* Weak U.S. homes sales data cuts pares stock gains
* BNP Paribas downgrade hits banks, sinks European shares
* World stocks slip after 10 sessions of gains
By Daniel Bases
NEW YORK, June 22 (Reuters) - Weak May U.S. housing data
undercut stocks and sent U.S. Treasuries up, while Europe
grappled with a fresh tremor to its banking system after Fitch
downgraded French bank BNP Paribas <BNPP.PA>.
The downgrade hit Europe's banking stocks, leading to the
end of a nine-day rally and pushed prices for gold higher on
safe-haven flows.
The rally fueled by China's weekend announcement to
emphasize a flexible currency rather than the de facto peg to
the U.S. dollar appeared to have fully dissipated.
U.S. crude oil futures edged lower in choppy trading,
curbed by a stronger greenback and lowered expectations about a
demand boost in China brought by its move toward currency
flexibility.
Sales of previously owned U.S. homes fell 2.2 percent month
over month in May, well below expectations for a rise of 5.5
percent. Analysts said the data bodes ill for the months ahead,
now that a key homeowner tax credit has expired.
"Clearly there's a large supply of homes on the market.
Prices are a little firmer than they were a year ago, but it's
still a buyers market. The tax incentives are not a permanent
fix for housing. We will need to see improved employment before
we see a sustained recovery in housing." said Gary Thayer,
chief strategist at Wells Fargo Advisors in St. Louis.
In mid-morning New York trade, the Dow Jones industrial
average <> fell 7.56 points, or 0.07 percent, at 10,434.85.
The Standard & Poor's 500 Index <.SPX> lost 2.36 points, or
0.21 percent, at 1,110.84.
Rising technology shares helped keep the Nasdaq Composite
Index <> up 5.12 points, or 0.22 percent, at 2,294.21.
MSCI's all-country world index <.MIWD00000PUS> fell 0.5
percent, looking set for its first loss since June 7. The
benchmark has gained more than 7 percent since then.
European share, however, lost ground with the FTSEurofirst
300 <> of leading shares down 0.4 percent to 1,050.70.
After Fitch's move on BNP Paribas sent its shares down 2.75
percent, the entire sector weakened, with the STOXX Europe 600
banks index <.SX7P> off 1.9 percent.
"Now everybody thinks that BNP is one of the most solid
banks, so the heat is more on SocGen and Credit Agricole, and
the latter gave a grim update on its exposure to Greece today,"
said IG analyst Philippe De Vandiere.
Credit Agricole <CAGR.PA> warned of worse-than-expected
losses at its Greek unit Emporiki and said it would take a big
writedown. []
Earlier, Japan's Nikkei <> closed down 1.2 percent, a
day after bouncing to a one-month high.
CURRENCY MOVE
Investors reassessed the impact of China's plan for more
currency flexibility and grew skeptical about how much Beijing
would allow the yuan to rise.
"People gave much more weight to the currency move than it
deserved," said Koen De Leus, economist at KBC Securities.
The funding concerns in European banks led to a second day
of losses for the euro against the U.S. dollar. The currency
dropped 0.31 percent to $1.2268 <EUR=>.
The euro barely reacted to the German Ifo business climate
index, which hit a two-year peak in June, while the
expectations index fell. []
The dollar fell 0.45 percent at 90.59 versus the yen
<JPY=>.
British Finance Minister George Osborne unveiled spending
cuts and tax rises in the tightest budget in a generation. He
cut growth forecasts only slightly but slashed borrowing
projections more than expected. []
The pound, however, erased earlier losses against the
greenback to rise 0.28 percent to $1.4789 <GBP=>.
In the credit markets, benchmark 10-year U.S. Treasuries
rose 8/32 of a point in price, pushing the yield down to 3.219
percent <US10YT=RR>.
Europe's 10-year Bund yield <DE10YT=TWEB> was down 5.9 bps
at 2.691 percent.
U.S. light sweet crude oil <CLc1> rose 16 cents to $77.98
per barrel, while spot gold <XAU=> rose $9.10, or 0.74 percent,
to $1240.70. Gold is off Monday's all-time high of $1,264.90.
(Additional reporting by Nick Olivari and Robert Gibbons in
New York; George Matlock, Jeremy Gaunt, Naomi Tajitsu, and Atul
Prakash in London; Umesh Desai in Hong Kong; editing by Jeffrey
Benkoe)
