NEW YORK: The euro wavered and oil slid on Monday as investors sought to avoid risk after European finance ministers postponed an emergency loan to Greece until the debt-strapped country approves new austerity measures.
Euro zone ministers meeting in Luxembourg gave Greece two weeks to approve stricter austerity measures in return for another 12 billion euros ($17 billion) in aid, piling pressure on Athens to get its ragged finances in order.
Still, investors grappled with whether Greece's fiscal crisis posed systemic risks. The news was initially perceived as a negative, but traders for the most part concluded Greece will obtain enough help by year's end to avert a default.
Strength in the Swiss franc suggested some anxiety even as Wall Street rose and US Treasury prices ended the day little changed.
The euro slid against the Swiss franc but recouped losses against the US dollar and yen, while the dollar rose slightly against a basket of major currencies. The US Dollar Index rose 0.07 percent. The euro rose 0.2 percent against the dollar but fell 0.1 percent against the franc.
"The strength of the franc shows investors are very nervous right now and are skeptical about Greece getting aid," said Kathy Lien, director of currency research at GFT Forex in New York. "If they were truly optimistic, we would not see the franc continue to remain strong."
Stocks in Tokyo were poised to open higher, with the September futures contract that trades in Chicago for the Nikkei 225 up 65 points to 9,445.
The CBOE Volatility Index, known as Wall Street's gauge of market fear, slid 8.2 percent, its biggest daily percentage drop in three months. Earlier the Euro STOXX 50 volatility index, one of Europe's main gauges of investor anxiety, closed 5.3 percent higher.
"Even though the EU is talking tough, it looks like things are going to come through in terms of providing additional funding, at least through the end of this year, and probably something will come together on the broader package as well," said Peter Jankovskis, co-chief investment officer of OakBrook Investments LLC in Lisle, Illinois.
The Dow Jones industrial average rose 76.02 points, or 0.63 percent, at 12,080.38. The Standard & Poor's 500 Index gained 6.86 points, or 0.54 percent, at 1,278.36. The Nasdaq Composite Index added 13.18 points, or 0.50 percent, at 2,629.66.
Benchmark 10-year US Treasury notes fell 3/32 in price to yield 2.95 percent. Yields earlier slipped to 2.89 percent.
The 10-year note has strong technical resistance at 2.88 percent, the lowest yield since the beginning of December and a level tested last week.
A further drop in US bond yields may depend on whether investors fear a higher risk of contagion from the troubled euro zone, or see much weaker economic data.
"The market is having difficulty rallying without bad news from Europe or bad news on the side of the US economy," said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York.
But earlier in the day shares in Europe closed lower on growing unease about the euro zone debt crisis and a possible downgrade of Italy's credit rating.
The pan-European FTSEurofirst 300 index of top shares closed 0.5 percent lower at 1,081.19 points, its lowest closing level in three months.
World stocks measured by the MSCI All-Country World Index straddled break-even, down 0.1 percent.
Brent oil futures fell, pressured by uncertainty over austerity measures for Greece and the selloff of a key spread between Brent and US crude oil futures.
The premium of Brent crude to West Texas Intermediate narrowed to below $18 a barrel in late trade, after widening to a record over $23 last week.
Brent crude settled down $1.52, or 1.3 percent, at $111.69 a barrel.
US light crude settled up 25 cents, or 0.27 percent, at $93.26.
US gold futures' benchmark August contract finished the session up $2.90, or 0.2 percent, at $1,542 an ounce.
Copyright Reuters, 2011
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