US stocks rise but euro falls on Greek fears

NEW YORK: US stocks edged higher on Monday, overcoming a mild sell-off tied to a rating agency's downgrade of Greece, but fears over a possible Greek default pushed the euro to an all-time low against the Swiss franc.

Standard & Poor's cut Greece's credit rating by three notches on Monday to CCC, saying the debt-laden country is increasingly likely to restructure its debt in a way the agency would consider a default.

The cost of insuring Greek sovereign debt against default rose to an all-time high, while the euro hit a record low against the safe-haven Swiss franc.

The S&P rating move was a reminder of Greece's grim fiscal situation, but not a game-changer that discouraged investors looking to purchase cheap stocks after they had fallen for six straight weeks.

"It's bringing in a bit of buying. People are just nibbling," said James Paulsen, chief investment officer at Wells Capital Management in Minneapolis, which has $340 billion in assets under management.

Weaker Chinese data fueled concerns about slowing global growth and knocked non-US shares to a 12-week low, according to the MSCl Global Equity Index. The index stabilized briefly on modest early gains in US and European stocks, then subsequently slipped back into negative territory after S&P's rating move on Greece.

Anxiety over a Greek default reduced risk appetite, fueling an unwinding of positions in oil and precious metals. On the other hand, it stoked safe-haven demand for low-risk government debt, pushing German Bund futures to contract highs.

"The longer Greece takes to resolve its problem, the more the market is going to assume the worst," said Chuck Retzky, director of futures sales at Mizuho Securitis USA in Chicago.

In US trading, the Dow Jones industrial average was up 28.61 points, or 0.24 percent, at 11,980.52. The Standard & Poor's 500 Index was up 3.74 points, or 0.29 percent, at 1,274.72. The Nasdaq Composite Index was up 4.19 points, or 0.16 percent, at 2,647.92.

The euro fell against the Swiss franc on worries over the cost of a Greece bailout. But it gained versus the US dollar on expectations that euro zone interest rates would remain higher than those in the United States.

The euro touched a record low of 1.2004 Swiss francs on the EBS trading platform. The Swiss franc is seen as a global barometer for risk aversion.

The euro was up around 0.2 percent at $1.44 after central bank buying erased early losses.

In the oil market, US crude oil fell 2.4 percent to $96.94 a barrel, prompted by a report of more supply from Saudi Arabia. The world's biggest oil exporter will raise output to 10 million barrels per day in July, Saudi newspaper al-Hayat reported on Friday, as Riyadh goes it alone in pumping more outside official OPEC policy.

Bullion prices fell 0.6 percent on the day after the S&P move on Greece reduced the euro's gain against the dollar. Spot gold touched a session low of 1,520.67 an ounce.

In government debt trading, benchmark US 10-year yields hovered near a six-month low just under 3 percent, while September German Bund futures hit a contract high of 126.11.

Five-year credit default swaps on Greek sovereign debt rose to a record high of 1,613.33 basis points prior to the S&P downgrade, according to data monitor Markit.

Copyright Reuters, 2011