GLOBAL MARKETS-German sentiment weighs on stocks, euro; oil slides

Tue Aug 12, 2014 11:36am EDT

* Brent crude hits 9-month low on ample supply

* German shares lag after sentiment data shows Ukraine fear

* U.S. stocks lower, energy sector weighs (Updates prices; changes comment, byline, dateline from previous LONDON)

By Rodrigo Campos

NEW YORK, Aug 12 (Reuters) - Brent crude oil hit a nine-month low on Tuesday as ample North American production outweighed concern over supply from the Middle East, while stocks and the euro were pressured by plunging investor morale in Germany, Europe's largest economy.

German shares fell and the euro weakened against the dollar after a gauge of economic sentiment fell to its lowest level since December 2012. The ZEW survey in August came as sanctions against Russia over its support of Ukrainian separatists raised fears about the impact on Germany's economy.

Russia said on Tuesday that a convoy of 280 trucks carrying humanitarian aid had set off for Ukraine, but Kiev said it would not allow the vehicles to cross into its territory.

"The situation seems a bit quieter now, with the aid going in, but it will take a while for this to play out, and this doesn't seem like a time for people to stick their necks out," said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia.

"It is hard to see the market moving higher in the short term, but long-term investors can still find value and the U.S. economic backdrop continues to be very positive."

The Dow Jones industrial average fell 36.31 points, or 0.22 percent, to 16,533.67, the S&P 500 lost 5.66 points, or 0.29 percent, to 1,931.26, and the Nasdaq Composite dropped 17.72 points, or 0.4 percent, to 4,383.62.

An MSCI index of stocks in major developed and emerging economies and a pan-European benchmark both fell 0.2 percent, while Frankfurt's DAX index fell 1.1 percent, in its biggest decline since Aug. 1.

Brent crude hit a nine-month low near $103 a barrel as production in North America more than offset concerns over supply out of the Middle East and Russia.

Brent prices were down more than 1 percent while U.S. crude fell 0.9 percent to $97.22.

The euro index, which measures the currency against five of its major peers, was on track for its worst daily performance in a week in the wake of the soft German data.

Against the U.S. dollar, the euro fell 0.2 percent, bringing the decline since the start of July to 2.5 percent.

"The recent string of disappointing economic indicators from (Germany), along with an escalation of sanctions towards Russia, has institutional investors and analysts nervous about future economic conditions," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

U.S. Treasury debt yields inched higher as traders sold some bond holdings in advance of a $27 billion auction of three-year notes, part of this week's $67 billion quarterly government refunding.

The selling pressure from this week's supply has been offset by a steady bid for safe-haven Treasuries on worries about conflicts in Iraq, eastern Ukraine and Gaza. Benchmark 10-year yields have lingered not far from last week's 14-month low of 2.349 percent and were recently at 2.4292 percent.

Gold firmed as equities fell, gaining 0.6 percent to over $1,315 an ounce.

Investors kept an eye on Iraq as the prime minister-designate Haider al-Abadi won endorsements from the United States and Iran as he called on political leaders to end feuds that have allowed jihadists to seize a third of the country.

Still, al-Abadi's Shi'ite party colleague Nuri al-Maliki has refused to step aside after eight years as premier that have alienated Iraq's once dominant Sunni minority and irked Washington and Tehran.

(Additional reporting by Richard Leong, Ryan Vlastelica and Gertrude Chavez-Dreyfuss in New York and Jason Neely in London; Editing by Leslie Adler)