* Euro-debt worries hit stocks, euro again
* Euro drops 1 percent against U.S. dollar
* World stocks fall 1 percent
(Updates with U.S. trading, adds byline, NEW YORK dateline)
By Jeremy Gaunt and Al Yoon
LONDON/NEW YORK, Nov 26 (Reuters) - World stock markets and
the euro slumped on Friday on concern the European sovereign
debt crisis will spread within the continent.
Also clouding markets, China warned against military acts
near its coastline before U.S.-South Korean naval exercises,
which North Korea said risked pushing that region toward war.
The North shelled a South Korean island earlier this week. For
details, see [] [].
Worry about the most deeply indebted European nations has
intensified, fueled on Friday as newspaper reports shifted
attention from Irish debt to Spain and Portugal. The crisis has
lingered amid questions whether indebted countries can meet
bond payments.
"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.
The Financial Times Deutschland reported, without
identifying 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, along with 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. [].
Bond rating company Standard & Poor's on Friday cut its
ratings on the four domestically owned Irish banks, citing
weakened credit-worthiness
.
The mounting worry pushed world stocks lower. MSCI's all
country world index <.MIWD00000PUS> dropped more than 1
percent, extending the decline since Nov. 5 to 5 percent.
In New York, the Dow Jones industrial average <> fell
75.38 points, or 0.67 percent, to 11,111.90. The Standard &
Poor's 500 Index <.SPX> declined 6.19 points, or 0.52 percent,
to 1,192.16 and the Nasdaq Composite Index <> slipped 7.02
points, or 0.28 percent, to 2,536.10.
The FTSEurofirst 300 <> index of top European shares
was down 0.4 percent. Banks led losses.
Resource-related U.S. stocks led declines, with the S&P
materials sector <.GSPM> off 1.3 percent as key base metals
prices fell, pressured by the advancing greenback and by a rise
in margin requirements by the Shanghai Futures Exchange that
prompted liquidation of speculative positions.
[].
Freeport McMoRan Copper & Gold <FCX.N> dropped 2.2 percent
to $98.48.
"The debt crisis in Europe is attracting a lot of dollar
buyers, causing risk aversion," said Peter Cardillo, chief
market economist at Avalon Partners in New York.
Despite price drops, the reaction to euro-zone debt worry
has not yet matched those seen in May and June around the time
of the Greek crisis due to 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.
U.S. stock markets will close at 1 p.m. (1800 GMT)
following the U.S. Thanksgiving holiday on Thursday. The light
trading session follows a Wall Street rally on Wednesday as
investors focused on upbeat data on the labor market and
consumer spending for the holiday season.
EURO WEAKENS
Pressure on the euro has intensified as the spiraling
debt crisis threatens to ensnare more countries, including
Spain, Portugal and Italy.
The euro fell around 1 percent against the dollar to fresh
two-month lows while the dollar got a lift from various
factors, ranging from rising optimism about the U.S. economy to
tensions in the Korean peninsula.
The euro <EUR=> fell 0.85 percent to $1.3247, having
dropped as low as $1.3200 on trading platform EBS.
The dollar rose as high as 84.18 <JPY=EBS>, the strongest
level since late September. It was last at 84.10 yen, up 0.63
percent, rising further from a 15-year low of 80.21 yen hit at
the beginning of this month.
Government debt markets also took their cue from
speculation over the euro-zone debt. U.S. Treasury debt tracked
German Bunds higher, with both kinds of securities seen as
safety plays by jittery investors.
Benchmark 10-year Treasury yields fell to 2.88 percent from
2.91 percent before the U.S. holiday on Thursday.
Ireland's 10-year bonds <IE10YT=TWEB> were yielding 9.5
percent, Portuguese counterparts <PT10YT=TWEB> 7.1 percent and
Spanish 10-year debt <ES10YT=TWEB> 5.2 percent. By contrast,
German Bunds <DE10YT=TWEB> yielded 2.7 percent.
In commodities, U.S. light sweet crude oil <CLc1> fell 24
cents, or 0.29 percent, to $83.62 per barrel.
(Additional reporting by Brian Gorman and Neal Armstrong in
London, and Rodrigo Campos in New York; Editing by Kenneth
Barry)
