* Portugal bond yield at new high as bailout fears grow
* Wall Street buoyed by Texas Instruments deal
* Euro slips; world stocks end five-day winning streak
(Rewrites, adds details, quote, updates prices)
By Leah Schnurr
NEW YORK, April 5 (Reuters) - An interest rate hike in
China and a downgrade of Portugal's debt pushed the euro
further away from a five-month peak against the dollar on
Tuesday, but a large technology company merger helped put a
floor in U.S. stocks.
Wall Street shares crept higher after Texas Instruments
<TXN.N> said it would buy rival National Semiconductor Corp
<NSM.N> $6.5 billion. Oil prices also shrugged off the China
rate hike, holding near 2-1/2-year highs.
China, viewed as a main source of global growth, lifted
interest rates for the fourth time since October to cool
inflation. For details, see []
"The market is getting used to the rate hikes in China, and
there is less concern it will derail global growth," said
Jeff Kleintop, chief market strategist at LPL Financial in
Boston of the U.S. stock market.
"On the plus side there's this M&A deal in the tech space,"
he said. "Companies are beginning to spend their cash on merger
deals and also on hiring. They're feeling confident enough to
spend on growth initiatives."
Rating agency Moody's cut Portugal's sovereign debt by one
notch, saying the incoming government would urgently need to
seek financial aid from the European Union. Portuguese bond
yields rose to euro lifetime highs. []
"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 as high as 9.033 percent, while Portuguese stocks <>
fell 0.7 percent. The Portuguese market fared worse than the
broader FTSEurofirst 300 index <>, which gained 0.2
percent.
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.
[]
The euro <EUR=> fell against the dollar for the second day
but trimmed losses after talk of a hawkish U.S. think-tank
report on European Central Bank monetary policy. The euro was
last trading at $1.4194, down 0.2 percent on the day, according
to Reuters data.
The single currency was also supported by expectations the
European Central Bank when it meets on Thursday will raise
rates by 25 basis points 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
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
CHINA HIKE NOT SEEN TOO WORRISOME
Global stocks snapped a five-day winning streak with the
MSCI All-Country World Index <.MIWD00000PUS> to trade flat
after hitting six-week highs in the previous session.
The Dow Jones industrial average <> added 18.13 points,
or 0.15 percent, to 12,418.16. The Standard & Poor's 500 Index
<.SPX> gained 2.84 points, or 0.21 percent, to 1,335.71. The
Nasdaq Composite Index <> rose 10.66 points, or 0.38
percent, to 2,799.85.
Brent crude <LCOc1> prices topped $122 a barrel, recouping
losses as worries about supply from oil-producing countries in
Africa and the Middle East overshadowed China's rate hike.
Brent futures were up 98 cents at $122.05 a barrel, while U.S.
crude futures <CLc1> were down 22 cents at $108.25.
Federal Reserve Chairman Ben Bernanke said late on Monday
that the recent spike in U.S. inflation was unlikely to
persist.
But sustained higher oil prices could pose a serious threat
to the global economic recovery and dampen risk appetite.
Investors were awaiting the release of minutes from the latest
rate-setting committee meeting of the Fed later in the
afternoon.
"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."
(Additional reporting by Nick Olivari and Rodrigo Campos;
Editing by Padraic Cassidy)
