Stocks sag as Irish rescue joy fades

NEW YORK: - Global stocks fell and the greenback rose as investor optimism about Ireland's 85-billion-euro ($115bn) debt bailout grew stale, exposing the unappetizing prospect Europe's fiscal problems will linger.

The safety trade's early domination on Monday faded as U.S. Treasury price gains, as well as the U.S. dollar's advances, were trimmed, giving some space for gold and oil prices to rebound.

Evidence of promising U.S. consumer spending for the end-of-year holiday shopping season is providing little counterweight so far. Retail stocks had moved higher in anticipation of the weekend sales, leaving them vulnerable to a sell-off.

"This seems to be more of a macro sell-off based on fears of what's happening in Europe," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore. "A lot of people don't understand the ramifications here. If Europe is having these systemic problems, it brings the question of whether our economic recovery is put on hold." Mata said.

While France and Germany hailed the Irish bailout as a rescue of the euro and set a course for a permanent debt resolution system, the currency dropped to a two-month low against the U.S. dollar. The rescue package was designed both to help Ireland and to stop a rolling crisis from moving on to Portugal and, perhaps, Spain. Yields on Irish government bonds are higher than Friday's close and off their lows seen in early trade after the agreement was sealed on Sunday.

The spreads between Spanish and Italian bonds versus their German equivalent widened to euro-lifetime highs as optimism for the Irish deal waned. Credit default swap costs on Portugal and Spain both hit record highs on Monday on fears that they may be next in line to struggle with their debt.

In midday New York trade, the Dow Jones industrial average fell115.91 points, or 1.04 percent, to 10,976.09, slipping below the psychologically significant 11,000 mark. The Standard & Poor's 500Index lost 10.31 points, or 0.87 percent, to 1,179.09. The NASDAQ Composite Index dropped 28.17 points, or 1.11 percent, to 2,506.39.

European shares closed at a seven-week low, with banks among the casualties. The FTSEurofirst 300 index of top European shares slid1.6 percent to 1,069.24.

Japan's Nikkei benchmark index closed at a five-month high as the weakening yen helped support the shares of the country's big exporting companies.

MSCI'S All-Country World Index fell 0.99 percent.