NEW YORK (Reuters) – World stocks slipped and the euro fell to a four-month low against the dollar on Tuesday after Greece said it would hold new elections and worries increased about its possible exit from the euro zone.
Gold touched a 4-1/2-month low, with the euro’s weakness unnerving investors over the profitability of holding euro-denominated assets.
The political turmoil in Greece kept pressure on markets. Investors have been concerned that long-lasting problems in the euro zone and a likely recession will hit global growth.
Greek politicians again failed to agree on a new government, nine days after an inconclusive election. After Greece‘s president said the country will hold new elections, the euro slumped and investors fled to the safe-haven dollar.
The Greek news “triggered the fall through $1.2800 and it looks like they can’t compromise so they will have to hold elections,” said Boris Schlossberg, director of FX Research at GFT in Jersey City, New Jersey.
“They are running out of money ahead of elections, so expect European leaders in the next few days to put enormous pressure on them to come up with a workable government along with some sort of extended schedule for the bailout.”
The euro fell for the fifth of the last six sessions on chances left-wing politicians opposed to Greece’s international bailout could win the June elections.
The euro was down 0.6 percent at $1.2744 after touching a session low of $1.2731, the lowest since January 17.
The MSCI world equity index fell 0.6 percent, while the FTSE Eurofirst index of top European shares ended down 0.7 percent.
U.S. stocks marginally higher after a slight bounce early in the session on positive economic data on regional manufacturing and national homebuilder sentiment.
A gauge of homebuilder sentiment rose to the highest in five years this month. Separately, the pace of growth in New York state manufacturing rebounded, the New York Federal Reserve said.
Data also showed U.S. retail sales rose 0.1 percent in April, coming in under expectations, but the S&P retail index climbed 1.1 percent.
The Dow Jones industrial average was down 7.42 points, or 0.06 percent, at 12,687.93. The Standard & Poor’s 500 Index was down 1.25 points, or 0.09 percent, at 1,337.10. The Nasdaq Composite Index was up 11.08 points, or 0.38 percent, at 2,913.66.
Among other global economic news, Germany kept hopes for growth alive when it reported that strong exports had helped its economy grow 0.5 percent in the first three months of the year, ahead of market forecasts.
Germany’s performance offset zero growth in France and recession in Italy and Spain, leaving the whole 17-member euro zone economy stagnating but not in recession.
Some of the optimism from the German GDP data was dispelled after a business survey by the ZEW Institute taken in the first two weeks of May showed a big dip in sentiment since the latest bout of political instability in Greece and the renewed concerns about Spain and Italy’s banking systems.
The upbeat German data helped Brent crude price, with Brent June crude up 54 cents at $112.11 a barrel. The German data raised hopes that Germany would steer the way through the European debt crisis.
In the precious metals market, spot gold was down 0.1 percent at $1,555.69 an ounce and earlier hit its lowest since December 30 at $1,547.99. It is down nearly 7 percent in May so far.
U.S. Treasuries prices eased as traders booked profits from an eight-week run-up primed by worries over the outcome of the European debt crisis.
The benchmark 10-year U.S. Treasury note was down 2/32, with the yield at 1.7757 percent.
While U.S. yields rose, benchmark rates remain below the technically important 1.8 percent level and not far off the seven-month low of 1.76 percent touched in overnight trade. Last week Treasuries yields fell for the eighth consecutive week.
“We’ve come a long way fairly quickly and were a little overbought, so I’m not surprised to see (the price losses), although I don’t see this as a reversal to the recent trend,” said David Coard, head of fixed-income sales and trading at The Williams Capital Group in New York.
(Reporting by Caroline Valetkevitch; Additional reporting by Nick Olivari, Gertrude Chavez-Dreyfuss and Chris Reese in New York and Richard Hubbard, Jan Harvey and Amanda Cooper in London; Editing by James Dalgleish)