NEW YORK - U.S. and European shares took a breather after a strong rally built on a long-awaited euro zone rescue deal, but a weak sale of Italian bonds on Friday showed investor confidence in the agreement remained shaky.
The euro eased from a seven-week high against the dollar, and oil prices declined about 1 percent on skepticism over whether the debt deal is enough to staunch the crisis.
Italy’s 10-year borrowing costs topped 6 percent for the first time since the launch of the euro after a debt auction, underscoring the country’s vulnerability at the center of the crisis.
It was the first euro zone bond auction after policymakers struck an agreement Thursday to slash Greece’s debt burden and strengthen the European Financial Stability Facility (EFSF), the region’s rescue fund.
Adding to concerns, the head of Europe’s bailout fund played down hopes of a quick deal with China to throw its support behind efforts to resolve the crisis. But said he expected Beijing to continue to buy bonds issued by the rescue fund.
"I think we have a long way to go with this (European debt) mess. I still see huge risks," Stanley J.G. Crouch, who oversees $2 billion as the chief investment officer of Aegis Capital in New York.
U.S. stocks edged lower in midday trade after a powerful rally Thursday that propelled the S&P to close above its 200-day moving average for the first time since August.
The Dow Jones industrial average was down 7.22 points, or 0.06 percent, at 12,201.33. The Standard & Poor’s 500 Index was down 4.09 points, or 0.32 percent, at 1,280.50. The Nasdaq Composite Index was down 10.88 points, or 0.40 percent, at 2,727.75.
The FTSEurofirst 300 index of leading European shares ended 0.2 percent lower at 1,018.14 points.
MSCI’s all-country world stock index was last up 0.2 percent at 318.35, though it was off its highest level in nearly three months hit earlier in the day. Emerging market shares rallied 1.6 percent.
Investors’ focus was shifting to a meeting of the Group of 20 nations next week in Cannes, France, watching for any coordinated efforts or pledges to help stabilize world financial markets, which have been battered this year by Europe’s debt crisis and a slowing world economy.
EURO OFF HIGHS
The euro slipped 0.2 percent to $1.4159, taking a breather from a rally Thursday, when it hit a seven-week high of $1.4247.
"We’re seeing the market reposition itself," said Michael Woolfolk, managing director at BNY Mellon Global markets in New York. "Going into the two (European) summits, speculators were long dollars. They have now exited those positions and players are fine tuning."
Analysts said much of this month’s 5.8 percent rally in the euro against the dollar was driven by a squeeze of short positions, with speculators reluctant to build bets against the euro ahead of the G20 and a U.S. Federal Reserve meeting next week.
Any hints the Fed is considering another round of monetary easing to boost the U.S. economy or of a commitment from G20 players to support the euro zone bailout fund would likely push the euro higher.
The dollar steadied, after falling 1.8 percent against a basket of currencies the previous day in its biggest daily fall in more than two years.
The U.S. dollar index last traded up 0.3 percent at 75.070. Against the yen, the dollar slipped 0.3 percent to 75.72, keeping alive the risk of intervention by Japanese authorities to curb the yen’s rally.
Brent crude shed $2.06 to $110.04. U.S. crude dropped 75 cents to $93.22.
Spot gold retreated to $1,736 an ounce from a one-month high of $1,751.99.
The benchmark 10-year U.S. Treasury note was up 24/32, with the yield at 2.30 percent.
