*Weak U.S. home sales data pares stock gains
* BNP Paribas downgrade hits banks, sinks European shares
* Euro slips for second day, hits record low vs. swiss franc
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 as investors
acknowledge this would not lead to a sharp appreciation of the
yuan.
U.S. crude oil futures were little changed at midday,
trading just below $78 a barrel after edging 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 federal tax credit for home buyers has
expired.
"It was generally expected that sales would be up, given
earlier contract signings because of the tax credit, so it is
a little surprising," said Paul Kasriel, senior vice president
at Northern Trust in Chicago.
"It's going to be a two-step forward, one-step backward
housing recovery."
Benchmark U.S. stock indexes seesawed in and out of
positive territory. In midday New York trade the Dow Jones
industrial average <> slipped 6.05 points, or 0.06
percent, to 10,436.36. The Standard & Poor's 500 Index <.SPX>
dipped 1.84 points, or 0.17 percent, at 1,111.36.
Rising technology shares helped keep the Nasdaq Composite
Index <> up 9.66 points, or 0.42 percent, at 2,298.75.
Apple <AAPL.O> gave a big boost to the Nasdaq. The
company said it sold 3 million iPad tablet computers in 80
days, sending its stock up 1.7 percent to $274.81. For details
see [].
MSCI's all-country world index <.MIWD00000PUS> fell 0.44
percent, looking set for its first loss since June 7. The
benchmark has gained more than 7 percent since then.
European shares lost ground with the FTSEurofirst 300
<> falling 0.43 percent to 1,050.79.
After Fitch's move on BNP Paribas sent its shares down
1.92 percent, the entire sector weakened, with the STOXX
Europe 600 banks index <.SX7P> off 0.79 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," IG analyst Philippe De Vandiere said.
Credit Agricole <CAGR.PA> warned of worse-than-expected
losses at its Greek unit Emporiki and said it would take a big
write-down. []
Earlier, Japan's Nikkei <> slid 1.2 percent to close
at 10,112.89, a day after bouncing to a one-month high.
RETHINKING CURRENCY MOVE
Investors reassessed the impact of China's plan for more
currency flexibility and grew skeptical about how much Beijing
would let the yuan rise.
"People gave much more weight to the currency move than it
deserved," said Koen De Leus, an economist at KBC Securities.
Funding concerns of European banks led to a second day of
losses for the euro against the greenback. The euro came off
its lows, but still lost 0.10 percent to $1.2294 <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 euro fell to an all-time low of 1.3590 Swiss francs
<EURCHF=> after the Swiss central bank's vice chairman said
the bank would not intervene in markets for now.
[]
The dollar fell 0.45 percent at 90.59 versus the yen
<JPY=>.
British Finance Minister George Osborne unveiled spending
cuts and tax increases 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 0.66 percent to $1.4845 <GBP=>.
In the credit markets, benchmark 10-year U.S. Treasuries
rose 6/32 of a point in price, pushing the yield down to 3.225
percent <US10YT=RR>.
Europe's 10-year Bund yield <DE10YT=TWEB> was down 5.9
basis points at 2.691 percent.
U.S. light sweet crude oil <CLc1> fell 12 cents to $77.70
per barrel, while spot gold <XAU=> rose $6.80, or 0.55
percent, to $1,238.40 an ounce. 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
Jan Paschal)
