(Adds New York dateline, U.S. trading, updates prices)
* Stocks drop as China boosts bank reserve mandate
* Dollar index hits 7-mth high; Greece concerns dent euro
* Oil falls 3 pct to below $74 a barrel
By Jessica Mortimer and Al Yoon
LONDON/NEW YORK, Feb 12 (Reuters) - World stocks slumped
and the dollar jumped to a seven-month high on Friday after
China surprised markets by tightening monetary policy with
higher bank reserve requirements.
China increased the reserve level for banks by 50 basis
points on the eve of its New Year's holiday in a move aimed at
slowing lending and tempering inflation. For details, see
[]
Global markets were rattled by fears that China's tightened
monetary policy will potentially dampen global growth. Worries
over Greece's debt problems and signs of slow growth in Europe
continued to sting the euro.
"As we look here in the United States to cut back on some
of the stimulus, we're almost counting on other nations to
continue to provide the same level of demand," said Rick
Meckler, president of investment firm LibertyView Capital
Management in New York.
"Seeing China possibly cut back at the same time is raising
concerns about whether or not we can come out of this with the
same level of demand."
World stocks reversed earlier gains, with the MSCI world
equity index <.MIWD00000PUS> falling 0.6 percent. U.S. stocks
dropped, with the Dow Jones industrial average <> off
129.24 points, or 1.27 percent, to 10,014.95. The Standard &
Poor's 500 Index <.SPX> lost 12.12 points, or 1.12 percent, to
1,066.35. The Nasdaq Composite Index <> dropped 19.01
points, or 0.87 percent, to 2,158.40.
In Europe, the FTSEurofirst 300 <>> declined 0.5
percent at 984.87, led lower by banks and mining stocks. Prior
to China's move, the index had risen as much as 1 percent and
looked set to extend a winning run into a fifth day.
"The rise in banks' reserve requirements reduces the
leverage of the Chinese to buy, and China are big buyers of raw
materials, so this has weighed heavily on mining stocks," said
Mic Mills, senior trader at ETX Capital.
Commodities fell, with crude oil futures <CLc1> off 2.8
percent to $73.20 per barrel, and spot gold prices <XAU=> down
$13.35, or 1.22 percent, to $1081.60. The Reuters/Jefferies CRB
Index <.CRB> lost 1.4 percent.
The dollar <.DXY> gained 0.5 percent against a basket of
currencies, as investors sought the safety of the U.S.
currency. The dollar hit a high of 80.552 after earlier
reaching its best level since July 2009, as investors sought
the safety of the U.S. currency.
The euro slid to a near nine-month low against the dollar
at $1.3533 <EUR=>, as the China news came on top of concerns
about the lack of any detailed plan to rescue debt-ladened
Greece and anemic euro zone economic growth. In New York, the
euro <EUR=> was down 0.78 percent at $1.3574, and the dollar
rose 0.27 percent to 89.96 yen <JPY=>.
The European Union sent a "clear message of solidarity"
with Greece on Thursday, tempering fears of a broader crisis in
the euro zone bloc, but investors were nervous that other euro
zone countries may run into similar trouble. []
Economic data sparked concerns the region's economic
recovery may be starting to falter, with euro zone gross
domestic product expanding a meager 0.1 percent in the fourth
quarter. []
The next focus for the market in the European fiscal saga
is meetings early next week between EU finance ministers.
Meanwhile, analysts said, markets are likely to remain
jittery.
"Until we get more details on a political solution for
Greece, the euro is going to stay under selling pressure," said
Kasper Kirkegaard, currency analyst at Danske Bank in
Copenhagen.
Traders bid U.S. Treasuries higher after the eurozone GDP
report and amid uncertainty over details of the EU plan for
Greece. A break in issuance of U.S. debt next week also buoyed
prices.
Prices were little changed after U.S. retail sales for
January topped forecasts. Retail sales grew by 0.5 percent,
compared with a consensus estimate of 0.3 percent. Also, U.S.
consumer confidence slipped in February. []
Yields on the benchmark 10-year Treasury note declined 0.05
percentage point to 3.68 percent. Bund futures <FGBLc1> rose.
(Additional reporting by Naomi Tajitsu and Jessica Mortimer
in London, and Leah Schnurr and Emily Flitter in New York;
editing by Jeffrey Benkoe)
