GLOBAL MARKETS-European shares head for first weekly drop since April

Fri Jun 27, 2014 5:35am EDT

* European shares inch up, but Iraq concerns, data weigh
    * Most Asian markets in the red as U.S. growth outlook in
spotlight
    * U.S. 10-year yield near 3-week low, German yield near
1-year trough
    * Canadian dollar at 6-month high following inflation
surprise

    By Marc Jones
    LONDON, June 27 (Reuters) - Concerns about Iraq and Ukraine
and subdued economic data left European shares facing their
first week of losses since early April on Friday and nudged gold
towards a two-month high.
    Other safe-haven assets including the yen, Swiss franc and
German government bonds were also in demand as investors took a
step back from riskier bets.
    Gold climbed back towards $1,325 an ounce and looked set for
its fourth straight weekly gain, as the fallout from Thursday's
weak U.S. consumer spending figures also hurt the dollar. 
    The situation in Iraq was tense overnight after at least one
armed forces helicopter crashed under fire from insurgents,
while Russia warned of "grave consequences" after Ukraine signed
a trade and political agreement with the European Union.
  
    But while the geopolitical tensions weighed, there was the
comfort that the disappointing U.S. data could keep interest
rates at record lows for a longer period of time - meaning
markets struggled for clarity.
    Stock markets in London, Frankfurt and
Paris rose slightly in early trading though the recent
selloff was set to bring a ten-week run of unbroken gains to an
end. 
    "The advance (in stock markets) has stopped for a while but
there has been no five or ten percent correction," said Alvin
Tan, a strategist at Societe Generale. "And that is a result of
the environment of very low volatility we have at the moment."
    Investors were also digesting a tick down in euro zone
business and consumer confidence data and
awaiting German inflation numbers, both important for the 
European Central Bank's future policy.
    Oil, usually the most sensitive to Middle East unrest, was
on course for its biggest weekly drop since January due to the
fact the fighting in Iraq had not yet spread to the south where
most oil is produced. 
    At $113 a barrel, prices have dropped nearly $3 from a
nine-month high of $115.71 hit on June 19. 
    "The exaggerated fear premium is being priced out," said
Carsten Fritsch, a senior oil and commodities analyst at
Commerzbank in Frankfurt. 
   
     
    U.S. DOUBTS
    Asian shares had followed Wall Street lower overnight.
Japan's benchmark Nikkei fell 1.5 percent and regional
markets, with the exception of Wellington and Mumbai, all posted
losses.
    A smaller-than-expected increase in May's U.S. consumer
spending, in data released on Thursday, had added to concerns
about the U.S. economy following surprisingly weak first quarter
GDP data.   
    The 10-year U.S. Treasuries yield fell to a four-week low of
2.511 percent in early European trading.
    The U.S. dollar index held close to one-month lows
hit on Wednesday. It stood at 80.150, a whisker above the low of
80.091 and at a five-week low of 101.315 yen. 
    "People are assessing where they think their second- and
third-quarter, fourth-quarter GDP estimates are going to be,"
said Wilmer Stith, co-manager of the Wilmington Broad Market
Bond Fund.
    The euro was little changed at $1.3618 after the euro
zone data. Standout performers were the New Zealand dollar,
which hovered at its highest in nearly three years, and the
Canadian dollar, which rose to a six-month high as investors
sought out higher-yielding currencies.

 (Reporting by Marc Jones; editing by John Stonestreet)