PARIS – European markets pulled back from earlier gains Wednesday and the euro fell as concerns grew that Greece’s creditors aren’t ready to hand over bailout loans needed to avert a default and that the money might not be sufficient anyway.

In earlier trading, markets rode news that China was still willing to invest in Europe and that Greece would fulfill all the obligations imposed by its international creditors. Those include making up a euro325 million ($425 million) funding gap and presenting written guarantees that the governing coalition’s party leaders would carry out the plan if they come to power. That seemed to indicate that when European leaders hold a conference call in the evening, they would green light a euro130 billion ($170 billion) bailout, Greece’s second.

But impatience with Greece, which has often missed deficit targets and been slow to respond to European demands, has been growing. And by Wednesday afternoon, a European official warned Greece’s assurances might not be enough. He spoke on condition of anonymity, citing policy.

There are concerns that after the elections, expected in April, Greek politicians might renege on promises made to their European colleagues. Greek leaders are in a tight spot, caught between a population enraged by painful budget cuts and international creditors who are demanding austerity in return for helping to stave off a potentially catastrophic default.

For weeks, many analysts have wondered if the bailout loans would be enough given the size of Greece’s debts. Now, there is speculation they may not come in time anyway. Greece has a chunk of loans coming due in March.

Allowing Greece to default is a gamble, and earlier in the day investors seemed confident that European officials wouldn’t dare risk it.

While Louise Cooper of BGC Capital said banks that hold Greek debt and governments are more prepared for a default than a few months ago, it is still risky. “We cannot know the impact of a Greek default until it happens,” she said.

But the mood turned more sour later in the day.

The euro erased its early gains, dropping 0.1 percent to $1.3145.

In France, the CAC-40 was up just 0.4 percent at 3,389; Germany’s DAX rose the same rate to 6,758. The FTSE index of leading British shares fell 0.1 percent to 5,895.

On Wall Street, markets struggled to get off the ground. The Dow Jones industrial average was down 0.3 percent at 12,839, while the broader S&P 500 was even at 1,351.

While many economists have advocated for a so-called orderly default, essentially allowing Greece to renege on all or most of its debts, others warn that would set a bad precedent.

“The ramifications from this are potentially catastrophic,” said David White, a trader for Spreadex. “Why would any member state act on Eurozone ministers’ demands when it’s been proven doubtful that what is promised in return might not be 100 percent deliverable?”

Greece’s European partners, meanwhile, are struggling with poor growth. On Wednesday, Eurostat figures showed that the economy for the 17 countries that use the euro contracted 0.3 percent in the final three months of 2011, a clear sign that Europe’s debt crisis has spared no country.

The decline followed a meager 0.1 percent increase in the previous three-month period and could signal the area is heading into recession, defined as two consecutive quarters of negative growth.

Slow growth has been one of the most damaging effects of Europe’s debt crisis, which forced many countries to savagely slash their budgets to reassure investors they would be able to pay off debts borrowed in boom times. But some observers have noted that cutting costs only exacerbates slow growth, which, in turn, exaggerates deficits.

To dig out of the vicious cycle, many have hoped for a rescue from the outside, particularly from China, which has vast foreign currency reserves. Chinese officials have been cautious to say they want to help Europe — their biggest export market — but that they have to make investments that are good for the Chinese. They have given no sign they would do more than continue to invest in the safest European government bonds.

China’s central bank governor, Zhou Xiaochuan, reiterated those ideas early Wednesday, but they boosted spirits in Europe, nonetheless, underscoring how eagerly investors are hoping for a miracle.

Earlier, Asian shares rode news that Japan’s central bank would further loosen monetary policy, raising hopes that would lift its powerhouse export sector.

The Nikkei 225 index in Tokyo soared 2.3 percent to close at 9,260.34, its highest close since Aug. 5. South Korea’s Kospi gained 1.1 percent to 2,025.32, while Hong Kong’s Hang Seng jumped 2.1 percent to 21,365.23, its highest finish since Aug. 4.

Mainland Chinese shares advanced with the benchmark Shanghai Composite Index climbing 0.9 percent to 2,366.70, its highest close this year. The Shenzhen Composite Index gained 1.5 percent to 925.99.

