Global stocks, euro stall on Greece concerns

Passers-by walk in front of a stock quotation board in Tokyo December 9, 2011.

NEW YORK (Reuters) - Concern Greece might not accept the terms of a proposed new bailout deal brought a rally in global shares to a halt on Monday, while the euro pared earlier losses as some shorts covered their bets.

U.S. stocks edged lower, tracking European equities, while a gauge of global shares hovered near break even after four straight sessions of gains. Declines were not enough to derail an uptrend of five consecutive weeks of gains on both the U.S. benchmark S&P 500 index and global stocks measured by MSCI.

So far this year, the S&P is up 6.8 percent and global stocks have gained 8.6 percent.

The Greek debt crisis remained a concern to markets as political leaders had not agreed to accept unpopular public wage cuts and other measures to qualify for a new bailout from the European Union and International Monetary Fund. Greece needs the cash by March to meet big debt repayments and avoid an unruly default.

The slow progress to sort out Greece's cash problems has angered the country's European partners and undermined investor confidence across markets.

"It's inevitable the risk profile that Greece represents is definitely going to cool the market tone. There is absolutely no way around that," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

"That lack of clarity, the protracted nature of this crisis and the fact that it simply will not go away, it's a bit unnerving to people who have seen the (U.S. stock) market tack on some very nice early-year gains, and it forces people to want to be a little cautious."

In afternoon trading in New York, the Dow Jones industrial average .DJI dropped 35.12 points, or 0.27 percent, to 12,827.11. The S&P 500 Index .INX dipped 1.98 points, or 0.15 percent, to 1,342.92. The Nasdaq Composite .IXIC shed 3.40 points, or 0.12 percent, to 2,902.26.

The FTSEurofirst 300 .FTEU3 index of top European shares closed down 0.14 percent. Global stocks measured by MSCI .MIWD00000PUS were barely changed.

The euro hit a session high above $1.31 as its earlier decline reached key technical levels, prompting investors to cover their short positions. The single currency fell to a low of $1.3026 according to Reuters data.

"Headlines out of Europe are affecting sentiment on the euro. Earlier, we had hit stop losses in the euro and we saw it trim some losses. But it's more of the same," said Brian Dolan, chief currency strategist at Forex.com, as investors still awaited the outcome on Greece's debt deal.

The underlining sentiment in markets remained positive due to strong January economic data from the United States, China and Germany. An easier monetary stance from the world's major central banks that appears set to continue at key meetings this week also supports investor sentiment.

Data on German industrial goods orders, released on Monday, extended the run of good data. A better-than-expected 1.7 percent rise for December was propelled by demand from outside the euro zone, which more than made up for a drop in orders from within the currency bloc.

U.S. Treasuries prices zigzagged on follow-through selling after Friday's better-than-expected jobs report and the safe-haven appeal of U.S. debt.

The benchmark 10-year U.S. Treasury note was up 5/32, with the yield at 1.9048 percent.

(Additional reporting by Chuck Mikolajczak and Gertrude Chavez-Dreyfuss; editing by Dan Grebler and Andrew Hay)