Reuters: US Dollar Report: GLOBAL MARKETS-Bonds, dollar gain on Europe debt worries

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GLOBAL MARKETS-Bonds, dollar gain on Europe debt worries Jun 25th 2012, 16:05 Mon Jun 25, 2012 12:05pm EDT * Pessimism about outcome of EU summit sours risk appetite * Government debt prices, dollar gain on safe-haven bid * Global equity markets, crude oil prices fall By Herbert Lash NEW YORK, June 25 (Reuters) - The dollar and U.S. government debt prices rose on Monday as doubts that a European summit this week would make progress in solving the region's debilitating debt crisis fed the purchase of safe-haven assets. Equity markets around the world fell sharply on investor skepticism the June 28-29 meeting would produce substantive measures to tackle the debt crisis, now in its third year and buffeting Spain, the euro zone's fourth-largest economy. German Chancellor Angela Merkel agreed last Friday with leaders of France, Italy and Spain on a 130 billion euros ($156 billion) package to revive growth. But Merkel resisted pressure for common euro zone bonds or a more flexible use of Europe's rescue funds. The absence of Greece's new prime minister and finance minister due to illness complicated the outlook for the summit. A German government spokesman said no decisions would be taken on the debt-stricken country, dashing Athens' hopes the EU might ease the terms of its bailout. "Hopes are fading for major action even before the summit begins; hence the bid to Treasuries and weakness in equities," said David Ader, head of government bond strategy at CRT Capital in Stamford Connecticut. The price of benchmark 10-year U.S. Treasury notes rose 20/32 to yield 1.61 percent. German bonds snapped three weeks of losses. The price of bund futures settled up 127 ticks at 142.15 while the yield on 10-year government bonds fell to 1.461 percent. Stocks on Wall Street traded sharply lower, with the S&P 500 down almost 2 percent, surpassing declines of more than 1 percent in Europe and elsewhere. The Dow Jones industrial average was down 166.92 points, or 1.32 percent, at 12,473.86. The Standard & Poor's 500 Index was down 24.15 points, or 1.81 percent, at 1,310.87. The Nasdaq Composite Index was down 60.99 points, or 2.11 percent, at 2,831.43. The FTSEurofirst 300 index provisionally fell 1.5 percent to 987.00 points, its biggest daily fall in three weeks, as stocks retreated for a third successive session. The MSCI all-country world equity index slipped 1.6 percent, while its emerging market index fell 1.5 percent. Spanish government bonds came under pressure after Spain formally requested aid to recapitalize its banks, but did not specify how much money it would need. Ten-year Spanish government bonds fell pushing yields higher, to 6.64 percent, while the cost of insuring five-year Spanish debt also rose. Pessimism about the summit's outcome drove all markets. "There's some nervousness ahead of the EU summit. Reports about the meeting have not intensified hopes or expectations that there will be agreement or any big progress," said Niels Christensen, currency strategist at Nordea. The euro fell to its lowest in almost two weeks against the dollar and looked set to extend losses. The euro fell as low as $1.2469, the weakest since June 12, and was last down 0.5 percent at $1.2484. It lost 1.7 percent to 99.26 yen. Brent crude slipped, falling below $90, with concerns about faltering global growth and Europe's intractable debt crisis hitting investor confidence. Brent crude was last down $1.04 at $89.94 a barrel. U.S. crude fell $1.54 to $78.22 a barrel. Spot gold prices rose $2.20 to $1,573.70 an ounce. The Reuters/Jefferies CRB Index was down 1.41 points at 269.38. Link this Share this Digg this Email Reprints

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