Greek debt worries markets

Worries about the ability of Greece and other European countries to pay down their debts weighed on North American stock markets at the open Monday, but traders recovered later in the day.

Traders sold the euro and bought the U.S. dollar, which in turn pushed down commodities, which are priced in U.S. dollars.

In Toronto, the commodity-weighted S&P/TSX composite index fell sharply at the open but rebounded to end the day up 19.19 points, to 11,967.17.  In New York, the Dow industrial average gained 43.91 points to 10,785.89. The Nasdaq composite index finished up 20.99 points to 2,395.40. 

The Canadian dollar ended at 98.15 cents US, down from Friday's close of 98.39 cents US.

A spat between European Union officials and German Chancellor Angela Merkel over how to help Greece has kept investors on edge ahead of a meeting of EU leaders, which starts Thursday.

"A crisis that began over Greece's borrowing costs is now metamorphosing into a more serious threat to the political and economic order in Europe as a whole," said Stephen Lewis, chief economist at Monument Securities in London.

EU governments said last week they would provide Greece with some form of support, possibly bilateral loans, should it be needed.

Greece says it does not need a direct cash infusion but concrete measures that will convince markets it will not be allowed to default.

That would lower the costs to Greece of replacing $27.6 billion Cdn of debt maturing over the next couple of months.

But on Sunday, Merkel said EU leaders should not discuss a bailout plan at the summit because Greece should try to solve its debt problems itself.

Also Monday, the Bank of Greece predicted Greece's economic contraction this year would be worse than the government predicts.

The central bank forecast the value of all goods and services would fall by two percent in 2010, the same rate of slowing as in 2009.