DJI- NEW YORK, May 29 (Reuters) - The euro neared a two-year low o n T uesday as investors fretted about Spain's troubled banking system, but global stocks jumped on speculation Greece would stay in the euro zone and news that China would take new measures to stem an economic slowdown.
The euro fell further below $1.25 after Egan-Jones Ratings cut Spain's credit score for the third time in less than a month, saying the need to support the country's banks was putting new strains on Spanish public finances.
The euro fell to lows versus the U.S. dollar last seen in since July 2010, as Spain's 10-year borrowing costs rose to 6.54 percent. The euro traded down 0.3 percent to $1.2503.
Spanish stocks also fell and Spain's borrowing costs held near six-month highs after a source said the government would issue new debt to recapitalize troubled lender Bankia.
European Central Bank officials declined to comment on speculation of further action to bolster banks in the euro zone.
"The rumor mill has been busy, with talk of an ECB press conference about bank recapitalization, supporting the euro and giving euro zone stocks upside momentum," said Saxo Bank Chief Economist Steen Jakobsen, in Copenhagen. "We do not believe in it, for the record."
Stocks on Wall Street rose on renewed hopes Greece will stay in the euro zone after Greek election polls pointed to support for pro-bailout parties in elections next month.
The major U.S. indices were up more than 1 percent even though Facebook Inc hit a new low of $28.65, with losses accelerating after falling through the $30 per share barrier.
The Dow Jones industrial average <.DJI> added 125.86 points, or 1.01 percent, to end at 12,580.69. The Standard & Poor's 500 Index <.SPX> was up 14.60 points, or 1.11 percent, at 1,332.42. The Nasdaq Composite Index <.IXIC> was up 33.46 points, or 1.18 percent, at 2,870.99.
Investors took heart from polls showing a party that backs Greece's international bailout was leading ahead of a June 17 election. If the New Democracy Party can form a government, Greece would be less likely to quit the euro. [ID:nL5E8GTCHN]
"There's increasing hope that the more conservative party will win out in Greece, which is enough to spur some buying today," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
Reports that China was planning a new round of stimulus spending to boost lending and growth also cheered stock markets and briefly boosted oil prices, which later slipped on the Spain downgrade and Middle East supply worries. [ID:nL4E8GT0AU]
Traders also appear to be anticipating better-than-expected economic news this week. U.S. May jobs and Institute for Supply Management reports are due on Fr iday, noted Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
Still, a high degree of caution marked trading in the bond markets.
U.S. government debt prices slipped in late trade and the yield on Germany's 10-year bond hit a record low as doubts grew over Spain's plan to recapitalize its banks and obtain financing for its struggling regional governments.
"It's mostly how you solve the Spanish bank problem, so there's a bit of safe-haven buying," said David Keeble, global head of interest rates strategy at Credit Agricole Corporate & Investment Banking in New York.
Spanish debt rose within 46 basis points of the 7 percent threshold that was the tipping point that forced other euro zone countries such as Portugal and Ireland to seek emergency rescues.
NYMEX- NEW YORK, May 29 (Reuters) - U.S. crude edged lower on Tuesday, retreating after a downgrade of Spain's credit rating sent the euro reeling against the dollar, while hopes that Greece will remain in the euro zone and China will move to stimulate growth limited oil's losses.
Egan-Jones Ratings cut Spain's credit rating for the third time in less than a month, pressuring the single currency and rekindling fears of a spreading debt crisis in the euro zone. [ID:nL1E8GT7HY] [USD/]
Before the downgrade, oil and equities rose on optimism about polls showing leads for Greek political parties in favor of austerity and a report that China's biggest banks have accelerated lending. [ID:nL5E8GQ2CK] [ID:nL4E8GT0AU]
Also supportive for oil were revived concerns about supply disruptions because Iran's dispute with the West over Tehran's nuclear program remains unresolved.
* On the New York Mercantile Exchange, July crude fell 10 cents, or 0.11 percent, to settle at $90.76 a barrel, having traded from $90.25 to $92.21.
* China's biggest banks appeared to have accelerated lending toward the end of this month, the official Shanghai Securities News reported on Tuesday, citing unidentified sources. [ID:nL4E8GT0AU]
* OPEC output in May has hit its highest since 2008 as Saudi Arabia maintained output at high rates and Iranian shipments did not fall substantially more ahead of a European Union embargo set for July, a Reuters survey found on Tuesday. [ID:nL9E8CA01M]
CBOT SOYBEAN- Soybean futures on the Chicago Board of Trade ended higher for a third straight session, supported by soybean/corn spreading and concerns about dry weather limiting the early growth of the U.S. soy crop, traders said.
* However, soybean values backed off the day's highs by the close of pit trading at 1:15 p.m. CDT (1815 GMT) as a downgrade of Spain's sovereign rating prompted traders to exit risky assets such as commodities.
