Euro-zone troubles linger on world markets

Equities on Wall Street and in Europe fell as Ireland's bailout failed to stem concern about the single currency-zone's financial crisis.

As the European Union and International Monetary Fund started to work out the details of a loan package to Ireland, expected to total about €80 billion euros (NZ$141 billion) to €90 billion euros, the country's government began to fall apart.

The Green Party, Irish Prime Minister Brian Cowen's junior coalition partners, today called for a January election, while two independent lawmakers said they might not support the budget, scheduled for December 7.

"There seems to be a creeping realisation that this won't necessarily mark the end of the euro-zone sovereign-debt crisis,"

London-based Will Heddon, a sales trader at IG Index, told Bloomberg News. "This lack of conviction from traders is resulting in the early support ebbing away."

In early afternoon trading, the Dow Jones industrial average dropped 1.23 per cent, the Standard & Poor's 500 Index fell 1.16 per cent while the Nasdaq Composite Index declined 0.61 per cent.

Exxon Mobil and Chevron dragged the Dow lower as oil weakened.

US crude oil futures for January delivery fell 38 cents to US$81.60 barrel by 1453 GMT, giving up earlier gains.

In Europe, the Stoxx 600 shed 0.7 per cent to 267.74 at the 4:30pm close in London. National benchmark indexes dropped in all 18 western European markets except Iceland.

Bank of Ireland led the decline in bank stocks, plunging 19 per cent, as Moody's Investors Service today warned a "multi-notch"
downgrade to Ireland's Aa2 credit rating was "most likely".

The euro also fell, weakening against 13 of 16 major counterparts, as investors worried that the Irish rescue package won't end the single currency zone's troubles in Portugal and Spain.

The euro weakened 0.6 per cent against the US dollar to US$1.3608.

"The market is sceptical as there are still fiscal issues with Portugal and Spain. Investors have been undecided on the euro for a while now and I can see that uncertainty lasting into year-end,"

Jane Foley, senior currency strategist at Rabobank in London, told Reuters.

The Dollar Index, which measures its value against a basket of currencies, advanced 0.42 per cent to 78.83.

Gold was steady, paring earlier gains. Spot gold gained 0.1 per cent to US$1,355.20 an ounce at noon.

US gold futures for December delivery rose US$2.50 to US$1,354.80.

"Obviously, there are concerns about weakness of the Irish government, but above and beyond that, what's weighing on gold is the US dollar, which has strengthened," Peter Buchanan, senior economist of CIBC World Markets, told Reuters.