GLOBAL MARKETS-Treasury yields climb; Moody’s Spain warning hits euro

* US 10 yield at 7-month high on signs of improved growth

* Dollar firms on upbeat U.S. data, Aussie back at parity

* Euro slips as Moody’s cuts outlook on Spain

* Asia stocks slip, however, as Fed remains cautious

By Ronald Popeski

SINGAPORE, Dec 15 (BestGrowthStock) – Yields on U.S. Treasuries
climbed to seven-month highs in Asia on Wednesday and the
dollar rebounded as upbeat retail sales data added to evidence
that America’s economy is gathering steam.

But a warning from Moody’s on a possible downgrade of
Spain’s credit ratings served as a reminder of the risks to
the global recovery heading into 2011, pushing the euro
slightly lower. [ID:nL3E6NF0D8]

Earlier on Wednesday, a Bank of Japan tankan survey showed
Japanese manufacturers’ business sentiment had worsened for
the first time in nearly two years, while Standard and Poor’s
cut its outlook on Belgian debt on Tuesday, flagging a new
risk for markets as the euro zone’s debt crisis continues to
fester.

Stocks in Asia slid after the Federal Reserve said the
U.S. recovery was still too slow to bring down stubbornly high
unemployment, and as investors continued to book profits from
a long autumn rally before closing their books for year-end.

European shares were expected to follow Asia
lower after gains in seven straight sessions.

Energy and resource stocks were under particular pressure
as oil prices retreated and as investors switched out of big
Australian miners which have outperformed in recent sessions.

At its last policy meeting of the year on Tuesday, the Fed
offered only a cautious nod to improving prospects for the
U.S. Economy and reaffirmed its commitment to buy $600 billion
in bonds to stimulate growth, despite fears of some economists
that it could over time trigger an inflationary shock.
[ID:nN14232588]

“The U.S. Fed’s statement strengthened the likelihood the
U.S. would continue its quantitative measure. Combined with a
good set of retail data, sentiment is still good,” said Hong
Soon-pyo, a market analyst at Daishin Securities

Japan’s Nikkei ended down 0.07 percent, while the
MSCI ex-Japan index of Asian stocks slid 1 percent, pressured
by a late-day selloff in U.S. markets overnight after the
Fed’s assessment of the economy proved to be more sober than
many traders would have liked.

South Korean shares managed to buck the downdraft,
rising 0.4 percent to a fresh 37-month closing high, led by
shipyards and oil refiners.

TREASURY YIELDS EXTEND CLIMB

U.S. Treasury prices extended their recent losses as the
Fed showed no signs of curtailing its economic stimulus
measures.

The yield on 10-year Treasuries rose to just
above 3.5 percent, its highest level since mid-May, having
climbed about 70 basis points so far this month. It later
slipped back to around 3.45 percent, down 2 basis points on
the day.

The benchmark notes are on track for their worst month
since April 2004.

“I still think the situation with the labour market and
prices has not changed in the United States, so recent moves
in the Treasury market are a bit overdone,” said Junko Ikeda
of Sumitomo Trust Bank Asset Management.

“Treasuries look attractive from the prospect of the
widening short- and long-term yield spreads.”

The U.S. dollar index (Read more about the global trade. ) against a basket of other
major currencies rose 0.44 percent, having climbed off a
three-week low plumbed on Tuesday.

The euro slipped to $1.3314 after the Moody’s warning on
Spain from around $1.3340 before the news, testing support at
$1.3280-1.3325. Failure to hold that level could open the way
for the single currency to test its November lower at $1.2969.

Oil prices fell 70 cents to $87.58 a barrel after the Fed
dampened expectations for a faster recovery, which is seen as
critical to reigniting oil demand in the world’s largest
energy user.

Spot gold dipped to $1,389.10 an ounce, under some
pressure from the firming dollar after opening little changed
at just over $1,395.

(Editing by Kim Coghill)

([email protected] +65 6870 3815)

GLOBAL MARKETS-Treasury yields climb; Moody’s Spain warning hits euro