* Soymeal and soyoil followed soybeans higher but soymeal gained relative to soyoil on meal/oil spreading.
* Dry weather was a worry for soybeans in much of the Midwest, especially southern areas, following a hot and windy U.S. holiday weekend. But showers were crossing parts of Ohio, southern Indiana and Kentucky at midday Tuesday.
* MDA EarthSat Weather said much-needed rains were expected in the southern Midwest and northern Delta over the next few days, and more rains were expected in the Midwest next week. The showers should replenish moisture supplies and improve conditions for corn and soybean growth.
* Oilseed crushers in Argentina's main grains hub Rosario will go on strike over wages on Wednesday, the general secretary of the local union Pablo Reguera said. [ID:nL1E8GT56K]
* China is likely to raise soybean imports to 56.8 million tonnes in 2011/2012, despite recent shipment cancellations, as the country has harvested a smaller soy crop and faces continued high demand - oilseed analysts Oil World. [ID:nL5E8GTAS5]
* Argentina's 2012 soybean crop could fall as low as 39 million to 40 million tonnes, from 49.2 million tonnes in 2011, as drought and flooding continue to force farmers to abandon soy crops - Oil World. [ID:nL5E8GT5RI]
* USDA reported export inspections of U.S. soybeans in the latest week at 12.414 million bushels, near the low end of estimates for 11 million to 15 million bushels.
FCPO- JAKARTA, May 29 (Reuters) - Malaysian palm oil futures climbed to a near two-week high on Tuesday as investors cited a rebound from a sell-off on the euro zone debt crisis, while expectations of dry weather conditions in soybean-growing regions in the United States also supported prices.
The euro hovered near a two-year low as investors worried about Spain's banking problems, the outcome of the Greek elections and the health of the global economy. [MKTS/GLOB]
The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange closed 1.1 percent higher at 3,178 ringgit ($1,000) per tonne. Prices have slipped about 8 percent this month.
Traded volumes stood at 15,689 lots of 25 tonnes each, compared with Monday's total at 14,730 lots.
"It was over-sold to begin with," said a Singapore-based analyst. "If you look at soybean prices, it has been quite resilient, so palm has been over-shooting to the downside.
"If you have a world (economic) crisis, you still need people to eat ... if there is no supplier, then prices will shoot up regardless."
Last week, the lack of any significant breakthrough in resolving the debt crisis in Europe weighed on palm prices, sending the benchmark down to its lowest level this year at 2,993 ringgit per tonne.
Prices rose as high as 3,193 ringgit on Tuesday, the highest level since May 16, and traders say they are likely to hit 3,200 before the end of May.
In related markets, corn and soybeans firmed as some weather models forecast crop-stressing heat in the U.S. Midwest this week. [GRA/]
"It was over-sold," said a Kuala Lumpur-based trader. "The fundamentals have been positive, even when we fell to 2,993. On the technical side, we have posted a bottom, so sentiment has shifted back to positive."
Traders also said there was some buying after leading palm oil buyer India, looked likely to end its freeze on the base import price of refined vegetable oils. [ID:nL4E8GS276]
"There is also some talk about India wanting to raise import products' base prices. Maybe some buying or covering before India raises base prices," said a second Kuala Lumpur-based trader. "Palm oil is more in consolidation mode after last week's sharp falls.
"There is not as much concern and fear about Europe. Maybe we can see some light at the end of the tunnel."
Also helping boost palm prices, according to traders, was a rise in demand from India and Pakistan for Ramadan, where fasting in the day is followed by feasting in the evening.
REGIONAL EQUITY- May 29 (Reuters) - Most Southeast Asian stocks ended firmer on Tuesday on hopes that China might launch spending measures to boost growth, but trading volumes and gains were capped asconcerns over a euro zone recovery flared after a surge in Spanish borrowing.
Investors were still cautious, waiting for clues from the euro zone, which is struggling to overcome its debt crisis, though an opinion poll pointed to the possibility of the formation of a Greek government committed to keeping the country in the euro zone in a June 17 election. [ID:nL5E8GQ2CK]
"China spending more is always welcome news for equities," said Song Seng Wun, an economist at CIMB, based in Singapore.
"Optimism has returned at least for now. But a long wobbly road is ahead," he said referring to the euro zone crisis.
Stocks in the Philippines <.PSI> rose 1.4 percent to hit a two-week high after Moody's Investor Service revised the country's rating outlook to positive from stable.
Energy shares lifted Thailand's benchmark <.SETI> by 1.2 percent in heavy trading, extending gains for the fourth session, while Singapore <.FTSTI> shares closed 0.5 percent firmer.
Malaysian shares <.KLSE> ended up 0.7 percent and the Indonesian benchmark <.JKSE> closed steady though the two countries saw net foreign selling of $2.13 million and $44.18 million respectively.
