GLOBAL MARKETS-Euro hit by ratings warnings; stocks gain

* Common currency hits lifetime low vs CHF

* Euro periphery bonds pressured, stocks edge up
* MSCI world equity index nears highest since Sept. 2008

By Naomi Tajitsu

LONDON, Dec 22 (BestGrowthStock) – The euro slumped to a lifetime
low versus the Swiss franc on Wednesday following credit ratings
warnings on Portugal and Greece but European shares hit a fresh
27-month high on growing optimism that the region’s economic
recovery will continue next year.

The oil price topped $90 a barrel as a cold snap continued
to wreak havoc in parts of Europe and on a drop in U.S.
inventories while Wall Street was primed for a slightly weaker
start, after climbing the previous day.

A warning from Moody’s on Tuesday that it may cut Portugal’s
rating and an announcement from Fitch that it could downgrade
Greece reminded investors that euro zone debt problems were far
from over and continued to spur selling in the euro.

The single currency fell to 1.2493 Swiss francs, its weakest
since its launch in 1999. However, it gained some respite
against a broadly lower dollar on a Portuguese newspaper
reported that China was ready to buy 4 to 5 billion euros of
Portuguese sovereign debt. [ID:nLDE6BL0MW]

Beijing offered no comment on the report, which failed to
convince investors in the bond market as peripheral euro zone
bonds remained under pressure with markets wanting more
information on how European officials will deal with fiscal
issues in the future.

“There’s been no clarity on what European Union leaders will
do to deal with the debt crisis,” said Investec economist Philip

“That uncertainty, coupled with the threat of downgrades to
various peripheral countries has led to more spread widening and
a weaker euro.”

Global stocks measured by the MSCI All-Country World Index
(.MIWD00000PUS: ) approached a 26-month high hit last month.

Europe’s FTSEurofirst 300 index (.FTEU3: ) rose to 1,147.82,
its highest intraday level since September 2008 but moves were
exaggerated by thin pre-holiday trade.

The index was boosted by a near 9 percent surge in the share
price of UK software company ARM Holdings (ARM.L: ), which
supplies processors for Microsoft (MSFT.O: ), on reports the
software giant is working on a new version of its operating

Mining shares suffered from a fall in metals prices, but
analysts said shares would remain supported through year end.

“Investors will be happy to see the market close off the
year with a decent gain,” said Richard Jeffrey chief investment
officer at Cazenove Capital Management. “There’s a lot of macro
information today that may influence people’s thinking on 2011.”

In Tokyo, the Nikkei average dipped 0.2 percent, backing
away from a seven-month intraday high hit earlier in the day
after downbeat comments on the economy by Prime Minister Naoto
Kan. [ID:nnTOE6BL04C]. Hong Kong’s Hang Seng Index (.HSI: ) edged
up 0.2 percent, helped by gains in property developers.


Reports that China is interested in buying Portuguese debt
highlighted the currency market’s focus on any possible move by
China to diversify its massive currency reserves out of dollars
and into other currencies, including the euro.

This is seen as a reason to sell the dollar against other
currencies, although the move is expected to take place over a
very long period.

The dollar index (Read more about the global trade. ) (.DXY: ) dipped 0.36 percent.

The newspaper report offered no relief for Portuguese bonds
with 10-year yields (PT10YT=TWEB: ) rising 10 basis points to 6.80
percent on persistent concerns about Portugal’s debt levels and
fears it may be forced to follow Greece and Ireland and seek a

Yield premiums of periphery euro zone bonds over Bunds have
been trending higher with the 10-year Portuguese spread widening
around 60 basis points since the start of the month.

Analysts expect the euro and bonds issued by euro zone
countries with ongoing debt problems to remain under pressure
from a steady drip of grim ratings news.

Many argue that markets were already pricing even more gloom
for the euro zone’s weaker members — Greece, Portugal, Spain,
Ireland and Belgium — and that ratings agencies were merely
playing catch-up.

Debt and fiscal issues have plagued the euro all year, but
European stocks have largely brushed off such issues as
investors have put their money to work in equities on the view
that the global economy will continue to grow in 2011.

Warnings from credit ratings on euro zone debt helped boost
the appeal of gold as a safe asset and the gold price (XAU=: )
firmed to $1,388.65 an ounce on Wednesday, building on three
straight sessions of gains.

Copper prices (CMCU3: ) dipped to $9,365 on the London Metal
Exchange after punching a record high of $9,392 on Tuesday.

Oil prices (CLc1: ) rose around half a percent on the day to
$90.30 per barrel, boosted by unusually cold weather in parts of
the northern hemisphere and after American Petroleum Institute
data released late on Tuesday showed a large 5.8 million barrel
decline in weekly crude stocks, surpassing analyst expectations.

(Additional reporting by Kirsten Donovan and Brian Gorman;
Editing by Susan Fenton)

GLOBAL MARKETS-Euro hit by ratings warnings; stocks gain