* U.S. stocks fall, trading volume lowest for the year
* Euro gains on expectations ECB will raise interest rates
* Brent oil flat as rebels advance on oil towns in Libya
(Updates with U.S. markets close)
By Walter Brandimarte
NEW YORK, March 28 (Reuters) - The euro rose on Monday on
expectations of higher euro-zone interest rates while U.S.
stocks slipped late in the day as concerns about the Middle
East and Japan outweighed positive economic data.
The euro rose above $1.41 after European Central Bank
President Jean-Claude Trichet said inflation is above the
bank's price stability target, adding to expectations interest
rates could be raised as early as next month.
The single currency erased most of its gains later,
however, pressured by worries that the defeat of German
Chancellor Angela Merkel's party in a key state election means
she will have less leeway to offer financial support for
debt-stricken members of the euro zone.
Data showing U.S. consumer spending rose for an eighth
straight month initially supported equities, allowing European
markets to finish near flat. But U.S. stocks erased early gains
and closed lower as lingering worries about unrest in the
Middle East and Japan's nuclear disaster left investors
cautious.
Trading volume was the lowest so far this year on the New
York Stock Exchange and the Nasdaq. In Europe, volume in the
FTSEurofirst 300 index reached only 60 percent of its 90-day
average.
"It puts a cap on things for right now, at least until we
start to see some earnings come out early in April. That might
finally give us a little more upside, assuming that we have
good earnings," said Janna Sampson, co-chief investment officer
at OakBrook Investments LLC in Lisle, Illinois.
"At some point people have got to price in Japan's problems
and the problems in the Middle East that we know about."
Fears of disappointing U.S. corporate earnings also
increased late in the day after hotel operator Marriott
International warned that higher gasoline prices may dampen
demand for leisure travel. For details, see [].
The Dow Jones industrial average <> finished down 22.71
points, or 0.19 percent, at 12,197.88, while the Standard &
Poor's 500 Index <.SPX> lost 3.61 points, or 0.27 percent, to
1,310.19. The Nasdaq Composite Index <> declined 12.38
points, or 0.45 percent, to 2,730.68.
Still, shares of AT&T Inc <T.N> gained 1.8 percent, while
Verizon Communications Inc <VZ.N> rose 1.2 percent after
brokerage Robert W. Baird upgraded them, saying AT&T's deal to
buy T-Mobile would help stabilize the hyper-competitive
industry. [].
In Europe, the FTSEurofirst 300 <> index of top
shares closed 0.07 percent higher, supported by technology
stocks.
The MSCI All-Country World Index <.MIWD00000PUS> lost 0.34
percent.
Brent crude oil <LCOc1> closed 79 cents lower at $114.80 a
barrel as rebels regained control of key oil towns in Libya.
[]
Yields on two-year U.S. Treasuries notes rose after an
auction of two-year notes, the first in three weeks, indicated
higher yields may be needed to attract bidders on this week's
five-year and seven-year note sales.
A $35 billion sale of two-year notes <US2YT=RR> priced one
basis point wider than where the notes had traded ahead of the
sale, though bidding by indirect bidders was relatively strong
at around 33 percent.
Two-year U.S. Treasury notes <US10YT=RR> fell 2/32 in
price, with the yield rising to 0.7563 percent.
The dollar was down against a basket of trading-partner
currencies, with the U.S. Dollar Index <.DXY> off 0.08 percent.
The euro <EUR=> edged up 0.09 percent to $1.4093.
(Reporting by Chuck Mikolajczak, Julie Haviv and Karen
Brettell in New York; Editing by Leslie Adler and Dan Grebler)
