* Moody's downgrade of Spain hits sentiment in Europe
* European stocks hit six-week low, euro at one-week low
* Weak China February trade fuels growth worries
* Violence in Libya keeps oil prices up
By Blaise Robinson
PARIS, March 10 (Reuters) - European stocks and the euro
retreated on Thursday after Moody's downgraded Spain, reigniting
worries over the euro zone debt crisis, while ongoing violence
in Libya kept Brent crude hovering around $116.
Investors were also fretting about surprisingly weak Chinese
trade data that hit Asian stocks and copper prices.
China swung to a surprise trade deficit in February of $7.3
billion -- its largest in seven years -- as the Lunar New Year
holiday dealt a sharper blow to export activity than had been
expected. []
"China's trade figures have been a shocker, setting the tone
in Asia's trading session. Add to that Spain's credit downgrade
and oil prices that aren't retreating, and the glass is now half
empty," said Lionel Jardin, head of institutional sales at
Global Equities in Paris.
"For U.S. stocks, this has been just a pause in the two-year
bull market so far, but the technical picture is much more
fragile for European stocks because of the health of the euro
zone. Same story for the euro currency: We switched to "sell" on
the euro yesterday, and we wouldn't be surprised to see a
retreat toward $1.35."
Moody's downgraded Spain to Aa2 from Aa1 with a negative
outlook and warned of further cuts, saying the country's plans
to clean up the battered banking sector will cost more than the
government expects and add to its debt burden. []
The single currency <EUR=> dropped half a cent to a one-week
low of $1.3804, triggering stop-losses on the break of $1.3850.
The yield gap between 10-year Spanish yields and equivalent
German Bunds <ES10YT=TWEB><DE10YT=TWEB> was nine basis points
wider on the day at 232 bps.
The FTSEurofirst 300 <> index of top European shares
was down 0.7 percent, hitting a six-week low, while Spain's
benchmark index IBEX 35 <> was down 1.1 percent at a near
two-month low.
World stocks as measured by the MSCI world equity index
<.MIWD00000PUS> were down 0.7 percent.
U.S. stock index futures <SPc1><NDc1><DJc1> were also in the
red, suggesting a weak start for Wall Street.
Brent crude <LCOc1> hovered around $116 a barrel as forces
loyal to Libyan leader Muammar Gaddafi bombed oil industry
infrastructure, inflicting longer-term damage on the country's
exporting capacity and keeping investors on edge.
"The recent geopolitical events that have boosted oil prices
are nothing to reassure retail investors, who have been shunning
equities," said Philippe Marchessaux, CEO of BNP Paribas
Investment Partners, which has 546 billion euros ($754 billion)
under management.
"But in the same time, when you look at corporate results
and equity valuations, stocks are tremendously cheap."
(Reporting by Blaise Robinson; Editing by Hugh Lawson)
