* Flight-to-safety trade on N. Korea attack sinks stocks
* Euro drops on Irish debt worries, Korea tensions
* Gold safe-haven status overcomes U.S. dollar strength
(Updates with U.S. markets' open)
By Daniel Bases
NEW YORK, Nov 23 (Reuters) - North Korea's deadly shelling
of a South Korean island on Tuesday rattled global financial
markets, leading investors to buy safe-haven assets, such as
the U.S. dollar and Treasuries, and sell stocks.
The euro, already soured by Ireland's debt crisis,
accelerated its decline as investors feared a rescue package
for Dublin may not stop problems from spreading to other
indebted euro zone countries. The currency was near a two-month
low with little relief in sight.
An upward revision of U.S. third-quarter gross domestic
product growth added to the greenback's allure while
weaker-than-forecast sales of previously owned U.S. homes did
little to diminish the dollar. For details, see []
Gold's safe-haven status overcame the stronger U.S. dollar,
but crude oil fell.
"Obviously there is a big flight-to-safety trade going on.
We've seen Treasury yields fall in tandem with some pretty big
declines in equity prices," said Kim Rupert, managing director
of global fixed income analysis at Action Economics in San
Francisco.
North Korea's artillery attack killed two South Korean
soldiers in one of the fiercest attacks on its neighbor since
the Korean War ended in 1953. []
In Korea, December KOSPI 200 index futures <KSc1> fell 2.4
percent in a late sell-off as the news broke at the end of the
trading day while the dollar rose more than 4 percent against
the won in offshore trade before trimming gains <KRWNDFOR=>.
The iShares MSCI South Korea Index Fund <EWY.P> traded down
5.1 percent during New York hours. Shares of Korea Electric
Power <KEP.N> traded in New York lost 4.9 percent to $12.20.
In midmorning trade the Dow Jones industrial average <>
fell 161.77 points, or 1.45 percent, to 11,016.81. The Standard
& Poor's 500 Index <.SPX> lost 17.98 points, or 1.50 percent,
at 1,179.86. The Nasdaq Composite Index <> dropped 41.49
points, or 1.64 percent, to 2,490.53.
The MSCI All-Country World equity index <.MIWD00000PUS>
fell 1.56 percent while the Thomson Reuters global stock index
<.TRXFLDGLPU> dropped 0.94 percent.
The FTSEurofirst 300 <> index of top European shares
fell 0.86 percent to 1084.05, recouping some of the losses that
earlier pushed the index to its lowest point in over a month.
IRISH JITTERS
The debt tensions in Ireland led to weak bank shares in
Europe in addition to pulling the euro down 1.51 percent at
$1.3419 <EUR=>, its weakest point since Sept. 28.
Bank of Ireland <BKIR.I> fell 20.3 percent. Other banks to
fall included Spain's Banco Santander <SAN.MC>, off 2.52
percent, and BBVA <BBVA.MC> off 2.04 percent.
The U.S. dollar rose 0.91 percent against a basket of
currencies that make up its major trading partners. The dollar
however fell 0.35 percent to 82.99 against the yen <JPY=>.
In Europe, Bund futures rallied a full point and yields of
peripheral issuers' bonds rose on fears about their ability to
manage their debt loads.
The Irish Prime Minister on Monday defied pressure to quit
ahead of the unveiling of an austerity plan later this week and
a 2011 budget on Dec. 7, but said he would then call an early
election. []
Bund futures <FGBLZ0> rallied to a session high of 128.94,
up a full point on the day, while 10-year cash yields
<DE10YT=TWEB> fell back towards the key psychological level of
2.5 percent.
The 10-year Spanish/German yield spread hit a new euro
lifetime high of 237 bps and the equivalent Irish spread was 44
basis points wider and back above 600 basis points.
Portugal and Spain are seen as the next weakest links and
an official from Portugal's main opposition party said it would
allow passage of the minority Socialist government's 2011
budget in the final vote on Nov. 26. []
Spot gold prices <XAU=> rose $8.20 to $1,374.00, while
crude oil <CLc1> fell 82 cents $80.92 per barrel.
(Additional reporting by Kirsten Donovan, Natsuko Waki, Chris
Reese; Editing by Kenneth Barry)
