* Stocks slump on gloomy U.S., euro zone economic data
* Oil steadies at seven-week low, off 15 pct from peak
* Euro at two-week low against dollar; gains vs sterling
* U.S., euro zone government debt gains on dismal data
(Recasts throughout with U.S. market focus, adds byline;
dateline previous LONDON)
By Herbert Lash
NEW YORK, July 24 (Reuters) - Stocks fell on both sides of
the Atlantic on Thursday after gloomy economic news in Europe
and the United States and a steadying oil market snapped
optimism that had been building from last week.
Oil prices recovered after falling to a seven-week low amid
recent signs of slackening demand.
U.S. and euro zone government debt rose amid ample evidence
of deteriorating economies. German business sentiment suffered
its biggest drop since the Sept. 11, 2001 attacks, British
retail sales took a record fall and surveys of German, French
and Italian businesses all came in below market expectations.
Stock market investors worried about reports pointing to
more labor market weakness and no let up in the housing slump.
Ford and Dow Chemical were both pressured by quarterly results
that disappointed.
In Europe, Daimler <DAIGn.DE> and Renault <RENA.PA> cut
their annual forecasts, hammering automakers and helping push
shares lower. The euro hit a two-week low against the dollar as
the increasingly gloomy outlook cooled any expectations the
European Central Bank would raise interest rates.
The euro <EUR=> eased 0.24 percent at $1.5649.
"Everywhere we look this morning we see crystal clear
evidence that it's not different this time and that weakness in
the U.S. economy is rapidly spreading around the globe," said
William O'Donnell, head of U.S. interest rate strategy at UBS
Securities in Stamford, Connecticut.
Post-earnings brokerage downgrades of Boeing Co <BA.N>,
down 6.5 percent, McDonald's Corp <MCD.N>, off 1.3 percent and
AT&T <T.N>, off 3.5 percent, added to the economic headwinds.
Ford <F.N> slid more than 10 percent and Dow Chemical
<DOW.N> fell 1.8 percent.
"It all gives one every reason to test what's been a
violent and surprising rally over the last few days," said Jim
Awad, chairman of W.P. Stewart Asset Management in New York.
"The big question is whether or not it was a fantasy
rally," he added. "Smart people will tell you there's enough
work to be done in the financial sector and enough after
effects from $4 gasoline to suggest we will go down again."
Before 1 p.m., the Dow Jones industrial average <> was
down 146.72 points, or 1.26 percent, at 11,485.66. The Standard
& Poor's 500 Index <.SPX> was down 14.92 points, or 1.16
percent, at 1,267.27. The Nasdaq Composite Index <> was
down 23.33 points, or 1.00 percent, at 2,302.55.
European stocks gave up most of the previous day's gains as
the lowered forecasts from Daimler and Renault hit autos and
weakening commodity prices dragged oils and miners lower.
Daimler <DAIGn.DE> sank 10 percent, Fiat <FIA.MI> lost 4.9
percent and Peugeot <PEUP.PA> fell 7.2 percent.
The FTSEurofirst 300 <> index of top European shares
closed down 1.6 percent lower at 1,170.80 points. The index
rose 2.1 percent on Wednesday.
"It's more than profit-taking today. The recovery of the
last few days was a kind of market illusion," said Victor Peiro
Perez, head of strategy at Caja Madrid Bolsa.
"With high short-selling pressure and a fall in oil prices,
it was normal to see a rebound, but earnings are sending mixed
signals and we think that it will be difficult for the European
markets to really recover in the short term."
U.S. Treasury debt extended gains while rate futures
trimmed chances of a September interest rate hike from the
Federal Reserve after lower-than-expected U.S. existing home
sales in June.
Euro zone government bonds rallied, snapping a six-day
losing streak triggered by falling oil and rising stock prices,
on the disappointing economic reports.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
16/32 to yield 4.05 percent. The 30-year U.S. Treasury bond
<US30YT=RR> added 24/32 to yield 4.63 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.23 percent at 72.963. Against the yen,
the dollar <JPY=> fell 0.34 percent at 107.58.
from a previous session close of 107.95.
U.S. light sweet crude oil <CLc1> rose 54 cents to $124.98
a barrel.
Spot gold prices <XAU=> rose $3.65 to $923.40 an ounce.
Japan's Nikkei share average <> rose 2.2 percent to
its highest close in almost a month.
Shares in the Asia-Pacific region excluding Japan
<.MIAPJ0000PUS> edged up 0.8 percent to the highest level in
more than three weeks. The MSCI index has bounced 8 percent
from a 16-month low plumbed last week.
(Reporting by Steven C. Johnson, Ellis Mnyandu, Chris Reese in
New York; Jamie McGeever, Kirsten Donovan, Ikuko Kao and Peter
Graff in London and Blaise Robinson in Paris)
(Reporting by Herbert Lash. Editing by Richard Satran)
