* Fitch downgrade on Spain sends US stocks into slide
* Euro hits session low after rating downgrade
* Investors shed risk ahead of U.S., UK long weekends
(Updates with New York midday trading)
By Albert H. Yoon
NEW YORK, May 28 (Reuters) - World equities slid and the
euro fell on Friday after a downgrade of Spain's credit rating
sent a new chill through markets already worried about the
European debt crisis.
The downgrade by Fitch Ratings ignited a new round of
selling in equities that were already lower after lackluster
U.S. economic data injected a note of caution ahead of long
holiday weekends in both the United States and the UK.
Fitch downgraded Spain's credit rating to AA-plus, and said
it expects the country's adjustment to a lower debt level will
materially reduce its rate of economic growth over the
medium-term.
Fitch cited an inflexible labor market and a restructuring
of of regional and local savings banks as hindrances to the
pace of adjustment.
"This should exacerbate the tremendous volatility we've
seen in global stocks as the world wrestles with the idea of a
debt-based collapse," said Chip Hanlon, president of Delta
Global Advisors in Huntington Beach, California.
"Adding to this is the fact that no one wants to be long
over a holiday weekend."
The euro fell as low as $1.2284 <EUR=EBS>, according to
electronic trading platform EBS, near a session of $1.2281.
The euro also dropped versus the yen <EURJPY=>, and was
last down 0.9 percent at 111.59 yen.
The major U.S. stock indexes shed more than 1 percent, and
U.S. Treasuries slightly extended gains, hitting session highs
after the Fitch downgrade. Benchmark 10-year notes <US10YT=RR>
were last up 18/32 in price, yielding 3.30 percent.
Investors had been shunning risk even before the Fitch
downgrade on Spain.
A Commerce Department repor that U.S. consumer spending
failed to rise in April after six straight months of gains,
cast a cloud over the outlook for the consumer-driven U.S.
economy. Traders were particularly cautious ahead of long
holiday weekends in London and New York, and ready to step back
and take profits after a strong equities rally on Thursday.
The Dow Jones industrial average <> was down 119.94
points, or 1.17 percent, at 10,139.05. The Standard & Poor's
500 Index <.SPX> was down 15.13 points, or 1.37 percent, at
1,087.93. The Nasdaq Composite Index <> was down 32.14
points, or 1.41 percent, at 2,245.54.
The S&P 500 and the Nasdaq had each fallen more than 1
percent earlier in the day, though had pared losses sharply
before the news on Spain sparked a new wave of selling.
Technology bellwether Apple Inc <AAPL.O> managed to buck
the downtrend, after Asian and European customers mobbed stores
as the iPad tablet computer debuted outside the United States.
Apple shares rose 1.5 percent. [] Bank of America
Merrill Lynch raised its price target on Apple by $25 to $325
and kept its "buy" rating.
But still pressuring global shares and the euro was concern
of contagion from the Greece debt crisis. Despite the lack of
major shocks from Spain, Portugal or Ireland, which all have
heavy debt loads, investors were still loathe to add risky
assets due to questions of how shakier sovereign credit would
affect the economic recovery.
Equities measured by the MSCI All-Country World Index
<.MIWD00000PUS> fell 0.12 percent after earlier hitting a
one-week high. The index is down about 9 percent in May and on
track for its worst monthly loss since February 2009.
In Europe, markets closed ahead of the downgrade on Spain.
The pan-European FTSEurofirst 300 <> index fell 0.3
percent, with energy shares falling along with a drop in crude
oil prices.
"It looked quite bullish earlier, but investors are taking
risk off the table going into the weekend and also holidays in
the U.S. and the UK on Monday," said Matthew Brown, sales
trader at ETX Capital. "They are not keen to hold equities."
Tokyo's Nikkei average <> closed up 1.3 percent in its
best one-day performance in two weeks as exporter shares
climbed on a halt in the yen's advance.
The Thomson Reuters/University of Michigan consumer
confidence index edged higher in April, while the Institute for
Supply Management-Chicago's business barometer dropped in May
from a five-year high in April, signaling inventory restocking
that has driven U.S. growth in recent quarters may be slowing.
For details, see []
Tempered views of global economic strength sent yields on
benchmark 10-year Bunds <EU10YT=RR> down by 0.01 percentage
point to 2.67 percent, and yields on 10-year U.S. Treasuries
<US10YT=RR> off by 0.05 percentage points to 3.31 percent.
In energy and commodities, U.S. light sweet crude oil
<CLc1> fell 1.1 percent to $73.73 per barrel, and spot gold
<XAU=> fell $5.65, or 0.47 percent, to $1,205.40.
(Additional reporting by Vivianne Rodrigues and Nick Olivari
in New York, and Dominic Lau, Jessica Mortimer, Blaise
Robinson, George Matlock and Joanne Frearson in London; Editing
by Leslie Adler)
