* Euro tumbles further on Moody's Ireland credit cut
* U.S. Treasuries rally on euro debt worries, Fed purchase
* U.S. stock markets flat as traders test limits of rally
(Updates with closing of U.S. markets, impact of Federal
Reserve bond purchase)
By Alina Selyukh
NEW YORK, Dec 17 (Reuters) - The euro fell against the
dollar for a second straight week and global stocks edged lower
on Friday, weighed by renewed concerns over euro zone debt
after a multi-notch downgrade of Ireland's credit rating.
Investors shifted into safe-haven bonds and sold the euro
after Moody's slashed Ireland's rating by five notches, warning
further downgrades could follow [].
U.S. Treasury securities rallied, causing yields to
decline, as the market got a boost from the Federal Reserve on
Friday with its latest purchase of long-dated bonds.
[]
Moody's move on Ireland followed Fitch's three-notch
downgrade last week. Earlier this week, Moody's placed Spain
and Greece on a review for possible downgrades.
"While the Moody's downgrade of Ireland isn't any surprise,
the sheer magnitude of five notches warrants a mention. We
haven't seen anything like this since the Asian crisis," said
Win Thin, senior currency strategist at Brown Brothers Harriman
in New York.
"We foresee ongoing downgrades for peripheral -- and
perhaps even some core -- euro zone countries over the course
of 2011 as the debt ratios are going to get much worse before
they get better," Thin added.
World markets gained little comfort from a European Union
summit, at which leaders agreed to create a permanent financial
safety net from 2013 but provided no new measures to deal with
the immediate crisis.
"Everyone should be troubled with the situation in Europe,
and we don't think this the last of the news," said Matt King,
chief investment officer at Bell Investment Advisors in
Oakland, California, which oversees $400 million in assets.
European banks were under severe selling pressure over
Ireland's debt situation. At the close in New York, U.S.-listed
shares of Allied Irish Bank <AIB.N> were down 4.6 percent to
$1.22 while Barclays <BCS.N> dropped 2.1 percent to $16.24.
U.S. stock markets closed near multi-year highs on Friday,
as the S&P edged higher, but more meaningful gains may be hard
to come by in the next two weeks, which are traditionally
quiet. []
U.S. benchmark indexes closed mixed. The Dow Jones
industrial average <> fell 7.34 points, or 0.06 percent, to
11,491.91, while the Standard & Poor's 500 Index <.SPX> rose
1.04 points, or 0.08 percent, to 1,243.91. Gains in the
technology sector lifted the Nasdaq Composite Index <>
5.66 points, or 0.21 percent, to 2,642.97.
The FTSEurofirst 300 <> index of top European shares
closed down 0.44 percent at 1126.28, dragged by banks
<.FTNMX8350>, which dropped 1.49 percent. As one example,
shares of Royal Bank of Scotland <RBS.L> dipped 5.73 percent.
The MSCI's all-country world stock index <.MIWD00000PUS>
slipped 0.02 percent, while the Thomson Reuters global stock
index <.TRXFLDGLPU> fell 0.15 percent.
EURO PRESSURES MARKETS
The euro sank against the dollar, hitting a two-week low
after a drop below $1.32 triggered automatic sell orders.
After a blip of positive news from better-than-expected
data on German business morale, the euro slid as low as $1.3133
on trading platform EBS <EUR=EBS>, and was last down <EUR=>
0.43 percent at $1.3179. A break below $1.3104, its 200-day
moving average that is deemed a near-term support level, could
lead to a further decline, traders said.
Bolstered by the weak euro, the dollar <.DXY> rose against
a basket of major currencies by 0.26 percent at 80.392. Against
the Japanese yen, however, the dollar <JPY=> softened 0.1
percent to 83.96.
With the dollar on stronger ground, gold and oil prices
slipped. At U.S. market close, crude oil <CLc1> 38 cents, or
0.43 percent, to $88.08 per barrel, while spot gold prices
<XAU=> climbed $6.15, or 0.45 percent, to $1375.40.
As investors sought security in the tumultuous market, U.S.
Treasury securities rallied. The benchmark 10-year U.S.
Treasury note <US10YT=RR> was up 25/32 points in price,
yielding 3.3356 percent. The 30-year note <US30YT=RR> jumped
53/32 to yield 4.4376 percent.
Over the last two weeks, Treasuries have been selling on
concerns of ballooning deficits, stemming from the extension of
the Bush-tax cut plan. Late Thursday, the U.S. House of
Representatives passed the deal between U.S. President Barack
Obama and Republican leaders to extend expiring tax cuts. The
measure now goes to Obama to sign into law.
(Additional reporting by Natsuko Waki, Brian Gorman and
William James in London, Ryan Vlastelica, Wanfeng Zhou, Karen
Brettell and Gertrude Chavez-Dreyfuss in New York, Editing by
Chizu Nomiyama)
