* Euro hit one-year low against yen on Greece concerns
* Stocks, commodities also fall
* Borrowing costs for peripheral euro zone countries rise
By Dominic Lau
LONDON, Feb 25 (Reuters) - World stocks, the euro and
commodities fell on Thursday on concerns over a potential
downgrade of Greece's debt, while borrowing costs for peripheral
euro zone countries rose.
Safe-haven government bonds firmed.
Credit agency Standard & Poor's said on Wednesday it may
downgrade Greece's BBB-plus rating by one or two notches within
a month, citing downside risks to growth that could hinder the
country's deficit-cutting plan. []
Moody's Investors Service said Athens would need to enact
its fiscal reform plans as promised if it was to avoid a
downgrade and Fitch Ratings said that, barring surprises, it
expected to keep its BBB-plus rating unchanged for the next few
months. [] []
The comments overshadowed U.S. Federal Reserve Chairman Ben
Bernanke's pledge on Wednesday to keep interest rates low for a
long time.
The euro hit a one-year low against the yen <EURJPY=> and
lost 0.4 percent against the dollar <EUR=> at $1.3485.
The low-yielding yen was the main beneficiary in Asian trade
as risk aversion fuelled a rally into the Japanese unit, forcing
it to a one-year high against the euro.
"The yen is in favour after sentiment deteriorated over
Greece Wednesday. It does tend to strengthen when times get
tough and I would also say the yen is likely to remain in favour
going into the Japanese fiscal year-end," said HSBC director of
currency strategy Paul Mackel.
The U.S. dollar <.DXY> was also firmer against a basket of
major currencies.
Adding to the downbeat mood in Europe, euro zone economic
sentiment eased marginally in February against January, defying
market expectations of a small rise and adding to concerns about
the sustainability of an economic recovery. []
PREMIUM UP
Borrowing costs for peripheral euro zone countries rose on
concerns over Greece, with the 10-year Greek/German bond
<GR10YT=RR> yield spread widening to 365 basis points (bps) from
342 bps on Wednesday.
The equivalent Spanish spread <ES10YT=RR> moved out by five
bps to 81 bps as concerns grew that the country might become the
next in the euro zone to struggle under the weight of a large
budget deficit.
The cost of insuring Greek debt default also rose, with the
country's five-year credit default swaps up 12.7 bps, taking the
cost of insuring 10 million euros of Greek debt exposure against
default to 394,600 euros, up from 381,900 euros.
"There's renewed focus again on sovereign risk and it's
hurting the sovereign European countries," said Niels From,
chief analyst at Nordea in Copenhagen. "It remains a huge theme
driving the market."
Yields on other 'safe-haven' bonds eased. The 10-year
benchmark Bund <EU10YT=RR> eased 1 basis point to 3.125 percent,
while 10-year U.S. Treasuries <US10YT=RR> were down 3 bps to
3.666 percent.
World stocks measured in the MSCI All-Country World Index
<.MIWD00000PUS> fell 0.5 percent and Greece's share benchmark
<> was down 2.1 percent.
U.S. stock index futures <DJc1> <SPc1> <NDc1> fell 0.1 to
0.5 percent, pointing to a weaker start for Wall Street.
The pan-European FTSEurofirst 300 <> drifted 0.2
percent lower, though gains in banks led by Royal Bank of
Scotland <RBS.L> and Credit Agricole <CAGR.PA> limited losses.
RBS soared 6.3 percent and Credit Agricole rose 3.7 percent
after results while European banks <.SX7P> added 0.3 percent.
In Asia, Japan's Nikkei average <> closed down 1
percent as the yen rose broadly.
Commodity prices also fell, with crude <CLc1> down 0.7
percent to trade below $80 a barrel and copper <MCU3> down 1.1
percent.
(Additional reporting by William James, Neal Armstrong and
Brian Gorman in London; editing by John Stonestreet)
