US stocks, euro fall on Greek default worries

By Richard Leong

NEW YORK (Reuters) – Wall Street stocks and the euro fell Monday as a rating agency downgrade of Greece compounded worries over a possible Greek default and sapped an early revival in risk appetite.

Standard & Poor’s Monday cut Greece’s credit ratings by three notches to CCC, saying the debt-laden country is increasingly likely to restructure its debt in a way the agency would consider a default.

The cost of insuring Greek sovereign debt against default rose to an all-time high, while the euro hit a record low against the safe-haven Swiss franc.

Weaker Chinese data fueled concerns about slowing global growth and knocked non-U.S. shares to a 12-week low, according to the MSCl Global Equity Index . The index stabilized briefly on modest early gains in U.S. and European stocks , then subsequently slipped back into negative territory after S&P’s rating move on Greece.

Anxiety over a Greek default reduced risk appetite, fueling an unwinding of positions in oil and precious metals.

“If Greece goes under, that would affect U.S. and European banks. If that’s the case, that’s going to hurt the (stock) market,” said Lou Brien, market strategist at DRW Trading in Chicago.

In U.S. trading, the Dow Jones industrial average was down 2.04 points, or 0.02 percent, at 11,949.87. The Standard & Poor’s 500 Index was down 1.82 points, or 0.14 percent, at 1,269.16. The Nasdaq Composite Index was down 7.85 points, or 0.30 percent, at 2,635.88.

The euro fell against the Swiss franc, but gained versus the U.S. dollar on expectations that euro zone interest rates would remain higher than those in the United States.

The euro touched a record low of 1.2004 Swiss francs on the EBS trading platform . The Swiss franc is seen as a global barometer for risk aversion.

The euro was up around 0.2 percent at $1.4358 after central bank buying erased early losses.

In the oil market, U.S. crude oil fell 2 percent to $96.95 a barrel, prompted by a report of more supply from Saudi Arabia. The world’s biggest oil exporter will raise output to 10 million barrels per day in July, Saudi newspaper al-Hayat reported Friday, as Riyadh goes it alone in pumping more outside official OPEC policy.

Bullion prices fell 0.6 percent on the day after S&P move on Greece reduced euro’s gain against the dollar. Spot gold touched a session low of 1,520.67 an ounce.

In government debt trading, benchmark U.S. 10-year yields lingered near a six-month low of 3 percent, while September German Bund futures hit a contract high of 126.03.

Five-year credit default swaps on Greek sovereign debt rose to a record high of 1,613.33 basis points prior to the S&P downgrade, according to data monitor Markit. (Additional reporting by Rodrigo Campos, Gene Ramos, Gertrude Chavez-Dreyfuss and Steve C. Johnson; Editing by Dan Grebler)