(Corrects 3rd bullet to say debt yield falls, not price)
* Wall Street shares slip further after Wednesday slump
* Euro hits two-month low after ECB holds rates steady
* U.S. government debt yield falls; gold rises
By Richard Leong
NEW YORK, Nov 8 Stocks on major markets fell
further on Thursday as investors focused on whether the United
States will tackle its fiscal problems, while the euro fell to a
two-month low after the European Central Bank refrained from
taking more action despite signs of further economic slowdown.
Despite U.S. lawmakers' pledges to avoid the automatic tax
rises and spending cuts due to start early next year, known as
the "fiscal cliff", doubts persisted as to whether Congress can
agree on a timely compromise.
Fears that the world's biggest economy may suffer a
recession in 2013 as a result of the sudden fiscal austerity,
worth $600 billion, led to sharp falls stocks and crude oil
prices on Wednesday.
"This gridlock adds to the uncertainty for markets. It shows
the difficult problems Washington faces won't get fixed any time
soon," said Daniel North, chief economist at Euler Hermes ACI in
Owings Mills, Maryland.
However, U.S. stocks stabilized Thursday morning partly on
news of a rise in U.S. exports and a bigger-than-expected drop
in jobless benefit claims, though claims were distorted by the
storm that disrupted life in U.S. Northeast in the past week.
On Wall Street, the three major U.S. stock indexes reversed
their slight gain after a flat opening. Their decline
accelerated in early afternoon trading, prompted by investors
socking more money into bonds from stocks, analysts said.
The Dow Jones industrial average was down 68.57
points, or 0.53 percent, at 12,864.16. The Standard & Poor's 500
Index was down 8.92 points, or 0.64 percent, at 1,385.61.
The Nasdaq Composite Index was down 23.81 points, or
0.81 percent, at 2,913.47.
Whole Foods Market Inc reported income that matched
forecasts, but shares of the biggest U.S. natural and organic
grocery chain fell 4.8 percent to $91.31.
On Wednesday, the S&P 500 stock index suffered its biggest
one-day percentage drop since June, and the Dow closed at its
lowest since early August.
The FTSE Eurofirst 300 index of top European shares
closed down 0.15 percent at 1,097.71 on Thursday, the lowest
level in a week.
FTSE component Siemens ended up 1.8 percent at
80.27 euros a share after the German engineering conglomerate
reported a smaller-than-expected drop in profits and announced a
cost-saving plan worth 6 billion euros ($7.7 billion).
The MSCI world equity index was down 0.8
percent at 324.20 after Tokyo's Nikkei lost 1.5 percent.
The ECB left its key interest rate at 0.75 percent,
disappointing some traders who had bet on more policy easing in
the wake of recent comments by ECB President Mario Draghi on the
weak economic outlook and gloomy European Commission growth
The Bank of England left its key rate unchanged at 0.5
The absence of more ECB action spurred selling in the euro
, knocking it down to a two-month low versus the U.S.
dollar at $1.2719. It last traded at $1.2744, down 0.22 percent
for the day.
The euro had been under pressure before the ECB rate
decision even though the Greek parliament approved in the early
hours of Thursday an austerity package needed to unlock
international aid and avert bankruptcy, defying political rifts
and violent protests.
"The euro will continue to weaken because there is no
recovery in sight for Europe and the rest of the world continues
to slip," said Joseph Trevisani, chief market strategist at
WorldWide Markets in Woodcliff Lake, New Jersey.
Meanwhile, Spain, another heavily indebted euro zone member,
sold 4.8 billion euros ($6 billion) of new debt, completing its
cash needs for this year. This meant Madrid can hold out longer
before asking for international aid.
The somewhat encouraging news in Europe curbed safe-haven
bids for U.S. and German government debt, but persistent unease
about the region's debt woes and the gridlock in Washington
deterred any meaningful selling in bonds.
The yield on the benchmark 10-year U.S. Treasury note
fell 6 basis points to 1.628 percent after the
strong 30-year bond auction, while German Bund futures
were up 28 basis points at 143.02, nearly their session highs.
In commodity markets, crude oil retreated from its session
highs after tumbling more than $4 a barrel on Wednesday on
concerns about weak demand for fuel as the U.S. and European
economies face the risk of a protracted slowdown.
Brent crude was flat at $106.82 per barrel after
falling nearly 4.0 percent on Wednesday, its steepest drop since
December 2011. It rose as high as $108.17 earlier.
U.S. crude rose 53 cents to $84.95, after losing
nearly 5 percent in the previous session, also its biggest slump
since December 2011.
Gold was on track for a fourth straight days of gains
on safe-haven bids due to worries about the U.S. fiscal cliff
and Europe's debt crisis. Spot bullion was up 0.41 percent at
$1,723.45 an ounce.
(Additional reporting by Rodrigo Campos and Wanfeng Zhou in New
York and Richard Hubbard in London; Editing by Jan Paschal and