* Stocks struggle on euro zone fears
* Euro dips below $1.30 to hit 10-week low vs dollar
* Mixed U.S. data does little to qualm euro worries
* Spanish, Italian yield spreads rise to lifetime highs
(Updates with U.S. markets, data, comment, changes byline,
dateline, previous LONDON)
By Manuela Badawy
NEW YORK, Nov 30 (Reuters) - The euro hit a 10-week low
against the dollar and stocks dropped on Tuesday on speculation
weaker member states of the euro zone may be forced to ask for
financial support.
Gold rallied to a 2-1/2 week peak as concern over sovereign
debt levels in European countries fueled buying of the precious
metal as a safe store of value. Oil dropped while U.S.
government bond prices trimmed gains after data signaled
faster-than-expected manufacturing growth in the U.S. Midwest.
The data on regional business activity in November as well
as gains in U.S. consumer confidence did little to halt the
drag on markets due to deepening uncertainty about the euro
zone.
"We are starting to see many warning signs of global
contagion, including lower U.S. stock prices," said Zach Pandl,
economist at Nomura Securities International in New York.
An 85 billion euro emergency loan package for Ireland and
plans for a permanent system to resolve debt crises announced
on Sunday failed to stem fiscal concerns, as speculators
targeted Portugal and Spain.
The Dow Jones industrial average <> was down 62.70
points, or 0.57 percent, at 10,989.79. The Standard & Poor's
500 Index <.SPX> fell 8.64 points, or 0.73 percent, at 1,179.12
while the Nasdaq Composite Index <> dropped 26.10 points,
or 1.03 percent, at 2,499.12.
Markets are already discounting an eventual rescue of
Portugal although the government in Lisbon denies the country
needs outside aid, much as Ireland did before its bailout.
While a Portuguese rescue would be manageable, assistance
for its larger neighbor, Spain, would sorely test EU resources,
raise deeper questions about the integrity of the 12-year old
currency area and possibly spread contagion beyond Europe.
The FTSEurofirst 300 <> index of top European shares
was down 0.12 percent, paring losses after data showed a
better-than-expected reading of U.S. consumer confidence.
The Conference Board said its index of consumer attitudes
increased to 54.1 in November, the strongest since June, from a
revised 49.9 in October, helped in part by improving labor
market conditions. []
MSCI's all country world index <.MIWD00000PUS> was down
0.58 percent.
CRITICAL DROP
The euro <EUR=> fell below the critical $1.30 level to
$1.2977, its lowest since mid-September, before bouncing back
to $1.3008 amid fear of regional contagion and uncertainty over
the currency's future.
With the spotlight on the euro, the dollar continued to
gain, hitting a more than two-month high at 81.444 against a
currency basket <.DXY>, lifted by safe-haven flows and recent
evidence of an improving U.S. economy.
"The European credit market is in panic mode because of
fears of insolvency (for some euro zone countries) and the euro
is trading off those credit yields," said Boris Schlossberg,
director of FX research at GFT in New York.
"For the euro to stabilize, credit yields need to stabilize
and for that to happen, we need action from the European
Central Bank. The Irish bailout was not enough and so the
pressure is building."
In tandem with euro weakness, the premium investors demand
to hold Spanish and Italian sovereign bonds over German bonds
hit their highest since the euro's launch, while some of the
region's "core" debt issuers, including France, were
pressured.
U.S. Treasury prices rose, adding to the previous day's
gains, as investors turned to government debt as a safe haven
from the recent flare-up in volatility.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
13/32, with the yield at 2.7785 percent. The 2-year U.S.
Treasury note <US2YT=RR> was up 1/32, with the yield at 0.4843
percent, while the 30-year U.S. Treasury bond <US30YT=RR>
gained 25/32, with the yield at 4.097 percent.
Spot gold <XAU=> rose $18.58, or 1.36 percent, to $1,385.00
an ounce after having touched a 2-1/2 week-high of $1,385.85 an
ounce. U.S. crude oil futures <CLc1> fell 18 cents, or 0.21
percent, to $85.55 per barrel.
(Additional reporting by Rodrigo Campos, Gertrude
Chavez-Dreyfuss in New York and Elizabeth Fullerton and Tamawa
Desai in London; Editing by Kenneth Barry)
