* Euro falls to four-month-low before reversing losses
* Portuguese 10-year yields above 7 pct on debt worries
* Debt concerns overshadow positive M&A news, stocks fall
(Updates European markets close)
By Walter Brandimarte and Jennifer Ablan
NEW YORK, Jan 10 (Reuters) - The euro hit a four-month low
against the dollar and and stocks around the world fell on
Monday as investors were gripped by worries that Portugal may
be the next euro zone member forced to seek a bailout.
Although the European single currency later recovered,
renewed euro-zone debt worries overshadowed news of
multibillion-dollar business deals. Major stock indexes in
Europe, the United States and most emerging market countries
were lower.
The euro was partly helped by gains versus the Swiss franc
on talk that the Swiss government may take measures to rein in
the strength of its currency.
Prices of U.S. Treasuries and gold rose as the debt
concerns stoked investors' appetite for safe-haven assets.
"We see a further escalation in the European debt crisis,
and a substantially weaker euro," said Stephen Jen, managing
director of macroeconomics and currencies at BlueGold Capital
Management LLP in London.
"There is no silver bullet because the underlying problems
are 'knotted.'"
The euro fell as low as $1.2860 <EUR=> on trading platform
EBS, a level not seen since mid-September. It later recovered
to $1.2948, up 0.25 percent on the day.
The euro is down more than 3 percent against the dollar so
far this year and investors may take the rebound as an
opportunity to sell the currency, which remains pressured by
debt worries.
Those debt concerns increased further on Sunday when
Reuters quoted a senior euro zone official as saying Germany
and France were increasing pressure on Portugal to seek
financial help from the European Union and International
Monetary Fund.For details, see [].
The report sent yields on Portuguese 10-year debt soaring
above 7 percent to their highest levels since the euro's
creation in 1999. Portuguese yields recovered some ground later
on Monday on talk of ECB bond buying, but remained above 7
percent, which is seen as an unsustainable cost of borrowing.
Portugal denied a German magazine report that it was under
pressure from Berlin and Paris to seek a
bailout.[]
"It highlights the problems of whether the bailout fund
will be sufficient to meet everybody's expectations," said Mark
Bon, fund manager at Canada Life in London, said of the reports
on Portugal.
The concern about euro zone debt returned after a brief
hiatus with a series of auctions of Portuguese, Spanish and
Italian debt due in the coming week. []
In the entire euro zone, 21.25 billion euros worth of bonds
will be on offer, with additional debt on sale from triple-A
rated Germany and the Netherlands.
WORLD STOCKS WEAKER
In global equity markets, the debt worries overshadowed
other news as investors prepared for the start of the quarterly
U.S. earnings season.
World stocks were 0.57 percent lower according to the
benchmark MSCI All-Country World Index <.MIWD00000PUS>.
In Europe, the FTSEurofirst 300 index <FTEU3> of top shares
fell 0.97 percent, after rising 2 percent last week.
The heavyweight banking sector, which has exposure to
sovereign debt in peripheral euro zone countries, was a major
loser. BNP Paribas, Banco Santander, Intesa SanPaolo, Societe
Generale and UniCredit fell between 2.7 and 5.7 percent. Greek
banks fell 6.6 percent.
Shares in Portugal's largest listed bank Millennium bcp
<BCP.LS> fell 3.15 percent while other Portuguese banks also
fell.
On Wall Street, shares were lower despite positive news on
mergers and acquisitions.
The Dow Jones industrial average <> lost 40.38 points,
or 0.35 percent, to 11,634.38, while the Standard & Poor's 500
Index <.SPX> fell 3.78 points, or 0.30 percent, at 1,267.72.
The Nasdaq Composite Index <> was down 6.49 points, or
0.24 percent, at 2,696.68.
Duke Energy Corp <DUK.N> agreed to buy Progress Energy Inc
for $13.7 billion in stock, and DuPont <PGN.N> plans to buy
Danisco, a Danish food ingredient firm, for $5.8 billion.
[] and []
Euro zone credit concerns benefited government bonds,
sending U.S. Treasury debt prices higher.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
3/32, with the yield at 3.3122 percent.
Analysts said that if investors judge that the price Lisbon
needs to pay to get funds is too high to sustain borrowing in
the long term, Portuguese bonds may sell off quickly, forcing
the country to seek emergency EU and IMF funds.
You-Na Park, currency strategist at Commerzbank, said
there's a "realistic possibility" that Portugal will not manage
to generate the funds required for 2011 without foreign aid.
But she added, "Even if Portugal does seek a bailout, the
market may well turn on Spain as the next candidate."
Kathleen Brooks, research director at FOREX.com, said
there's a risk the euro could revisit the low $1.20s area it
hit in 2010, but losses could be slowed by Asian reserve
diversification flows.
Gold prices <XAU=> rose $3.05, or 0.22 percent, to
$1371.60 on a renewed safe-haven bid.
U.S. crude oil prices <CLc1> rose $1.15, or 1.31 percent,
to $89.18 per barrel, after a leak shut an Alaskan pipeline
that carries 12 percent of U.S. crude output.
(Additional reporting by Wanfeng Zhou, Karen Brettell and
Chuck Mikolajczak; Editing by Leslie Adler
