By Herbert Lash
NEW YORK (Reuters) - Stocks worldwide jumped on Wednesday on signs a resolution to Greece's debt saga appeared in hand, but U.S. stocks later pared gains as hopes faded after Greece's prime minister called on citizens to reject a bailout deal with international creditors.
Prime Minister Alexis Tsipras urged Greeks to vote "No" in Sunday's referendum on the bailout in a defiant address that dispelled speculation he was dialing back on his combative stance under mounting pressure.
A "No" vote would not be tantamount to a rejection of Europe or the euro, Tsipras said. Instead, it would step up pressure on creditors to give Greece an economically viable agreement.
Major European stock indexes earlier surged 2 percent or more, with Germany's DAX (GDAXI) gaining more than 3 percent, after Tsipras told international creditors that Athens could accept the bailout offer if some conditions were changed. Later, he told Greeks that the country was being "blackmailed."
"People thought he was ready to throw in the towel, obviously that's not going to be the case," said Robbert van Batenberg, director of market strategy at Societe Generale (PARIS:SOGN) in New York.
"One line of thinking says with a 'No' vote in hand Tsipras can tell creditors that, 'Look, the people don't want this, the people want to protect their pensions. You got to give me a better deal.'"
The pan-European FTSEurofirst 300 index (FTEU3) rose 1.6 percent to close at 1,533.89, while Germany's DAX gained 2.2 percent. MSCI's all-country equities world index (MIWD00000PUS) rose 0.29 percent, down from earlier gains of almost 1 percent. MSCI's emerging markets index (MSCIEF) retreated, falling 0.26 percent.
Stocks on Wall Street also pared gains. The Dow Jones industrial average (DJI) rose 91.36 points, or 0.52 percent, to 17,710.87. The S&P 500 (SPX) gained 8.45 points, or 0.41 percent, to 2,071.56 and the Nasdaq Composite (IXIC) added 13.25 points, or 0.27 percent, to 5,000.12.
Prices of battered bonds from southern European countries rose, while safe-haven bonds such as U.S. Treasuries and German bunds fell. The euro was lower after Greece's default overnight on its International Monetary Fund loans weakened the single currency by about half a percent.
The benchmark 10-year Treasuries note (US10YT=RR) fell 24/32 in price to yield 2.4201 percent. German 10-year Bund yields
Yields on bonds issued by Italy, Spain and Portugal, the countries most vulnerable to contagion from Greece's debt crisis, all fell.
The dollar gained on news that U.S. private employers had ramped up hiring in June, a further sign of an improving labour market that adds weight to the notion the Federal Reserve will raise interest rates later this year.
The ADP National Employment Report showed 237,000 private-sector jobs were created last month, handily exceeding expectations of 218,000 new jobs, according to a Reuters survey of economists.
The ADP data comes a day before the U.S. Labor Department's more comprehensive non-farm payrolls report on Thursday, which is expected to show 230,000 new jobs were created last month, down from 280,000 in May.
"There's potential for an upside surprise in payrolls given the read we got from ADP," said Mark McCormick, currency strategist at Credit Agricole (PARIS:CAGR) in New York. "The fundamentals are supportive of broad dollar strength, particularly against the euro."
The dollar was up 0.74 percent against the euro
Oil prices slumped, with U.S. crude posting its sharpest daily loss since early April, after U.S. crude stockpiles posted the first rise in more than two months.
Brent crude
The market was further weighed by the dollar's rally on Greece's default, Iran's renewed efforts to reach a nuclear deal with the West to freely resume its crude exports, and signs that output from the Organization of Petroleum Exporting Countries is at three-year highs.
"The overall feel is that we have more than enough crude and the market could be in a bearish tilt hereon with the Greece and Iran factors in play," said Tariq Zahir, oil trader and managing member at Tyche Capital Advisors in Laurel Hollow, New York.