GLOBAL MARKETS-Euro hits 2-year low, oil extends losses
* Spain gets extra year to cut deficit
* European shares up, German top court eyed on bailout fund
* Weak Chinese import data sends oil lower
* Profit warnings bruise U.S. stocks
By Leah Schnurr
NEW YORK, July 10 (Reuters) - The euro fell to a two-year low against the dollar on Tuesday as news of a bailout agreement for Spain was offset by concern that a German court could delay Europe's new bailout fund.
European stock markets, however, rose after euro zone finance ministers agreed to release the first 30 billion euros ($37 billion) of bailout funds for Spain's troubled lenders by the end of July.
Oil prices extended losses in the afternoon with Brent crude falling back below $100 a barrel after data showed China imported less crude oil last month, while Norway's government ordered an end to an oil workers' strike that had threatened production.
Germany's top court began a hearing into whether the euro zone's fund, known as the European Stability Mechanism, and planned changes to the region's budget rules are compatible with German law.
German Finance Minister Wolfgang Schaeuble told the court that any significant delay in approving the measures could fuel financial market turbulence. Spanish and Italian government bond yields eased, while European stocks ended up nearly 1 percent.
Approval would pave the way for funds to be used more flexibly to ease the European debt crisis, but a delay of more than a few weeks would slow an already protracted process of implementation of the key bailout fund, and possibly pressure the euro and equities.
"People have been selling into bounces as euro sentiment remains very low," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
"Euro weakness is partly a reflection of the unresolved issues in the euro zone and there is also a limit to how much the European Central Bank can ease, so now we are seeing easing through the currency," he said.
The common currency fell as low as $1.2233, its lowest since July 1, 2010. It last traded at $1.2257, down 0.5 percent. The euro fell to 97.20 yen and last traded down 0.7 percent at 97.37, according to Reuters data.
Euro zone ministers decided to grant Spain an extra year, until 2014, to reach its deficit-reduction target, but made no apparent progress on how the bloc's new rescue fund, the ESM, will be used to help lower Madrid's elevated borrowing costs.
U.S. stock indexes did not fare as well as their European counterparts as Wall Street was hurt by several profit warnings from technology companies.
China, the world's second-largest economy, curtailed imports in June in further evidence that Europe's three-year-long debt crisis is dragging down economic activity around the world.
Annual import growth was 6.3 percent in June, far short of the 12.7 percent forecast by economists, and the 12.7 percent achieved in May.
Brent crude oil fell $2.37 to $97.94 a barrel, while U.S. crude settled at $83.91 a barrel, down $2.08.
U.S. stocks, after trading modestly lower for much of the day, saw declines accelerate in the mid-afternoon as shares of chip makers fell.
The Dow Jones industrial average fell 92.25 points, or 0.72 percent, to 12,644.04. The Standard & Poor's 500 Index lost 11.51 points, or 0.85 percent, to 1,340.95. The Nasdaq Composite Index dropped 30.24 points, or 1.03 percent, to 2,901.53.
"The market is slowly adapting to the reality that we are going into a global recession. Today is the perfect example of that. Materials, energy and technology sectors are all down while defensive sectors are up," said James Dailey, portfolio manager of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
Weak earnings and pre-announcements "are really starting to hit the market," he said.
Advanced Micro Devices tumbled 11 percent to $5.00 after the chipmaker slashed its outlook for second-quarter revenue. Applied Materials Inc lost 2.6 percent to $10.72 after it said it expects to miss its full-year estimates.
European shares rose in choppy and light trade. The FTSE Eurofirst 300 index closed up 0.9 percent at 1,039.12. The MSCI world equity index dipped 0.1 percent.
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