*World stocks stumble on US earnings, economic reports
*S&P warns on health of UK banking system
*Dollar benefits from euro zone fiscal worries
By Al Yoon
NEW YORK, Jan 28 (Reuters) - Most global shares slumped on
Thursday after reports cast doubts on the U.S. economic
recovery and the health of the UK banking system, while fiscal
worries elsewhere in Europe dented the euro versus the dollar.
Earnings reports also helped send U.S. stocks lower.
Shares in the United States and Europe turned lower as a
drop of 8,000 in initial claims for unemployment benefits
suggested a sluggish jobs recovery. Another report showing a
disappointing rise in orders for big-ticket durable goods also
dulled the recovery outlook that has underpinned markets for
months. For details, see [] and [].
"We used to think we would start creating jobs in the first
half of the year, but data points like this suggest that's less
likely," said Michael Sheldon, chief market strategist at RDM
Financial in Westport, Connecticut. "The longer it takes to
create jobs, the more uncertain the recovery becomes."
Quarterly results from 3M Co <MMM.N> and AT&T Inc <T.N>
also pushed indexes lower. 3M shares fell 2.9 percent to $79.92
and AT&T fell 0.3 percent to $25.69.
The Dow Jones Industrial Average <> at midday swooned
146.31 points, or 1.43 percent, to 10,089.85. The Standard &
Poor's 500 Index <.SPX> fell 15.74 points, or 1.43 percent, to
1,081.76 and the Nasdaq Composite Index <> declined 48.43
points, or 2.18 percent, to 2,172.98.
World stocks as measured by MSCI <.MIWD00000PUS> fell
nearly 1 percent. The index is at its lowest since Nov. 6 and
down more than 7 percent from highs set earlier this month.
European stocks also struggled, and the euro fell, as
concerns about banks and the fiscal health of Greece, Portugal
and other smaller euro zone countries weighed on investor
confidence. European shares <> dropped 1.2 percent.
German unemployment beat forecasts, while European Central
Bank Executive Board member Gertrude Tumpel-Gugerell said it
was time fiscal and monetary policy returned to normal.
European shares shed earlier gains after bond rating
company Standard & Poor's said the UK banking system was no
longer classified among the most stable and low-risk.
In currencies, the dollar rose to its highest level in more
than six months against the euro as Germany and France denied a
newspaper article suggesting an EU bailout for Greece was being
planned, while Athens said it has struck no deal for China to
buy its bonds and will search mainly in Europe for funds.
The premium investors demand to hold Greek government bonds
rather than benchmark German Bunds set a new euro lifetime high
on Thursday. In U.S. debt, benchmark 10-year U.S. note yields
rose 0.01 percentage point to 3.66 percent.
Meantime, budget proposals from the Portuguese government
on Wednesday failed to reassure ratings firms []
[]. The premium to hold Portuguese debt compared
with benchmark German bonds also rose.
"Clearly that concern is not going away and if anything,
it's becoming a greater concern for the market," said Matthew
Strauss, senior currency strategist at RBC Capital Markets in
Toronto. "It seems that the market is willing to push
euro/dollar even lower."
The euro <EUR=> dropped 0.31 percent to $1.3973, the lowest
level since mid-July. The dollar <.DXY> rose against a basket
of major trading-partner currencies, up 0.27 percent at 78.891,
but fell 0.26 percent against the Japanese yen <JPY=> to 89.77
yen.
Losses sustained in Europe and the U.S. followed an upbeat
day in Asia, where Japan's Nikkei average rose 1.6 percent,
snapping a four-day losing streak following positive reports
from Honda Motor <7267.T> and Sony Corp <6758.T>.
In energy and commodities prices, U.S. light sweet crude
oil <CLc1> fell 23 cents, or 0.31 percent, to $73.44 per
barrel, and spot gold prices <XAU=> fell 45 cents, or 0.04
percent, to $1,085.90.
Earlier, investor optimism after U.S. President Barack
Obama's State of the Union speech late on Wednesday had knocked
the dollar off highs reached after the U.S. Federal Reserve
kept its low interest rate policy intact.
That Obama did not aggressively attack banks soothed
markets, said David Morrison, market strategist at GFT Global
(Additional reporting by Tamawa Desai, Harpreet Bhal, Naomi
Tajitsu, Elaine Lies, Ryan Vlastelica and Wanfeng Zhou; Editing
by Kenneth Barry)
