* U.S., European shares eke out gains on defensive stocks
* Oil above $72 a barrel on weak dollar, cold weather
* Euro rebounds versus dollar despite fiscal worries
* U.S. bonds edge down ahead of new supply auction
(Updates U.S. prices)
By Herbert Lash
NEW YORK, Feb 8 (Reuters) - U.S. and European stocks eked
out gains on Monday, lifted by defensive shares, while the euro
edged up from 8-1/2-month lows despite persistent worries about
the fiscal health of highly indebted nations in the euro zone.
A modest rebound on Wall Street helped pushed the euro to a
session high above $1.37, although sentiment toward the single
currency remained broadly negative, analysts said.
U.S. stocks edged higher after results at drugstore
operator CVS Caremark Corp <CVS.N> and toy maker Hasbro Inc
<HAS.N> topped expectations and both companies raised their
outlooks. Rising defensive stocks such as drug makers helped
European shares snap three days of losses, but worries about
Greece and other debt-laden European countries kept gains in
check.
U.S. Treasury debt prices fell slightly ahead of new
supply. But the spread of peripheral euro zone government bond
yields over German benchmarks widened and the cost of insuring
against a default rose as investors doubted the effectiveness
of deficit-reduction plans by certain European governments.
Greek civil servants threatened to stage more strikes to
protest austerity measures, heightening fears that governments
cannot deliver on promises to tackle stretched budgets.
[]
"There's still a credibility gap, particularly on Greece,
but growing on Spain and Portugal. Investors are still not
convinced these measures in Greece will be implemented and
remain skeptical about governments' ability to hit deficit
reduction targets," said Nick Stamenkovic, a rate strategist at
RIA Capital Markets.
Shortly after midday, the Dow Jones industrial average
<> was up 3.10 points, or 0.02 percent, at 10,015.33. The
Standard & Poor's 500 Index <.SPX> was up 3.05 points, or 0.29
percent, at 1,069.24. The Nasdaq Composite Index <> was up
9.01 points, or 0.42 percent, at 2,150.13.
Financial shares on both sides of the Atlantic were
pressured by fears the fiscal problems in Europe could spread.
JPMorgan Chase & Co <JPM.N> fell 1.3 percent to $37.81 and
was one of the Dow's top drags.
In Europe, Greek banks National Bank of Greece SA
<NBGr.AT>, Alpha Bank <ACBr.AT> and Bank of Piraeus <BOPr.AT>
lost 5.4 percent to 8.5 percent,
"The fact that Greek (bond) spreads remain at that level
raises an issue for Greek banks' net equity position and that
is why the sector is under heavy pressure," said Pegasus
Securities analyst Manos Hatzidakis.
Banks elsewhere in Europe rebounded from earlier falls.
Dexia <DEXI.BR> rose 4.7 percent, while Credit Agricole
<CAGR.PA> and UBS <UBSN.VX> rose about 2 percent.
The FTSEurofirst 300 <> index of top European shares
closed up 0.8 percent at 979.72 points in choppy trade.
"Markets are in a tug of war. There is a chance of
stabilization in the short-term," said Gerhard Schwarz, head of
global equity strategy at UniCredit in Munich, while noting the
lack of clarity over the debt problems of the 16-member euro
zone.
"The choppy conditions are likely to prevail over some
time, unless we get a more clearer picture of what is happening
and what help looks like coming," he added.
Oil rose above $72 a barrel, as a weaker U.S. dollar and
cold weather provided support after three straight losing
sessions. []
Unusually cold weather is forecast to settle across key
heating fuel consuming regions in the United States this week,
in the wake of heavy snow over the weekend. []
U.S. light sweet crude oil <CLc1> rose 86 cents to $72.05 a
barrel.
Spot gold prices <XAU=> rose $3.80 to $1,068.70 an ounce.
U.S. Treasury prices slipped as investors prepared for a
series of auctions of three-year, 10-year and 30-year U.S.
government securities worth a total of $81 billion.
The Treasury Deparment will sell $40 billion in three-year
notes on Tuesday. Three-year notes traded slightly lower ahead
of the auction.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 6/32 in price to yield 3.59 percent.
Earlier in Asia, Japan's Nikkei average <> fell 1.1
percent to a two-month closing low as exporters like Sony Corp
<6758.T><SNE.N> were clobbered by a strong yen. Asia Pacific
shares outside Japan as measured by MSCI <.MIAPJ0000PUS> fell
0.6 percent after earlier falling to its lowest levels since
early September.
(Reporting by Ryan Vlastelica, Wanfeng Zhou, Edward McAllister
and Emily Flitter in New York; Joanne Frearson, Harpreet Bhal,
Jessica Mortimer, William James and Jan Harvey in London;
writing by Herbert Lash; Editing by Leslie Adler)
