* Euro debt worries hit stocks, euro again
* Euro loses 1 percent against dollar
* World stocks also down 1 percent
By Jeremy Gaunt, European Investment Correspondent
LONDON, Nov 26 (Reuters) - Financial markets were battered
on Friday by worries over peripheral euro zone debt, knocking
European stocks down 1 percent and the euro by the same amount
against the dollar.
The cost of insuring against a default by peripheral euro
zone countries rose again.
Wall Street also looked set to open lower following its
Thanksgiving break on Thursday and a large run up of stocks on
Wednesday.
Two newspaper reports were helping set the tone. The
Financial Times Deutschland reported, without revealing its
sources, that a majority of euro zone members and the European
Central Bank were urging Portugal to apply for a financial
bailout. []
EU Commission President Jose Manuel Barroso, the Portuguese
and German governments denied the report was true.
The Irish Times, meanwhile, said officials at the
International Monetary Fund and in the European Union were
examining how senior bondholders could be compelled to pay some
of the cost of rescuing Ireland's banks. []
The reports fed into general market disquiet about how the
euro zone debt crisis -- created by questions about whether
indebted countries' can meet bond payments -- will play out.
"Officials now seem to be pressing Portugal to take aid and
that's unsettling investors. Peripheral issues are unlikely to
go away in the short-term and the euro will remain under
pressure into the end of the year," said Manuel Oliveri,
currency strategist at UBS in Zurich.
In the past month, there have been some hefty losses in
euro/dollar and on European bourses as a result of the crisis.
The reaction has not yet, however, matched those seen in May and
June around the time of the Greek crisis.
This is in large part because of the creation of a bailout
mechanism involving the European Union and International
Monetary Fund.
The EU is attempting to create a more permanent mechanism,
but the various proposals floated for what it might contain have
created highly volatile markets.
The irony is that it is occurring just as the world economic
recovery is gaining traction.
EURO SLIDED
The euro fell around 1 percent against the dollar to fresh
two-month lows <EUR=> while the dollar was boosted by various
factors, ranging from rising optimism about the U.S. economy to
tensions in the Korean peninsula.
The euro <EUR=> was at $1.3223, levels last seen in
September.
European shares fell, with banks in particular in focus.
The FTSEurofirst 300 <> index of top European shares
was down 1.4 percent, although it is still up around 67 percent
from its lifetime low in March 2009.
"It is amazing how resilient markets have been considering
the financial explosions we have had in Europe and the gunfire
in Korea," said Justin Urquhart Stewart, director at Seven
Investment Management.
"The market is still trying to find where it goes next. A
lot of people may well be saying 'I will take my profits and
square the books'."
MSCI's all country world index <.MIWD00000PUS> was down 1
percent and its emerging market benchmark <.MSCIEF> lost 1.6
percent.
Ireland's 10 year bonds <IE10YT=TWEB> were yielding 8.9
percent, Portuguese counterparts <PT10YT=TWEB> 7.2 percent and
Spanish 10-year debt <ES10YT=TWEB> 5.3 percent.
By contrast, German Bunds <DE10YT=TWEB> yielded 2.6 percent.
(Additional reporting by Brian Gorman and Neal Armstrong,
editing by Mike Peacock)
