* Chinese GDP growth fuels worries on world economy * Concerns re-emerge over euro zone debt crisis * Rising Spanish bond yields add to risk aversion * Cost to insure against Spanish default hits record high By Richard Leong NEW YORK, April 13 (Reuters) - World stock and oil prices fell o n F riday after China reported disappointing growth for the first quarter, stoking worries about the strength of the global economy, while the euro slipped as a rise in Spain's borrowing costs revived worries about the debt-plagued euro zone. A sharp re-emergence of fears over contagion from the euro zone debt crisis took a steep toll on bank shares in both Europe and the United States, as well as dragging down the euro against the dollar for the first time in three days. The yield on Spain's 10-year government bonds came close to testing 2012 highs, and the cost to insure against a Spanish default jumped to a record high. "The underlying problem is the renewed concern that Europe hasn't fixed its problem," said John De Clue, global market strategist at U.S. Bank Wealth Management in Minneapolis.
"People are not comfortable going into the weekend with a dark cloud." Reduced optimism about global growth spurred hedge funds and other investors to shift cash into safe-haven U.S. and German government debt ahead of the weekend, analysts and traders said. China, the world's second-largest economy, reported first-quarter growth of 8.1 percent, the weakest in almost three years and below market expectations for an 8.3 percent rate.
Market talk on Thu rsday that growth could come in at 9 percent had spurred a rally in riskier assets "The Chinese GDP number was weaker than expected, and everyone had used it as an excuse to rally yesterday," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. Oil and other commodities fell on Friday on concerns about slowing demand, while equity markets sold off on the fears about Europe. In mid-afternoon trading, the Dow Jones industrial average was down 77.46 points, or 0.60 percent, at 12,909.12. The Standard & Poor's 500 Index was down 11.56 points, or 0.83 percent, at 1,376.01. The Nasdaq Composite Index was down 34.36 points, or 1.12 percent, at 3,021.19. The S&P was poised to fall 1.6 percent on the week, its biggest weekly drop so far this year. The Nasdaq was on course to decline 1.9 percent on the week, which would be the first back-to-back weeks of losses since November. The Dow was set to drop 1.2 percent on the week, shaving its year-to-date gain to 5.7 percent. "We are seeing some really serious stuff in the European credit markets," said James Dailey, portfolio manager at the TEAM Asset Strategy Fund in Harrisburg, Pennsylvania. "The concern is now on global recession. The data out of China and our consumer sentiment data point to a recession, which the market has been in denial about for a while." U.S. data on Friday showed a modest decline in consumer sentiment in early April. Banks were the biggest losers. The S&P financial sector index fell 1.8 percent despite earnings from JPMorgan Chase & Co and Wells Fargo & Co that beat Wall Street's expectations. JPMorgan shares slid 2.6 percent to $43.69, and Wells Fargo shares fell 2.2 percent to $33.25. The FTSEurofirst 300 index of top European shares closed down 16.46 points, or 1.6 percent, at 1,027.73. The index was down 2.3 percent for the week for a fourth consecutive weekly loss. Euro zone banking stocks slid, led by Italian lender UniCredit, down 6.0 percent. Both Spanish and Italian indexes ended down 3.6 percent and 3.4 percent respectively, lagging core-Europe peers. The MSCI world stock index was down 0.8 percent at 323.91, putting its weekly loss at 1.3 percent. Gold prices fell, paring their biggest one-week rise since late February. In Europe, Spain's government bond yields rose and the cost of insuring its debt hit an all-time high as its banks borrowed a record amount from the European Central Bank. That underscored fears about the finances of the euro zone's fourth-biggest economy. Spain tests market appetite for its debt next week.
The yield on 10-year Spanish sovereign debt flirted with 6 percent, a 4-1/2-month high. The cost to insure against a Spanish default jumped to 500 basis points for the first time, according to data firm Markit. EURO, OIL FALL; BONDS RISE The euro was down 0.8 percent against the dollar at $1.3079, knocking it into a 0.2 percent deficit against the greenback for the week. Still, the common currency was not expected to break out of the lower end of the $1.30-$1.35 range it has traded in since January. The dollar gained versus other major currencies. The dollar index rose 0.7 percent to 79.814, ending the week almost unchanged. May Brent crude futures in London lost 45 cents or 0.37 percent at $121.26 a barrel. The front-month Brent contract is poised for a fourth straight weekly decline, matching a similar losing streak in late September. U.S. oil fell 75 cents or 0.72 percent, to $102.89 per barrel. It was on track to fall 0.4 percent on the week.
In other commodity trading, spot gold fell 1.5 percent to $1,648.99 an ounce with losses capped on expectations for further monetary easing from Beijing after the weaker first-quarter growth data. Copper prices fell 3 percent to the lowest level since mid-January over worries about demand from China, the world's top metals consumer. In the bond market, benchmark 10-year U.S. Treasury notes last traded up 17/32 in price with the yield at 1.99 percent, down 6 basis points from Thursday. German Bund futures were up 58 basis points at 140.25, retracing the losses from the prior two days.
