* Sterling down as BoE holds rates steady
* Euro falls, peripheral yields rise
* Strong U.S. jobless claims boost dlr, Treasury yields
* U.S. futures pare losses after jobs data
By Sujata Rao
LONDON, Feb 10 (Reuters) - Weak corporate earnings weighed on global stocks on Thursday and worries over the Saudi king's health ratcheted political tensions up another notch in the Middle East, keeping Brent crude prices above $100 a barrel.
Major European markets were down more than half a percent while stock futures indicated a weaker opening on Wall Street, though better-than-expected data on U.S. weekly jobless claims helped U.S. stock futures pare some losses.
U.S. Treasury yields also rose and the dollar gained against the euro after data showed new claims for unemployment benefits dropped more than expected last week to touch their lowest point in 2-1/2 years.
The data "looked good and the market had a muted but positive reaction to them. Anecdotally, we do hear that there is some improvement on the jobs front and this is another indication of that," said Tim Ghriskey, chief investment officer at Solaris Asset Management.
Earlier, the Bank of England kept interest rates on hold at 0.5 percent as expected, soothing bond markets but briefly pushing sterling lower after markets had priced in an outside chance of a hike.
Britain's FTSE 100 index was down 0.9 percent. The FTSEurofirst 300 index of top European shares fell 0.7 percent despite a boost from Deutsche Boerse, which looks set to buy peer NYSE Euronext.
After weeks of generally positive news on the corporate front, investors have suddenly been presented with a barrage of less than robust reports, shaking some of the optimism over the global economic recovery.
Credit Suisse missed profit expectations and Diageo, the world's biggest spirits group, missed expectations with a 9 percent rise in half-year earnings. Credit Suisse shares fell over 5 percent.
U.S. tech giant Cisco Systems Inc posted quarterly results after the New York market close on Wednesday, beating profit and sales expectations but with disappointing margins.
Its stock fell nearly 10 percent in extended trading.
"Most earnings themselves have been supportive, but if you look at the guidance and the impact of inflationary pressure, what is almost certain is that this will have an impact on profit margins," said Jeremy Batstone-Carr, strategist at Charles Stanley.
MSCI's all-country world index was down 0.4 percent, pressured in particular by emerging market losses. The EM sub-index lost 1.8 percent
Traders said a weak bond auction in Portugal was also weighing on sentiment. Yields rose above 7.4 percent on 10-year paper, well above the 7 percent many consider as the limit for sustainable servicing of the country's debt.
"Portuguese spreads are widening, making some traders nervous again," senior trader at ETX trading Markus Huber said. "On top of somewhat disappointing earnings, from Credit Suisse for example, this is weighing on investor sentiment," he added.
In the United States, data showed new unemployment benefit claims at lowest point in 2-1/2 years. That helped futures pare losses, with S&P futures down 6.5 points compared to 7 just before the data.
Dow Jones industrial average futures tumbled 44 points and Nasdaq 100 futures were off 16.75 points.
U.S. earnings due on Thursday include Expedia, Goodyear Tire & Rubber Co. Kraft and Philip Morris.
CRUDE UP, EURO DOWN
The weak Portuguese auction also hit the euro, which fell against the dollar. Analysts said the lack of concrete policy measures to tackle the euro zone debt crisis was weighing on sentiment on the single currency and peripheral bonds. Investors must wait until March to hear details of steps to tackle the crisis, and speculation of a near-term rise in euro zone interest rates also is being pared back.
The euro eased 0.7 percent against the dollar to $1.3620 ahead of the U.S. data, dipping further to 1.3593 by 1354 GMT.
"There are... downside risks that the European Central Bank may not be prepared to hike rates and the potential that bondholders may be forced to take debt haircuts," said Barclays currency strategist Raghav Subbarao.
Sterling fell after the BoE meeting where rates were held steady even though UK inflation is almost twice the targeted rate.
Sterling fell to a session low of $1.6012 soon after the announcement from around $1.6053. It recouped those losses, but was still 0.3 percent down for the day. March gilt futures were up 25 ticks to 115.65, giving up some of the modest gains immediately after the decision.
On oil markets, Brent crude oil futures stayed above $102 a barrel as investors remained concerned that unrest in Tunisia and Egypt could ignite similar protests in bigger oil producers such as Libya -- or even Saudi Arabia.
Rumours the Saudi King Abdullah was seriously ill also triggered buying, the fears felling a surge in Saudi credit default swaps, instruments used to hedge exposure to a credit. U.S. crude however remained at $86 a barrel, the gap between the two markets widening to a fresh record. The positive jobs data however helped futures to pare losses slightly.
(Additional reporting by Jeremy Gaunt, Neal Armstrong and Chris Johnson; Editing by Toby Chopra, John Stonestreet)