* Euro rises vs dollar on profit-taking
* European shares drop 1 percent
* Gold hits record high on flight-to-safety
By Manuela Badawy
NEW YORK, June 8 (Reuters) - The euro rose against the
dollar on Tuesday, but worries over Europe's debt troubles
continued to dampen sentiment and European stocks dropped.
U.S. Federal Reserve Chairman Ben Bernanke's reassuring
comments on the state of the U.S. economy helped support U.S.
stocks, but a report by Fitch Ratings that the UK faced a
"formidable" fiscal challenge pushed European stocks to near
two-week closing lows.
Risk-averse investors streamed into gold, sending prices
for the precious metal to a record dollar high amid fears that
euro zone credit contagion could stunt global economic growth.
Bernanke said the U.S. economy seemed to have enough
momentum to avoid a "double-dip" recession, while European
leaders were committed to ensuring the survival of the euro and
had enough money to meet obligations of heavily indebted member
nations. For details, see []
Still, traders remained anxious about debt levels in
several euro zone countries, as Portugal, Italy and Spain
prepared to sell new bonds this week. It will be the first sale
by Spain since a credit ratings downgrade.
"Markets remain under pressure," said Peter Dixon, an
economist at Commerzbank. "Until we see any indications that
uncertainty has lifted, the prospects of any decent rally in
the European markets appears distant."
The pan-European FTSEurofirst 300 <> index of top
shares provisionally closed down 1 percent, falling for the
third consecutive session, but the MSCI's all-country world
stock index <.MIWD00000PUS> gained 0.2 percent with support
from U.S. stocks.
The Dow Jones industrial average <> was up 67.42
points, or 0.69 percent, at 9,883.91. The Standard & Poor's 500
Index <.SPX> was up 4.96 points, or 0.47 percent, at 1,055.43.
The Nasdaq Composite Index <> was down 11.11 points, or
0.51 percent, at 2,162.79.
DEBT WORRIES
The euro rose above $1.20 against the dollar a day after
hitting its lowest level since March 2006, and pared losses
against the Swiss franc as traders cited possible intervention
by the Swiss National Bank. []
The euro <EUR=> was last up 0.44 percent at $1.1966.
The pound fell after Fitch urged Britain to cut its
deficit, the latest in a series of concerns expressed by rating
agencies about the state of government finances in Europe,
encompassing Greece, Spain, Hungary, and Ireland.
[]
Solving debt problems implies heavy budget cuts at a time
when many believe spending is needed to help keep economic
recovery on track.
Meanwhile, safe-haven U.S. Treasury debt prices were lower
ahead of the $36 billion worth of three-year notes at 1 p.m.
EDT (1700 GMT), followed by offerings of 10- and 30-year bonds
later in the week.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 9/32, with the yield at 3.1784 percent. The 2-year U.S.
Treasury note <US2YT=RR> fell 2/32, with the yield at 0.75
percent. The 30-year U.S. Treasury bond <US30YT=RR> was off
18/32, with the yield at 4.1139 percent.
Spot gold prices rose above $1,250 an ounce, a record high,
benefiting from fears the European sovereign debt crisis may
spread, weighing on a global recovery.
"It is mainly the fear of another slide into recession
which is seeing demand for gold as a safe haven," said
Commerzbank analyst Daniel Briesemann.
(Additional reporting by Chuck Mikolajczak in New York,
Joanne Frearson in London; editing by Jeffrey Benkoe)
