U.S. equities helped by weak dollar; inflation lifts euro

NEW YORK (Reuters) - U.S. stocks edged down on Tuesday while the dollar fell and bond yields rose as investors sought clarity on Greece’s debt crisis and awaited the U.S. jobs report.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell June 2, 2015. REUTERS/Lucas Jackson

The U.S. dollar was on track for its biggest one-day percentage decline against a basket of major currencies in nearly two years while the euro rose on expectations that Greece would reach a deal with its creditors.

“The big moves are happening on the back of Greece,” said Alfonso Esparza, senior currency Strategist at Oanda in Toronto. “There’s a light at the end of the tunnel.”

Athens faces a Friday deadline to repay 300 million euros ($329.58 million) to the International Monetary Fund.

Greece’s creditors drafted the broad lines of an agreement on Tuesday to put to the leftist government in Athens in a bid to conclude four months of acrimonious negotiations and release aid before the cash-strapped country runs out of money. A Greek government official said Athens would pay up on Friday if there was agreement with the creditors, hinting it might otherwise withhold the money without saying so explicitly.

But U.S. equity investors were cautious about making big bets ahead of the U.S. non-farm payrolls report for May due on Friday, according to Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

“Investors are waiting on the job numbers on Friday,” he said. “On top of that you also have the Greek situation.”

It did not help that new orders for U.S. factory goods unexpectedly fell in April, the eighth decline in the last nine months.

The Dow Jones industrial average .DJI fell 28.43 points, or 0.16 percent, to 18,011.94, the S&P 500 .SPX fell 2.13 points, or 0.1 percent, to 2,109.6 and the Nasdaq Composite .IXIC dropped 6.40 points, or 0.13 percent, to 5,076.52.

MSCI's all-country world index .MIWD00000PUS of stock performance in 46 countries was up 0.23 percent.

Yields on safe-haven German 10-year bonds DE10YT=RR rose 14.7 basis points to 0.677 percent, while those on lower-rated Spanish, Italian and Portuguese debt touched their highest of the year after the data showing inflation resumed in the euro zone last month.

U.S. long-dated Treasury debt yields rose to two-week highs, drawing support from rising European yields after news inflation in the euro zone was picking up and overall optimism about Friday’s U.S. jobs report.

“The big decline in Bunds prices was a major catalyst behind the recent downturn in Treasuries,” said Kim Rupert, director of fixed income at Action Economics in San Francisco.

The euro EUR= was up 2 percent at $1.117 while the dollar index .DXY was down 1.5 percent against major currencies.

The weaker dollar helped oil prices rise during the day but prices pared some of their gains after data showed a U.S. crude supply build last week. Brent crude LCOc1 was at $65.31 after settling up 0.94 percent at $65.49 a barrel before the data. U.S. crude CLc1 was at $60.99 after settling up 1.76 percent at $61.26.

Additional reporting by Gertrude Chavez-Dreyfuss, Sam Forgione and Caroline Valetkevitch in New York; Editing by Nick Zieminski and Chizu Nomiyama