Greek aid delay hits world stocks, commodities

World stocks, the euro and crude prices fell on Monday and bond yields in heavily indebted euro zone countries jumped after the region's finance ministers delayed a final decision on extending emergency loans to Greece.

Yields on safer US Treasuries and German Bunds slipped and gold prices held steady at above USD 1,530 an ounce.

Euro zone finance ministers at the weekend postponed a final decision on extending a further 12 billion euros in emergency loans to Greece, ratcheting up pressure on Athens to first impose harsh austerity measures.

They said they expected the money, the next tranche in last year's 110 billion euro bailout package extended by the European Union and the International Monetary Fund, to be paid by mid-July.

"At the moment then, we are still in limbo -- the EU and ECB appear to have reached a compromise on private sector involvement in the Greek bailout, but are still demanding austerity measures which are unacceptable to some in Greece," said Kit Juckes, currency strategist at Societe Generale.

The euro was down 0.7% at USD 1.4205, edging back in the direction of a three-week low of USD 1.4073 hit last Thursday on trading platform EBS, and down USD 1 to SEK 1.2022.

The dollar rose 0.6% against a basket of major currencies.

The yield on 10-year Greek government bonds jumped 16 basis points to 17.69%, not far from a euro lifetime high of 18.90% hit on Friday.

Yields on 10-year Italian government bonds rose 5.6 basis points to 4.88% after Moody's warned late on Friday that it could cut its rating on Italy's sovereign debt, adding to contagion fears in the euro zone.

"That's the worry: how far is this going to spread?," said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin.

Europe's FTSEurofirst 300 lost 0.7%, while the Thomson Reuters Peripheral Eurozone Index shed 2.1% and Italy's benchmark stock index dropped 2.4%.

WORLD STOCKS, OIL DOWN

World stocks measured by the MSCI All-Country World Index fell 0.5%, extending a three-week decline. The benchmark is down 1.1% this year.

Brent crude fell for the fourth straight session, down 1.1% to below USD 112 a barrel, while copper prices lost 1.3%, falling below USD 9,000 an ounce.

UBS strategists said in a note that investors should remain "underweight" global equities and cyclical commodities, even though risk asset valuations were "undemanding", until euro zone debt uncertainty subsided and US growth improved.

A deepening political crisis in Greece had done nothing to change the broker's view that a default was likely.

"Whether this leads to imminent default, remains unclear ... We, the markets and more recently the ratings agencies, believe default is unavoidable. What is less clear, however, is how the crisis might spread via financial linkages to other parts of the capital markets," they said.

"Precisely that uncertainty is reason, we believe, to remain cautious, as reflected in our underweight allocation to global equities."