* Flight-to-safety trade on N. Korea attack sinks stocks
* Euro drops on Irish debt worries, Korea tensions
* Gold safe-haven status overcomes U.S. dollar strength (Updates with U.S. markets' open)
By Daniel Bases
NEW YORK, Nov 23 (Reuters) - North Korea's deadly shelling of a South Korean island on Tuesday rattled global financial markets, leading investors to buy safe-haven assets, such as the U.S. dollar and Treasuries, and sell stocks.
The euro, already soured by Ireland's debt crisis, accelerated its decline as investors feared a rescue package for Dublin may not stop problems from spreading to other indebted euro zone countries. The currency was near a two-month low with little relief in sight.
An upward revision of U.S. third-quarter gross domestic product growth added to the greenback's allure while weaker-than-forecast sales of previously owned U.S. homes did little to diminish the dollar. For details, see [ID:nN2399302]
Gold's safe-haven status overcame the stronger U.S. dollar, but crude oil fell.
"Obviously there is a big flight-to-safety trade going on. We've seen Treasury yields fall in tandem with some pretty big declines in equity prices," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.
North Korea's artillery attack killed two South Korean soldiers in one of the fiercest attacks on its neighbor since the Korean War ended in 1953. [ID:nL3E6MN0SQ]
In Korea, December KOSPI 200 index futures
The iShares MSCI South Korea Index Fund
In midmorning trade the Dow Jones industrial average <.DJI> fell 161.77 points, or 1.45 percent, to 11,016.81. The Standard & Poor's 500 Index <.SPX> lost 17.98 points, or 1.50 percent, at 1,179.86. The Nasdaq Composite Index <.IXIC> dropped 41.49 points, or 1.64 percent, to 2,490.53.
The MSCI All-Country World equity index <.MIWD00000PUS> fell 1.56 percent while the Thomson Reuters global stock index <.TRXFLDGLPU> dropped 0.94 percent.
The FTSEurofirst 300 <.FTEU3> index of top European shares fell 0.86 percent to 1084.05, recouping some of the losses that earlier pushed the index to its lowest point in over a month.
IRISH JITTERS
The debt tensions in Ireland led to weak bank shares in
Europe in addition to pulling the euro down 1.51 percent at
$1.3419
Bank of Ireland
The U.S. dollar rose 0.91 percent against a basket of
currencies that make up its major trading partners. The dollar
however fell 0.35 percent to 82.99 against the yen
In Europe, Bund futures rallied a full point and yields of peripheral issuers' bonds rose on fears about their ability to manage their debt loads.
The Irish Prime Minister on Monday defied pressure to quit ahead of the unveiling of an austerity plan later this week and a 2011 budget on Dec. 7, but said he would then call an early election. [ID:nLDE6AL2AG]
Bund futures
The 10-year Spanish/German yield spread hit a new euro lifetime high of 237 bps and the equivalent Irish spread was 44 basis points wider and back above 600 basis points.
Portugal and Spain are seen as the next weakest links and an official from Portugal's main opposition party said it would allow passage of the minority Socialist government's 2011 budget in the final vote on Nov. 26. [ID:nLSB001015]
Spot gold prices