* Euro skids to 3-week low of $1.2758
* Germany Q2 GDP beats estimates, rises 2.2 percent
* U.S. stocks lose ground, Treasury yields fall
(Updates with early trading in U.S. markets, changes byline,
dateline)
By Daniel Bases
NEW YORK, Aug 13 (Reuters) - Investor euphoria over
Germany's robust economic growth and rising U.S. consumer
sentiment reports proved fickle on Friday as the euro fell to a
three-week low versus the dollar and U.S. stocks lost ground.
A slight rise in U.S. consumer confidence for early August,
plus a small advance in retail sales and an increase in
business inventories were not enough to sustain confidence in
the U.S. economy. []
"For the stock market these data should be a bit of a
disappointment, particularly the retail sales figures. Just
another sign of a soft growth path," said Zach Pandl, economist
at Nomura Securities International in New York.
Germany's 2.2 percent second quarter growth -- dwarfing
forecasts for a 1.3 percent rise and marking the best quarter
since before reunification -- brought forth fears a peak in a
lackluster economic rebound has been reached. []
French GDP growth also exceeded forecasts.[]
Trepidation about the strength of the global economy, in
large measure born earlier this week from the Federal Reserve's
decision to address a slowdown in the U.S. economic recovery by
buying more Treasuries, led to a sharp selloff in stocks.
[].
Crude oil prices slipped while gold rose, although down
from an earlier one month high.
A disappointing auction of Italian government bonds
undermined peripheral euro zone debt prices, driving investors
into benchmark German Bunds. []
In midmorning New York trade, the Dow Jones industrial
average <> fell 9.46 points, or 0.09 percent, at 10,310.49.
The Standard & Poor's 500 Index <.SPX> lost 1.74 points, or
0.16 percent, at 1,081.87. The Nasdaq Composite Index <>
dropped 11.96 points, or 0.55 percent, at 2,178.31.
European share prices held onto some gains, although mining
and banking stocks weakened. The pan-European FTSEurofirst 300
<> index of top shares rose 0.13 percent to 1,044.15.
The MSCI world equity index <.MIWD00000PUS> slipped,
reversing gains of roughly 0.5 percent early in the session. It
hovered near a three-week low the previous day. The Thomson
Reuters global stock index <.TRXFLDGLPU> traded flat.
EURO STUMBLES
The euro fell to fresh three-week lows against the U.S.
dollar, retreating from the highs fueled by Germany's upside
economic surprise.
In midmorning trade the euro dropped as low as $1.2758
<EUR=>, its weakest level since July 22, according to Reuters
data. It was last at $1.2766, down 0.4 percent on the day and
approaching a fall of nearly 3.7 percent this week.
Adam Cole, global head of currency strategy at RBC, 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 rose 0.32 percent against a currency basket of
major trading partners <.DXY>.
Against the yen <JPY=> the greenback was up 0.43 percent at
86.30 yen, hovering 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.
U.S. Treasury bond yields fell on fresh safe-haven buying.
The 30-year Treasury yield <US30YT=RR> hit a three week low of
3.880 after the U.S. data pointed to low growth and low
inflation. Benchmark 10-year Treasury yields dropped to 2.70
percent <US10YT=RR>.
September Bund futures <FGBLc1> hit a record high at
131.44, surpassing the previous peak at 131.40 set on Thursday,
and were last up 12 ticks on the day at 131.34. The 10-year
Bund yield <DE10YT=TWEB> plumbed a record low at 2.399 percent
U.S. light sweet crude oil <CLc1> fell 22 cents to $75.52
per barrel. Spot gold prices <XAU=> rose 95 cents to $1212.10.
(Additional reporting by Wanfeng Zhou, Naomi Tajitsu, Ian Chua
Tamawa Desai; Editing by Kenneth Barry)
