July 23, 2012 / 2:12 PM / 7 years ago

GLOBAL MARKETS-Spanish bailout fears knock euro, stocks lower

* World shares fall as euro plumbs new two-year lows

* Investors turn to safe-haven bonds, sending yields to fresh records

* Oil falls about $4 a barrel (Adds opening of U.S. markets, byline, dateline; previous LONDON)

By Herbert Lash

NEW YORK, July 23 (Reuters) - The euro hit its lowest level in more than two years and world equity markets fell sharply on Monday after reports that Spain’s indebted regions need help fueled fears that the country will become the fourth euro-zone member to ask for a major bailout.

Spanish media reported that up to six regions may seek aid from the central government after Valencia asked for funds on Friday. That request sent Spanish bonds to a euro-era high of more than 7.5 percent, above the 7 percent level viewed as sustainable.

How Spain’s 17 indebted autonomous regions, locked out of international debt markets, refinance 36 billion euros in debt this year has been a major source of concern for investors ever since they missed deficit targets last year.

The euro slid as low as $1.2067, its weakest since June 2010, and was last down 0.3 percent at $1.2089. Against the yen, it was near a 12-year trough. Yields of U.S. Treasury benchmark notes set new record lows in a flight to quality.

“The week is off to a challenging start as rising fears over Europe push risk aversion higher,” said Camilla Sutton, chief currency strategist at Scotia bank in Toronto.

“Most of the focus is on Spain, with rising concern it too will need to access financial aid,” Sutton said.

Wall Street stocks opened more than 1 percent lower, following declines of more than 2 percent in European and emerging market indexes.

The Dow Jones industrial average was down 209.53 points, or 1.63 percent, at 12,613.04. The Standard & Poor’s 500 Index was down 20.98 points, or 1.54 percent, at 1,341.68. The Nasdaq Composite Index was down 64.06 points, or 2.19 percent, at 2,861.24.

The FTSE Eurofirst 300 index of top European shares fell 2.5 percent to 1022.74 points, while MSCI’s emerging markets index was down 2.8 percent and the all-country world equity index fell 2.2 percent.

Spain’s main share index, the Ibex, was down 2.5 percent.

Highlighting Spain’s urgent situation, the country must make coupon and redemption payments to bondholders totaling 20 billion euros ($24.3 billion) next Monday.

Spanish Economy Minister Luis de Guindos, who visits Berlin on Tuesday for talks with Germany’s finance minister, has insisted Spain does not need a full sovereign bailout, such as those for Greece, Ireland and Portugal.

Data from the Commodity Futures Trading Commission released on Friday showed that currency speculators are increasing their bets in favor of the dollar as Europe’s debt crisis shows signs of growing worse and threatens the global economy.

The steady trend away from riskier assets has pushed safe-haven government bond prices higher and yields lower across the board.

Five- and 10-year German government bond yields hit new lows and U.S. Treasury-note yields hit their lowest since the early 1800s. Ten-year U.S. Treasuries yields fell as low as 1.3977 percent, and last traded up 10/32 in price to yield 1.4229 percent.

Brent crude was down $4.13 at $102.70 a barrel, while U.S. crude fell $3.83 to $88.00 a barrel.

Additional reporting by Richard Hubbard in London; Reporting By Herbert Lash; Editing by Kenneth Barry

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