* MSCI world equity index flat, relinquishes early gains
* Europe stocks fall, initial gains on German GDP fizzle
* Euro slips vs dollar, euro zone growth seen unsustainable
By Naomi Tajitsu
LONDON, Aug 13 (Reuters) - European stocks fell on Friday
while the euro also slipped as assets considered to be higher
risk relinquished early gains after initial euphoria from a
surprisingly strong German economic growth data fizzled out.
Official data showed the German economy grew by 2.2 percent
in the second quarter -- dwarfing forecasts for a 1.3 percent
rise to post its biggest gain since reunification and boosting
overall growth in the euro zone. []
Stock prices and the euro had rallied in an initial reaction
to the data, but investors quickly booked profits, reckoning
that euro zone countries would struggle to maintain the pace of
growth in the second half of the year.
Analysts said this week's underlying downward trend in
risk-sensitive assets was hard to dislodge after the U.S.
Federal Reserve said it would address a slowdown in the U.S.
economic recovery by picking up more Treasuries. []
Investors were also unwilling to hold on to risky positions
ahead of U.S. data on consumer prices and retail sales due later
on Friday.
"The broadening perception is that the strong GDP represents
the peak of the bounce (in the economic recovery)," said Ashraf
Laidi, chief markets strategist at CMC Markets.
He said few investors were willing to stay long on risk
given that U.S. share prices have fallen around 3 percent so far
this week on growing speculation that the pace of the global
economic recovery is slowing.
"When the market drops in the way it has in the past three
days ... the bulls will just go and hand the week over to the
bears, and won't bother fighting the trend," he said.
EARLY RALLY FIZZLES
By 1122 GMT, the MSCI world equity index <.MIWD00000PUS> was
flat on the day, reversing gains of roughly 0.5 percent early in
the session. It hovered near a three-week low the previous day.
The euro <EUR=> fell 0.2 percent to $1.2800, retreating from
the day's high of $1.2906 hit after the German data.
On Thursday, it fell as low as $1.2779, its weakest since
late July, and on the week the single currency is on track to
fall nearly 3.7 percent.
The dollar was little changed against a currency basket
<.DXY>, pulling back from an early slide.
S&P futures <SPv1> slipped 0.3 percent while Dow Jones
futures <DJc1> were down slightly on the day. U.S. crude oil
prices <CLc1> were up 0.3 percent at $75.97, paring early gains.
German government Bund futures <FGBLc1> were up slightly at
131.33, recovering from losses in early trade.
Adam Cole, global head of currency strategy at RBC, said the
strong GDP data had initially sparked some demand for riskier
assets, which had tumbled earlier this week on U.S. and global
growth concerns.
He said concerns about fiscal and banking problems in
countries on the euro zone periphery may weigh on the shared
European currency over the medium term.
"The peripherals are still weak, and how the euro trades
depends on whether the market focuses on the strong core or the
weak peripherals, and the risk is they will focus on the weak,"
he said.
The dollar <JPY=> was 0.3 percent lower versus the yen at
85.68 yen, but hovered above a 15-year trough of 84.72 yen hit
earlier this week.
The yen has pulled back slightly from those gains on
speculation that Japanese authorities may act to stem its
strength, but few expect actual intervention unless the dollar
drops near its record low of 79.75 yen or the trend becomes more
volatile.
(Additional reporting by Tamawa Desai; Editing by John
Stonestreet)
