* Dollar falls across the board
* Risk aversion pushes gold to record high
* German debt rises on U.S. warning, euro zone woes
By Jeremy Gaunt, European Investment Correspondent
LONDON, July 14 Rating agency Moody's warning
that the U.S. economy's top credit ranking may be in danger
weakened world stocks on Thursday, hit the dollar and helped
push gold to a record high.
Moody's said late on Wednesday there was an increased
possibility the statutory U.S. debt limit would not be raised on
a timely basis, leading to a default on U.S. Treasury debt
The idea of Washington losing its triple-A status was enough
to wipe out any residual bounce on stock markets from U.S.
Federal Reserve Chairman Ben Bernanke's comments on Wednesday
that there could be further stimulus if needed.
World stocks as measured by MSCI fell 0.3
percent while the FTSEurofirst 300 shed more than 1
percent. Japan's Nikkei lost 0.3 percent.
Analysts continue to believe that there will be a
last-minute political deal to extend the U.S. debt limit, but
the uncertainty is playing into a generally nervous market.
"The U.S. debt situation is annoying. It's politics pure and
simple. I guess they'll get out of it in time so no harm will be
done," said Koen De Leus, strategist at KBC Securities.
"But it does create additional nervousness on top of all
other issues like the uncertainty about U.S. growth in the
second half of 2011, inflation problems in emerging countries
and the European debt problem."
U.S. stock futures fell around 0.1 percent SPc1, pointing
to a weaker open on Wall Street later.
General risk aversion towards debt pushed investors into
gold , which hit a nominal record of $1,589.56 an ounce.
"Lacking a really reliable destination, a lot of the funds
leaving the bonds market are going into precious metals on the
notion that their value will be retained even if policymakers
are pressured to go to further extremes to work against
contagion," said one gold trader in Singapore.
Demand for triple-A rated German debt rose after the Moody's
U.S. warning. But that was only one factor driving a flight from
risk as concern about the euro zone's own problems also grew
over delays to policymakers' plans to tackle the region's
deepening debt and after Fitch downgraded Greece further into
junk territory on Wednesday.
Italy has moved closer to centre stage in Europe's debt
crisis over the past week. At an auction on Thursday, Italy had
to pay the highest rates in three years to sell almost 5 billion
euros of long-term debt, highlighting growing pressure on its
public finances .
The euro erased early gains to stand flat at $1.4191 .
The U.S. dollar fell 0.2 percent against a basket of currencies
, hurt by both Moody's and Bernanke.
"The dollar has digested the news from Moody's but there is
still an awful lot of event risk in the coming couple of
sessions. It's going to be a bit of a wild ride," said Adam
Cole, FX strategist at RBC Capital Markets.
Concerns about the U.S. budget deficit put the brakes on a
rally in oil prices, pushing Brent LCOc1 down 20 cents to
$118.48 a barrel.
(Additional reporting by Nia Williams and Atul Prakash; Editing
by John Stonestreet)