DJI - NEW YORK, NEW YORK, May 30 (Reuters) - Benchmark U.S. Treasury yields fell to their lowest levels in at least 60 years on Wednesday, while stocks and commodities sold off as fear of the euro zone's debt crisis gripped investors.
The euro fell below $1.24 to a fresh 23-month low against the dollar after Italian borrowing costs soared, and concerns mounted over Spain's banking sector following a caution by its central banker that Madrid will miss deficit targets for this year. Crude oil prices fell 3 percent.
In equity markets, the three major indexes on Wall Street closed down more than 1 percent each. Pan-European and global share indexes also lost more than 1 percent apiece.
Spain's stock market hit a nine-year low as the country's borrowing costs rose to near the 7 percent level that had forced other euro-zone nations to seek bailouts.
"You're seeing the deterioration in Spain gain magnitude and that is worrisome because it involves a larger bailout (than Greece's) and far more capital to alleviate banking problems," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
"Traders and long-term investors believe Europeans are working on solutions. But the ultimate question is, 'Will capital markets give them the time before a liquidity issue becomes a solvency issue?'"
GREEK POLLS CLOUDY; SPANISH STOCKS LANGUISH
In Greece, the outcome of an election next month that may decide whether it remains in the euro was still uncertain as polls showed parties for and against a bailout neck-and-neck.
At the close, the Dow Jones industrial average <.DJI> was down 160.83 points, or 1.28 percent, at 12,419.86. The Standard & Poor's 500 Index <.SPX> was down 19.10 points, or 1.43 percent, at 1,313.32. The Nasdaq Composite Index <.IXIC> was down 33.63 points, or 1.17 percent, at 2,837.36.
The benchmark 10-year U.S. Treasury note was up 7/32 in price, with its yield of 1.620 percent falling to its lowest in at least 60 years, based on monthly figures gathered by Reuters.
European stocks, tracked by the FTSEurofirst 300 index <.FTEU3>, fell 1.5 percent to close at 975.74, after trading 105 percent of its 90-day volume average. The blue-chip Euro STOXX 50 <.STOXX50E>, which fell 2 percent, traded 70 percent of its volume average.
Spain's Ibex 35 index fell as much as 2.9 percent to a session low at 6,073.70, its lowest since 2003.
MSCI's all-country world equity index shed 1.66 percent.
The yield on Spain's 10-year benchmark note was at 6.675 percent. Italy's funding costs rose sharply at a bond sale, with 10-year yields topping 6 percent for the first time since January.
The euro was last down 1 percent at $1.2367 after touching $1.2360 earlier, its lowest level since early July 2010. The euro also fell against the safe-haven yen, losing nearly 1.5 percent to trade near 97.82 yen, a four-month low.
ONLY "BAND-AID" SOLUTIONS FROM EUROPE
"Uncertainty remains high and headline risk is likely the key driver," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto. "The fear is that we only have Band-Aid solutions, and we still don't have a medium-term plan for Europe."
The European Commission threw Spain two potential lifelines, offering more time to reduce its budget deficit and offering direct aid from a euro-zone rescue fund to recapitalize distressed banks.
The euro's weakness underpinned the dollar index <.DXY>, which measures the dollar against a basket of major currencies. The index hit a session high above 83.1, its highest level since September 2010.
The rise in the dollar, as well as fears about the European debt crisis, dragged down commodities. Copper and platinum both sank to 4-1/2-month lows as investors piled into safe havens. [MET/L]
"As we've seen during other periods of extreme risk aversion, investors go into Treasury bonds, which are yielding record lows, or they stay in cash. It's preservation of capital," said analyst Robin Bhar at Societe Generale in London.
NYMEX - NEWYORK, NEW YORK, May 30 (Reuters) - U.S. crude futures tumbled more than 3 percent o n W ednesday, falling to a seven-month low on the threat to petroleum demand from a spreading euro zone debt crisis and China's signal that it is not planning a large economic stimulus.
Rising borrowing costs for Spain and Italy and the latest poll showing a lead for Greece's left-leaning, anti-austerity parties ahead of next month's elections added to concerns about the region's economy being enveloped in the debt turmoil.
U.S. crude was headed for a monthly decline of more than 17 percent for May. Equities and other commodities, like industrial feedstocks platinum and copper, also felt pressure from the mounting crisis in the euro zone economy.
Expectations that China would act to counter slowing growth were dimmed after influential academics said Beijing should shun aggressive fiscal stimulus, in remarks published in leading state-backed newspapers.
U.S. crude inventories fell by 353,000 barrels last week, according to industry group the American Petroleum Institute's weekly report.
Gasoline stocks rose 2.1 million barrels and distillate stocks fell 1.3 million barrels, the API said.
Crude stocks had been forecast to be up, by 600,000 barrels. Gasoline stocks were expected to be down 800,000 barrels, with distillate stocks seen near flat, down 100,000 barrels.
