GLOBAL MARKETS-Euro-zone fears sink stocks, euro, oil

NEW YORK (Dec 14): Stocks, oil, gold and the euro all fell on
Wednesday, as sky-high borrowing costs for Italy fed fears of Europe's
debt crisis spinning out of control.

The Federal Reserve's decision to do nothing new to support growth
despite warning that Europe's debt crisis could hurt the U.S. economy
added to a rush into less risky U.S. and German government bonds.

Global equity markets fell for a third straight day and the euro hit
its lowest level in 11 months. Oil and gold prices were on track for
their biggest one-day drop since late September.

"The main issue right now is the complete, absolute failure of the
European Union to come to any kind of solution. They're back to where
they started from," said Jeffrey Sica, president and chief investment
officer of SICA Wealth Management in Morristown, New Jersey.

The Dow Jones industrial average fell 131.46 points, or 1.10
percent, to end at 11,823.48. The Standard & Poor's 500 Index lost
13.91 points, or 1.13 percent, to finish at 1,211.82. The Nasdaq
Composite Index dropped 39.96 points, or 1.55 percent, to close at
2,539.31.

An index of top European stocks lost 2.1 percent, while Tokyo's Nikkei closed down 0.4 percent.

A Morgan Stanley index of global stocks slid 1.6 percent.

Investors were disappointed that the Fed showed no new urgency after
its Tuesday meeting to launch more stimulus programs to counter a likely
economic drag from the European debt crisis.

The euro was down 0.4 percent against the U.S. dollar at $1.2979. It
broke below $1.30 for the first time since January after Rome's auction
of five-year debt, with foreign- exchange markets still speculating
that more rating downgrades were in prospect for euro zone governments.

The 17-member euro zone's currency is about 10 cents above its
average New York closing levels going back to January 1999, when it
first began trading, according to Reuters data.

"The problem hasn't been solved, so why would you want to buy the
euro?" said Ronald Simpson, director of currency research at Action
Economics in Tampa, Florida. "The problem is that nobody knows how this
is going to end, including the politicians and policymakers."

German Chancellor Angela Merkel told parliament on Wednesday tougher
budget discipline is needed to deal with the euro zone's debt crisis,
which she reckons might take years -- not weeks --to resolve. Her
remarks came after last week's EU summit, which investors concluded did
not produce a comprehensive solution to keep the crisis from worsening.

Debt-laden euro-zone members are paying dearly for the political
quagmire. Italy paid 6.47 percent at a five-year note auction on
Wednesday. That was a euro-era record high for a five-year Italian sale,
breaching the previous auction peak of 6.3 percent set in November.

On the other hand, Germany raised 4.2 billion euros in a two-year
debt auction that fetched a euro-era record low yield of 0.29 percent,
down from 0.39 percent at the last such auction.

Strong demand at the two-year German note sale and 30-year U.S.
Treasury bond auctions on Wednesday underscored how desperate investors
are to find a safe haven for their money.

The benchmark U.S. 10-year Treasury note rose 18/32 in price to yield 1.90 percent, the lowest in three weeks.

The dollar index, which tracks the greenback's value against a basket
of currencies, was up for a third straight day to its highest since
January. It finished up 0.4 percent at 80.555, slightly off its earlier
highs.

Investors' flight into the dollar and less risky bonds resulted in
heavy losses in oil, gold and industrial commodity prices on worries
about a slowing global economy.

Copper in London closed down 5 percent at $7,222.75 a tonne, a
two-week low, while Brent crude closed down 4.1 percent, or $4.48, at
$105.02 a barrel. U.S. January oil futures settled at $94.95 a barrel,
down $5.19, or 5.2 percent.

Gold fell 3.9 percent to $1,566.79 an ounce, its lowest since late
September, after the euro's decline encouraged more non-U.S. investors
to take profit on their bullion holdings. - Reuters