* World stocks firm, on track for best week so far in 2011
* Greenback up vs major currencies after U.S. GDP revised
* Portugal 10-year yield at euro-era high
* Oil, gold steady, watching Mideast, Libya
(Updates prices, adds Spain comment, drops London from
dateline)
By Rodrigo Campos
NEW YORK, March 25 (Reuters) - The euro slipped against the
dollar on Friday on increasing concern about the worsening debt
crisis in Portugal after S&P downgraded the country's rating,
while world stocks rose on bets on economic recovery.
Portuguese bond yields hit new highs after Standard &
Poor's downgraded the country's debt ratings and warned it
could cut them again.
"For most of the week the market has treated Portugal as an
isolated problem that will not spread to other parts of Europe
but this sentiment is losing popularity very quickly," said
Kathy Lien, director of currency research at GFT in New York.
She added that the downgrade prompted "the first major
rejection of Portuguese assets."
Still, Spain's Prime Minister Jose Luis Rodriguez Zapatero
said he did not fear contagion from a potentially prolonged
period of political instability in Portugal. []
Spain is considered by the markets as a likely candidate to
be the fourth euro zone country to seek a bailout following
Greece, Ireland and possibly Portugal.
U.S. stocks rose after an optimistic outlook by software
maker Oracle and an upward revision to fourth-quarter GDP
fueled hopes that a global resurgence in technology spending
remained intact. However, volume remained weak.
"When you get an upward revision (in GDP), along with some
very good earnings out of Oracle, that will give more
confidence that even with uncertainty in the rest of the world,
we're on a good footing here, and that will help stocks," said
Elizabeth Miller, president of Summit Place Financial Advisors
in Summit, New Jersey.
The Dow Jones industrial average <> gained 70.20
points, or 0.58 percent, to 12,240.76. The Standard & Poor's
500 Index <.SPX> rose 7.95 points, or 0.61 percent, to
1,317.61. The Nasdaq Composite Index <> added 23.21
points, or 0.85 percent, to 2,759.63.
Equity volumes have dwindled in U.S. and other markets,
including Europe, as violence in the Middle East and northern
Africa, coupled with Japan's natural disasters two weeks ago
and its ongoing nuclear crisis, cloud the outlook for the
global economic recovery.
The MSCI All-Country index <.MIW0000PUS> was up 0.4 percent
and was on track to post its best week in more than four
months.
European shares traded near break-even as stronger signs on
the economy and corporate results were tempered by the euro
zone debt problems and violence in Libya.
Portugal's president consulted political leaders on Friday
on whether to call a snap election after the Socialist prime
minister resigned after a reform was rejected in parliament.
The crisis could force Lisbon to request a bailout from the
European Union and International Monetary Fund.
[].
The yield on 10-year Portuguese government bonds rose to a
euro-era high above 8 percent, well above the level the
government says is sustainable, and the premium to hold its
10-year debt rather than Germany's widened to 474 basis
points.
The euro <EUR=EBS> was last down 0.3 percent at $1.4128,
having earlier hit a session low of $1.41133 on trading
platform EBS. Traders reported option barriers around $1.4250
and said the level will be strongly defended. Technical
analysts said a weekly close above $1.4200 would leave it well
positioned for a further rise.
The dollar index <.DXY>, a gauge of the greenback against a
basket of major currencies, rose 0.3 percent, supported by the
revised U.S. GDP data.
The yen traded above 81 per dollar <JPY=>, a level it has
clung tightly to all week since a rare coordinated intervention
by leading central banks last Friday to curb its appreciation.
Higher-yielding currencies gained as the global economic
outlook boosted risk appetite and on growing demand for
dollar-funded carry trades.
The high-yielding Australian dollar hit a 2011 high of
$1.0255 <AUD=D4>, just shy of its 29-year peak of $1.0257.
Traders cited stops above $1.0260, with option expirations at
$1.0200. Traders said model funds were adding to long positions
in the currency, as were real money accounts.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FX COLUMN-Return of the yen carry trade []
Reuters polls on world stock markets: []
Graphic on world stock polls: http://r.reuters.com/juw68r
European sovereign debt crisis: http://r.reuters.com/hyb65p
Japan disaster in figures: http://r.reuters.com/ser58r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
OIL, GOLD PREY TO MIDEAST
Both U.S. crude <CLc1> and Brent <LCOc1> were on track to
post healthy weekly gains, though prices were little changed.
Investors were keeping a close eye on protests in Yemen,
Bahrain and Syria.
"So long as ongoing problems in the Middle East continue to
elevate risks of a further supply disruption, there is a strong
likelihood of a price spike in the second quarter," said J.P.
Morgan analysts headed by Lawrence Eagles.
Spot gold held steady below the previous session's record
highs, as worries over euro zone's debt crisis and Middle East
turmoil supported sentiment. []
Japan's Nikkei index <> rose 1.1 percent to post its
best week since November as foreign investors scooped up
battered shares. In the previous two weeks, the Nikkei had lost
nearly 14 percent.
(Additional reporting by Angela Moon, Wanfeng Zhou, Axel Bugge
and Shrikesh Laxmidas; Editing by Dan Grebler)
