* Europe, Asia shares slip on U.S. growth fears
* Dollar at eight-month low vs yen before U.S. GDP
* Fed official's warning add to fears about the economy
By Emelia Sithole-Matarise
LONDON, July 30 (Reuters) - The dollar fell to an
eight-month low against the yen on Friday while global shares
slipped on worries U.S. growth data due later in the day may
show the world's biggest economy is losing steam.
The retreat in stocks and other riskier assets fed a rally
in theoretically safer euro zone and U.S. government bond
prices, with comments from a Federal Reserve official that
adding to fears about the economy.
The second quarter GDP data, due at 1230 GMT, will be
particularly closely watched after a stream of economic data in
the past month flagged a slowdown in the U.S. economy's recovery
from the worst downturn since the 1930s.
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For a graphic on prospects of a double-dip recession, click
http://graphics.thomsonreuters.com/10/GLB_CYC.html
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The dollar was down 0.6 percent at 86.38 yen <JPY=> by 1053
GMT, after hitting an eight-month low of 86.15 yen on trading
platform EBS. Stop-loss trades below the previous low of 86.25
yen were triggered before support emerged from bids in the 86.20
yen area.
"U.S. economic data is underperforming and keeping pressure
on the dollar," said Lee Hardman, currency economist at Bank of
Tokyo-Mitsubishi UFJ.
"Concerns about the U.S. economy and Fed easing will also
put U.S. yields, which are a key driver for dollar/yen, on the
downside," he said.
Two-year U.S. Treasury note yields <US2YT=RR>, which move
inversely to prices, hovered near record lows of around 0.556
percent set earlier this month ahead of the GDP data.
Benchmark U.S. 10-year Treasury note yields were about three
basis points lower at 2.961 percent <US10YT=RR>. The yields hit
a 15-month low of 2.855 percent earlier this month on persistent
fears the economy was tipping back into recession.
The dollar also fell to a six-month low against the Swiss
franc of 1.0364 francs <CHF=>.
The euro, meanwhile, fell 0.6 percent to $1.3000 <EUR=>,
pulling back from a 12-week peak of $1.3107 hit on Thursday,
when data showed a jump in euro zone economic sentiment and
lower German unemployment.
"The grind higher in euro/dollar may continue but it seems
there is still plenty of selling interest out there in the
market," said Daragh Maher, deputy head of FX strategy at Credit
Agricole CIB. "Some softer U.S. data would clearly help the
bullish euro case."
JAPAN STYLE QUAGMIRE?
Economists forecast U.S. growth to have slowed to 2.5
percent in the three months to June from 2.7 percent in the
first quarter. But worries persist it could come in weaker.
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St. Louis Federal Reserve Bank President James Bullard, a
voting member on the Fed's rate-setting committee this year,
said he was worried about the risks the United States might fall
into a Japan-style quagmire of falling prices and investment.
[]
World stocks as measured by MSCI <.MIWD00000PUS> were 0.4
percent down as European shares retreated for a third
consecutive session.
The pan-European FTSEurofirst 300 index shed 0.3 percent but
was still on track to record its best monthly gain since March,
helped by upbeat corporate earnings.
"What I see in this market is a fight between macro-economic
data and better-than-expected company results," said Koen De
Leus, economist at KBC Securities. "It appears the U.S. Federal
Reserve is preparing the markets for worst-than-expected data."
Japan's Nikkei <> closed down 1.6 percent as signs that
the U.S. recovery was faltering outweighed upbeat domestic
earnings.
Sluggish jobs growth, marked by a 9.5 percent unemployment
rate, is the biggest obstacle to the U.S. economy's recovery
from the most brutal recession since the 1930s.
In Britain, consumer confidence fell for the fifth month in
a row in July to its lowest in almost a year, further cooling
deemed for riskier assets.
"This type of news flow will continue to depress
expectations over the pace of economic recovery," said Gerard
Lane, analyst at Shore Capital.
U.S. crude <CLc1> prices retreated, heading for a fourth
consecutive weekly settlement within the $75-$80 range, with
investor focus on a slowing economy and rising U.S. inventories.
(Additional reporting by Tamawa Desai and Atul Prakash;
Editing by Ron Askew)
