GLOBAL MARKETS-Stocks slide on renewed Europe debt fears, Spain yields jump

by on September 26, 2012 6:06 pm BST

Wed Sep 26, 2012 2:06pm EDT

* Euro dips to two-week low as austerity protests in Europe

* Spanish stocks lead European stocks lower, Wall Street

* U.S. government debt rises on safe-haven buying

* Spain’s 10-year debt yield jump to 6 pct as pressure on
Madrid grows

By Herbert Lash

NEW YORK, Sept 26 (Reuters) – World shares fell sharply and
the euro slipped to a two-week low on Wednesday as growing
opposition in Europe to measures aimed at resolving the euro
zone’s debt crisis unnerved investors already skittish about the
weak outlook for global growth.

Investors focused on Spain, where the main share index lost
3.9 percent and yields on 10-year bonds hit 6 percent on
worries about Madrid’s commitment to reform due to violent
protests and talk of secession by the wealthy Catalonia region.

A general strike in Greece and signs of discord among top
euro zone officials over new policies to tackle the crisis added
to investor concerns, taking the gloss off recent moves by the
European Central Bank to calm markets by buying bonds.

International lenders are at loggerheads over how to solve
the crisis in Greece, threatening more trouble for the euro zone
as the International Monetary Fund demands European governments
write off some of the Greek debt they hold.

The euro fell to $1.2836, a two-week low, and traded
at $1.2854, down more than 0.3 percent on the day.

Crude oil prices fell more than 1 percent and stocks on Wall
Street followed European shares lower, though not as sharply.
Stocks in the euro zone suffered their worst session in two
months, while government debt rose in a safe-haven bid.

“Things are bumpy again in Europe. You are seeing more
tension there,” which has driven a rally in bonds, said Eric
Green, global head of rates and FX research and strategy with TD
Securities in New York.

Yields on Spain’s 10-year bond topped 6
percent for the first time in a week, while U.S. government debt
prices rose for an eighth straight session. Reluctance by Spain
to ask for aid could prolong the euro zone debt crisis.

The benchmark 10-year U.S. Treasury note was up
14/32 in price to yield 1.6232 percent.

Traders and investors active in the market realize that
despite reduced risks, the ECB’s bond-buying program does not
resolve all the problems in the euro zone, analysts said.

A fresh batch of weak data and gloomy corporate reports from
across the globe weighed on sectors most sensitive to the
economic cycle, like autos and basic resources.

The Euro STOXX 50 index of euro zone blue chips
closed down 2.7 percent at 2,498.52 points, its biggest one-day
drop since early August.

MSCI’s all-country world equity index was
down 1.2 percent at 331.13 points.

The FTSEurofirst 300 of top regional shares fell
1.86 percent to 1099.01.

In the United States, the view of the economy deteriorated
sharply in the third quarter and is now as bleak as it was in
the immediate aftermath of the last recession, according to a
survey of chief executives released by the Business Roundtable.

Slowing global growth is likely to crimp company profits.
Caterpillar Inc cut its 2015 earnings outlook on Monday,
as have FedEx Corp and Norfolk Southern, both of
which are economic bellwethers because of their shipping roles.

“Buyers have reached a point of exhaustion after FedEx and
Caterpillar and the like, all of whom pointed to economic
weakness,” said James Dailey, portfolio manager at TEAM Asset
Strategy Fund in Harrisburg, Pennsylvania.

“People had been buying on the idea that the Fed would prop
everything up, but if they can’t, there’s real potential for
panic selling,” Dailey said.

The Dow Jones industrial average was down 12.51
points, or 0.09 percent, at 13,445.04. The Standard & Poor’s 500
Index was down 4.44 points, or 0.31 percent, at 1,437.15.
The Nasdaq Composite Index was down 19.90 points, or
0.64 percent, at 3,097.83.

In the oil markets, developments in Europe overshadowed any
bullish sentiment generated by government data that showed U.S.
crude inventories fell 2.45 million barrels last week, against
analyst expectations they would be higher.

Brent crude oil, the global benchmark, fell more than 1
percent to below $109 a barrel before paring some losses later
in the session.

Brent futures fell 81 cents to $109.64 a barrel.
U.S. light sweet crude oil fell $1.76 to $89.61 a

“It is ‘Risk Off’ today,” said Olivier Jakob, energy analyst
at Petromatrix in Zug, Switzerland. “The Greek strike and
Spanish demonstrations are getting a lot of coverage.”