* Portugal bond yield at new high as bailout fears grow
* Wall Street opens lower after China rate hike
* Euro slips; world stocks end five-day winning streak
(Adds Wall Street open, updates prices)
By Leah Schnurr and Dominic Lau
NEW YORK/LONDON, April 5 (Reuters) - The euro fell further
from a five-month peak against the dollar on Tuesday as
Portugal moved closer to a possible debt bailout and after a
rate hike by China, which also pressured global stocks.
Wall Street opened modestly lower. China, which is viewed
as a main source of global growth, hiked interest rates for the
fourth time since October to cool inflation. For details, see
[]
Brent crude <LCOc1> prices topped $121 a barrel, recouping
earlier losses as worries about supply from oil-producing
countries in Africa and the Middle East overshadowed China's
rate hike. Brent futures were up 51 cents at $121.57 a barrel,
while U.S. crude futures <CLc1> were down 57 cents at $107.90.
Rating agency Moody's cut Portugal's sovereign debt by one
notch, saying it believed the incoming government would
urgently need to seek financial aid from the European Union.
Portuguese bond yields rose to euro lifetime highs on
[]
"Even though Moody's still rates the sovereign two notches
higher than Standard & Poor's, the downgrade is another blow to
sentiment," said Gavan Nolan, an analyst at data monitor
Markit.
There were also reports that Portuguese banks may be
threatening to stop buying government bonds to pressure Lisbon
into seeking a bailout, following the same path as Greece and
Ireland. []
Yields on Portugal's 10-year government bonds <PT10YT=TWEB>
rose as high as 9.033 percent, while Portuguese stocks <>
fell 0.7 percent. The Portuguese market fared worse than the
broader FTSEurofirst 300 index <>, which was off 0.2
percent.
Credit default swaps implied a 41 percent probability of a
Portuguese default within five years, compared with 33 percent
at the end of February, data provider CMA said.
[]
The euro fell against the dollar for the second day in a
row and was down 0.3 percent at $1.4183 <EUR=>.
The single currency was supported, however, by expectations
the European Central Bank when it meets on Thurssday will raise
rates by 25 basis points from a record low of 1 percent to tame
inflationary pressures. <ECBWATCH>
CHINA HIKE NOT SEEN TOO WORRISOME
Global stocks snapped a five-day winning streak with the
MSCI All-Country World Index <.MIWD00000PUS> off 0.4 percent
after hitting six-week highs in the previous session. On Wall
Street, the broad S&P 500 opened slightly lower.
The Dow Jones industrial average <> dipped 17.59
points, or 0.14 percent, to 12,382.44. The Standard & Poor's
500 Index <.SPX> eased 0.90 points, or 0.07 percent, to
1,331.97. The Nasdaq Composite Index <> added 1.87 points,
or 0.07 percent, to 2,791.06.
"The market is getting used to the rate hikes in China and
there is less concern it will derail global growth," said "
Jeff Kleintop, chief market strategist at LPL Financial in
Boston.
"On the plus side there's this M&A deal in the tech space,"
he said. "Companies are beginning to spend their cash on merger
deals and also on hiring, they're feeling confident enough to
spend on growth initiatives."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphics on Thursday's ECB meeting:
http://r.reuters.com/kah88r
Graphic on euro zone credit ratings:
http://r.reuters.com/pyh48r
Graphic on China rate rise: http://r.reuters.com/veh88r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
OIL IMPACT
Federal Reserve Chairman Ben Bernanke said late Monday that
the recent spike in U.S. inflation was unlikely to persist.
But sustained higher oil prices could pose a serious threat
to the global economic recovery and dampen risk appetite.
"The recent rally in oil has had virtually no impact on
equities. It was just over a month ago where equities markets
were nervous about the impact of oil prices on the economy,"
Deutsche Bank strategist Jim Reid said in a note.
"The difference this time is that the rise has likely been
due to decent growth rather than immediate geopolitical
concerns. Nevertheless one would expect the creeping price of
oil to start to get more attention given the recent rally."
Metal prices dipped modestly after China's rate rise was
overshadowed by other factors ranging from Mideast unrest to a
rise in copper inventories. Silver dipped after rising to its
highest since early 1980 at $38.77 an ounce. []
(Additional reporting by Nick Olivari; Editing by Leslie
Adler)
