Billionaire investor George Soros gave high marks to the euro on Monday and speculated the U.S. dollar may eventually be replaced as world reserve currency while U.S. stocks lost ground on failure of the merger between Sun Microsystems and IBM Corp.
Soros told Reuters Financial Television the euro has been "a tremendous advantage" to countries that use it and said there was "no question of a weaker country dropping out."
The dollar fared less well, with Soros saying the greenback remains under pressure and may eventually be replaced as world reserve currency, possibly by the IMF's Special Drawing Rights.
China recently proposed greater use of SDRs, possibly as an eventual replacement of the dollar as global reserve currency.
"In the long run, having an international accounting unit other than the dollar may be to our advantage," Soros said.
He added that there were still problems in and around the euro zone, though there were positive signals from Germany.
While the International Monetary Fund will help to stabilize struggling eastern Europe, Soros said the Baltic states still face "serious problems" even as Germany, the euro zone's biggest economy, is becoming more open to offering help.
"Germany, which has been the most reserved about being the deep pocket of the rest of Europe, has recognized that it too has a responsibility toward the new member states," he said.
The U.S. Federal Reserve said on Monday it was teaming up with four other central banks to get foreign currency liquidity to U.S. financial companies.
Monday's open for U.S. stocks tempered Friday's gains, when the Dow Jones industrial average marked its best four-week winning streak since 1933.
The Dow .DJI> slipped 1.2 percent while the technology laden Nasdaq Composite index .IXIC> fell almost 2 percent.
Sun Microsystems stock slumped 22 percent as news of the merger failure swept through the market. Sun ended talks that were seen as the way for the company, once viewed as synonymous with the rise of the Internet, to survive.
A rally in European shares, driven by Asian gains, petered out as U.S. benchmark indexes fell. The pan-European FTSEurofirst 300 .FTEU3> index of top shares was down 0.6 percent as the New York session began in earnest.
Asian shares had climbed to a six-month high as demand rose for riskier assets while investors sold the low-yielding yen and Japanese government bonds and safe-haven gold.
Japan, grappling with its worst recession since World War Two, said it plans to spend at least $100 billion more to help steer its economy through the global crisis.
It will unveil a new economic package on Friday, doubling stimulus spending to around 4 percent of gross domestic product, Finance Minister Kaoru Yosano said.
One sign of higher risk tolerance early in the global day was a drop in the yen against most major currencies, although those declines pared as the U.S. stock market failed to extend recent gains.
"With the G20 summit last week, and obviously some massive stimulus packages, there's some good news here and there, mixed with some bad news," said James Foulsham, head of trading at CMC Markets in Sydney.
The depth of the challenge still facing western Europe's contracting economies was underlined by data showing consumer demand remained weak even as inflationary pressures waned.
The EU statistics office said euro zone retail sales dropped much more sharply than expected while producer prices also fell.
Economic and Monetary Affairs Commissioner Joaquin Almunia said the EU needed to consolidate its representation in the International Monetary Fund to be able to pull its weight in shaping global economic policy
"Too often the EU's voice on key issues at the global level is fractured and we fail to influence policy debates as effectively as we might," he said.
With no major data from the United States, the focus was clearly on corporate and political news.
Both political analysts and investors will be looking to U.S. Defense Secretary Robert Gates, who will unveil his budget recommendations for fiscal year 2010 on Monday in a proposal likely to call for major changes in priorities, a defense official said.
"These are not changes to the margins. This is a fundamental shift in direction," Pentagon press secretary Geoff Morrell told reporters.
Heartened investors did pile into the $19 billion rights issue of HSBC, Europe's largest bank. HSBC sold 4.89 billion shares, or 96.6 percent of the offering, to existing shareholders and bankers successfully placed the remaining shares.