Stocks slip, dollar up as Irish bailout joy fades

By Daniel Bases

NEW YORK (BestGrowthStock) – Global stocks fell and the greenback rose as investors’ optimism about Ireland’s 85-billion-euro ($115 billion) debt bailout waned, exposing the unappetizing prospect that Europe’s fiscal problems will linger.

U.S. Treasuries benefited from both the concerns about Europe’s financial health as well as from bond purchases by the U.S. Federal Reserve as part of its quantitative easing program.

Share prices in Tokyo are poised to open higher, extending Monday’s five-month closing high. Nikkei futures in Chicago are up 40 points at 10,105.

The euro hit a two-month nadir against the greenback, cutting back gold’s gains for the day.

But U.S. crude oil futures rebounded, rallying more than 2 percent to settle above $85 a barrel, as a rally in gasoline and heating oil futures — plus tensions in the Korean peninsula — helped spur demand for crude.

Evidence of promising U.S. consumer spending for the end-of-year holiday shopping season is providing little counterweight so far. Retail stocks had moved higher in anticipation of the weekend sales, which were better than expected. So on Monday, investors took some profits in the retail sector.

“Tell me what the euro’s going to do and I’ll tell you where the (stock) market is going to go,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

By the close, the Dow Jones industrial average (.DJI: ) fell 39.51 points, or 0.36 percent, to 11,052.49. The Standard & Poor’s 500 Index (.SPX: ) lost 1.64 points, or 0.14 percent, to 1,187.76. The Nasdaq Composite Index (.IXIC: ) dropped 9.34 points, or 0.37 percent, to 2,525.22.

U.S. bank and energy stocks outperformed the wider market. The KBW bank index rose 1.1 percent, helped by Bank of America (BAC.N: ), which climbed 1.5 percent to $11.31,

France and Germany hailed Sunday’s Irish bailout as a rescue of the euro and set a course for a permanent debt resolution system.

The rescue package was designed both to help Ireland and to stop a rolling crisis from moving on to Portugal and, perhaps, Spain.

The spreads between Spanish and Italian bonds versus their German equivalent widened to euro-lifetime highs as optimism for the Irish deal waned.

Credit default swap costs on Portugal and Spain both hit record highs on Monday on fears that they may be next in line to struggle with their debt.

European shares closed at nearly an eight-week low, with banks among the casualties. The FTSEurofirst 300 (.FTEU3: ) index of top European shares slid 1.6 percent to end at 1,069.24. The STOXX 600 banking index (.SX7P: ) fell 1.29 percent.

Japan’s Nikkei benchmark index (.N225: ) closed on Monday at a five-month high. MSCI’S All-Country World Index (.MIWD00000PUS: ) fell 0.68 percent.

EURO SLUMPS, TREASURIES RISE

The euro’s respite was brief in the early hours of Monday’s global trading day. The deal for Ireland, endorsed by the EU finance ministers, also includes provisions that could make private bondholders share the burden of restructuring sovereign debt after 2013.

After rising to $1.3302, one euro bought $1.3132 — or 0.88 percent less than what could be exchanged on Friday.

Analysts expect further losses in the euro, given the uncertainty surrounding the fiscal outlook of the region’s peripheral countries. The next key target is $1.30 after the euro fell (Read more about the trembling euro. ) below the 200-day moving average around $1.3130.

“There is a real possibility the euro could hit $1.30 by the end of the week,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington D.C.

“Given the momentum already in place, the euro will likely be between $1.29 and 1.32 at the end of the year,” he said.

The dollar rose 0.60 percent to 80.836 against a basket of major trading-partner currencies (.DXY: ).

The greenback rose 0.17 percent to 84.24 yen.

The benchmark 10-year U.S. Treasury note rose 12/32 of a point in price, pushing the yield down to 2.828 percent.

Sentiment remained fragile, with a sale of Italian bonds meeting lukewarm demand and highlighting investors’ unease about euro-zone debt.

Irish bond yields reversed an early fall to end the day higher at 9.6 percent and on course to complete the largest monthly rise since at least 1992, according to Reuters data.

The rising likelihood that Portugal and possibly other euro zone states will require expensive bailouts and increase the burden on Germany, hit Bund futures which settled 28 ticks lower at 127.07.

U.S. December gold futures rose $3.60 to settle at $1,366 an ounce.

U.S. crude oil for January delivery added $1.97, or 2.35percent, to settle at $85.73 a barrel, not far below its intraday high.

(Reporting and writing by Daniel Bases; Additional reporting by Julie Haviv, Frank Tang, Gene Ramos, Edward Krudy, Jeremy Gaunt, Kirsten Donovan, Anirban Nag, Atul Prakash, Karen Brettell, Amanda Cooper, Gertrude Chavez-Dreyfuss; Editing by Jan Paschal)

Stocks slip, dollar up as Irish bailout joy fades