GLOBAL MARKETS-Portugal downgrade hits stocks, boosts dollar

* Wall St opens lower, dollar gains on Europe debt worries

* Gold hits six-week low

* Euro weaker against the US dollar to May 2009 levels

By Walter Brandimarte and Naomi Tajitsu

NEW YORK/LONDON, March 24 (Reuters) - Global stocks declined and the U.S. dollar reached a 10-month high against the euro on Wednesday after Fitch Ratings downgraded Portugal, raising worries about Europe's growing sovereign debt burden.

Commodity prices also fell as the dollar gained, with gold at a six-week low, but U.S. Treasuries prices also posted losses as investors sold bonds on stronger U.S. economic data and worries about the supply of new debt.

Fitch cut Portugal's sovereign credit rating by one notch to AA-minus, citing budgetary underperformance in 2009 and warning that a similar outcome this year and next could trigger another downgrade. [ID:nLDE62N193]

Ongoing speculation that Greece may have a difficult time securing debt aid at an upcoming European Union summit also highlighted problems facing the euro system, and helped push the single currency to a lifetime low against the Swiss franc.

"I think this is just the beginning of a long process of downgrading a number of major governments until they put their debt in order," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

"It's a negative because it sends the message that investments that were previously thought to be safe could have problems."

The Dow Jones industrial average <.DJI> lost 9.15 points, or 0.08 percent, to 10,879.68, while the Standard & Poor's 500 Index <.SPX> was down 1.63 points, or 0.14 percent, at 1,172.54. The Nasdaq Composite Index <.IXIC> declined 7.83 points, or 0.32 percent, to 2,407.41.

The FTSEurofirst 300 <.FTEU3> index of top European shares was 0.14 percent lower just after hitting its highest level since October 2008 earlier on the day.

"The (stock) market was increasingly overbought, so Portugal is a perfect excuse to book some profits," said Kenneth Broux, market economist at Lloyds TSB in London.

The euro was nearly 1 percent weaker on the day at $1.3365. Following the Fitch announcement, the euro hit its weakest level against the greenback since May 2009.

Analysts said the euro's weakness, despite a stronger-than-expected reading of the Ifo Institute's survey of German business sentiment, suggested strong downward momentum in the common European currency. [ID:nBAE003750]

The dollar index <.DXY> hit a 10-month high of 81.647 as the downgrade and jitters ahead of the EU summit prompted traders to sell currencies perceived to be higher risk and buy the safe-haven dollar. That pushed the dollar to a one-month high versus the yen.

A stronger dollar sent commodity prices down. U.S. crude oil prices fell $1.29, or 1.57 percent, to $80.62 per barrel, while spot gold fell as low as $1,088.05 an ounce, its weakest since Feb. 12.

Increased aversion to risk did not translate into demand for U.S. Treasuries, though. Bond prices fell sharply, sending benchmark 10-year yields to their highest in a month, on concerns about a large government debt issuance ahead.

The benchmark 10-year U.S. Treasury note fell 17/32 in price, with the yield at 3.756 percent. The 30-year bond lost 29/32, sending the yield to 4.6598 percent. (Additional reporting by Leah Schnurr; Editing by Padraic Cassidy)