* Euro slips to 5-month lows on concerns over Greek woes
* Global stocks sell off after China restricts lending
* Crude falls below $78 a barrel on world growth concerns
* U.S. debt prices rise after U.S. Senate power shift
(Updates with U.S. markets, changes byline; dateline
previously LONDON)
By Herbert Lash
NEW YORK, Jan 20 (Reuters) - The euro slumped to five-month
lows on Wednesday on worries over Greece's fiscal woes and
global equity markets sold off after China, the world's growth
engine, ordered banks to curb lending to cool its economy.
Crude oil fell below $78 a barrel while copper, a proxy for
Chinese growth, shed nearly 2 percent on fears that demand in
China will slow as authorities tighten monetary policy. For
details see: []and[]
The lending restrictions in China sparked worry about the
global economic recovery, knocking down equity markets around
the world and pushing the U.S. dollar to a one-month high
relative to a basket of major currencies.
A surge of new lending this month in China triggered a
series of steps by authorities to rid the financial system of
excess cash that can fuel inflation and asset bubbles.
[]
U.S. stocks slipped almost 2 percent before recouping some
losses and MSCI's all-country world index <.MIWD00000PUS> fell
1.9 percent. European stocks closed down 1.5 percent.
It was the worst day for U.S. stocks so far in 2010, just
one day after U.S. and European shares closed at 15-month
highs.
The stronger dollar crimped commodity prices while investor
unease over a conservative outlook from International Business
Machines Corp <IBM.N> weighed on technology shares.
[]
IBM's earnings outlook for 2010 implies a slowdown in
earnings per share growth compared to recent years, analysts
said. Its shares fell 3.4 percent.
"You combine what's going on in China with the strength in
the dollar and you have an unwind of the commodity trade," said
Peter Boockvar, equity strategist at Miller Tabak & Co in New
York. "Then you throw in mediocre earnings relative to
expectations and the market is taking a well-needed
correction."
The CBOE Volatility index <.VIX>, Wall Street's favorite
measure of investor fear, jumped more than 11 percent in its
biggest one-day jump in nearly two months as caution swirled.
Shares of commodity-related companies dragged the S&P
materials sector <.GSPM> down more than 2.2 percent. The
Reuters/Jefferies CRB Index <.CRB> was down about 1.5 percent.
After midday, the Dow Jones industrial average <> was
down 187.88 points, or 1.75 percent, at 10,537.55. The Standard
& Poor's 500 Index <.SPX> was down 18.29 points, or 1.59
percent, at 1,131.94. The Nasdaq Composite Index <> was
down 43.20 points, or 1.86 percent, at 2,277.20.
European stocks also fell on a drop in commodity shares and
as banks fell over worries about the sector's health.
The FTSEurofirst 300 <> index of top European shares
ended 1.5 percent lower at 1,052.53 points.
In currency markets, the euro fell as concerns intensified
over cash-strapped Greece's ability to finance its mounting
budget deficit, driving the cost of insuring against a Greek
sovereign debt default to a record high. []
"Concerns about Greece and the implications for the euro
and the euro zone have been the catalyst for the dollar
strength," said John McCarthy, director of foreign exchange at
ING Capital Markets in New York.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 1.16 percent at 78.40.
The euro <EUR=> fell 1.43 percent at $1.4093, and against
the yen, the dollar <JPY=> was up 0.11 percent at 91.20.
U.S. Treasury debt prices rose as stock prices fell sharply
and on optimism that new government debt supply could moderate
after the Democrats lost their supramajority in the U.S. Senate
with the election of Republican Scott Brown to fill the seat
left vacant by the death of Edward Kennedy.
U.S. government debt prices joined in a global upward
trend, with the benchmark 10-year Treasury note <US10YT=RR>
tracking the 10-year German bund. The 10-year note was up 13/32
to yield 3.65 percent.
U.S. gold futures hit a two-week low as the dollar's sharp
rally dampened bullion's investment appeal as a hedge against
paper currency depreciation. []
Spot gold prices <XAU=> fell $27.10 to $1110.60 an ounce.
The MSCI Asia-Pacific index excluding Japan eased 1.01
percent <.MIAPJ0000PUS>, while Thomson Reuters index of
regional shares <.TRXFLDAXPU> lost 0.4 percent. Japan's Nikkei
<> gave up early gains to drop 0.25 percent.
(Reporting by Ellis Mnyandu, Vivianne Rodrigues, Emily Flitter
in New York; Chris Baldwin, Kirsten Donovan and Ian Chua in
London; writing by Herbert Lash; Editing by Leslie Adler)
