GLOBAL MARKETS-Equities, euro steady, peripherals dip on Spain

* European shares, euro near flat in cautious trade

* EU summit begins, Spain pays premium at bond auction

* Euro zone peripheral bonds dip

* Treasuries win some reprieve from recent sell-off

By Neal Armstrong

LONDON, Dec 16 (BestGrowthStock) – European shares shed early gains
and peripheral euro zone bonds dipped on Thursday after Spain
paid a high premium at a debt auction, ahead of a summit at
which EU leaders will focus on the region’s debt crisis.

U.S. Treasury yields eased but held near seven-month highs
after jumping the previous day on a rise in inflation
expectations and the spectre of higher growth and a wider
deficit.

EU leaders are meeting in Brussels on Thursday and Friday
for their end-of-year summit, with efforts to overcome the
year-long debt crisis at the heart of their agenda.

Leaders will try to agree how to stop it spreading, with
Portugal and Spain in their sights, and discuss changing the
EU’s treaty to create a permanent crisis-resolution mechanism
from 2013 and might look at enlarging the existing crisis fund.
[ID:nLDE6BE29I].

Markets are not anticipating any significant developments
from the summit, though any positive news would likely support
the euro and risk appetite.

“Spain is going to be the issue, with the threat of a
downgrade, investors will be looking for comments from the EU
meeting,” Will Hedden, a sales trader at IG Index, said.

“We don’t want Spain to get bailed out. If it does, it sends
a big message to investors that if an economy as big as Spain is
fragile, then the euro-zone may be a risky place to do
business.”

Spain was forced to pay a hefty premium at its final bond
auction of the year on Thursday, in a key test of investor
appetite for euro zone peripheral debt a day after Moody’s said
it may cut the country’s rating.

The Spanish Treasury raised 2.4 billion euros ($3.20
billion), within the targeted range of 2-3 billion euros but
disappointing some analyst who expected more debt to be sold.

“In the short term this should reduce pressure on the
Spanish market, but I think when one looks at the bigger picture
and considers the small amount sold, with low bid-covers, yet at
a high yield, then it seems clear that peripheral markets remain
under pressure and in need of support from policymakers,” said
Peter Chatwell, rate strategist at Credit Agricole in London.

Government debt yields for Spain as well as Portugal and
Italy were pulled higher after the auction, while Bunds traded
in a narrow range with yields little changed on the day.

U.S. YIELDS EASE

European stocks gave up earlier gains to trade close to flat
at 1,128.79 (.FTEU3: ) as shares in southern Europe dipped
following the Spanish bond sale.

The euro (EUR=: ) was up 0.1 percent against the dollar at
$1.3225 after coming under pressure on Wednesday on Moody’s
Spain warning, while the dollar was steady versus a basket of
currencies (.DXY: ).

Oil was trading a touch lower at $88.10 (CLc1: ) and gold
(XAU=: ) rose 0.2 percent.

In the cash market, the yield on the 10-year U.S. note slid
to 3.47 percent (US10YT=RR: ) after climbing as high as 3.57
percent overnight.

The 10-year yield has risen nearly 90 basis points since
November, contributing to a dramatic steepening of the 2-year to
10-year yield curve to 282 basis points from 226 basis points at
the beginning of November.

That spread is on course for the largest widening in a
quarter since the first quarter of 2008.

“The market is very difficult now … but what I do sense is
that we’ve got down to levels that are technically supportive,”
said a trader at a European firm.

“It’s difficult to sell at this low and initiate a new
position,” he added.

U.S. equity futures were pointing to a slightly lower open
(SPc1: ) ahead of a raft of U.S. data, with the current account,
housing starts, weekly jobless claims and the Philly Fed
Business Activity index all set for release.

(Additional reporting by Paul Day, Joanne Frearson and
Hideyuki Sano, editing by John Stonestreet)

GLOBAL MARKETS-Equities, euro steady, peripherals dip on Spain