* Confidence over Greek bailout evaporates
* Euro extends slide, trades at lowest in a year
* Spain PM Zapatero denies rumor that Spain needs help
By Al Yoon
NEW YORK, May 4 (Reuters) - Global stocks and the euro
tumbled on Tuesday amid fears that European Union officials
will not be able to stop Greece's sovereign debt crisis from
spreading around the region.
The premium that investors demand to buy bonds from other
debt-laden European nations such as Spain and Portugal rose
despite a hefty Greek aid package from the European Union and
the International Monetary Fund.
The single currency that binds 16 nations hit its lowest
level in a year.
World stocks as measured by MSCI <.MIWD00000PUS> fell 2.5
percent, dragged down by losses for most indices across Europe
and the United States.
Investor skepticism about the efficacy and implementation
of the 110 billion euro ($146 billion) bailout intensified on
equity markets that were buoyed on Monday by signs of global
growth.
The rejection of some euro nations' debts could slow the
recovery that has fueled a strong equities rebound since March
2009.
In exchange for aid, Athens has promised spending cuts and
tax increases worth 30 billion euros over three years, on top
of belt-tightening measures already taken. The key to ending
the crisis is whether Greece can meet budget deficit targets, a
Moody's Investors Service official said. For details, see
[]
"There is no faith in what the EU and IMF have proposed for
Greece," said Dean Popplewell, chief currency strategist at
OANDA, a foreign exchange brokerage in Toronto. "Capital
markets are betting on a Greek default."
U.S. shares slid steeply, echoing drops in Europe that
fully erased 2010 gains for a key index there.
The Dow Jones industrial average <> swooned 225.06
points, or 2.02 percent, to 10,926.77. The Standard & Poor's
500 Index <.SPX> lost 28.66 points, or 2.38 percent, to
1,173.60 and the Nasdaq Composite Index <> dropped 74.49
points, or 2.98 percent, to 2,424.25.
Europe's FTSEurofirst 300 <> was off 3 percent to
1,033.18. Germany's DAX <.DAX> was down 2.6 percent, while
Spain's IBEX 35 <> dropped 5.4 percent. Japan's Nikkei 225
<> rose 1.2 percent.
EURO SINKING
The euro plummeted to a one-year low beneath $1.30 amid
worry that the financial drubbing endured by Greece will spread
to other countries that use the currency. Late in New York, the
euro traded at $1.2991, down 1.52 percent.
Against the Japanese yen, the dollar <JPY=> edged lower by
0.11 percent to 94.44. The U.S. Dollar Index <.DXY> rose 1.31
percent to 83.35.
Investment advisers at RGE suggested that clients build
short positions on the euro on any sign of strength.
"We believe the Greek crisis is only the tip of the
iceberg," RGE said. "The debt sustainability problems in other
euro zone countries are equally serious while the macroeconomic
limitations are often more severe than in Greece."
Spanish Prime Minister Jose Luis Rodriguez Zapatero on
Tuesday pointed to indications that the nation has emerged from
recession, and said that data due on May 12 would bear that
out. He discounted dismal views from financial markets, denied
that his nation needed help and noted that Spain has lower debt
to gross domestic product than the European average.
Still, euro zone fiscal worries overshadowed signs of
global recovery. U.S. stocks staged a broad rally on Monday
that drove the S&P 500 to its best day in two months after
manufacturing, consumer spending and construction data all
instilled confidence in economic recovery.
Investors ignored U.S. data on Tuesday showing pending
sales of previously owned homes hit a five-month high in March
and that factory orders rose unexpectedly. []
Strong U.S. data reinforced views that the U.S. Federal
Reserve could raise interest rates this year. Europe's debt
woes are likely to keep euro zone rates on hold in 2010.
Benchmark government bonds from the euro zone's core and
U.S. Treasuries gained as investors sought safer assets.
Ten-year euro zone government debt yields <EU10YT=RR>
declined 0.1 percentage point to 2.97 percent, and benchmark
10-year U.S. Treasury note yields <US10YT=RR> fell to 3.60
percent from 3.69 percent.
Spreads between benchmark German Bunds and Portuguese and
Italian bonds widened, while the cost of insuring against a
Greek default rose.
In energy and commodity trading, U.S. light sweet crude oil
<CLc1> fell $3.61, or 4.19 percent, to $82.58 per barrel, and
spot gold <XAU=> fell $10.25, or 0.87 percent, to $1171.60.
(Additional reporting by Jessica Mortimer in London, Nigel
Davies in Brussels and Steven C. Johnson in New York; Editing
by Dan Grebler)
