Reuters: US Dollar Report: GLOBAL MARKETS-Shares, euro fall on Spanish region's aid request

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GLOBAL MARKETS-Shares, euro fall on Spanish region's aid request Jul 20th 2012, 16:26 Fri Jul 20, 2012 12:26pm EDT * U.S. stocks fall, European shares slip from four-month highs * Euro hits record lows against several currencies * Spanish 10-year bond yields climb above 7 percent By Herbert Lash NEW YORK, July 20 (Reuters) - U.S. and European stocks slid o n F riday and the euro hit record lows against several currencies after Spain's heavily indebted Valencia region called for aid, increasing investor fears that the Spanish government is moving toward a full-blown bailout. Valencia sought help under an 18 billion euro ($22.1 billion) program passed o n T hursday that aims to help regional finances. The risk premium on Spanish government debt hit a euro-era high as its borrowing costs rose to 7.32 percent. That yield is above the 7 percent threshold considered unsustainable, and little relief is seen any time soon. The euro plumbed record lows against the Australian, Canadian and New Zealand currencies and hit multi-month lows against the Norwegian and Swedish crowns. Against the yen, it hit the lowest level in more than 11 years. The euro fell as low as $1.2143, its weakest level against the dollar since mid-June 2010. It last traded at $1.2167, down 0.9 percent, as a sell-off against sterling and the Swedish crown exacerbated the euro's slide. "The market got a little bit of a curve ball thrown at it with the Valencia news," said Matthew Lifson, senior currency trader and market analyst at Cambridge Mercantile Group in Princeton, New Jersey. "We were drifting and everything was looking OK and this news comes out and it just gives people more reason to sell the euro." U.S. stocks snapped a three-day winning streak while stocks in Europe extended losses after the European Central Bank said it would stop accepting Greek bonds as collateral, adding to concerns about the euro zone debt crisis. The news from Spain overshadowed another round of strong corporate earnings, including a profit beat at General Electric and strong advertising revenue at Google. The Dow Jones industrial average was down 108.91 points, or 0.84 percent, at 12,834.45. The Standard & Poor's 500 Index was down 12.02 points, or 0.87 percent, at 1,364.49. The Nasdaq Composite Index was down 31.13 points, or 1.05 percent, at 2,934.77. The FTSEurofirst 300 provisionally closed down 1.4 percent at 1,049.28, and Spain's IBEX fell 5.8 percent, its biggest one-day drop in two years. Banks and insurers, which stand to lose on their sovereign bond holdings and loan books if the euro zone crisis intensifies, were among the top decliners in Europe. Banks fell 3.8 percent and insurers slipped 2 percent. "The news from Europe continues to be a smoldering mess, and it will be a long convoluted process before things are resolved there," said John Kattar, who helps oversee $1.7 billion in assets as chief investment officer at Eastern Investment Advisors in Boston. German bond prices jumped and U.S. Treasuries rose as investors clamored for safe-haven assets. German 10-year bond yields fell almost 6 basis points to 1.164 percent, and the benchmark 10-year U.S. Treasury note was up 15/32 in price to yield 1.4584 percent. The U.S. dollar index rose almost 0.7 percent to 83.443. Oil fell below $106 per barrel as a firmer dollar spurred a dip from an eight-week high hit in the previous session due to supply worries linked to tension in the Middle East and hopes of an economic stimulus in the United States. Brent crude was down $1.83 at $105.97 a barrel, but still headed for its longest winning streak since the end of February, having gained about 18 percent over the four-week period. U.S. August crude was down $1.79 at $90.87 a barrel around the same time. It is on track for an almost 6 percent gain this week, its third weekly gain in four. A rally in soft commodities, which has pushed corn and soybean prices to record highs, showed no signs of abating. Link this Share this Digg this Email Reprints

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