Markets jittery on mounting Greek uncertainty

By Pan Pylas

Associated Press

Published: Thursday, Feb. 16 2012 9:50 a.m. MST

Currency traders work under a screen indicating the exchange rate, above, of the U.S. dollar against Japanese yen and the Nikkei 225 index, at a foreign exchange firm in Tokyo, Wednesday, Feb. 15, 2012. The dollar was at a three-month high against the Japanese yen after the Bank of Japan said it would increase its economic stimulus program as Asian stock markets surged Wednesday after Greece indicated a willingness to commit to spending cuts to secure its bailout.

Shizuo Kambayashi, Associated Press

LONDON — Markets were in a jittery mood Thursday as uncertainty escalated over whether Greece will get vital bailout cash to avoid defaulting next month, but more buoyant U.S. jobs data helped shore up sentiment.

Greece's economic future was the focus in the markets as a long-awaited bailout remained elusive.

Stocks mostly fell, particularly in Europe, while the euro traded below $1.30 and borrowing rates rose for Italy and Spain, an indication of renewed investor concerns that they will eventually be dragged back into the crisis that had shown signs of easing over the past few weeks.

The prevailing view for much of this year has been that Greece would get its second bailout in less than two years and that has supported markets following the febrile atmosphere of 2011. For months, Greece has been discussing the details of a planned bailout worth €130 billion ($170 billion) and an accompanying €100 billion ($131 billion) debt writedown by private bondholders.

Jean-Claude Juncker, who heads eurozone finance meetings, promised more clarity on Monday, when he said decisions will be made on Greece. His comments came as relations between Greece and its partners in the eurozone — especially Germany — hit a new low with strong comments on both sides.

However, over the past few days worries have grown that a deal may not emerge, that Greece could default within a month, and that the country's eurozone partners may be contemplating what had previously been thought very unlikely — pulling the plug on Greece and allowing it to default.

"Whilst there have been suggestions that Europe is much better prepared to face such an eventuality it is still difficult to believe that would be many politicians first choice because you just do not know what the reaction would be across the capital markets," said Gary Jenkins, managing director of Swordfish Research. "Heck of a chance to take considering the fragility of confidence and the economy."

News that Moody's could follow up its European sovereign ratings cuts earlier this week by downgrading dozens of European banks, utilities and other companies with close ties to government finances added to the unease, though figures showing a third straight weekly fall in U.S. jobless claims solidified the open on Wall Street.

In the week to Feb.11, jobless claims fell 13,000 to 348,000 its lowest level since February 2008.

"Nothing here to dissuade a market view that payrolls growth can keep to a 200,000 per month 'lift off' pace for self sustaining growth," said Alan Ruskin, an analyst at Deutsche Bank.

A run of stronger than anticipated U.S. economic data have reinforced hopes that the world's largest economy is over its soft patch of last summer — that's crucial for the global economy, especially as figures Wednesday confirmed that the eurozone shrank by 0.3 percent in the final three months of 2011.

The U.S. jobs data helped European markets and the euro clamber off earlier lows and pushed U.S. stocks up at the open.

In Europe, the FTSE 100 index of leading British shares closed 0.1 percent lower at 5,885.23 while Germany's DAX fell 0.2 percent to 6,745.28. The CAC-40 in France ended flat at 3,391.29.

The euro was 0.1 percent higher at $1.3077, having dipped below the $1.30 mark earlier.

In the U.S., the Dow Jones industrial average was up 0.7 percent at 12,866.96 while the broader Standard & Poor's 500 index rose 0.6 percent to 1,351.10.

The focus will likely remain on Greece prior to Monday's meeting of eurozone finance ministers.

Greece was asked last week to meet three demands so it could get the bailout cash which it needs to avoid defaulting on its debts on March 20, when a big bond redemption is due. Other countries who share the euro currency insisted that the Greek Parliament agree on another batch of austerity measures, spell out a further €325 million ($425 million) in Greek savings measures and give written assurances by the leaders of Greece's coalition government that they will stick to those requirements even after an election scheduled for spring.

Even though all three conditions appear to have cleared, the eurozone is seemingly balking at finalizing the bailout, with some suggesting the money should not be handed over until after the election.

Earlier in Asia, Tokyo's benchmark Nikkei 225 index shed 0.2 percent to 9,238.10 and Hong Kong's Hang Seng was off 0.4 percent at 21,277.2. Seoul's Kospi fell 1.4 percent to 1,997.45. China's Shanghai Composite Index lost 0.4 percent to 2,356.86.

In the oil markets, prices fell alongside equities despite ongoing concerns about developments in the Persian Gulf and conflicting reports about whether Iran is cutting crude exports to Europe — the benchmark New York rate was down 12 cents at a barrel at $101.68.

Joe McDonald in Beijing contributed to this report.

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