* 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 close)
By Herbert Lash
NEW YORK, Jan 20 (Reuters) - The euro slumped to five-month
lows on Wednesday amid worries over Greece's fiscal woes and as
global equity markets sold off as China, the world's growth
engine, ordered banks to curb lending to cool its economy.
Crude oil futures dipped 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: [] []
The lending restrictions in China sparked worries about the
global economic recovery, knocking equity markets around the
world and pushing the U.S. dollar to a one-month high against
a basket of major currencies.
A surge in 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.
[]
On Wall Street, U.S. stocks slipped almost 2 percent before
recouping some losses, but the Dow Jones industrial average
still suffered its worst drop of 2010, while MSCI's all-country
world index <.MIWD00000PUS> fell 1.6 percent. European stocks
earlier closed down 1.5 percent.
The stronger dollar crimped commodities 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 slid 2.9 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, settled up more than 6.25 percent,
but not before jumping more than 11 percent -- 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 1.5 percent. The
Reuters/Jefferies CRB Index <.CRB> was down about 1.33
percent.
At the close, the Dow Jones industrial average <> was
down 122.28 points, or 1.14 percent, at 10,603.15, while the
Standard & Poor's 500 Index <.SPX> was down 12.19 points, or
1.06 percent, at 1,138.04. The Nasdaq Composite Index <>
was down 29.15 points, or 1.26 percent, at 2,291.25.
European stocks also fell on a drop in commodity shares and
as banks fell amid worries about the sector's health.
The FTSEurofirst 300 <> index of top European shares
ended 1.54 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 was up against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> at 78.358, up
1.11 percent from a previous session close of 77.500.
The euro <EUR=> last traded at $1.41, down 1.38 percent from
a previous session close of $1.4298. Against the Japanese yen,
the dollar <JPY=> was up 0.16 percent at 91.25 compared with a
previous session close of 91.100.
U.S. Treasury debt prices rose as stock prices fell sharply
and on fresh optimism that new government debt supply could
moderate after the Democrats lost their supermajority in the
U.S. Senate with the election of Republican Scott Brown to fill
the seat left vacant by the death of Sen. 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 10/32
in price to yield 3.66 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 $26.35 to $1,111.30 an ounce.
The MSCI Asia-Pacific index excluding Japan eased 1.08
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.
(To read Reuters Global Investing blog, click on
http://blogs.reuters.com/globalinvesting. For the MacroScope
blog, click on http://blogs.reuters.com/macroscope. For Hedge
Fund blog, click on http://blogs.reuters.com/hedgehub)
