Stocks retreat on Greek uncertainty, oil tumbles

NEW YORK (Reuters) - Stocks markets around the world reversed earlier gains on Thursday, with European equities retreating from seven-year highs, after Germany rejected a Greek proposal to extend its bailout and as oil prices dropped.

Government borrowing costs fell across the euro zone, and the euro lost ground.

Despite the German rejection, Greece's wording of a document seen by Reuters appeared to cooperate substantially with the terms laid out by euro zone finance ministers in early negotiations.

"At this point, investors think that even if a deal is reached, it won't mean that the 'Greek issue' will be resolved," said Mirabaud Securities senior equity sales trader John Plassard in Geneva. "There will be serious doubts on whether Greece will fully implement the agreement."

The Greek request for a six-month extension to its euro zone loan agreement came as it was weeks away from running out of cash. Crucially, Greece agreed the plan would be monitored by the EU Commission, European Central Bank and International Monetary Fund, a retreat by Prime Minister Alexis Tsipras, who had vowed to end cooperation with "troika" inspectors.

Shortly after Wall Street opened, the Dow Jones industrial average <.DJI> fell 47.61 points, or 0.26 percent, to 17,982.24, the S&P 500 <.SPX> slipped 3.66 points, or 0.17 percent, to 2,096.02 and the Nasdaq Composite <.IXIC> declined 3.03 points, or 0.06 percent, to 4,903.34.

The broader FTSEurofirst 300 index <.FTEU3> was down 0.04 percent at 1,515.38 after hitting a seven-year high of 1.522.25 points.

Earlier Tokyo's Nikkei index <.N225> reached 15-year highs.

In the currency market, the euro fell 0.2 percent against the dollar at $1.1377 after Wednesday's gains on the Fed minutes <0#FF:>. The dollar <.DXY> edged 0.2 percent higher against a basket of major on Thursday after falling due to the perceived dovish minutes.

As stock markets turned negative and a report on U.S. Mid-Atlantic factory activity fell short of expectations, investors moved some money back into safehaven U.S. Treasuries , cutting earlier losses due to competition from higher-yielding corporate bond supply.

10-year bond yields in Spain, Italy and Portugal, the countries most vulnerable to the Greek crisis, fell 4-7 basis points to 1.55 percent , 1.60 percent and 2.25 percent , respectively.

In oil markets, benchmark Brent crude futures for April was down $2.28, or down 3.77 percent, at $58.25 a barrel. U.S. crude was last down $2.61, or 5.01 percent, at $49.53 per barrel. The oil market sagged after data showed another huge weekly build in U.S. crude inventories and a possible rise in Saudi output.

Spot gold prices fell $0.51 or 0.04 percent, to $1,212.10 an ounce.

(Reporting by Marius Zaharia in London; Blaise Robinson in Paris; Editing by Larry King and Meredith Mazzilli)

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