MARKETS NEWS
* London copper fell more than 2 percent, turning negative for the year and coming within $20 of its 2012 low on fears of a widening European debt crisis and fading hopes for a Chinese stimulus.
CBOT SOYBEAN - May 30 (Reuters) - Nearby soybean futures on the Chicago Board of Trade fell, halting a three-day rally, as mounting concerns over Europe's debt crisis prompted investors to exit risky assets including commodities.
* U.S. crude oil futures fell about $3 per barrel, adding pressure on soybeans and soyoil.
* But new-crop November soybeans were higher at the end of pit trading at 1:15 p.m. CDT (1815 GMT), buoyed by worries about dryness in parts of the U.S. Midwest crop belt, and updated forecasts that scaled back rains that had been expected this week.
* USDA late Tuesday said the U.S. soybean crop was 89 percent seeded, up from 76 percent a week earlier and well ahead of the five-year average of 61 percent.
* USDA said the crop was 61 percent emerged, ahead of the five-year average of 30 percent. [US/SOY]
* Stevedores at Brazil's largest port, Santos, went on strike on Wednesday, threatening delays to shipments of soy, coffee, sugar and other commodities, the port authority said.
* CIF soybean basis bids for soybeans shipped to the U.S. Gulf were mostly steady as moderate demand from exporters was met by limited farmer sales.
* Front-month July soybeans fell to a one-week low before paring losses. The contract traded between support at the 100-day average of $13.48-1/2 and resistance at the 50-day average of $14.22.
FCPO- JAKARTA, May 30 (Reuters) - Malaysian palm oil futures snapped a four-day rally on Wednesday, falling more than 2 percent as euro zone debt jitters weighed on prices, although losses were capped by expected demand ahead of the Muslim fasting month of Ramadan in July.
European shares slipped and the euro touched a 23-month low on Wednesday as investors worried that Spain's banking problems would push its borrowing costs to unsustainable levels and after China signalled it is not planning a large stimulus package.
The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange ended 2.1 percent lower at 3,111 Malaysian ringgit ($990) per tonne. Prices, which earlier hit a low at 3,106 ringgit, have slipped more than 10 percent this month.
Traded volumes stood at 17,601 lots of 25 tonnes each, compared with Tuesday's total at 15,689 lots.
Palm oil is "taking its cue from macro uncertainties," said a Kuala Lumpur-based trader. "If Europe fail to provide the much needed simulation, it will have more downside."
Last week, palm prices were weighed down as no significant breakthrough was made in resolving Europe's debt crisis, sending the benchmark down to its lowest level this year at 2,993 ringgit per tonne.
Palm oil will drop to 3,069 ringgit per tonne, driven by a wave (5), the fifth wave of a five-wave cycle, said Reuters market analyst Wang Tao based on technical analysis.
"The market fundamentals are still bullish because of slower production and exports not being too bad, but outside factors really scared buyers," said a Jakarta-based buyer.
But highlighting how jittery investors are, benchmark palm prices rose to their highest peak in almost two weeks earlier this week as investors keep a close eye on weather conditions in the United States.
Soybeans rose for a fourth straight session, supported by dryness in parts of the U.S. Midwest, tight supplies from South America and strong Chinese demand.
"Palm oil today is down a bit," a second Kuala Lumpur-based trader said. "With the euro zone crisis dragging ... everything is uncertain."
"So far so good," he added on the U.S. weather patterns. "But it's only the initial part of the planting season."
Also helping to 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.
"We are moving into the fasting season, where demand is going to come in and pick up," the second trader added.
In other vegetable oil markets, the most active Dalian soyoil September contract eased slightly.
REGIONAL EQUITY - May 30 (Reuters) - Thailand's stock market ended Wednesday 1.3 percent weaker, while other southeast Asian markets closed mixed as fears over Spain's bank crisis and the possibility of China taking a cautious stance on economic stimulus measures damped investor appetite for risky assets.
Concerns over Spain's borrowing costs rising to unsustainable levels hit hopes for the recovery of the euro zone.
Thailand <.SETI> snapped a four-session rising streak, but Bangkok-based Viwat Techapoonphol, senior strategist of Tisco Securities, said the fall would help boost buying in the Bangkok market, where foreigners have been net sellers only for one month so far this year.
"There will be buying opportunities, especially for local investors, in this market at the lower prices. If you look at the domestic economy in the second half, I think it's a good story," Techapoonphol said.
Shares in Singapore <.FTSTI> lost 0.6 percent, and the Philippines benchmark <.PSI> edged down 0.1 percent.
Indonesian stocks <.JKSE>, recovering from early losses, closed steady with foreign inflows of $12.36 million, while Malaysian shares <.KLSE> gained 0.6 percent with net foreign buying of $29.80 million and Vietnam's benchmark <.VNI> added 0.9 percent.
