May 25, 2011 / 8:22 PM / 7 years ago

GLOBAL MARKETS-Stocks, oil rise; euro dips on Greek worries

 * Wall Street rises on technical buying, bargain-hunting
 * Oil prices rise on fall in U.S. distillate inventories
 * Euro hits record low vs Swiss franc, recovers vs dollar
 * Gold hits 3-week high on safe-haven bid, weaker dollar
 * Worries over European debt problems persist
 (Recasts lead, updates market action, adds quotes)
 By Richard Leong
 NEW YORK, May 25 (Reuters) - U.S. stocks ended a three-day
losing streak on Wednesday, as recent underperformers and
energy shares led a rally as oil climbed above $100 on supply
 The euro sank to a record low against the Swiss franc on
uncertainty over the Greek debt crisis and edged lower against
the dollar and the yen.
 Gold touched three-week highs, while bonds dipped on
reduced flows due to the gains in stocks.
 "Investors are tired of selling the market, especially with
commodities finding their feet," said Andrew Wilkinson, senior
market analyst at Interactive Brokers Group in Greenwich,
 In Europe shares rose, led by banking stocks, but the
problems in Greece and other debt-laden European countries cast
a long shadow over markets.
 Europe's policy options to avert a Greek debt default
appeared to be dwindling quickly, fueling fears of a chain
reaction affecting other heavily indebted countries in the
17-nation currency bloc.
 "The growing consensus of an eventual technical default by
Greece is contributing to uncertainty, which is increasingly
undermining the euro," said Michael Woolfolk, senior currency
strategist at BNY Mellon in New York.
 Investors expect Athens, which saddled by massive debts, to
have difficulty implementing more austerity measures as the
government's main opposition party opposes such a move.
 "For now, there is euro demand around $1.40, but it's just
a matter of time before it goes significantly lower," said Greg
Salvaggio, vice president of trading at Tempus Consulting.
 "What's happening in Europe is the beginning of a prolonged
sovereign debt crisis that will play out this summer," he
added. "Polls suggest 80 percent of Greeks oppose more
austerity, so if the government forces the issue, it will
fall,"  which could increase the risk of a debt default.
 The euro was last down 0.1 percent at $1.4083 EUR= ,paring earlier losses after a slide halted at $1.4011.
 It fell to a record low against the Swiss franc at 1.2270
francs EURCHF=EBS, down some 1 percent from late Tuesday.
 On Wall Street, the thinly traded rally on Wednesday wasn't
seen as strong enough to overcome worries about waning global
 The Dow Jones industrial average .DJI was up 38.45
points, or 0.31 percent, at 12,394.66. The Standard & Poor's
500 Index .SPX was up 4.19 points, or 0.32 percent, at
1,320.47. The Nasdaq Composite Index .IXIC was up 15.22
points, or 0.55 percent, at 2,761.38.
 Energy shares gained on an unexpected drop in distillate
stockpiles, which boosted heating oil futures. The S&P energy
index .GSPE advanced 1.5 percent, by far the biggest
percentage gainer among S&P 500 sectors. Dow component Exxon
 Bespoke Investment Group said breadth in the S&P 500 was
very close to extremely oversold levels and that it was a
buying opportunity the last time those levels were reached, in
 Despite that, further upside was seen as limited given
headwinds from Europe and the prospect of an environment
without supportive monetary policy.
 "There's a lot of listlessness given the euro-zone issues
and the volatility both ways in commodities, which is
unsettling," said Rob McIver, co-portfolio manager of the
Jensen Portfolio in Portland Oregon.
 World stocks as measured by MSCI were up 0.3 percent while
the pan-European FTSEurofirst index .FTEU3  of top shares
rose 0.7 percent, with anxiety about the potential for further
Greek contagion limiting gains.
 Japan's Nikkei closed 0.6 percent lower.
 In the oil market, U.S. data showing a drop in distillate
inventories overshadowed worries over a pullback in gasoline
demand. U.S. crude 2CLc1 rose $1.73, or 1.74 percent, to
settle at $101.32 a barrel, while July Brent crude LCON1 was
up 2 percent at $114.88.
 "The core fundamentals in crude are not deteriorating. They
are still pretty good," said Barry Knapp, head of U.S.
portfolio strategy at Barclays Capital in New York.
 Gold touched fresh three-week highs. Bullion priced in
euros struck a record high on concerns about the impact of a
possible debt default by Greece on other euro zone economies.
 Spot gold was last bid at $1,524.49 an ounce, down from
$1,525.75 in New York late on Tuesday. Earlier, it hit a
three-week high of $1,532.10.
 Appetite for stocks and commodities curbed the safe-haven
demand for U.S. and German government bonds.
 The 10-year Bund yield EU10YT=RR was just above the
significant 3.0 percent level and could soon breach it given
the unresolved debt crisis.
 The 10-year U.S. Treasury yield US10YT=RR was edged up to
3.13 percent. It was still within striking distance of its
200-day moving average of 3.09 percent, which if breached would
signal a further rally for U.S. bonds.
 (Additional reporting by Ryan Vlastelica, Wanfeng Zhou, Carole
Vaporean and Gene Ramos in New York; Editing by Leslie Adler)

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