The euro hit a two-month high against the dollar on Thursday after Greece agreed to an austerity package in exchange for new funds but questions on whether the deal will be enough to avoid a messy default curbed stocks' gains.
News that Greek leaders had clinched a long-stalled deal just hours before a key meeting with the country's financial backers encouraged investors to take on some risk, driving down prices of safe-haven US Treasuries.
Oil prices rallied more than 1 per cent on the agreement, which is crucial for Greece to secure a 130 billion euro ($US172 billion) bailout from the European Union and the International Monetary Fund.
Still, investors wondered whether Greece's promises will be enough to secure the funds, as well as what contribution the European Central Bank will offer in the restructuring of Greek debt.
"Today's pledge by Greece's main political leaders to accept the terms for a second bailout is of limited significance," said Nicolas Spiro, managing director at Spiro Sovereign Strategy in London.
"The causes of the failure of the first bailout have yet to be addressed. Market concerns center around the orderliness of the Greek restructuring and its implications for the rest of the periphery, notably Portugal," he added.
Adding to the uncertainty, Dutch Finance Minister Jan Kees de Jager said a final decision on a second bailout package for Greece will not be taken on Thursday.
On Wall Street, investors seemed tempted to take profits, keeping a lid on key stock indexes.
"There is definitely a whiff of 'sell the news' in the air," said Michael Marrale, managing director and head of sales trading at RBC Capital Markets in New York. "We've climbed this wall of worry and the first reaction for people is to hit the sell button."
After spending most of the morning session little changed, the Dow Jones industrial average was up 30.73 points, or 0.24 per cent, at 12,914.68 in afternoon trading. The Standard & Poor's 500 Index was up 3.85 points, or 0.29 per cent, at 1,353.81. The Nasdaq Composite Index was up 8.71 points, or 0.30 per cent, at 2,924.57.
In Europe, the FTSEurofirst 300 index index of top shares closed 0.25 per cent higher, with cyclical shares such as those of automakers in high demand.
"The market has potential to go up further. Economic support is there and earnings are continuing to do well," said Anko Beldsnijder, managing director at MainFirst Asset Management, which manages 1 billion euros ($US1.33 billion).
World stocks measured by the MSCI All-Country World Index gained 0.25 per cent.
The euro strengthened 0.2 per cent to $US1.328, after hitting a two-month high of 1.3321.
Also supporting the European single currency were comments from ECB President Mario Draghi, who said the euro zone outlook, while uncertain, had stabilized.
"That poured a little cold water on expectations of a March rate cut," said Adnan Akant, head of foreign exchange at Fischer Francis Trees & Watts, with $US48 billion in assets.
Benchmark 10-year US Treasury notes fell 21/32 in price, which took its yield up to 2.05 per cent. Lower-than-expected claims for unemployment benefits in the US also contributed to reduce the appeal of Treasuries.
Prices of 30-year Treasuries fell 1-6/32, taking the yield up to 3.21 per cent. They trimmed part of their losses after a well-bid auction of 30-year bonds.
US crude oil prices rose 1.3 per cent to $US100 a barrel, the third day of gains.
Reuters
