A credit agency warning that Greece could face default if it follows an international plan designed to help the country cope with its massive debts caused Asian markets to stall Tuesday.

Oil prices hovered below $95 a barrel in Asia as traders mulled improving signs about the U.S. economy. The dollar rose against the yen and the euro.

Japan’s Nikkei 225 dropped 0.2 per cent to 9,949.88, a small retreat from Monday’s two-month high as investors sought to cash in profits a day after the index rose above the 10,000 mark for the first time since May 5.

South Korea’s Kospi index rose 0.4 per cent to 2,153.63 and Hong Kong’s Hang Seng was virtually unchanged at 22,771.65.

Few trading cues were available from Wall Street since U.S. markets were closed Monday for the Independence Day holiday. As such, markets focused on the Greek debt crisis.

Sentiment last week was buoyed after the country’s lawmakers backed austerity measures required from international creditors in return for more bailout cash. Relief that a Greek default has been avoided helped stock markets around the world post one of the best weeks in months. However, S&P’s warning on Monday that two proposals by an association of French banks “would likely amount to a default” weighed investment fervor down.

The S&P warning came a week after French banks said they were ready to help Greece by accepting a significant debt rollover. Germany’s banks later said they were also considering helping out on similar terms.

Though the Greek debt crisis has the capacity to flare up, the coming week is expected to be dominated by an interest rate increase from the European Central Bank and the monthly U.S. nonfarm payrolls data.

On Thursday, the ECB is expected to raise its main interest rate by a quarter of a per centage point for the second time since April. Most interest will center on what the bank’s chief Jean-Claude Trichet says in his ensuing press conference.

On Friday, attention will turn to the U.S. jobs data, which often set the stock market tone for a week or two after their release. After a string of mostly poor economic indicators in recent weeks, investors will be looking for indications on the health of the U.S. recovery.

Benchmark oil for August delivery was down 15 cents to $94.79 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude last settled down 48 cents at $94.94 on Friday. Financial markets in the U.S. were closed Monday for the Independence Day holiday.

In currencies, the euro dropped to $1.4486 from $1.4511 late Thursday in New York. The dollar strengthened to 80.99 yen from 80.84 yen.

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