* Sterling down as BoE holds rates steady
* Euro falls, peripheral yields rise
* Strong U.S. jobless claims boost dlr, Treasury yields
* U.S. futures pare losses after jobs data
By Sujata Rao
LONDON, Feb 10 (Reuters) - Weak corporate earnings weighed
on global stocks on Thursday and worries over the Saudi king's
health ratcheted political tensions up another notch in the
Middle East, keeping Brent crude prices above $100 a barrel.
Major European markets were down more than half a percent
while stock futures indicated a weaker opening on Wall Street,
though better-than-expected data on U.S. weekly jobless claims
helped U.S. stock futures pare some losses.
U.S. Treasury yields also rose and the dollar gained against
the euro after data showed new claims for unemployment benefits
dropped more than expected last week to touch their lowest point
in 2-1/2 years.
The data "looked good and the market had a muted but
positive reaction to them. Anecdotally, we do hear that there is
some improvement on the jobs front and this is another
indication of that," said Tim Ghriskey, chief investment officer
at Solaris Asset Management.
Earlier, the Bank of England kept interest rates on hold at
0.5 percent as expected, soothing bond markets but briefly
pushing sterling lower after markets had priced in an outside
chance of a hike.
Britain's FTSE 100 index <> was down 0.9 percent. The
FTSEurofirst 300 <> index of top European shares fell 0.7
percent despite a boost from Deutsche Boerse <DB1Gn.DE>, which
looks set to buy peer NYSE Euronext <NYX.N>.
After weeks of generally positive news on the corporate
front, investors have suddenly been presented with a barrage of
less than robust reports, shaking some of the optimism over the
global economic recovery.
Credit Suisse <CSGN.VX> missed profit expectations and
Diageo <DGE.L>, the world's biggest spirits group, missed
expectations with a 9 percent rise in half-year earnings. Credit
Suisse shares fell over 5 percent.
U.S. tech giant Cisco Systems Inc <CSCO.O> posted quarterly
results after the New York market close on Wednesday, beating
profit and sales expectations but with disappointing margins.
Its stock fell nearly 10 percent in extended trading.
"Most earnings themselves have been supportive, but if you
look at the guidance and the impact of inflationary pressure,
what is almost certain is that this will have an impact on
profit margins," said Jeremy Batstone-Carr, strategist at
Charles Stanley.
MSCI's all-country world index <.MIWD00000PUS> was down 0.4
percent, pressured in particular by emerging market losses. The
EM sub-index lost 1.8 percent <.MSCIEF>
Traders said a weak bond auction in Portugal was also
weighing on sentiment. Yields rose above 7.4 percent on 10-year
paper, well above the 7 percent many consider as the limit for
sustainable servicing of the country's debt.
"Portuguese spreads are widening, making some traders
nervous again," senior trader at ETX trading Markus Huber said.
"On top of somewhat disappointing earnings, from Credit Suisse
for example, this is weighing on investor sentiment," he added.
In the United States, data showed new unemployment benefit
claims at lowest point in 2-1/2 years. That helped futures pare
losses, with S&P <SPc1> futures down 6.5 points compared to 7
just before the data.
Dow Jones industrial average futures <DJc1> tumbled 44
points and Nasdaq 100 futures <NDc1> were off 16.75 points.
U.S. earnings due on Thursday include Expedia <EXPE.O>,
Goodyear Tire & Rubber Co <GT.N>. Kraft <KFT.N> and Philip
Morris <PM.N>.
CRUDE UP, EURO DOWN
The weak Portuguese auction also hit the euro, which fell
against the dollar. Analysts said the lack of concrete policy
measures to tackle the euro zone debt crisis was weighing on
sentiment on the single currency and peripheral bonds.
Investors must wait until March to hear details of steps to
tackle the crisis, and speculation of a near-term rise in euro
zone interest rates also is being pared back.
The euro <EUR=> eased 0.7 percent against the dollar to
$1.3620 ahead of the U.S. data, dipping further to 1.3593 by
1354 GMT.
"There are... downside risks that the European Central Bank
may not be prepared to hike rates and the potential that
bondholders may be forced to take debt haircuts," said Barclays
currency strategist Raghav Subbarao.
Sterling fell after the BoE meeting where rates were held
steady even though UK inflation is almost twice the targeted
rate.
Sterling <GBP=D4> fell to a session low of $1.6012 soon
after the announcement from around $1.6053. It recouped those
losses, but was still 0.3 percent down for the day. March gilt
futures <FLGH1> were up 25 ticks to 115.65, giving up some of
the modest gains immediately after the decision.
On oil markets, Brent crude oil futures stayed above $102 a
barrel as investors remained concerned that unrest in Tunisia
and Egypt could ignite similar protests in bigger oil producers
such as Libya -- or even Saudi Arabia.
Rumours the Saudi King Abdullah was seriously ill also
triggered buying, the fears felling a surge in Saudi credit
default swaps, instruments used to hedge exposure to a credit.
U.S. crude however remained at $86 a barrel, the gap between
the two markets widening to a fresh record. The positive jobs
data however helped futures to pare losses slightly.
(Additional reporting by Jeremy Gaunt, Neal Armstrong and
Chris Johnson; Editing by Toby Chopra, John Stonestreet)
