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GLOBAL MARKETS-Debt fears roil stocks, euro; gold hits record

Published 07/18/2011, 09:54 AM
Updated 07/18/2011, 09:56 AM

* US stocks open lower; MSCI world index down 0.8 pct

* Euro zone bank stress tests fail to calm worries

* Gold at record above $1,600/oz as investors seek safety

* U.S. debt limit worries cap Treasuries gains

(Updates market action, changes dateline, previous London)

By Richard Leong

NEW YORK, July 18 (Reuters) - Wall Street stocks and the euro fell on Monday, while gold prices climbed to a new record high, on fears the debt problems in Europe and the United States may spiral into a global crisis.

Stress tests for euro zone banks released on Friday failed to stem the anxiety about a potential Greek sovereign debt default. [ID:nL6E7IF19G]

In the United States, as the clock ticks down to the Aug. 2 deadline for an increase in the statutory $14.3 trillion borrowing limit, investors were nervous about the stalemate in Washington.

The lack of progress in negotiating a U.S. fiscal package has already led to two ratings agencies to warn of a credit rating downgrade. Such a move, some traders fear, could send interest rates soaring and erode the U.S. dollar's reserve currency status.

"There's a perfect storm happening on a global macroeconomic basis with no debt deal here and the ongoing issues in Europe, and the market is looking at all these things and is fairly anxious," said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York.

The Dow Jones industrial average <.DJI> was down 63.73 points, or 0.51 percent, at 12,416.00. The Standard & Poor's 500 Index <.SPX> was down 5.18 points, or 0.39 percent, at 1,310.96. The Nasdaq Composite Index <.IXIC> was down 8.12 points, or 0.29 percent, at 2,781.68. See [.N]

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European stocks <.FTEU3> lost more than 1.0 percent on the day, while the MSCI world equity index <.MIWD00000PUS> fell 0.8 percent.

In the currency market, the euro

With fears growing that the debt crisis could spread to Italy or Spain, the euro zone's third and fourth largest economies, Spanish 10-year government bond yields

As worries over fiscal burdens persist, investors have been scrambling to shelter their money in cash, gold, the Swiss franc and other less risky investments.

Spot gold

The safe-haven Swiss franc

Europe's debt crisis stoked a mild bid for U.S. government debt, but Washington's stalemate to raise the debt ceiling has limited the appetite for Treasuries.

Prices on the benchmark 10-year Treasury note

(Additional reporting by Ryan Vlastelica and Karen Brettell in New York; Jessica Mortimer, Ana Nicolaci da Costa, Neal Armstrong and Jan Harvey in London)

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