The euro steadied after an initial jump and European stocks eased on Tuesday after a long-awaited agreement on a second bailout for Greece removed the threat of a disorderly bond default but left markets fearing further problems ahead.
Stock index futures pointed to a rise in U.S. equities when the markets reopen after the Presidents' Day holiday, with eyes on the Dow Jones index, which is close to breaking through 13,000, a level it hasn't seen since May 2008.
After 13 hours of talks, euro zone ministers finalized a 130-billion-euro ($172-billion U.S.) deal for Greece by forcing Athens to commit to unpopular budget cutbacks and private bondholders to accept deeper losses, ensuring it can meet a debt repayment due next month.
The euro initially jumped over half a cent against the U.S. dollar on relief the deal was signed to a two-week high of $1.3293 U.S. before it stabilized at near $1.3230 as worries over the impact of the deal left investors in a cautious mood.
The major concerns are that the austerity measures imposed on Greece will severely weaken its already shrinking economy, making it harder to repay its debts. The sharp cuts in the value of bonds held by private sector creditors also mean it will be hard for the country to borrow from the capital markets again.
Yields on Spanish and Italian bonds, seen as a gauge of risk for other peripheral euro zone nations, fell on relief that Athens had at least sealed a bailout deal, but Portugal's debt came under initial pressure on fears it could be the next in line after Greece.
The yield on 10-year Italian debt fell 8 basis points to 5.40%, its lowest level since early October. Yields on 10-year Portuguese bonds gained initially then eased to be around 12.39%.
However, Spain was able to sell new short-term debt on Tuesday at the lowest cost in over two years in the first test of appetite for debt issued by a country at the fringes of the euro-zone since the deal for Greece was agreed.
