Euro, global stocks fall on call for ECB debt action

Wed Jan 11, 2012 7:58am EST
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By Richard Hubbard

LONDON (Reuters) - The euro and global stocks fell on Wednesday after ratings agency Fitch called on the European Central Bank to do more to solve the currency bloc's debt crisis, unnerving investors ahead of auctions for Spanish and Italian bonds later in the week.

U.S. stock index futures also turned lower, pointing to a weaker start on Wall Street, hurt by computer giant Microsoft's (MSFT.O: Quote) warning that sales of personal computers will probably be lower than analysts expect in the fourth quarter.

The euro hit session lows of $1.2695 after Fitch said the ECB needed to ramp up its buying of troubled euro zone debt to support Italy and prevent a "cataclysmic" collapse of the euro.

"Can the euro be saved without more active engagement from the ECB? Quite frankly we think no," David Riley, the head of sovereign ratings for Fitch, said at an investor roadshow in Frankfurt.

The shared currency was down over 0.5 percent and close to a 16-month trough at $1.2666 set on Monday.

Italian 10-year bond yields rose back above 7.0 percent and Spanish yields rose about 10 basis points to 5.34 percent as investors sought higher returns to hold the debt.

Investor attention is focusing more on Spain, which sells up to 5 billion euros of 2015 and 2016 paper on Thursday, just hours before an ECB interest rate decision. Italy offers up to 4.75 billion euros of five-year bonds on Friday.

The concerns about Europe's deep-rooted debt problems nudged the FTSEurofirst 300 .FTEU3 index of top European shares down 0.7 percent to 1,020.05 points after it touched 1,029.32 earlier in the session, the highest since early August. The index surged 1.8 percent in the previous session.   Continued...