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

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GLOBAL MARKETS-Stocks, euro fall on Spanish region's aid request Jul 20th 2012, 18:37 Fri Jul 20, 2012 2:37pm 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 on Friday and the euro hit record lows after Spain's heavily indebted Valencia region asked for financial aid, increasing investor fears that the Spanish government will seek a full-blown bailout. Valencia sought help under an 18 billion euro ($22.1 billion) program passed on Thursday that aims to help regional finances. Spain's IBEX stock index fell 5.8 percent, its biggest one-day drop in two years, and the risk premium on 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. "There is very little to stop Spanish bond (yields) moving up at the moment, and that is a big concern," said Ed Shing, head of European equity strategy at Barclays. "This is just another piece of bad news reminding people that it is not just the government that has issues but also the regional governments." The euro plumbed record lows against the Australian, Canadian and New Zealand currencies and hit multimonth 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 $1.2159, down 1.0 percent, as a sell-off against sterling and the Swedish crown exacerbated the euro's slide. 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 U.S. corporate earnings, including a profit beat at General Electric and strong advertising revenue at Google . The Dow Jones industrial average was down 122.26 points, or 0.94 percent, at 12,821.10. The Standard & Poor's 500 Index was down 12.38 points, or 0.90 percent, at 1,364.13. The Nasdaq Composite Index was down 32.70 points, or 1.10 percent, at 2,933.20. The FTSEurofirst 300 closed down 1.5 percent at 1,048.98. 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 3.7 percent and insurers slipped 1.9 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 5 basis points to 1.168 percent, and the benchmark 10-year U.S. Treasury note was up 16/32 in price to yield 1.4567 percent. The U.S. dollar index rose almost 0.7 percent to 83.470. Oil fell below $106 per barrel at one point 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 $1.00 at $106.80 a barrel, but still was on pace to post a 3 percent weekly gain and has gained about 18 percent over the past four weeks. U.S. August crude was down $1.12 at $91.54 a barrel after seven straight settlements higher. 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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