NEW YORK: World stocks rebounded on Tuesday from the prior day's losses, but debt woes on both sides of the Atlantic and new signals from China on inflation dangers weighed on markets.
Greece sold 1.6 billion euros of three-month debt, but was forced to pay more than 4 percent, underlining growing unease in the market over a potential debt restructuring that could further strain the euro zone.
Gold hit a record high near $1,500 an ounce, while oil in London fell $2 to $119.67 a barrel.
Investors dipped their toes back into stocks and other risk assets in part on solid company results.
"It is kind of nice to see a couple of big headline companies come in with positive surprises after a string of headline companies delivering negative surprises over the last week," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Wall Street opened 0.2 percent higher after Goldman Sachs posted a smaller-than-expected fall in profits and Johnson & Johnson reported unexpectedly strong earnings. It fell more than 1 percent on Monday on worries about sovereign debt in both Europe and the United States.
European stocks climbed 0.78 percent, recovering from Monday's 2 percent drop after above-consensus results from LVMH and Burberry.
Japan's Nikkei closed down nearly 1.3 percent in the wake of the prior day's losses in the US and Europe.
Debt rating agency Standard & Poor's rattled investor confidence on Monday when it changed its outlook on the United States to negative from stable, threatening the future of its prized AAA credit rating.
The dollar slipped 0.3 percent against a basket of major currencies after making headway on Monday.
Its gains on Monday were due to a rush for safe havens despite the risk of S&P downgrading US debt in two years if Washington fails to achieve a budget plan that relies less on debt.
S&P's warning intensified scrutiny on the huge US budget deficit and the political fight to slash it.
The deficit is a key element in the global imbalances that currently worry many investors and policymakers.
There was no direct reaction to the S&P move on Tuesday from Beijing, which holds vast reserves of US Treasuries though the head of China's central bank said the country should diversify investments as its some $3 trillion of foreign exchange holdings had grown too large.
Another Chinese rate-setter said inflation pressures gave further scope for a rise in banks' reserve requirements following seven hikes ? together with four increases in benchmark interest rates since last October.
"Discussions on the US losing its AAA-status have been active for two years, if not longer. S&P's move might have been a jolt, but should not really be a true surprise," said David Watt, senior currency strategist at RBC Dominion Securities.
EURO STABILIZES
The euro recovered somewhat from the previous day's sell-off, as the region's debt problems remained in focus.
The single currency edged up to $1.4298. Overall, it has pulled back sharply, having hovered at a 15-month high around $1.4520 for the past week.
"The European debt crisis is in the market's focus again, and people are concerned there is no lasting solution.
Meanwhile, even negative news in the US isn't putting too much pressure on the dollar anymore," said Lutz Karpowitz, currency analyst at Commerzbank in Frankfurt.
Worries over the cost to bailout peripheral countries exerted pressure on the European debt market, lagging US Treasuries.
Ten-year Greek bond yields were last up 17 bps at a euro-era high of 14.818 percent, while German Bund futures fell 0.4 percent at 121.99.
Benchmark US 10-year note yield held steady at 3.38 percent, its lowest in about 2-1/2 weeks.
Comments
Comments are closed for this article.