World Stocks, the Euro down on Greek Default Fears

(REUTERS) -- World stocks and the euro suffered on Wednesday as uncertainty about Greece's debt talks overshadowed strong economic data from Germany, blow-out earnings from Apple, and expectations that the Federal Reserve will push back the timing of an eventual rate hike.

Apple's stellar results sent its shares to an all-time high, helping lift the technology-rich Nasdaq stock index, but Europe's debt fears kept other key Wall Street indexes down.

The euro slid against the dollar on worries the European Central Bank would have to write down its holdings of Greek debt, crimping its ability to purchase debt from other troubled peripheral euro zone countries.

Uncertainty over the Greek debt talks and disappointment that there has still been no deal is spoiling the party for the euro, said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.

The Greek government said it hopes to complete talks on a deal with its private creditors as early as this week, despite euro finance ministers' rejection of an initial plan.

The euro zone common currency weakened 0.4 percent against the dollar to $1.2977. It earlier reached a session high of $1.3051, boosted by a report showing German business sentiment rose for the third month in a row in January, beating market expectations.

The greenback held gains against a basket of key currencies, with the dollar index .DXY up 0.4 percent, despite expectations that the Fed will signal later in the day that it will leave benchmark U.S. interest rates near zero for at least two more years.

The dollar also jumped to a two-month high against the yen, at 78.28 yen, as news that Japan posted its first trade deficit since 1980 called into question how much longer it can rely on exports to help finance its huge public debt.

APPLE SOARS, WALL ST RALLY STALLS

On Wall Street, European debt fears weighed on the Dow and the S&P 500, stalling a strong rally that had started last year.

The Dow Jones industrial average .DJI lost 49.88 points, or 0.39 percent, at 12,625.87, while the Standard & Poor's 500 Index .SPX declined 1.96 points, or 0.15 percent, at 1,312.69. But the Nasdaq Composite Index .IXIC gained 13.92 points, or 0.50 percent, at 2,800.56, lifted by Apple.

Shares of the iPhone maker (AAPL.O) shot up as much as 8 percent in early trading, hitting an all-time high of $454.45 after it announced quarterly results that blew past market expectations. Apple shares were last up 6.5 percent at $447.90.

We do believe the company should examine a meaningful dividend closely and are intrigued by the possibilities around any sizeable acquisitions that could improve its wireless and online services, Barclays Capital wrote in a note to clients, referring to Apple's results.

In Europe, the FTSEurofirst 300 index .FTEU3 fell 0.6 percent, weighed down by the technology sector despite Apple's earnings.

Concerns about Greece also increased demand for safe-haven assets. Benchmark 10-year U.S. Treasury notes rose 14/32 in price, which sent its yield down to 2.01 percent.

U.S. crude oil prices erased early losses and rose 0.15 percent to $99.07 a barrel after a government report showed refined products stocks fell last week, against expectations.