* Wall Street lower on weak Cisco results, outlook
* U.S. weekly jobless claims drop to 2-1/2-year low
* U.S. dollar rallies on jobless claims report
* Portugal debt concerns weigh on euro
(Updates with European close, Mubarak, prices, comment)
By Daniel Bases
NEW YORK, Feb 10 (Reuters) - Weak corporate results
jeopardized an eight-day rally in the Dow industrials and
weighed on European stocks on Thursday, overshadowing upbeat
weekly U.S. jobless claims data that boosted the U.S. dollar.
Growing expectations that Egyptian President Hosni Mubarak
would step down on Thursday relieved some investor anxiety,
however bargain hunting likely played more of a role in cutting
early losses in global share prices.
Oil prices recouped losses and gained modestly while gold
remained under pressure from a stronger U.S. dollar.
The greenback gained after the U.S. Labor Department
reported an unexpected drop in initial claims for unemployment
benefits to their lowest level in 2-1/2 years.
"The pattern that we have been seeing recently is that we
don't see sell-offs that last very long. They are being bought.
Investors are buying on the dips," said Howard Ward, chief
investment officer of Gamco Growth Fund in New York.
After weeks of generally positive news on the corporate
front that has lifted benchmark indexes to 2-1/2-year highs,
investors have suddenly been presented with a barrage of
less-than-robust reports.
The latest reading of U.S. earnings, for instance, showed
that of the companies listed on the Standard & Poor's 500
index, 72 percent of those reporting have beaten analysts' mean
quarterly estimates, according to Thomson Reuters data.
However, companies such as computer networking equipment
maker Cisco Systems Inc <CSCO.O> fell 13.75 percent to $19.01 a
day after warning about dwindling public spending and weaker
margins.
In Europe, major bank Credit Suisse <CSGN.VX> missed profit
expectations because of debt charges, and Diageo <DGE.L>, the
world's biggest spirits group, missed expectations with a 9
percent rise in half-year earnings.
In midday trade, the Dow Jones industrial average <>
fell 33.19 points, or 0.27 percent, to 12,206.70. The Standard
& Poor's 500 Index <.SPX> lost 1.65 points, or 0.12 percent, at
1,319.23. The Nasdaq Composite Index <> dropped 2.76
points, or 0.10 percent, at 2,786.31.
MSCI's all-country world index <.MIWD00000PUS> fell 0.57
percent, pressured in particular by emerging markets. The EM
sub-index lost 1.75 percent.
Europe's FTSEurofirst 300 <> pared its losses on the
potential exit of Mubarak but still fell for a third straight
session, dropping 0.18 percent, even with a gain of 3.65
percent for Deutsche Boerse <DB1Gn.DE>, which looks set to buy
peer NYSE Euronext <NYX.N>. NYSE'S stock fell 1 percent.
Japan's Nikkei index <> closed down 0.1 percent.
DOLLAR SURGE
The U.S. dollar's rise accelerated after the weekly jobless
claims report showed a drop in the latest week to a seasonally
adjusted 383,000, the lowest since July 2008.
While the U.S. data underpinned the greenback's gains,
investors remain worried about Europe's lack of progress in
tackling a sovereign debt crisis which undermined the euro.
"I think this can continue as the run-up in yields is
dollar-supportive and now we're encountering a renewed sense of
fear about euro zone debt issues," said Brian Dolan, chief
strategist at Forex.com in Bedminster, New Jersey.
The euro, which hit a 12-week high above $1.38 this month,
struggled as investors drove Portuguese bond yields to their
highest since the currency was introduced in 1999.
Portugal is considered at risk of becoming the next euro
zone country to need a bailout. The European Central Bank
stepped in to buy Portuguese bonds to help stabilize the
fragile market.
The euro fell 0.74 percent to $1.3628 <EUR=> while sterling
cut early losses to rise 0.13 percent to $1.6123 <GBP=>.
The dollar made 1 percent gains against the Swiss franc,
rising to 0.9673 francs <CHF=> and rose 0.93 percent against
the yen to 83.15 <JPY=>.
U.S. Treasury debt prices fell, renewing their recent
sell-off, as traders sold older issues to make room for $16
billion in 30-year bonds <US30YT=RR> in this week's quarterly
refunding.
U.S. light sweet crude oil <CLc1> rose rose 35 cents, or
0.4 percent, to $87.06 per barrel. Spot gold prices <XAU=> fell
39 cents, or 0.03 percent, to $1,362.00 an ounce.
(Additional reporting by Angela Moon, Jeremy Gaunt, William
James, Richard Leong, Rodrigo Campos, Steven C. Johnson, Neal
Armstrong and Brian Gorman; Editing by James Dalgleish)
