GLOBAL MARKETS-Mkts tread water ahead of EU meet, Spain in focus

* European shares, euro inch higher in cautious trade

* EU summit due, Spanish bond auction digested

* Treasuries win some reprieve from recent sell-off

By Neal Armstrong

LONDON, Dec 16 (BestGrowthStock) – European markets were little
changed in thin trade on Thursday as investors digested a key
Spanish debt auction ahead of a summit at which they hope EU
leaders will agree fresh steps to tackle the region’s debt

U.S. Treasuries won some reprieve from a sell-off near key
support levels.

EU leaders meet 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.

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

Spain’s Treasury paid 5.5 to 6 percent on Thursday to sell
more than 2 billion euros of 10- and 15-year bonds, with yields
rising sharply from the previous corresponding sales a day after
ratings agency Moody’s put the country’s sovereign debt on
review for a possible downgrade.
European stocks traded with gains of around 0.2 percent at
1,129.45 (.FTEU3: ). The euro (EUR=: ) was up 0.2 percent against
the dollar at $1.3240 after coming under pressure on Tuesday on
Moody’s Spain warning.

Oil was trading a touch lower at $88.48 (CLc1: ), while gold
(XAU=: ) rose 0.3 percent.

Ten-year U.S. Treasury futures expiring in March were up
19/64 (TYv1: ) after plumbing a 7-month low overnight. In the cash
market, the yield on the 10-year 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.


Japanese stocks continued to outperform global stock markets
thanks to foreign investment. Japan’s Nikkei share average was
flat, though up 1 percent (.N225: ) so far in the week,
outperforming the MSCI all-country world index advance of 0.1
percent (.MIWD00000PUS: ).

“The Nikkei is taking a breather after a six-week rally, but
sentiment remains bullish overall,” said Takashi Ohba, a senior
strategist at Okasan Securities in Tokyo. Foreign investors
have been net buyers of Japanese stocks for six consecutive
weeks to Dec. 11, purchasing a cumulative $9.8 billion worth of
equities, Japan’s finance ministry data showed.

The MSCI Asia Pacific ex-Japan index of equities fell 0.5
percent (.MIAPJ0000PUS: ) in sluggish trade, lead by a fall in
Chinese stocks (.SSEC: ).

After sliding more than 2 percent in November on early
profit taking, the index has staged a rally in light turnover in
December. It is up 3.6 percent so far in December.

(Additional reporting by Joanne Frearson, Hideyuki Sano and
Kevin Plumberg, editing by John Stonestreet)

GLOBAL MARKETS-Mkts tread water ahead of EU meet, Spain in focus