* China's unexpected trade deficit fuels growth worries
* Spain's ratings downgrade drives euro down
* Rising US jobless claims weigh on sentiment
* Crude oil prices fall despite Libya
(Updates with European markets close)
By Walter Brandimarte
NEW YORK, March 10 (Reuters) - World stocks and commodities
sank on Thursday after an unexpected Chinese trade deficit
fueled concerns about the global economy, while the euro fell
after a downgrade of Spain's credit rating by Moody's.
Prices of oil and copper fell after China, the world's
fastest-growing economy, posted its largest trade deficit in
seven years in February. Exports from China, which is the
world's largest consumer of copper and the second-biggest
consumer of oil, suffered a larger-than-expected impact from
the Lunar New Year holiday. For details, see [].
The retreat in oil prices was limited, however, as the
violence in Libya drove fears that the country's oil
infrastructure could suffer long-lasting damage. Forces loyal
to Libyan leader Muammar Gaddafi assaulted the eastern oil town
of Ras Lanuf on Thursday. []
European stocks fell to their lowest closing level so far
this year, dented by worries over the economy and intensifying
fears about Europe's sovereign debt crisis.
U.S. stocks fell more than 1 percent as an unexpectedly
large increase in claims for unemployment benefits in the
United States and a much wider-than-expected U.S. trade deficit
added to the economic concerns. []
"Overseas issues continue to play a role in U.S. markets.
The situation in Europe isn't complete, the market continues to
have concerns about sovereign credit," said Subodh Kumar, chief
investment strategist at Subodh Kumar & Associates in Toronto.
"Markets have been hoping that China would lead the
recovery, but when you put this (U.S.) data with slower growth
out of China, the idea that everything looks normal is going
away."
China posted a trade deficit of $7.3 billion for February,
its first since March 2010 and the biggest since February 2004.
Economists, who had forecast a small surplus of $4.95 billion,
said the sudden drop was likely to prove temporary.
The Dow Jones industrial average <> fell 147.39 points,
or 1.21 percent, to 12,065.70, while the Standard & Poor's 500
Index <.SPX> lost 16.65 points, or 1.26 percent, to 1,303.37.
The Nasdaq Composite Index <> was down 39.61 points, or
1.44 percent, at 2,712.11.
In Europe, the FTSEurofirst 300 <> index of top
shares closed down 1.15 percent to 1,131.54. Global stocks
measures by MSCI's All-Country World Index <.MIWD00000PUS> slid
1.6 percent.
SPAIN DOWNGRADED
The euro <EUR=> fell 0.64 percent to $1.3818 after Moody's
downgraded on Spain to Aa2 from Aa1, warning of further cuts to
the country's credit ratings. []
The move comes a few days after Moody's downgraded Greece
by three notches, fueling negative sentiment toward struggling
euro zone sovereign borrowers on the eve of a summit of the
currency bloc. []
London-based UBS FX analyst Geoffrey Yu said the Spanish
downgrade showed the euro zone's debt crisis is far from over,
adding that investors have yet to fully acknowledge the risk of
Europe's inability to agree on a framework for a debt rescue
fund this month.
"This is a reminder they need to come up with a
comprehensive, believable solution by the end of the month,"
said Colin Ellis, chief economist at BVCA.
"With the level of uncertainty at the moment, pressure on
yields will build up in the next two weeks... and you could
continue to see spreads going wider. But I'm not expecting any
spikes like those pre-Greece or pre-Ireland (bailouts)."
The U.S. dollar strengthened broadly, with the U.S. Dollar
Index <.DXY> up 0.6 percent. The dollar's strength contributed
to a fall in oil and other commodity prices, which became more
expensive to non-U.S. investors.
U.S. crude oil <CLc1> fell 2.87 percent to $101.38 per
barrel, while Brent oil <LCOc1> traded 1.7 percent lower at
$113.92 per barrel.
Spot gold prices <XAU=> fell 1.72 percent to $1,404.50 an
ounce. Copper for three-months delivery <CMCU3> on the London
Metal Exchange was $9,214 a tonne, down from a close of $9,275
a tonne on Wednesday.
Increased aversion to risk pushed investors into the
perceived safety of U.S. government bonds. Benchmark 10-year
Treasury notes <US10YT=RR> were up 3/32 in price, with the
yield at 3.4582 percent.
(Additional reporting by Chuck Mikolajczak in New York and
Marius Zaharia in London; Editing by Leslie Adler)
