* Stocks soften further on weaker U.S. GDP data
* US consumer sentiment rises, dollar haven flows subside
* US financial regulatory reform taken in stride, banks up
(Updates U.S. trading)
By Al Yoon
NEW YORK, June 25 (Reuters) - Worries about the fragility
of the global economic recovery drained strength from
financial markets on Friday, with Wall Street taking an
agreement on regulatory reform in stride as lawmakers eased
off some draconian rules.
The euro erased losses against the dollar and hit a
session high, lifted by a slight comeback in stocks and a
rally in commodities. That helped the euro fight off earlier
weakness amid concerns of fiscal strains in Europe.
Earlier, a report that showed U.S. first-quarter growth
slower than first estimated had prompted safe-haven flows into
the dollar. But consumer sentiment in the United States rose,
providing limited support for Wall Street stocks and
ultimately reversing the bid for dollars.
The U.S. data capped a week in which investors have been
pulling back a bit from riskier assets as evidence grew that
economic growth, particularly in the United States, may fall
short of 2010 forecasts.
"Overall, we have a modest recovery going on," said Paul
Ballew, chief economist at U.S. insurer Nationwide in
Columbus, Ohio. "The conversation of a double-dip recession is
a bit aggressive. You are getting growth in fits and starts,
rather than an outright contraction."
On Wall Street, financial stocks gained as uncertainty
ebbed following an historic agreement to overhaul financial
regulations. Business models were preserved even as provisions
cut into profitability and added layers to regulators.
JPMorgan Chase & Co <JPM.N> and Bank of America Corp
<BAC.N> gained more than 1 percent.
"It is not very different from what investors and we had
come to expect in the last few weeks, with the most onerous
provisions getting watered down," analysts at Morgan Keegan
said in a note to clients.
U.S. lawmakers hammered out the new Wall Street
regulations in the early hours on Friday, though the measure
must still win approval from both chambers of Congress before
U.S. President Barack Obama can sign it into law.
G8 leaders meeting on Friday in Canada -- turning into the
G20 on Saturday -- are set to grapple with fears that the
spending cuts and tax increases being promulgated by European
governments to cut debt will hurt the recovery. Meanwhile,
Washington is warning against cutting too far and too fast.
MSCI's all-country world index <.MIWD00000PUS> declined
0.13 percent, heading for a weekly loss of more than 2 percent
and its fourth straight losing session. Its emerging market
counterpart <.MSCIEF> slipped 0.53 percent.
In midday trading in New York, the Dow Jones industrial
average <> fell 12.84 points, or 0.13 percent, to
10,139.96.
But the Standard & Poor's 500 Index<.SPX> edged up 1.97
points, or 0.18 percent, to 1,075.66 and the Nasdaq Composite
Index <> rose 5.93 points, or 0.27 percent, to 2,223.35.
European shares turned negative after initially bucking
the trend. The FTSEurofirst 300 <> fell 0.7 percent to
end at 1,013.58, a two-week closing low, adding to three
previous days of losses.
Earlier, Japan's Nikkei average <> fell 1.9 percent
to finish at 9,737.48, its lowest close in two weeks.
EURO AT SESSION HIGH
The euro overcame earlier weakness to wipe out losses
against the dollar and hit a session high at $1.2358,
according to trading platform EBS, as traders cited a minor
comeback in stocks and the rally in commodities.
The dollar fell against the yen after the earlier report
of soft U.S. economic growth.
Earlier in the session, funding concerns in the euro zone
have prompted caution as banks need to repay some 442 billion
euros in one-year loans to the European Central Bank next
week.
The dollar slipped against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
down 0.26 percent at 85.506.
Against the yen, the dollar <JPY=> declined 0.23 percent
to 89.33 Japanese yen.
U.S. Treasury debt prices rose after the disappointing
report on U.S. economic growth. Benchmark 10-year Treasury
notes <US10YT=RR> rose 8/32 in price, while yields declined to
3.11 percent from 3.14 percent late Thursday.
Core euro-zone government bonds struggled to make further
headway after three consecutive sessions of gains drove
futures to two-week highs. Losses were limited by stock
weakness.
In commodities, U.S. light sweet crude oil <CLc1> rose
$2.08, or 2.7 percent, to $78.59 per barrel, and spot gold
prices <XAU=> rose $12.00, or 0.96 percent, to $1,256.00 an
ounce.
