Shares in Europe closed flat and US stocks were edging higher on hopes that Greek political leaders will agree on the terms needed to secure fresh bailout funds.

Greek PM Lucas Papademos is holding new meetings with his political rivals to finalise an accord. EU finance ministers have been asked to be available for a conference call tomorrow.
Hopes drove the euro to eight-week highs against the greenback. The currency was last 0.8 percent stronger at US$1.32420.

"The market is expecting a Greek deal, so there's greater optimism overall. That drove the euro to several key technical levels," Greg Moore, currency strategist, at TD Securities in Toronto, told Reuters.

"But it's certainly up in the air at this point. It's unclear as to what will come out of this. All these are very fluid headlines and that highlights the high level of uncertainty at the moment."

While Greece is dominating the headlines, there were poignant reminders from the world's two largest economies that the outlook for corporate profits is far from secure.

China today warned that the nation's industrial output growth would probably slow this quarter, while Federal Reserve Chairman Ben Bernanke warned that the US unemployment rate understated the weakness in the country's labour market.

In early afternoon trading in New York, the Dow Jones Industrial Average rose 0.25 percent, the Standard & Poor's 500 Index gained 0.14 percent and the Nasdaq Composite Index advanced 0.16 percent.

According to Thomson Reuters data through Tuesday morning, of the 301 companies in the S&P 500 posting results so far, 60 percent surpassed estimates, tracking below recent quarters at this point of the reporting season.

In Europe, the Stoxx 600 Index closed with a 0.3 percent decline for the day.

UBS, Switzerland's biggest bank, said fourth-quarter profit dropped 76 percent after its investment bank reported a second consecutive quarterly loss.

Net income fell to 393 million Swiss francs (US$427 million) from 1.66 billion francs in the year-earlier period, the Zurich- based bank said in a statement today. Earnings missed the 721 million-franc average estimate of eight analysts surveyed by Bloomberg over the past four weeks.

In Washington, Bernanke reminded investors that there are still plenty of challenges ahead for the world's largest economy and reiterated that the bank's key interest rate will probably remain near zero at least through late 2014.

While acknowledging improvement in some jobs data, Bernanke warned that the 8.3 percent rate of unemployment in January understated the labour market's weakness.

“It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke said today in response to questions at a hearing before the Senate Budget Committee in Washington, according to Bloomberg. “There are also a lot of people who are either out of the labour force because they don’t think they can find work” or in part-time jobs.

(BusinessDesk)