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Euro falls amid Greek standoff, but shares rebound

By Ryan Vlastelica

NEW YORK (Reuters) - The euro fell on Tuesday as it appeared more likely that debt-stricken Greece would default or have to leave the single currency, while the U.S. dollar rose at the start of a two-day meeting by the Federal Reserve.

Stocks mostly rose on the day, with shares in both Europe and the United States rebounding after a two-day decline, though investors continued to closely monitor the situation with Greece. Wall Street stocks were also supported by potential deal activity in the healthcare space.

Prime Minister Alexis Tsipras lashed out at Greece's creditors on Tuesday, accusing them of trying to "humiliate" Greeks, and he defied a drum beat of warnings that Europe is preparing for his country to leave the euro. The address was seen as a sign that Tsipras was unlikely to accept austerity cuts needed to unlock frozen aid and avoid a debt default within two weeks.

"The market is still anxious about Greece and would like the situation to be dealt with one way or another. The week-after-week uncertainty isn't good for the market," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

The euro (EUR=) fell 0.35 percent to $1.1243 while the U.S. dollar index (.DXY), which measures the greenback against a basket of currencies, rose 0.2 percent. The yen (JPY=) was flat against the dollar.

The all-country MSCI International ACWI Price Index <.MIWD00000PUS> rose 0.3 percent, while the pan-European FTSEurofirst 300 (.FTEU3) ended 0.6 percent higher, rebounding after a decline of 2.4 percent over the previous two sessions. Shares in Hong Kong (.HSI) fell 1.1 percent.

The Dow Jones industrial average (.DJI) rose 113.31 points, or 0.64 percent, to 17,904.48, the S&P 500 (.SPX) gained 11.86 points, or 0.57 percent, to 2,096.29 and the Nasdaq Composite (.IXIC) added 25.58 points, or 0.51 percent, to 5,055.55. The S&P 500 is coming off a two-day decline of 1.2 percent.

Wall Street was also lifted after the Wall Street Journal reported that UnitedHealth (UNH.N) was considering buying Cigna (CI.N) and Aetna (AET.N). UnitedHealth, a Dow component, rose 2.2 percent to $121.55.

U.S. investors were also looking for clues regarding the timing of a rate hike after a two-day Federal Reserve meeting.

The central bank is unlikely to raise rates in this meeting but traders will watch for any hints from Fed Chair Janet Yellen at a news conference after the meeting on Wednesday.

The Fed has said it remains data-dependent and will raise rates only when it sees an improvement in the economy. Second-quarter data pointed to a recovery after a halt in growth earlier in the year.

The benchmark 10-year U.S. Treasury note rose 12/32 in price, pushing the yield down to 2.3111 percent.

In the commodity market, U.S. crude futures (CLc1) rose 0.8 percent to $60.01 per barrel, lifted as a tropical storm moved ashore in the oil-producing state of Texas. [O/R] Brent crude for August delivery (LCOc1) was down 0.5 percent at $63.65 per barrel.

Gold prices (XAU=) fell 0.4 percent while silver (XAU=) lost 0.5 percent. Copper (CMCU3) lost 1.1 percent in its second straight daily decline of more than 1 percent.

(Additional reporting by Tanya Agrawal; Editing by Nick Zieminski)