GLOBAL MARKETS-Stocks, euro fall on fears of Greek euro exit
* Markets turn skittish after Catalonia debt appeal
* Euro briefly slips below $1.25, weighed down by Spain
* Bond prices rise on safety bid, oil advances modestly
By Herbert Lash
NEW YORK, May 25 (Reuters) - U.S. stocks and the euro slipped o n F riday as Spain's deteriorating finances and a possible Greek exit from the euro overshadowed an upbeat report on U.S. consumer confidence.
Oil prices edged higher due to a lack of progress in talks with Iran over its disputed nuclear program and the rise in U.S. consumer confidence.
European equities rose for a second straight day, but gains were driven by defensive plays like utilities and drugmakers. A tough economic outlook in Europe dampened investors' appetite for riskier assets.
After notching some gains earlier in the day, U.S. equities fell as the afternoon progressed ahead of the 3-day Memorial Day holiday weekend, as uncertainty continued to swirl over Europe.
"The market is drifting and cautious ahead of the holiday. There's no consistency, though we do seem to be digging in after some bad weeks," said Donald Selkin, chief market strategist at National Securities in New York, which has about $3 billion in assets under management. "Still, we have the overhang of Europe and just have to hope things don't get worse over there."
The Dow Jones industrial average closed down 74.92 points, or 0.60 percent, at 12,454.83. The Standard & Poor's 500 Index fell 2.86 points, or 0.22 percent, to 1,317.82. The Nasdaq Composite Index lost 1.85 points, or 0.07 percent, at 2,837.53.
In Europe, the FTSEurofirst 300 index rose 0.2 percent to close at 984.97.
MSCI's all-country world equity index fell 0.2 percent to 300.23.
Trading volume in Europe was lower than an already weak 90-day average, reflecting a downbeat mood that was heightened by concerns about Greece.
The euro plumbed a 22-month low against the U.S. dollar after the president of Catalonia, Spain's wealthiest autonomous region, said it is running out of options for refinancing more than 13 billion euros in debt that comes due this year.
Catalonia's troubles came as Spain's Bankia SA was set to ask the state for a bailout valued at more than 15 billion euros ($19 billion), marking another rise in the cost of rescuing the country's fourth-biggest bank.
"The Catalonia news was a big deal because it implies that the Spanish government may have to take on more debt, and it cannot afford to do so," said Richard Franulovich, senior currency strategist at Westpac Securities in New York.
"For now, it's all about contagion," he added.
The euro briefly fell below $1.25 on trading platform EBS but pared some losses to trade down 0.2 percent at $1.2510.
The U.S. Dollar Index rose 0.09 percent at 82.420.
Bonds prices rose in a bid for safety as investors prepare for what is likely to be volatile trading over the coming month.
The benchmark 10-year U.S. Treasury note was up 10/32 in price to yield 1.75 percent.
Brent crude rose 28 cents to settle at $106.83 a barrel. U.S. July crude edged up 20 cents to settle at $90.86,
But even as oil prices rose for the day on the lack of progress related to Iran and the improved U.S. consumer sentiment, crude futures were headed for a fourth straight weekly loss as Europe's economic problems threatened to reduce demand.
The Thomson Reuters/University of Michigan's final reading on the overall index on U.S. consumer sentiment rose to 79.3 in May from 76.4 in April, topping forecasts for 77.8 and an initial May reading at the same level.
"Unfortunately, consumer confidence is still extremely vulnerable to a reversal, as occurred in the past two years," survey director Richard Curtin said.
Traders said the outlook is negative.
"Europe is in a recession, China is slowing down, and the United States is slowing down as well," said Michel Juvet, chief investment officer at Swiss bank Bordier & Cie.
Spot gold prices rose $15.50 to $1,572.50 an ounce.
The Reuters/Jefferies CRB Index of commodities was up slightly at 281.95.
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