* Euro-debt worries hit stocks, euro again
* Euro drops 1 percent against U.S. dollar
* World stocks fall 1 percent
(Updates with U.S. close)
By Al Yoon
NEW YORK, Nov 26 (Reuters) - World stock markets and the
euro slumped on Friday on concern the European sovereign debt
crisis will spread within the continent.
Also clouding markets, China warned against military acts
near its coastline before U.S.-South Korean naval exercises,
which North Korea said risked pushing that region toward war.
The North shelled a South Korean island on Tuesday. For
details, see [] [].
Worry about the most deeply indebted European nations has
intensified, fueled on Friday as newspaper reports shifted
attention from Irish debt to Spain and Portugal. The crisis has
lingered amid questions whether indebted countries can meet
bond payments.
"Officials now seem to be pressing Portugal to take aid and
that's unsettling investors. Peripheral issues are unlikely to
go away in the short term, and the euro will remain under
pressure into the end of the year," said Manuel Oliveri,
currency strategist at UBS in Zurich.
The Financial Times Deutschland reported, without
identifying its sources, that a majority of euro zone members
and the European Central Bank were urging Portugal to apply for
a financial bailout. [].
European officials denied "absolutely false" reports
Portugal was under pressure to seek a bailout and Spain ruled
out needing help to manage its finances despite fears of a
spreading euro debt crisis. []
The Irish Times, meanwhile, said officials at the
International Monetary Fund and in the European Union were
examining how senior bondholders could be compelled to pay some
of the cost of rescuing Ireland's banks. [].
Bond rating company Standard & Poor's cut its ratings on
the four domestically owned Irish banks, citing weakened
credit-worthiness.
The mounting worry pushed world stocks lower. MSCI's all
country world index <.MIWD00000PUS> dropped more than 1
percent, extending the decline since Nov. 5 to 5 percent.
Commodity-related shares led U.S. stocks lower in a
shortened post-holiday session as investors sold risky assets
on worries that euro-zone debt problems may spread.
The Dow Jones industrial average <> dropped 95.28
points, or 0.85 percent, to 11,092. The Standard & Poor's 500
<.SPX> declined 8.95 points, or 0.75 percent, to 1,189.40. The
Nasdaq Composite <> lost 8.56 points, or 0.34 percent, to
2,534.56.
U.S. stock markets closed at 1 p.m. (1800 GMT) following
the U.S. Thanksgiving holiday on Thursday.
The FTSEurofirst 300 <> index of top European shares
closed down 0.56 percent. Banks led losses.
Resource-related U.S. stocks led declines, with the S&P
materials sector <.GSPM> off 1.1 percent as key base metals
prices fell, pressured by the advancing dollar and by a rise in
margin requirements by the Shanghai Futures Exchange that
prompted liquidation of speculative positions.
[].
Freeport McMoRan Copper & Gold <FCX.N> dropped 2.5 percent
to $98.16.
"The debt crisis in Europe is attracting a lot of dollar
buyers, causing risk aversion," said Peter Cardillo, chief
market economist at Avalon Partners in New York.
Some confidence was restored after Portugal approved its
2011 austerity budget, vowing to spur growth and apply tough
spending cuts in the hope of avoiding a bailout, causing
10-year Portuguese/ German bond yield spreads to ease off
earlier wide levels.
Furthermore, the reaction to euro-zone debt worry has not
yet matched that seen in May and June around the time of the
Greek crisis due to the creation of a bailout mechanism
involving the European Union and International Monetary Fund.
EURO WEAKENS
Pressure on the euro has intensified as the debt crisis
threatens to ensnare Spain, Portugal and Italy.
The euro fell around 1 percent against the dollar to fresh
two-month lows while the dollar got a lift from rising optimism
about the U.S. economy and tensions in the Korean peninsula.
The euro <EUR=> fell 0.85 percent to $1.3247, with bids
dropping below $1.3200.
The dollar rose as high as 84.18 <JPY=EBS>, the strongest
level since late September. It was last at 84.10 yen, up 0.63
percent, rising further from a 15-year low of 80.21 yen hit at
the beginning of this month.
Government debt markets also took their cue from
speculation over the euro-zone debt outlook. U.S. Treasury debt
tracked German Bunds higher, with both kinds of securities seen
as safety plays by jittery investors.
Benchmark 10-year Treasury yields fell to 2.87 percent from
2.91 percent before the U.S. holiday on Thursday.
Ireland's 10-year bonds <IE10YT=TWEB> were yielding 9.5
percent, Portuguese counterparts <PT10YT=TWEB> 7.1 percent and
Spanish 10-year debt <ES10YT=TWEB> 5.2 percent. By contrast,
German Bunds <DE10YT=TWEB> yielded 2.7 percent.
In commodities, U.S. light sweet crude oil <CLc1> was
little changed at $83.83 per barrel.
(Additional reporting by Brian Gorman, Neal Armstrong and
Jeremy Gaunt in London, and Rodrigo Campos in New York; Editing
by Kenneth Barry)
