Hopes for Greece offset worries on US jobs

Optimism about a pending bailout package for Greece was offset by concern that tomorrow's US jobs report will confirm recent data suggesting the recovery of the world's largest economy is faltering.

In late trading on Wall Street, the Dow Jones Industrial Average edged 0.07 per cent lower. The Standard & Poor's 500 Index rose 0.13 per cent and the Nasdaq Composite Index advanced 0.30 per cent.

Senior European Union officials tentatively agreed on a new three-year adjustment plan for Greece. Meanwhile, investors are eyeing Friday's non-farm payrolls report, which is expected to show 150,000 jobs added in May, according to a Thomson Reuters poll of economists.

"Markets are focused on two 'Es' right now: Europe and employment, and if there's stability in those, that will lead to greater market confidence," Tom Galvin, managing director and lead portfolio manager at Columbia Management in Stamford, Connecticut, told Reuters.

A report today showed that US initial jobless claims fell 6,000 to a seasonally adjusted 422,000 in the latest week, compared with expectations for a drop to 415,000.

In Europe, the benchmark Stoxx 600 Index dropped 1.3 per cent, as Moody's Investors Service lifted Greece's default risk to 50 per cent.

Meanwhile, the US dollar weakened after Moody's warned there was a small but increasing risk of a short-lived default by the US if the country's debt limit was not raised in coming weeks.

The greenback was 0.69 per cent lower against a basket of major currencies.

In a statement, Moody's said it would put the Aaa US credit rating on review for a possible downgrade if lawmakers in Washington did not make substantive progress in budget talks by the middle of July.

"Since the risk of continuing stalemate has grown, if progress in negotiations is not evident by the middle of July, such a rating action is likely," Moody's said.

Greece has agreed to 6.4 billion euros in new measures to cut its 2011 budget deficit and aims to wrap up bailout talks with international inspectors by Friday, a senior government official told Reuters on Thursday.

The euro was last up 1.2 per cent at US$1.44971, having earlier reached US$1.4515 on electronic trading platform EBS.

"The euro is rallying as comfort over a near-term outcome for Greece improves and the market refocuses on problems in the US economy," Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, told Reuters. "A key psychological level is US$1.45. The euro and dollar are in an ugly dog contest and the euro is winning right now."

The greenback was steady at 80.85 yen.

In other news, online coupon company Groupon Inc filed for an initial public offering, the latest in a series of social networking companies to tap the US capital markets.

Groupon filed to raise up to US$750 million in its IPO.

On the commodity front, metals weakened.

Spot gold was last at US$1,528.54 an ounce, down from US$1,540.20 on Wednesday.

Silver futures sank to US$36.2350 an ounce.

Oil climbed, helped by a weakening US currency. Investors closely eyed comments that Opec could raise production targets next week and rising US inventories.

Opec sources said the group could lift output targets by up to 1.5 million barrels per day when it meets on June 8 to help bring down high fuel costs, according to Reuters.

"Oil prices are too high. US$100 oil is scaring people," one delegate said.

Brent rose 57 cents to US$115.10 a barrel at 1.03pm EDT.

Even so, US crude oil prices were 60 cents lower to US$99.69 a barrel.