The euro fell against the U.S. dollar on Wednesday on fresh concerns about Spain's debt, while global stocks faltered after data showed U.S. housing starts fell more than expected in May to a five-month low.
Demand for safe-haven assets like bonds and gold rose as U.S. homebuilding suffered from the expiration of a popular homebuyer tax credit that had buoyed construction over the past two months.
Bund futures hit a session high and U.S. Treasury debt prices added to gains, with the 30-year bond rising a full point following the data, which showed May housing starts fell 10 percent and starts in April were revised lower.
September Bund futures rose as much as 40 ticks on the day to a session high of 128.70. The Spanish/German 10-year government bond yield spread widened to 222 basis points, a euro lifetime high, following the report.
The 10-year Treasury note was up 10/32 in price to yield 3.27 percent.
European shares extended losses on the housing data, but then turned higher. Wall Street opened lower as a profit warning from Nokia Corp (NOK1V.HE) (NOK.N) and cost constraints at FedEx Corp (FDX.N) put a damper on sentiment.
The housing start numbers weren't great, and you have the concerns about Spain and other euro zone countries' debt situation, said Kurt Brunner, portfolio manager at Swarthmore Group in Philadelphia.
He said the Nokia and FedEx results painted a picture of an economic recovery that could be slower and more difficult.
The MSCI world equity index .MIWD00000PUS hovered near break-even after hitting its highest level since mid-May earlier in the session, and the MSCI emerging markets index .MSCIEF rose 0.5 percent.
The FTSEurofirst 300 index .FTEU3 also rose slightly, extending a rally to six days.
At 10 a.m., the Dow Jones industrial average .DJI was down 35.37 points, or 0.34 percent, at 10,369.40. The Standard & Poor's 500 Index .SPX was down 3.37 points, or 0.30 percent, at 1,111.86. The Nasdaq Composite Index .IXIC was down 5.19 points, or 0.23 percent, at 2,300.69.
In early New York trading, the euro fell 0.3 percent to $1.2289, after rising as high as $1.2354 on electronic trading platform EBS, the strongest level in two weeks.
Spanish banks' reliance on European Central Bank funding increased to record levels in May, according to RBS research.
The banks in Spain are facing a liquidity freeze with other banks reluctant to lend to Spanish banks, said Fergal Smith, managing market strategist in Canada at Action Economics in Toronto.
That's helped cap the recent rally in the euro and in riskier assets. We've seen Treasuries rally today, (the) euro/dollar come off, he added.
Gold rose 75 cents to $1,234.20 an ounce, with demand for the metal as a haven holding firm on widening spreads between Spanish and German government bond yields.
Industrial metal prices also fell from two-week highs, as the weak U.S. housing data stoked concerns about the demand outlook for copper.
Oil prices initially fell toward $76 a barrel after a surprise hike in crude inventories in the United States, and on news of the weaker U.S. housing data. Prices later turned slightly positive.
U.S. light sweet crude oil rose 7 cents, or 0.09 percent, to $77.01 a barrel.
U.S. crude inventories jumped 579,000 barrels in the week to June 11 and oil product stocks rose across the board, weekly data from the American Petroleum Institute (API) trade group said on Tuesday.
When you look at the last data on the API side, it showed an increase in crude oil. We are also looking at a big jump in gasoline stocks, and that could be pretty bearish for oil, said Christopher Barret, an oil analyst at Credit Agricole.
(Reporting by Rodrigo Campos, Wanfeng Zhou, Emily Flitter in New York; Joanne Frearson, Emma Farge, Jan Harvey and Ian Chua in London; Writing by Herbert Lash; Editing by Padraic Cassidy)