Greek debt fears weigh on euro, curb world stocks

The euro slipped and world stocks were stuck on Monday with fears of a Greek debt default undimmed and U.S. and UK market holidays keeping many investors on the sidelines.

The shared currency was down 0.4 percent and European shares were flat in anemic trade, although German utilities sagged after Berlin's decision to shut all nuclear reactors by 2022 in the wake of Japan's Fukushima disaster.

German utilities RWE (RWEG.DE) and E.ON (EONGn.DE) were among the biggest fallers, down by around 2.4 and 1.7 percent respectively, while shares in renewable energy companies rose.

Greece's debt crisis continued to deter investors from searching out higher risk assets.

European Union and International Monetary Fund officials are expected to deliver their verdict this week on Greece's faltering drive to bring its budget deficit under control.

Prime Minister George Papandreou has failed to win backing from the opposition to adopt fresh austerity steps, as demanded by the EU and IMF, raising concerns over whether Greece will receive its next tranche of bailout loans.

Adding to the pall of debt gloom, a government minister in Ireland said it may have to ask for another loan from the EU and IMF because it will struggle to return to debt markets to raise funds next year.

The euro fell to $1.4280. Traders said it faced resistance around $1.4350 and above.

"The market is a bit hesitant about picking up the euro and taking it past the mid-May highs of $1.4345 given uncertainty whether Greece will receive its next tranche from the IMF/EU," said Niels Christensen, FX strategist at Nordea.

German government bond futures were little changed, with investors reluctant to stray from safer harbors.

The Greek/German 10-year bond yield spread was 20 basis points wider on the day at 1,387 bps.

"We have headline risk out of Greece and it could go either way, but on balance risk is off as the situation is unclear," said Rainer Guntermann, strategist at Commerzbank.

Weak Data Hamper Dollar

Against a basket of currencies .DXY, the dollar was trading near the 75 line, just shy of a two-week trough hit on Friday.

A batch of weak U.S. data last week raised expectations that the Federal Reserve may keep interest rates near zero well into 2012, undermining the dollar's appeal.

U.S. Treasury bond yields held near six-month lows, with 10-year yields at 3.07 percent compared with 3.29 percent at the start of the month.

World stocks as measured by the MSCI All-Country World Index were up 0.1 percent.

Japan's Nikkei .N225 ended down 0.2 percent, while the MSCI index of Asia Pacific stocks outside Japan found a footing after falling for five consecutive weeks.

Brent crude fell below $115 a barrel, weighed down by expectations that OPEC's oil output in May would come in higher than April, while investors also kept an eye on demand from the United States as the summer driving season begins.

Gold held steady, buoyed by the debt crisis in the euro zone.

[Source: By Mike Peacock, Reuters, London, 30May11]

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