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 European shares lurched lower, and U.S. stock futures extended
losses, after a Greek government official said the country's
creditors had rejected some of its proposals.
According to a statement from the official, Greek Prime Minister
Alexis Tsipras, before leaving for talks in Brussels, that creditors
had rejected some of Greece's proposals.
Losses were pared after a European Union official said talks with
Greece were still going on and that Tsipras would meet the creditors
as planned.
The episode nonetheless rattled markets.
"Most people were assuming ... they'd agree on something," said Alan
McQuaid, chief economist at Merrion Stockbrokers. "I was quite
relaxed thinking a deal might get done and now you get this
bombshell... Is that the end of it? I don't know."
Tsipras was due to meet the heads of the European Central Bank, the
International Monetary Fund and the European Commission in Brussels
before a meeting later in the day of euro zone finance ministers.
The pan-European FTSEurofirst 300 index fell 0.3 percent after the
statement, having traded about flat for most the day. U.S. stock
index futures extended losses.
Greek shares fell further to trade 3.6 percent lower.
Yields on German 10-year government bonds, the benchmark for euro
zone borrowing costs, fell as low as 0.81 percent after the
statement, before rebounding slightly to 0.84 percent, down 3.4
basis points on the day.
Yields on Italian and Spanish 10-year bonds, seen vulnerable to
contagion from the Greece crisis, both ticked up to 2.14 percent.
"We have a very important day ahead and it may be a volatile day,"
said KBC strategist Piet Lammens. "It's clear that it's not yet a
done deal."
The euro fell against the dollar, which held on to most of Tuesday's
gains on prospects of higher interest rates.
Earlier, Asian shares eked out modest gains. MSCI's index of
Asia-Pacific shares outside Japan ticked up 0.2 percent. A close
around there would bring gains over the past six sessions to around
3 percent.
Japan's Nikkei closed up 0.3 percent to hit its highest level since
1996, lifted by the prospect of a deal on Greece and signs of a
pick-up in Japanese economic growth.
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In foreign exchange, the dollar fell 0.2 percent against a basket of
currencies, but held on to most of Tuesday's 1.2 percent gains.
The euro rose 0.2 percent to $1.1190, having risen as high as
$1.1235, and the yen was all but flat at 123.90 per dollar.
"We had a pretty big move up in the dollar, so it's natural that
there is a pause especially with the U.S. calendar a bit empty and
little in store to push Treasury yields higher today," said Niels
Christensen, FX strategist at Nordea.
ROBUST
Robust U.S. economic data has firmed up expectations that the
Federal Reserve will raise interest rates later this year for the
first time since 2006.
Fed Governor Jerome Powell said on Tuesday he was prepared to raise
interest rates twice this year as long as the economy performed as
expected.
Oil prices nudged higher on prospects of stronger U.S. demand after
the American Petroleum Institute forecast on Tuesday a
bigger-than-expected fall in U.S. oil stocks last week. Concern
about potential impediments to a nuclear deal between Iran and six
world powers also supported prices.
Brent crude was last 11 cents a barrel higher at $64.56.
Gold lifted off a one-week low after the Greek statement. It last
traded at $1,177.94 an ounce, having fallen as low as $1,173.80.
(Additonal reporting by Anirban Nag and Marius Zaharia in London and
Wayne Cole in Sydney; Editing by Raissa Kasolowsky)
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