Reuters: US Dollar Report: GLOBAL MARKETS-Euro hit by Spain woes, Facebook slows stocks

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GLOBAL MARKETS-Euro hit by Spain woes, Facebook slows stocks May 29th 2012, 18:12 Tue May 29, 2012 2:12pm EDT * Spanish bank woes rattle euro, bond investors * Speculation grows that ECB will aid ailing regional banks * Stocks up, though Facebook dive slows rally By Herbert Lash and Steven C. Johnson NEW YORK, May 29 (Reuters) - The euro neared a two-year low o n T uesday as investors fretted about Spain's troubled banking system. Already down sharply by midday, the euro fell further below $1.25 after Egan-Jones Ratings cut Spain's credit score for the third time in less than a month, saying the need to support Spanish banks was putting new strains on public finances. Spanish stocks also fell and Spain's borrowing costs held near six-month highs after a source said the government would issue new debt to recapitalize troubled lender Bankia. U.S. stocks lost momentum after social network Facebook shares dived below $30, extending a losing streak that began with its controversial market debut on May 18. That hurt the tech-heavy Nasdaq Composite Index. But neither was sufficient to erase all of Wall Street's gains, and investors took heart from polls showing a party that backs Greece's international bailout was leading ahead of a June 17 election. If the New Democracy Party can form a government, Greece would be less likely to quit the euro. "There's increasing hope that the more conservative party will win out in Greece, which is enough to spur some buying today," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. Reports that China was planning a new round of stimulus spending to boost lending and growth also cheered stock markets and briefly boosted oil prices, which later slipped on the Spain downgrade and Middle East supply worries. The Dow Jones industrial average was up 73.79 points, or 0.59 percent, at 12,528.62. The Standard & Poor's 500 Index was up 8.31 points, or 0.63 percent, at 1,326.13. The Nasdaq Composite Index was up 17.70 points, or 0.62 percent, at 2,855.23. Traders also appear to be anticipating better-than-expected economic news this week. May jobs and Institute for Supply Management reports are due on Fr iday, noted Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. The FTSEurofirst 300 rose 0.7 percent to 990.99, and MSCI's all-country world equity index rose 0.6 percent to 302.68. Spain's IBEX was down 2.3 percent. But a high degree of caution regulated trading in the bond markets. U.S. government debt prices rose and the yield on Germany's 10-year bond hit a record low as doubts grew over Spain's plan to recapitalize its banks and obtain financing for its struggling regional governments. "It's mostly how you solve the Spanish bank problem, so there's a bit of safe-haven buying," said David Keeble, global head of interest rates strategy at Credit Agricole Corporate & Investment Banking in New York. The benchmark 10-year U.S. Treasury note was up 8/32 in price to yield 1.72 percent. Benchmark 10-year German Bund yields touched a new low before edging up to 1.356 percent. The June Bund futures contract also hit a record high of 144.58, but later traded down at 144.29. Spanish 10-year government bond yields hit 6.53 percent on Monday, the highest since November. A rise above 7 percent proved the tipping point that forced other euro zone countries such as Portugal and Ireland to seek emergency rescues. Kathy Lien, director of research at GFT Forex in Jersey City, New Jersey, said such a spike could add to pressure on the euro. Current prices, she said, "suggest everyone who wants to be short the euro is already short," but "the next catalyst could come from a rise above 7 percent in Spanish yields, which would accelerate selling." Markets barely reacted after a private sector report showed U.S. consumer confidence unexpectedly cooled in May, falling to the lowest level in four months as Americans became more pessimistic about the job market and economic outlook. Another report showed U.S. home prices edged higher for the second month in a row in March, suggesting prices are stabilizing as the housing recovery gains momentum. U.S. light sweet crude oil fell 13 cents, or 0.14 percent, to $90.73 per barrel,, and spot gold prices fell $20.54, or 1.31 percent, to $1552.20. Link this Share this Digg this Email Reprints

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