Debt concern offsets Apple's overnight Wall St climb

Apple's solid profits failed to take away investors' concern about the political wrangling in the US over raising the nation's debt ceiling, needed for the world's largest economy to stave off default.

In afternoon trading, the Dow Jones Industrial Average edged 0.09 per cent higher and the Standard & Poor's 500 Index rose 0.21 per cent. The Nasdaq, however, fell 0.17 per cent.

Apple's stock rose to another record on its stellar quarterly earnings reported yesterday.

"There was some profit-taking this morning, but it's over now," Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago, told Reuters. "Right now, the US debt deal is the real factor that is still holding us back."

With the August 2 deadline approaching fast, the White House on Wednesday indicated President Barack Obama could support a short-term extension of the US borrowing limits as long as it was part of a broader long-term deficit reduction deal, according to Reuters.

"We believe a short-term extension absent an agreement to a larger deal is unacceptable," White House press secretary Jay Carney told reporters. "If both sides agree to something significant, we will support the measures needed to finalise details."

Obama has previously said he would not sign a short-term extension of the US borrowing limit.

Meanwhile, Fitch Ratings told Reuters on Wednesday it would decide next month whether the US deserved to keep a stable outlook on its AAA credit rating as it concluded a review of the country's economic and fiscal outlook.

Fitch, the only of the three big ratings agencies with a stable outlook on US ratings, still believed the likelihood of a debt default was low, David Riley, Fitch's main analyst for the US, told Reuters.

On the economic front, data indicated the American real estate market was still languishing. Existing home sales unexpectedly dropped to the lowest level in seven months in June as cancellations of pending contracts surged, according to the National Association of Realtors.

And earnings reports weren't all rosy either. Yahoo shed more than 7 per cent a day after posting a drop in second-quarter revenue.

Across the Altantic, the euro was last 0.3 per cent higher at US$1.4198, climbing ahead of tomorrow's summit of European leaders who will be discussing measures to solve the Greek debt crisis and prevent it from spilling over into other euro-zone countries.

"There definitely is a pricing in of a deal" in the euro zone, John McCarthy, director of currency trading at ING Capital Markets in New York, told Reuters.

European officials were considering steps previously rejected by Germany, including the use of precautionary credit lines, Bloomberg News reported, citing a person close to the talks.

Other options up for discussion on Thursday include enabling the main 440 billion euro rescue fund to lend to recapitalise banks, according to Bloomberg.

"We expect a new framework for Greece to be agreed, involving the first real efforts to reduce Greece's debt burden. But we expect little concrete in terms of measures to reduce contagion more broadly," Jens Nordvig, global head of G10 FX strategy at Nomura in New York, told Reuters.

The greenback fell 0.46 per cent against a basket of major currencies.