May 25, 2012 / 6:24 PM / 7 years ago

GLOBAL MARKETS-Stocks, euro fall as Europe dents sentiment

* 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 eased slightly on Friday as Spain’s deteriorating finances and a possible Greek exit from the euro weighed on investor sentiment more than an upbeat report on U.S. consumer confidence.

Oil prices and European stocks rebounded after recent declines, but shares in Europe were lifted by defensive plays like utilities and drugmakers.

Trading volume in Europe was lower than an already weak 90-day average, reflecting a downbeat mood that was heightened by concerns about Greece ahead of a three-day U.S. holiday weekend.

The euro plumbed a fresh 22-month low against the U.S. dollar after the president of Catalonia, Spain’s wealthiest region, said it is running out of options for refinancing more than 13 billion euros in debt that comes due this year.

The euro briefly fell below $1.25 on trading platform EBS but pared some losses to trade down 0.1 percent at $1.2519.

A report that showed U.S. consumer sentiment rising to its highest level in more than four years in May helped buoy sentiment in some quarters, leading U.S. stocks to pare some losses. The broad S&P 500 traded near break-even, but the Dow was 0.15 percent lower.

The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment rose to 79.3 from 76.4 in April, topping forecasts for 77.8 and an initial May reading of the same.

“Unfortunately, consumer confidence is still extremely vulnerable to a reversal, as occurred in the past two years,” survey director Richard Curtin said in a statement.

The Dow Jones industrial average was down 43.06 points, or 0.34 percent, at 12,486.69. The Standard & Poor’s 500 Index was down 0.23 points, or 0.02 percent, at 1,320.45. The Nasdaq Composite Index was up 3.28 points, or 0.12 percent, at 2,842.66.

In Europe, the FTSEurofirst 300 index rebounded, rising 0.2 percent to close at 984.97.

MSCI’s all-country world equity index erased nearly all losses to trade 0.1 percent lower at 300.59.

Catalonia’s troubles came as Spain’s Bankia SA is 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.

Bonds prices rose in a bid for safety as investors prepare for what is likely to be volatile trading over the coming month.

“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 U.S. Dollar Index rose 0.03 percent at 82.376. The benchmark 10-year U.S. Treasury note was up 12/32 in price to yield 1.74 percent.

Brent crude oil prices gained, supported by a lack of progress in talks with Iran over its nuclear program, returning investor focus to fears about supply if tension over the issue intensifies.

Brent crude rose 30 cents to $106.85 a barrel. U.S. light sweet crude oil rose 22 cents to $90.88.

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 $16.16 to $1,573.10 an ounce.

The Reuters/Jefferies CRB Index of commodities was down 0.1 percent at 281.55.

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