Markets turn nervous on Greece

Reuters reports the market reaction to the latest developments on Greece's debt problem.

World stocks and the euro slumped on Wednesday as upheaval in highly indebted Greece and indecision among Europe's leaders about helping the nation fed fears the euro zone member is edging closer to default.

The euro tumbled 2 percent against the dollar and government debt of the United States and Germany rallied on a safety bid after euro zone finance ministers failed to agree on how to involve private investors in a second financial rescue for Greece.

Senior EU officials said a deal was now unlikely to be reached at a summit next week and was likely to be delayed until mid-July...

The dollar's strengthening against the euro helped propel a more than 4 percent slide in the price of U.S. crude oil, hurt also by further signs of economic weakness...

The MSCI world stock index sagged 1.9 percent a day after posting its biggest single-day percentage rise in two weeks due to less-grim economic data from China and the United States.

European industrial production data had been positive on Wednesday. From Bloomberg:

European industrial production unexpectedly rose in April, led by increased output of durable consumer goods such as home appliances and furniture.

Production in the 17-nation euro area advanced 0.2 percent from March, when it held steady, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 0.2 percent, the median of 36 estimates in a Bloomberg News survey showed. Production increased 5.2 percent from a year earlier after rising 5.8 percent in March.

Industrial production also rose in the US in May, but so did inflation. Bloomberg reports:

The cost of living in the U.S. rose more than forecast in May as prices for everything from autos to hotel rooms climbed, signaling raw-material expenses are filtering through the economy.

The consumer-price index increased 0.2 percent last month and was up 3.6 percent from May 2010, the biggest year-over-year advance since October 2008, according to figures from the Labor Department today in Washington...

Prices excluding food and fuel climbed 0.3 percent in May, the biggest one-month gain since July 2008...

Output at factories, mines and utilities rose 0.1 percent in June after no change the prior month, figures from the Federal Reserve showed. Factory production climbed 0.4 percent, led by the biggest gain in business equipment output in four months...

The Federal Reserve Bank of New York’s general economic index dropped to minus 7.8, the lowest level since November, from 11.9 in May. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut.

Also today, the National Association of Home Builders/Wells Fargo sentiment index fell to 13 in June, a nine-month low, from 16 the prior month. The drop indicates housing will remain a weak spot in the economy.