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GLOBAL MARKETS-Euro zone reels over Finnish vote, Greek struggle

Published 04/18/2011, 07:19 AM
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* Potential Greek debt restructuring in focus

* Finnish vote adds concerns about euro zone bailouts

* Earnings disappoint

* Wall Street set for losses

By Jeremy Gaunt, European Investment Correspondent

LONDON, April 18 (Reuters) - The euro sank on Monday and European stocks fell into the red for the year as the rise of a euro-sceptic party in Finland and growing unease about Greek debt battered investor sentiment in the single currency zone.

Equities were also weaker on disappointing European earnings and concerns about Japan's coming reporting season, and Wall Street looked set for losses.

Gold and silver hit new record highs on inflation fears.

MSCI's all-country world stock index <.MIWD00000PUS> started what is in many places a holiday-shortened week trading down more than half a percent, led by Europe, where the FTSEurofirst 300 <.FTEU3> was off 1 percent.

The fall wiped out the European index's gains this year, leaving it in negative territory for 2011.

Japan's Nikkei <.N225> earlier closed down 0.36 percent.

In a weekend election, Finnish voters handed the anti-euro True Finns party a crucial role in parliament and possibly a path into government.

Finland's parliament has the right to vote on European Union requests for bailout funds, meaning it could in theory hold up costly plans to shore up Portugal and bring stability to debt markets. [ID:nLDE73G02L] [ID:nHEL010101]

Talk about Greek debt restructuring has also boiled up in recent weeks, including a Greek newspaper report on Monday that the government had asked the International Monetary Fund and European Union to start discussions on a restructuring.

A Greek finance ministry source said the report was not true. [ID:nATH006025] [ID:nLDE73H0DR]

Equities were also being hurt by an increasing concern that the current earnings season is not going to be as good as recent quarters.

"Company results haven't been that great and there are concerns that margins for a lot of companies are not going to rise. The bias for the market is more on the downside. There are a lot of risks and you may get a serious knock," said Koen De Leus, strategist at KBC Securities in Brussels.

Dutch consumer electronics major Philips Electronics posted lower than expected first-quarter net profit and said it would divest its struggling television business. [ID:nLDE73H03T]

Citigroup Inc is expected to report a drop in quarterly profit and revenue later, as an uncertain trading environment and weak consumer loan demand hinder its efforts to move past the financial crisis. [ID:nN17260604]

WEAKER EURO

The euro hit a 10-day low against the dollar on concerns about Greek restructuring and the Portuguese bailout.

It fell 0.9 percent to $1.4305

"The focus is turning towards the Greek situation and is acting as a dampener on the euro -- it would be the first restructuring and the market has no idea when or whether it will happen," said Mic Ingenuus, currency strategist at Nordea in Copenhagen.

Analysts were sceptical the Finnish vote could derail the Portugal's bailout but it added to already negative sentiment.

On bond markets, Portuguese, Spanish and other lower-rated euro zone government debt came under pressure.

Greece's five-year credit default swaps -- the cost of insuring against default -- rose 84 basis points on the day to a new record high of 1,220 basis points, also dragging peripheral peers with them.

(Additional reporting by Atul Prakash and Jessica Mortimer; Editing by John Stonestreet)

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