Stock markets shrugged off another credit rating downgrade of Greece and eked out some modest gains Tuesday as oil prices dipped for the second day running and investors awaited another offering to banks of super-cheap long-term loans from the European Central Bank.
With many of the world's leading indexes back at levels they were trading at before last summer's massive sell-off and U.S. markets above the levels last seen before the collapse of U.S. investment bank Lehman Brothers in September 2008, the buying momentum has eased over recent sessions, especially as oil prices hit nine-month highs.
While developments surrounding oil prices will continue to be monitored for fear they may derail the global economic recovery, investors will be watching developments over Europe's debt crisis closely, especially on Wednesday when the European Central Bank offers banks another round of three-year loans.
Its first so-called long-term refinancing operation last December has been widely credited for helping to calm markets in 2012. The consensus in the markets is that eurozone banks will take up around euro500 billion ($669 billion), around the amount taken up in December. That's equivalent of around 5 percent of the eurozone's collective GDP.
"There can be little doubt that the ECB's decision to funnel nearly half a trillion euros into the eurozone banking sector in late December had a profound market impact," said Neil Mellor, an analyst at the Bank of New York Mellon.
However, he warned that the greatest risk is that in swelling its balance sheet, the ECB has "become increasingly hostage to the fortunes of the eurozone economy and loans that are of unknown discounted value."
Investors are unsure how the markets will react to the amount actually taken up. For example, a higher than anticipated number may stoke concerns about the financial health of the eurozone's banks, but could equally shore up the prevailing market mood by increasing the amount of liquidity in the markets. One outcome of the December offering is that the banks, awash with cash, looked for places to invest their new money _ stocks and the government bonds of Italy and Spain are thought to have been beneficiaries of the ECB's largesse.
Given that uncertainty over this week's ECB operation, European stocks are trading in very narrow ranges. The FTSE 100 index of leading British shares was flat at 5,916 while Germany's was up 0.2 percent at 6,861. The CAC-40 in France was 0.1 percent higher at 3,446.
U.S. markets are expected to open modestly higher _ Dow futures and the broader S&P 500 futures were both up 0.3 percent.
Sentiment in the markets has not only been buoyed in recent weeks by the seeming calm in Europe's debt crisis. A run of strong U.S. economic data, particularly with regard to jobs, has helped too. Later, there will be interest in monthly durable goods orders figures, as well as a closely watched consumer confidence report from the Conference Board.
However, European debt concerns will never be too far away, especially as Greece has still to get its hands on the bailout cash it needs to avoid a default next month.
Greek lawmakers are to vote on a package of tough salary and pension cuts Tuesday as part of measures needed to secure the payout of the debt-ridden country's second international package of bailout loans.
The parliamentary vote comes a day after the Standard & Poor's ratings agency downgraded Greece's credit rating to "selective default" over a debt writedown deal with private creditors that is an integral part of the second bailout.
The downgrade had been widely expected, as ratings agencies had said the bond swap with private creditors would constitute a selective default. Once the swap is carried out next month, the agencies are expected to upgrade Greece.
"The market's reaction was one of complete indifference, such is the reality of life in this latest, but not unexpected, twist in what has become the almost everyday routine of the European debt crisis," said Michael Hewson, markets analyst at CMC Markets.
Earlier in Asia, the Nikkei 225 index in Tokyo rose 0.9 percent to 9,722.52 _ its highest close since Aug. 2, while Hong Kong's Hang Seng jumped 1.7 percent to 21,568.73. Mainland Chinese shares were mixed, with the benchmark Shanghai Composite Index up 0.2 percent to 2,451.86, its highest close in more than three months. The Shenzhen Composite Index for China's second, smaller stock market lost 0.6 percent to 969.51.
Oil prices fell for the second day running, albeit modestly _ benchmark oil for April delivery was down 10 cents to $108.46 in electronic trading on the New York Mercantile Exchange. Last Friday, it hit $109.77 a barrel, its highest close since May 3. Crude has soared from $96 earlier this month as stronger U.S. economic indicators bolstered investor confidence.
Pamela Sampson in Bangkok contributed to this report.