

Rising prices of raw materials supported commodity-related shares in general, also keeping emerging market stocks in positive territory.

Jitters about Greece returned to the market on a report that Athens wants to amend a deal struck at a European Union summit last month to bypass a contribution from the International Monetary Fund, which could impose tougher conditions in exchange for aid.

A Greek finance ministry source denied the report. For details, see [ID:nSGE635012] and [ID:nATH005333].

"The bond spreads in Greece relative to German bonds are at their widest level now since the introduction of the euro," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.

"This shows the debt crisis has intensified there, and I think there is frustration that there is not more of an agreement about how to deal with Greece and concern that the solution is dragging out."

The Dow Jones industrial average <.DJI> lost 21.24 points, or 0.19 percent, to 10,952.31, while the Standard & Poor's 500 Index <.SPX> fell 0.75 points, or 0.06 percent, to 1,186.69. The Nasdaq Composite Index <.IXIC> was down 4.27 points, or 0.18 percent, at 2,425.26.

Speculation that the Federal Reserve may hint of higher interest rates when it releases the minutes from its latest meeting also put a lid on U.S. stocks.

However, the FTSEurofirst 300 <.FTEU3> index of top European shares rose 0.5 percent, after hitting a 18-month high earlier, as investors reacted positively to Friday's strong U.S. jobs data.

The European benchmark is up more than 70 percent from its low of March 9, 2009.

Commodity and banking shares led European markets higher, as U.S. crude oil prices rose 12 cents, or 0.14 percent, to $86.74 a barrel.

EURO SINKS

The worries about Greece caused a sell-off in the euro . The single European currency was down 0.85 percent against the dollar, at $1.3368, after hitting a session low of $1.3357, the lowest in more than a week, Reuters data showed.

It also dropped 1.3 percent against the yen to 125.55 yen .

"There's speculation that the financial situation in Greece will become increasingly difficult," said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt. "Negative news about Greece will continue to pressure the euro."

Five-year Greek credit default swaps -- the cost of insuring Greek debt against default -- rose to 377.3 basis points from 347 basis points in New York on April 2, according to CDS monitor CMA DataVision.

Benefiting from rising oil prices, the Canadian dollar broke parity with the U.S. dollar for the first time since July 2008, rising to C$0.9999 per U.S. dollar.

U.S. Treasury prices rose as a recent sharp rise in yields attracted buyers. The benchmark 10-year U.S. Treasury note was up 9/32 in price, with the yield at 3.9505 percent, easing from 3.99 percent late on Monday.

With benchmark 10-year yields close to 4 percent, traders expect solid demand for the Treasury's three-year note auction later in the session. (Additional reporting by Edward Krudy in New York; Editing by Padraic Cassidy)

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