Debt worries return to put pressure on euro, markets

Reuters and AFP

LONDON/HONG KONG–Fears over the outcome of crucial Greek debt restructuring talks pulled the euro off its recent highs and put share markets on the retreat on Wednesday, overshadowing signals this week that the global economy may not slow as much as feared. International creditors are set to meet the Greek government later on Wednesday to resume talks that broke down last week over the interest rate Greece will offer on new bonds and a plan to enforce private investor losses. A deal with the private sector is vital to cash-strapped Athens if it is to gain its next batch of international aid and avoid going bankrupt when 14.5 billion euros (US$18.5 billion) of bond redemptions fall due in late March. “Greek bond negotiations could trigger more euro weakness as they have to close a deal soon, before Greek debt repayments are due in March,” Richard Falkenhall, currency strategist at SEB in Stockholm said. Analysts said European share markets were still looking for reasons to go higher after economic data from China and Germany on Tuesday encouraged hopes that the outlook was improving and prodded shares to 5-1/2-month highs.

“Global stocks are still over sold and have room to grow on further good news,” said Tom Elliott, global strategist at JP Morgan Asset Management.

European markets were little changed in early trade Wednesday with London’s benchmark FTSE 100 index dipping 0.15 percent, the Paris CAC 40 adding 0.15 percent and Frankfurt’s DAX 30 edging down 0.04 percent. And in the United States, the Federal Reserve’s Empire State index of manufacturing activity in New York also showed a pick-up in January that widely topped expectations. The positive news lifted Wall Street, where the Dow gained 0.48 percent, the S&P 500 added 0.36 percent and the Nasdaq was 0.64 percent higher. Financial stocks also fell after Citi said in New York that fourth-quarter profit fell to US$1.2 billion, from US$1.3 billion in the same period in 2010, while full-year earnings were a lower-than-expected US$11.3 billion. Asian Markets Asian markets mostly rose on Wednesday, extending the previous day’s rally thanks to upbeat U.S. and German data as well as successful bond auctions in Spain and Greece. However, eurozone fears continued to cast a shadow while financial plays were weighed by disappointing earnings from banking giant Citi. Tokyo rose 0.99 percent, or 84.18 points, at 8,550.58, while Sydney and Seoul both ended flat. Sydney’s benchmark index nudged up 2.3 points to 4,217.9 while Seoul dipped 0.35 points to 1,892.39. Hong Kong was 0.30 percent, or 59.17 points, higher at 19,686.92 while Shanghai, which surged more than four percent on Tuesday, shed 1.39 percent, or 32.00 points, to close at 2,266.38. The advances follow Tuesday’s impressive showing after China said economic growth in the final quarter of 2011 was bigger than expected. Gold was at US$1,655.60 an ounce at 1050 GMT, against US$1,662.40 late Tuesday.