Global stocks mixed, euro flat on downgrade fears

NEW YORK (Dec 16): World stocks were mixed and the euro was flat on Friday as worries about downgrades of weaker euro zone countries curbed risk appetite, pushing aside an improved outlook on the U.S. economy.


Volume was below average across financial markets heading into the
weekend. Trading was choppy as perceived risky assets gave up much of
their initial gains.

Anxiety over potential ratings downgrades in European sovereign debt
and their repercussion on the region's banks underpinned safety bids
for U.S. and German government bonds.

Fitch Ratings on Friday placed Belgium, Cyprus, France,
Ireland, Italy, Slovenia and Spain on watch for possible downgrade and
warned that a comprehensive solution to this festering problem is
"technically and politically beyond reach".

It affirmed France's AAA-rating but could strip the second-biggest euro zone economy of its top-notch rating in two years.

Fitch's rating move and dire warning about Europe trumped optimism about the U.S. economy following recent upbeat data.

Government data released on Friday showed U.S. inflation pressure
waning, fanning expectations the Federal Reserve could do more to boost
economic growth. The latest consumer price report followed data on
Thursday suggesting a possible pick-up in job growth, which has been
meager during the current recovery.

Investor fears about the euro zone debt crisis persist as European
leaders have not delivered more measures to contain the crisis after
promising increased fiscal disciple at a summit in Brussels last week.

"There remains a great deal of concern about the direction of the
euro zone," said Michael Woolfolk, senior currency strategist at BNY
Mellon in New York. "We're still not trading on fundamentals and
haven't been for some time."

The MSCI world equity index rose 0.3 percent after hitting a
three-week low on Thursday. The index is still down 3.5 percent on the
week.

The Dow Jones industrial average .DJI closed down 2.42 points, or 0.02 percent, at 11,866.39. The Standard & Poor's 500 Index .SPX was up 3.91 points, or 0.32 percent, at 1,219.66. The Nasdaq Composite Index .IXIC was up 14.32 points, or 0.56 percent, at 2,555.33.

On the week, the Dow fell 2.7 percent; the S&P lost 2.9 percent and the Nasdaq declined 3.5 percent. .N

European stocks .FTEU3
ended down 0.5 percent, erasing earlier gains on selling tied to
expiration of options contracts. They finished 2.9 percent lower on the
week.

Tokyo's Nikkei .N225 ended up 0.3 percent, reducing its weekly drop to 1.6 percent.

The euro clung to the $1.30 area versus the dollar after falling to
11-month lows on Wednesday. The 17-nation common currency was poised to
close up 0.1 percent against the greenback after touching a high of
$1.3084. It lost 2.6 percent against the dollar on the week.

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PERIPHERAL YIELDS STAY HIGH

Long-term borrowing costs for Italy
and Spain, whose heavy debt loads have worried investors and rating
agencies, fell early in the trading day. That helped to steady the euro
and briefly boosted European shares.

But they ratcheted back up to alarmingly high levels, with the yield
on 10-year Italian government bonds creeping back above 7 percent,
which analysts deem unsustainable for the euro zone's third-biggest
economy to pay.

Italy faces a confidence vote in parliament, called to speed up
approval of a 33 billion euro ($43 billion) austerity package aimed at
restoring investor confidence.

Amid these political developments, worries linger about the euro
zone debt crisis and have supported U.S. Treasuries and German Bunds.
They pushed aside optimism about the U.S. economy and hopes the
European Central Bank will ultimately step in to buy bonds of troubled
euro zone peripheral countries.

Bund futures
ended up 1 point at 138.66 at their highest in four weeks. Benchmark
10-year Treasury notes were up 17/32 in price for a yield of 1.85
percent, touching their lowest levels in early October.

Gold, another traditional safehaven asset, snapped a four-day losing streak tied to fund liquidation.

Spot bullion in London ended up 1.5 percent at $1,593.68 an ounce
after touching the lowest level since late September on Thursday. For
the week, gold fell 6.8 percent, the biggest weekly decline since late
September.

The oil market struggled to hold early gains on nagging worries
about the euro zone crisis causing a global economic slowdown. February
Brent crude
futures settled down 25 cents at $103.35 a barrel, while spot U.S. oil
futures settled down 34 cents at $93.53, briefly falling below their
300-day moving average. - Reuters