* World equities stabilize, solid company results help
* Greek, U.S. debt woes weigh; European yields rise
* China warns on inflation dangers, forex reserves
* Gold hits record high; oil falls
(Updates market action, adds fresh quote)
By Richard Leong
NEW YORK, April 19 (Reuters) - World stocks stabilized on
Tuesday following the prior day's losses, but debt woes on both
sides of the Atlantic and new signals from China on inflation
dangers weighed on markets.
Greece sold 1.6 billion euros of three-month debt, but was
forced to pay a yield of more than 4 percent, underlining
growing unease in the market over a potential debt
restructuring that could further strain the euro zone.
Gold <XAU=> hit a record high near $1,500 an ounce, while
oil in London <LCOc1> fell 63 cents to $120.97 a barrel.
Investors dipped their toes back into stocks and other risk
assets in part on solid company results, a day after Standard &
Poor's jolted sentiment when it warned political gridlock in
Washington is impeding work to pare the $14.3 trillion federal
debt load.
Speculation about Greek debt restructuring has also crimped
investor sentiment.
"We are getting a tug-of-war between the macros and micros.
We are in the middle of the earnings season with these macro
shocks," said Brett Hryb, senior portfolio manager at Manulife
Asset Management in Toronto.
Wall Street stocks <> <.SPX> <> turned flat to
slightly lower in late morning trading as a rally attempt
faded. They opened up 0.2 percent after Goldman Sachs <GS.N>
posted a smaller-than-expected fall in profits and Johnson &
Johnson <JNJ.N> reported unexpectedly strong earnings. It fell
more than 1 percent on Monday on worries about sovereign debt
in both Europe and the United States. See []
European stocks <> climbed 0.36 percent, recovering
from Monday's 2 percent drop after above-consensus results from
LVMH <LVMH.PA> and Burberry <BRBY.L>.
Japan's Nikkei <> closed down nearly 1.3 percent in
the wake of the prior day's losses in the U.S. and Europe.
DOLLAR FALLS
Debt rating agency Standard & Poor's rattled investor
confidence on Monday when it changed its outlook on the United
States to negative from stable, threatening the future of its
prized AAA credit rating.
The dollar slipped 0.5 percent against a basket of major
currencies <.DXY> after making headway on Monday. Its gains on
Monday were due to a rush for safe havens despite the risk of
S&P downgrading U.S. debt in two years if Washington fails to
achieve a budget plan that relies less on debt.
S&P's warning intensified scrutiny of the huge U.S. budget
deficit and the political fight to slash it. The deficit is a
key element in the global imbalances that currently worry many
investors and policymakers.
There was no direct reaction to the S&P move on Tuesday
from Beijing, which holds vast reserves of U.S. Treasuries.
However, the head of China's central bank said the country
should diversify investments as its some $3 trillion of foreign
exchange holdings had grown too large.
Another Chinese rate setter said inflation pressures gave
further scope for a rise in banks' reserve requirements
following seven hikes -- together with four increases in
benchmark interest rates -- since last October.
The euro recovered somewhat from the previous day's
sell-off, as the region's debt problems remained in focus.
The single currency notched up to $1.4312 <EUR=>. Overall,
it has pulled back sharply, having hovered at a 15-month high
around $1.4520 for the past week. See []
Worries over the cost to bailout peripheral countries
exerted pressure on the European debt market, lagging U.S.
Treasuries. Ten-year Greek bond yields <GR10YT=TWEB> were last
up 17 bps at a euro-era high of 14.818 percent, while German
Bund futures <FGBLc1> fell 0.2 percent at 122.18.
Benchmark U.S. 10-year note yield <US10YT=RR> fell 3 basis
points to 3.35 percent, its lowest in about 2-1/2 weeks.
(Additional reporting by Chuck Mikolajczak, Wanfeng Zhou
and Chris Reese in New York; Jeremy Gaunt, Joanne Frearson and
William James in London; Editing by Andrew Hay)