Benchmark oil for March delivery moved up 84 cents to $101.58, also brushing off troubles in Greece to focus on tensions in the Middle East that could lead to a tightening of supplies.

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Associated Press writers Gabriele Steinhauser in Brussels, Pamela Sampson in Bangkok, Pan Pylas in London and Joe McDonald in Beijing contributed to this report.

PARIS – European leaders’ hard line in negotiations with Greek bondholders drove stock markets lower on Tuesday as investors worried that a deal necessary to cut Athens’ mountain of debt might fall through.

After 10 hours of talks on Monday, the finance ministers of the countries that use the euro announced that Greece would pay less than 4 percent interest on the new bonds creditors will get in a swap meant to cut Greece’s debt by about euro100 billion ($130 billion).

The deal is crucial to Greece’s and the eurozone’s stability since it’s clear there’s no way Athens can ever pay back all that it owes. Banks that hold Greek debt have already been asked to take a 50 percent loss on those investments — and some think even that writedown isn’t big enough.

The negotiations involve a delicate balancing act between getting a deal large enough to ensure that Greece can someday dig out from under its pile of debts but not so harmful to banks that it scares investors off from investing in any eurozone debt.

European leaders have promised Greece is a special case and bondholders won’t ever be asked to take losses again, but there are signs that investors are staying clear of the bonds of other vulnerable countries, like Portugal.

Time is running out for politicians and the banks to get it right — Greece has several billions of euros of debt coming due in March — and stocks dropped Tuesday amid worries they might not.

In France, the CAC-40 fell 0.8 percent to 3,312, while Germany’s DAX dropped 1 percent at 6,370. The FTSE index of leading British shares was down 0.7 percent to 5,740.

Wall Street was also set to open lower. Dow futures fell 0.3 percent at 12,609 and S&P futures dropped 0.4 percent to 1,305.

The euro fell 0.2 percent to $1.3000.

Politicians are also aware that European banks are under tremendous pressure because of the amount of government debt they hold and have seen their stock prices crash and their sources of funding dry up during the crisis. Late Monday, Standard & Poor’s downgraded the credit ratings of two major French banks, Credit Agricole and Societe Generale. They confirmed the rating of a third major bank, BNP Paribas, but the stock prices of all three plummeted Tuesday, underscoring how fragile all financial institutions are.

Compounding these concerns is the poor state of Europe’s economy and worries that the eurozone is slipping back into recession. Even relatively positive results from two economic surveys released Tuesday were not enough to ease those worries.

January’s manufacturing purchasing managers’ composite index rose to 48.7 from 46.9, according to Markit, a financial data company. The services PMI rose to 50.5 from 48.8. Both surveys, which are considered indicators for growth, beat the expectations of analysts, but experts warned they are far from good news.

“While the January purchasing managers’ surveys lift hopes that eurozone activity is stabilizing, they also suggest that the eurozone is far from out of the economic woods,” said Howard Archer, an analyst with IHS Global Insight. “Worrying elements remain in the purchasing managers’ surveys and we suspect that it is still more likely than not that the eurozone will suffer further contraction in the first quarter of 2012 which will put it back into recession.”

Concerns about the state of economy even tempered oil prices, which had been skyrocketing after European leaders announced they would stop buying Iranian oil in an effort to pressure Tehran into resuming talks on its nuclear program.

Benchmark oil fell back 30 cents to $99.28 in electronic trading on the New York Mercantile Exchange.

Earlier in Asia, Japan’s Nikkei 225 stock rose 0.2 percent to 8,785.33 despite the central bank cutting growth forecasts for the fiscal year ending March 2012 and the following year because of a slowdown in overseas demand and the strong yen.

Australia’s S&P/ASX 200 closed little changed at 4,224.20. Indonesia’s benchmark was up 0.1 percent at 3,994.91 and India’s Sensex was 1.5 percent higher at 16,997.35 after the Reserve Bank of India lowered cash reserve requirements for commercial lenders.

