* Spain's downgrade spooks investors ahead of summit
* European stocks hit six-week low, euro at one-week low
* Weak China February trade fuels growth worries
* Brent crude falls below $115; fighting rages in Libya
By Blaise Robinson
PARIS, March 10 (Reuters) - European stocks and the euro
fell on Thursday as Moody's downgraded Spain, reigniting worries
over the euro zone debt crisis ahead of the bloc's summit and
prompting investors to turn to safer bets such as Bunds.
Brent crude <LCOc1>, which has gained 13 percent over the
past three weeks, dipped below $115 on Thursday, but the retreat
was limited as forces loyal to Libyan leader Muammar Gaddafi
launched an assault on the eastern Libyan oil town of Ras Lanuf,
sparking worries about long-term damage to the country's oil
infrastructure. []
Investors were also fretting about surprisingly weak Chinese
trade data that hit Asian stocks and copper prices.
China swung to a 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.
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 move comes a few days after Moody's steep three-notch
downgrade of Greece, fuelling negative sentiment towards
struggling euro zone sovereign borrowers on the eve of a summit
of the currency bloc. []
"If speculators really hit Portugal hard there would appear
to be an increased possibility that Spain will be put back under
the spotlight, but we don't think Spain will need to be bailed
out," said Jane Foley, senior currency strategist at Rabobank.
The euro <EUR=> hit the day's low around $1.3805, although
sovereign demand and technical support buffered the currency
against more intraday losses.
The yield gap between 10-year Spanish yields and equivalent
German Bunds <ES10YT=TWEB> <DE10YT=TWEB> was 5 basis points
wider on the day at 228 bps, after rising to 232 bps earlier.
Negative sentiment in the periphery has pushed investors to
seek safer trades, and Bund futures <FGBLc1> rose 27 ticks to
121.86. The 10-year Bund yield <DE10YT=TWEB> fell 3.2 basis
points to 3.706 percent.
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 1.3 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.
"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 at the same time, when you look at corporate results
and equity valuations, stocks are tremendously cheap."
The broad MSCI world equity index carries a forward
price-to-earnings ratio of 12.2, well below a 20-year average of
16.6, according to Thomson Reuters Datastream.
In the UK, the FTSE 100 index <> extended its losses
and sterling slipped in afternoon trading after the Bank of
England's Monetary Policy Committee left interest rates on hold
at 0.5 percent, as expected. []
(Additional reporting by Neal Armstrong in London; Editing by
Catherine Evans)
