U.S. stocks indexes were mixed in early trading after European leaders failed to agree on releasing more financial aid to Greece.
LONDON — Worries over Europe's debt crisis kept markets on edge Monday, following a warning over Italy's credit rating and a failure by eurozone finance ministers to agree an immediate release of bailout funds to Greece.However, a brighter than anticipated opening on Wall Street helped stocks in Europe to recover from earlier lows and shored up the euro currency — an improvement in investors' risk appetite often gives the euro a lift.
On Wall Street, stocks indexes were mixed in early trading Monday after European leaders failed to agree on releasing more financial aid to Greece.
Deputy Managing Director of the IMF, John Lipsky speaks during a press conference in Luxembourg on Monday. European stocks and the euro were down after eurozone finance ministers came up short of a final deal to get Greece its next installment of bailout money. Officials say they expect Greece to get the next euro 12 billion installment in July, that would prevent a default that could cause financial chaos in Europe.Prime Minister George Papandreou's newly-reshuffled government is expected to prevail in the confidence vote, and officials say they expect Greece to get its next installment of emergency loans in July. If Greece defaults on its debt, it could trigger losses for the banks that hold Greek bonds and more turmoil in financial markets.
The S&P 500 fell 1 point in early morning trading to 1,270. The Dow Jones industrial average edged up 2 points to 12,006. The Nasdaq composite index fell 2 points to 2,613.
Greece has been at the center of Europe's debt worries, but other countries are also facing troubles. Moody's warned that it may cut Italy's credit rating because of its mounting debt and sluggish growth prospects. The worries dragged down markets across Europe Monday: Italy's FTSE MIB index sank 2.2 percent, France's CAC 40 index dropped 0.7 percent and Germany's DAX index fell 0.3 percent.
Major U.S. stock indexes broke a six-week losing streak last week as prospects for a solution to Greece's debt crisis improved.
In corporate news fertilizer producer Agrium Inc. raised its forecast for second-quarter earnings after record crop prices pushed up demand for its products. Its stock rose 2.7 percent.
Nabors Industries Ltd., a driller for oil and gas, warned that its pressure pumping and international businesses have been weaker than it expected. The stock lost 3.5 percent.
PNC Financial Services Group Inc. fell 2.3 percent after saying it would buy the U.S. retail operations of Royal Bank of Canada for $3.45 billion. The deal will make PNC the fifth biggest U.S. bank with 2,870 branches. The deal follows Capital One Financial Corp.'s $9 billion purchase last week of ING's U.S. online bank.
The yield on the 10-year Treasury note fell to 2.94 percent as investors sought out the relative safety of U.S. debt. A bond's yield falls when its price rises. The 10-year yield had been as high as 3.74 percent in February.
In Europe, the FTSE 100 index of leading British shares was down 0.3 percent at 5,699 while Germany's DAX fell 0.3 percent to 7,145. The CAC-40 in France was 0.9 percent lower at 3,137.
All three had been trading even lower as had Europe's worst performing stock market, Italy's FTSE MIB index. The FTSE MIB was hit by a warning Friday from Moody's that it may downgrade its Aa2 rating on the country on account of "long-term structural impediments to growth." The index was trading 2 percent lower at 7,140.
Wall Street's stronger than anticipated opening helped the euro recover its earlier losses to trade 0.1 percent higher at $1.4298, helping it to build on Friday's rally when German Chancellor Angela Merkel indicated that private creditors, such as banks, would not be compelled to share any pain in a second bailout of Greece. Instead, she backed the line touted by the French government and the European Central Bank that any private sector involvement has to be on a "voluntary" basis.
Greece will likely remain the main driver in the markets this week, especially after the eurozone's finance ministers said they would only hand over Greece's next bailout installment — worth €12 billion ($17 billion) — on condition the Greek Parliament backed further austerity measures.
With the Greek government facing a confidence vote in Parliament on Tuesday, there's still an element of political risk and that's clearly weighing on markets at the start of a week that's likely to be dominated again by the country's woes. Though Prime Minister George Papandreou's newly reshuffled government is expected to prevail in the confidence vote, there's still uncertainty over the passage of another €28 billion in austerity measures.
"That has put the ball fairly and squarely back in Greece's court," said Nick Bennenbroek, an analyst at Wells Fargo Bank. "While those votes will probably pass, we may have a nervous few days until those decisions are out of the way."
Though all developments Greek will likely dominate sentiment in the markets, investors will be interested to see what the U.S. Federal Reserve does in its rate-setting meeting on Wednesday.
The headlines will likely be that the benchmark rate will be left unchanged at near zero percent and that the current $600 billion monetary stimulus will come to an end as expected at the end of the month. Most interest, though will likely center on Fed chairman Ben Bernanke's second post-meeting press briefing and specifically on what he says about elevated inflation levels in the U.S.
Earlier in Asia, Japan's Nikkei 225 was one of the few benchmarks posting gains for the day. The benchmark gained less than 0.1 percent close at 9,354.32 despite data showing the country's exports dropped for the third straight month in May due to massive production losses following the March 11 earthquake.
South Korea's Kospi sank 0.6 percent to 2,019.65, while Hong Kong's Hang Seng shed 0.4 percent to 21,599.51
Mainland Chinese shares extended losses for a fourth straight trading session amid a lack of funds as banks complied with the central government's latest order to raise the level of deposits they must hold as reserves.
The Shanghai Composite Index lost 0.8 percent to 2,621.25, its lowest close this year, while the Shenzhen Composite Index lost 1.1 percent to 1,073.19.
In the oil markets, worries over the global economy pushed prices lower again. Benchmark oil for July delivery was down 16 cents to $92.85 a barrel in electronic trading on the New York Mercantile Exchange.