FRANKFURT (Reuters) – Top executives at Deutsche Boerse (DB1Gne.DE) and NYSE Euronext (NYX.N) sent a letter to European Commissioners emphasizing the "European" nature of a combined company, in a bid to salvage their deal after antitrust regulators threatened to block it.

The letter was sent by NYSE Euronext Chief Executive Duncan Niederauer and Deutsche Boerse chief Reto Francioni on January 13, and was addressed to European Union Commission President Jose Manuel Barroso and also copied to the remaining 26 commissioners, a copy of the letter seen by Reuters shows.

In it, executives from Deutsche Boerse and NYSE Euronext expressed "profound concern" that blocking the takeover "would represent a serious missed opportunity at a critical juncture for Europe."

Earlier this month, European Commission antitrust regulators signaled they would recommend blocking a merger over concerns about creating a dominant player in derivatives, a source told Reuters.

Deutsche Boerse and NYSE have now focused their efforts to convince the so-called college of 27 commissioners that EU antitrust commissioner Joaquin Almunia's conclusions are wrong, and that approving the deal would help advance EU interests.

"The transaction will facilitate the effective implementation of European Union financial services regulation and offer a unique opportunity to deepen regulatory cooperation and reduce the risk of regulatory arbitrage," the letter said.

"If this combination is prohibited by the College of commissioners, the global consolidation of exchanges might very well shift the balance towards countries favoring 'light touch' regulation, which would severely endanger the European Commission's agenda," the letter continued.

In the letter Deutsche Boerse Chief Reto Francioni and NYSE Euronext head Duncan Niederauer said the new company would be domiciled in the European Union and be strictly under European supervision.

Furthermore, 80 percent of the governance of the company and

70 percent of the revenues would be generated within the European Union, the letter said.

"The new company would accelerate the integration of Europe's capital markets, and serve as the vanguard for the implementation of European Union and G20 regulatory reforms," the letter said.

The college of commissioners will give a formal ruling by February 9.

Both executives again emphasized that a review of the deal should look at the derivatives market from a global, rather than just European perspective, and should include the over-the-counter market.

"Contrary to the views expressed by the Directorate General for Competition, effective competition will continue to exist, in particular due to over-the-counter trading, the global nature of the derivatives market, and our strong global rivals.

"For instance, CME, the largest derivatives exchange in the world, competes with us directly in Europe, has more employees in Europe than NYSE Liffe and a larger interest rate derivative portfolio than our combined businesses."

The letter said Europe would be disadvantaged given that the U.S. had approved the merger of Chicago Mercantile Exchange with the Chicago Board of Trade in 2007 to create CME.

The European Commission has demanded Deutsche Boerse and NYSE sell either the Eurex derivatives arm or Liffe, a move that both exchanges have ruled out so far.

German union representatives on Wednesday said they would be pleased if the European authorities blocked the deal. "We had feared there would be grave consequences for Frankfurt as a financial centre if the deal succeeded."

(Reporting By Foo Yun Chee in Brussels; writing by Edward Taylor; Editing by Helen Massy-Beresford)

(This story is corrected in the second paragraph to reflect number of commissioners to 26, from 27)

FRANKFURT (Reuters) – Top executives at Deutsche Boerse (DB1Gne.DE) and NYSE Euronext (NYX.N) sent a letter to European Commissioners emphasizing the "European" nature of a combined company, in a bid to salvage their deal after antitrust regulators threatened to block it.

The letter was sent by NYSE Euronext Chief Executive Duncan Niederauer and Deutsche Boerse chief Reto Francioni on January 13, and was addressed to European Union Commission President Jose Manuel Barroso and also copied to the remaining 27 commissioners, a copy of the letter seen by Reuters shows.

In it, executives from Deutsche Boerse and NYSE Euronext expressed "profound concern" that blocking the takeover "would represent a serious missed opportunity at a critical juncture for Europe."

Earlier this month, European Commission antitrust regulators signaled they would recommend blocking a merger over concerns about creating a dominant player in derivatives, a source told Reuters.

Deutsche Boerse and NYSE have now focused their efforts to convince the so-called college of 27 commissioners that EU antitrust commissioner Joaquin Almunia's conclusions are wrong, and that approving the deal would help advance EU interests.

