NEW YORK: The euro continued to strengthen against the dollar yesterday on expectations that a request by Spain for a bailout is imminent, but major stock markets fell on uncertainty of when Madrid will make its request and growing uneasiness over third-quarter earnings.

European officials said on Monday that Spain is ready to make the request for a euro zone bailout as early as next weekend, although Germany has signaled that it should hold off.

A request for a bailout is viewed as positive for financial markets because it would trigger Spanish bond buying by the European Central Bank, which would lower the country's borrowing costs. It would also remove another layer of uncertainty in the region's three-year old debt crisis.

"Spain being rescued would be good for risk assets and ultimately global growth, but while the benefits are largely priced in, we're still getting conflicting signals that understandably have investors apprehensive," said Brian Barish, president of Cambiar Investors LLC in Denver, who helps oversee $7 billion.

"Until we get some kind of clarity, we should expect a lot of volatility and difficulty holding onto gains," Barish said.

Adding to the confusion about when aid could arrive, Spanish Prime Minister Mariano Rajoy said yesterday that a request for European aid was not imminent.

The MSCI global stock index slipped 0.1 percent to 333.08.

Wall Street stocks surrendered early gains and turned negative. The Dow Jones Industrial Average dropped 72.61 points, or 0.54 percent, to 13,442.50. The Standard & Poor's 500 Index dropped 3.31 points, or 0.23 percent, to 1,441.18.

The Nasdaq Composite Index dropped 2.22 points, or 0.07 percent, to 3,111.31.

The Dow was pressured by stocks closely tied to the pace of growth, including heavy machinery maker Caterpillar Inc. and plane maker Boeing Co. A major headwind for the global economy has been falling demand from Europe, which has been drifting toward recession.

The FTSEurofirst-300 index of pan-European shares fell 0.3 percent to end at 1,101.55 points, also weighed by doubts over third-quarter results and weakness in basic resources stocks.

In currency markets, the uncertainty over the timing of Spain's request for aid kept investors on edge, with many selling the euro at higher levels.

Analysts said safe-haven currencies like the US dollar and the yen would be in demand until Madrid asked for aid.

The euro rose 0.4 percent to $1.2942, notching a second straight day of gains against the greenback, while the dollar gained slightly against the yen to 77.99 yen.

Spanish 10-year yields were last 12 basis points lower at 5.77 percent.

Earlier on Tuesday, Australia's central bank cut its main rate by a quarter point to 3.25 percent. The Australian dollar fell to a one-month low of $ 1.0291 and last traded down 0.7 percent at $1.0286.

Brent crude slipped 31 cents to $ 111.88 a barrel as investors weighed a weaker outlook for fuel demand and sluggish economic growth. US crude rose 10 cents to $ 92.57.

Gold prices remained close to their highest level of the year. Gold is seen as a safe-haven asset. Spot gold was last at $ 1,779.19 an ounce.