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 The euro also recovered from early losses to rise against the dollar
after Monday's breakdown of talks between Greece and euro zone
finance ministers. Initial declines on equity markets were modest.
"For now, we assume that logic will prevail and this movie won't end
in disaster," said Paul O’Connor, co-head of the multi-asset desk at
Henderson Global Investors.
Both sides raised the possibility of another attempt to find common
ground before the end of this week. The European Central Bank is set
to decide on Wednesday whether to maintain emergency lending to
Greek banks, and the Greek state faces some heavy loan repayments in
March.
Dutch Finance Minister Jeroen Dijsselbloem, who chairs the group of
euro zone ministers, gave Athens until Friday to request an
extension of its current bailout, which would otherwise expire at
the end of the month.
The pan-European FTSEurofirst 300 <.FTEU3> equity index opened lower
but was last up just under 0.1 percent.
Greek stocks underperformed. The volatile ATG main Athens share
index <.ATG> was down 2.8 percent, after earlier dropping more than
4 percent and then briefly turning positive.
Yields on three-year Greek government bonds <GR0029312=TWEB> rose
130 basis points to 19.04 percent and 10-year yields <GR10YT=TWEB>
rose 66 bps to 10.58 percent.
"The risk of a collapse is more elevated now because time is running
out," said Patrick Jacq, rate strategist at BNP Paribas. "This is
putting Greek government bonds under pressure, but contagion effects
will remain relatively limited ... Eventually a deal is likely to be
reached."
Yields on lower-rated euro zone debt edged lower, suggesting no fear
of an imminent break-up of the bloc. Italian 10-year bonds
yielded 1.62 percent, down 1.8 basis points.
Without support from creditors, the Greek government and banks face
a funding crunch. That might lead to Greece's becoming the first
country to ditch the euro and re-introduce its own currency.
The MSCI all-country world stocks index was down 0.1 percent, after
touching its highest since September on Monday.
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Japan's Nikkei share average and MSCI's broadest index of
Asia-Pacific shares outside Japan both dipped 0.1 percent.
The euro traded weaker against the dollar in early European trade
but later picked up to $1.1388, up 0.3 percent on the day but well
shy of Monday's high of $1.1429.
"The market has witnessed this before -- it remembers the
brinkmanship during the Greek debt negotiations of 2011," said
Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.
"There are only nine trading days left until the Feb. 28 deadline,
but some see that as enough time. Thus we are not seeing the euro
sold in panic."
In commodities markets, Brent crude extended its recent rally and
last traded at $61.97 a barrel as the International Energy Agency
warned of supply risks in the Middle East, although some analysts
said that prices had risen too far from the six-year lows hit in
January.
The crude rally helped support the Russian rouble <RUB=>, which also
benefited from political efforts to make a ceasefire hold in eastern
Ukraine, although gains were capped by doubts about whether the
ceasefire would hold.
(Additional reporting by Nigel Stephenson and Marius Zaharia in
London; Editing by Larry King)
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