"The transaction will facilitate the effective implementation of European Union financial services regulation and offer a unique opportunity to deepen regulatory cooperation and reduce the risk of regulatory arbitrage," the letter said.

"If this combination is prohibited by the College of commissioners, the global consolidation of exchanges might very well shift the balance towards countries favoring 'light touch' regulation, which would severely endanger the European Commission's agenda," the letter continued.

In the letter Deutsche Boerse Chief Reto Francioni and NYSE Euronext head Duncan Niederauer said the new company would be domiciled in the European Union and be strictly under European supervision.

Furthermore, 80 percent of the governance of the company and 70 percent of the revenues would be generated within the European Union, the letter said.

"The new company would accelerate the integration of Europe's capital markets, and serve as the vanguard for the implementation of European Union and G20 regulatory reforms," the letter said.

The college of commissioners will give a formal ruling by February 9.

Both executives again emphasized that a review of the deal should look at the derivatives market from a global, rather than just European perspective, and should include the over-the-counter market.

"Contrary to the views expressed by the Directorate General for Competition, effective competition will continue to exist, in particular due to over-the-counter trading, the global nature of the derivatives market, and our strong global rivals.

"For instance, CME, the largest derivatives exchange in the world, competes with us directly in Europe, has more employees in Europe than NYSE Liffe and a larger interest rate derivative portfolio than our combined businesses."

The letter said Europe would be disadvantaged given that the U.S. had approved the merger of Chicago Mercantile Exchange with the Chicago Board of Trade in 2007 to create CME.

The European Commission has demanded Deutsche Boerse and NYSE sell either the Eurex derivatives arm or Liffe, a move that both exchanges have ruled out so far.

German union representatives on Wednesday said they would be pleased if the European authorities blocked the deal. "We had feared there would be grave consequences for Frankfurt as a financial centre if the deal succeeded."

(Reporting By Foo Yun Chee in Brussels; writing by Edward Taylor; Editing by Helen Massy-Beresford)

Jan 9 (Reuters) – The Securities and Exchange Commission has urged banks to publish more details about their exposure to European sovereign debt, a factor in the recent bankruptcy of the futures brokerage MF Global Holdings Ltd (MFGLQ.PK).

In guidance issued on Friday, the regulator's Division of Corporation Finance said disclosures by publicly-traded financial institutions have been "inconsistent in both substance and presentation."

It said this could make it harder for investors to discern how much risk the banks are taking, both individually and relative to each other, and how the exposures will affect operating results or financial health.

The SEC urged that banks reveal direct and indirect exposures "separately by country, segregated between sovereign and non-sovereign exposures."

It said they should also provide more details on hedging, through such instruments as credit default swaps, and sums they might need to raise if forced to close out their positions.

"In determining which countries are covered by this guidance, registrants should focus on those experiencing significant economic, fiscal and/or political strains such that the likelihood of default would be higher than would be anticipated when such factors do not exist," the SEC said.

The non-binding guidance was issued about two months after MF Global filed for bankruptcy protection, amid a liquidity crunch spurred by investor and customer worries about its $6.3 billion bet on sovereign debt from Belgium, Ireland, Italy, Portugal and Spain.

MF Global had revealed that exposure in the prior week.

Worries about European debt exposure have also weighed on the stocks of Morgan Stanley (MS.N) and the investment bank Jefferies Group Inc (JEF.N).

The SEC is trying to learn more about some of the more opaque means that banks use to reduce the risk of credit losses, including derivatives and off-balance-sheet financings. This could reduce the threat of further liquidity shortfalls.

An SEC spokesman declined to comment.

Another regulator, the Financial Industry Regulatory Authority, has stepped up oversight of leverage at brokerages after concluding that MF Global had not been fully candid in disclosing its European debt exposure as little as one month prior to the bankruptcy.

Jon Corzine, a former New Jersey governor, stepped down as MF Global's chief executive on November 4, four days after the New York-based company's bankruptcy filing. (Reporting by Jonathan Stempel in New York; Additional reporting by Carrick Mollenkamp in New York and Sarah N. Lynch in Washington, D.C.; editing by Carol Bishopric)