* Portugal bond yield at new high as bailout fears grow
* Metal prices, Aussie fall after China rate rise
* Euro slips; world stocks end five-day winning streak
(Adds U.S. stock futures, China graphic)
By Dominic Lau
LONDON, April 5 (Reuters) - Portuguese bond yields rose to
euro lifetime highs on Tuesday as the country moved closer to a
possible debt bailout, hitting the euro, which fell further from
a five-month peak versus the dollar after China raised rates.
Metal prices and the Australian dollar, seen as a proxy for
Chinese growth because of raw materials exports to the world's
second largest economy, fell after Beijing hiked interest rates
for the fourth time since October to cool inflation.
[]
China's tightening also dented Brent crude prices, which
pulled back further from 32-month highs but stayed just above
$120 a barrel as markets focused on fears that unrest in
producer states in Africa and the Middle East could disrupt
supply.
Global stocks snapped a five-day winning streak, and U.S.
stock index futures <SPc1> <DJc1> <NDc1> fell 0.2 to 0.7
percent, indicating a weak start on Wall Street. []
Rating agency Moody's earlier cut Portugal's sovereign debt
by one notch, saying it believed the incoming government would
urgently need to seek financial aid from the EU. []
"Even though Moody's still rates the sovereign two notches
higher than Standard & Poor's, the downgrade is another blow to
sentiment," said Gavan Nolan, an analyst at data monitor Markit.
There were also reports that Portuguese banks may be
threatening to stop buying government bonds to pressure Lisbon
into seeking a bailout, following the same path as Greece and
Ireland. []
Yields on Portugal's 10-year government bonds <PT10YT=TWEB>
rose to 9.033 percent, while Portuguese stocks <> fell 0.9
percent, underperforming the broader FTSEurofirst 300 index
<>, which was flat.
Credit default swaps implied a 41 percent probability of a
Portuguese default within five years, compared with 33 percent
at the end of February, data provider CMA said.
EURO PRESSURED
The euro was down 0.4 percent at $1.4163 <EUR=>, off a
five-month high of $1.4268 hit on Monday, and down 0.1 percent
at 119.39 yen <EUR=>, while the Australian dollar <AUD=> fell
0.5 percent to $1.0318.
Market doubts over whether the single currency can make
fresh gains given that players have already positioned
themselves for interest rate rises in the euro zone during 2011
also put pressure on the euro, which has risen 5.9 percent
against the dollar and 9.9 percent versus the yen this year.
"There is a lot of good news priced into the euro already
and (ECB President Jean-Claude) Trichet will have to support the
rate view to keep the positive momentum," said Niels
Christensen, currency strategist at Nordea in Copenhagen.
The European Central Bank is widely expected to raise rates
by 25 basis points on Thursday from a record low of 1 percent to
tame inflationary pressures <ECBWATCH>.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphics on Thursday's ECB meeting:
http://r.reuters.com/kah88r
Graphic on euro zone credit ratings:
http://r.reuters.com/pyh48r
Graphic on China rate rise: http://r.reuters.com/veh88r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
OIL IMPACT
Federal Reserve Chairman Ben Bernanke said late on Monday
that the recent spike in U.S. inflation was unlikely to persist.
But a sustained higher oil price could pose a serious threat
to the global economic recovery and dampen risk appetite, and
commodity price pressures saw silver <XAG=> rise to a 31-year
high.
"The recent rally in oil has had virtually no impact on
equities. It was just over a month ago where equities markets
were nervous about the impact of oil prices on the economy,"
Deutsche Bank strategist Jim Reid said in a note.
"The difference this time is that the rise has likely been
due to decent growth rather than immediate geopolitical
concerns. Nevertheless one would expect the creeping price of
oil to start to get more attention given the recent rally."
World stocks measured by MSCI All-Country World Index
<.MIWD00000PUS> fell 0.3 percent after hitting six-week highs in
the previous session, while emerging market shares <.MSCIEF>
were flat.
In Asia, Japan's Nikkei average <> lost 1.1 percent
with investors still wary about the long-term impact of last
month's massive earthquake and tsunami and a resulting nuclear
accident that workers are still struggling to contain. []
Brent <LCOc1> crude eased after hitting a 32-month high of
$121.29 on Monday as Nigerian election delays and a short-lived
strike in Gabon added to supply jitters for a market already on
edge over fighting in Libya and unrest in Yemen, which borders
top producer Saudi Arabia.
Silver <XAG=> dipped 0.3 percent after rising to its highest
since early 1980 at $38.77 an ounce before the Chinese rate
rise, while gold <XAU=> fell 0.3 percent and copper <CMCU3> lost
0.2 percent, down for the third day in a row.
(Additional reporting by Emelia Sithole and Jessica Mortimer
in London, and Alex Richardson in Singapore; editing by Patrick
Graham and John Stonestreet)
