GLOBAL MARKETS-U.S. fiscal worries take stocks, euro on a roller-coaster

Wed Nov 28, 2012 11:23am EST

* Investors focus on U.S. fiscal risks, Greek uncertainty
    * Stocks fall around the world
    * Commodities ease on worry over U.S. growth
    * Euro down, dollar falls vs yen


    NEW YORK, Nov 28 (Reuters) - World stocks and the euro
recovered from early losses on Wednesday, as investors shifted
into buying mode after positive news on U.S. federal budget
talks.
    U.S. House Speaker Republican John Boehner of Ohio said he
is willing to put revenues on the table if accompanied by
spending cuts, but he repeated his opposition to raising income
tax rates. 
    Boehner's comments came as U.S. indexes were marking session
lows, and produced a sharp turnaround that reverberated through
other markets, including the euro, which also pared declines. 
    European stocks were still lower, as investor caution
remained over the plan agreed to late Monday by the EU, ECB and
IMF to reduce Greece's debts. The deal opened the way for more
aid to Athens to avoid a chaotic default, but details remain
unclear and analysts worry it will not do enough to make
Greece's debt viable.
    However, prices of riskier sovereign debt of Italy and Spain
bounced sharply, in part due to hedge funds taking profits on
previous short positions following the Greece deal.
 
    U.S. stock markets have been a prisoner of the shifting
winds in Washington in recent weeks. The equity market has been
under pressure in recent weeks following the re-election of
President Obama due to concerns about impact on the economy of
the planned package of tax rises and spending cuts known as the
"fiscal cliff".  
    "Anything that points to a deal happening is going to be
good for the market right now. Anything that points to a deal
falling apart is going to be bad for a market. We are becoming
myopically focused on this one issue and I think that continues
for a while longer," said Stephen Massocca, managing director at
Wedbush Morgan in San Francisco.
    On Tuesday, stocks declined after U.S. Senate Majority
Leader, Democrat Harry Reid of Nevada, expressed disappointment
over the progress of talks between Democrats and Republicans on
avoiding the so called "fiscal cliff". 
    Chief executives from top U.S. corporations, including
Goldman Sachs, Deloitte LLP, and Caterpillar Inc,
will meet with President Barack Obama on Wednesday to discuss
U.S. fiscal problems, the White House said. 
    U.S. economic data published on Wednesday also dampened
sentiment. New U.S. single-family home sales fell slightly in
October and the government revised sharply lower its estimate
for the prior month's sales, casting a shadow over what has been
one of the brighter spots in the U.S. economy.. 
    The Dow Jones industrial average was down 2.72
points, or 0.02 percent, to 12,875.41 late morning. The Standard
& Poor's 500 Index dropped 2.69 points, or 0.19 percent,
to 1,396.25. The Nasdaq Composite Index dropped 7.53
points, or 0.25 percent, to 2,960.26.
    The MSCI index of global stocks was down 0.3
percent. The FTSEurofirst300 index of European stocks
was down 0.1 percent.
     "We have some aftermath effects of the Greek deal with
investors probably reconsidering some of their optimism and
focus is also shifting to the U.S. fiscal cliff issue," said
Joost Beaumont a senior economist at ABN Amro In London.
    Adding to investor caution was news that Fitch Ratings could
strip France of its triple-A credit status next year if the
country fails to meet its targets on debt reduction and its
economy performs worse than forecast..
    
    EURO SLIPS
    In currency markets, the euro was down 0.3 percent to
$1.2907 as some traders bet recent gains made in the run up to
the Greek deal were too far, too fast. 
    "The uncertainty brought by this (Greek deal) approach makes
European assets, including the euro, vulnerable to global growth
risks," Barclays Capital analysts said in a note. "For that
reason we think the European muddle through amplifies the
market's response to the fiscal cliff discussion in the U.S." 
    European Central Bank economic data added to the
uncertainty, showing depositors continued to pull money out of
Spanish and Italian banks in October, despite ECB President
Mario Draghi's conditional promise in September to help troubled
euro zone countries. 
    Ten-year Italian government bond yields fell to their lowest
since February 2011, however, falling as far as 4.59 percent,
while Spain's benchmark 10-year note was at 5.35 percent, lowest
in a month. 
 
      
    COMMODITY SLIDE
    In Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan fell 0.4 percent.
    Commodity markets also reflected the worries of a possible
U.S. budget crisis and how this could tip the world's biggest
economy into recession.
    Gold fell for a third straight day, copper 
dropped from a three-week high and Brent crude fell to 
$109.04 per barrel.   
    U.S. crude oil futures fell 1.0 percent to $86.32.
    "There is bearish sentiment caused by problems in U.S.
negotiations, with the fiscal cliff still looming," said Filip
Petersson, analyst at SEB in Stockholm.   
    German government bonds firmed as the U.S. fiscal and Greek
problems attracted support for safe haven assets. 
   The benchmark 10-year U.S. Treasury note was up
7/32, with the yield at 1.613 percent.