(Recasts with latest price moves, adds Wall Street outlook)
By Natsuko Waki
LONDON, May 27 (Reuters) - World stocks erased early gains
and hit a two-week low on Tuesday after concerns resurfaced over
the health of banks, while data showing deteriorating consumer
and business morale in many parts of Europe weighed on the euro.
A broadly stronger dollar failed to tame oil prices which
rose above $133 a barrel -- close to last week's all-time highs,
while gold slipped.
Data from the European Central Bank on its overnight loan
facility showed a bank or banks borrowed 538 million euros from
it on Monday, which, on the margins, rekindled some fears about
the banking sector hit by the credit crisis.
However, analysts and traders played down the figures,
pointing out that Monday was a UK and U.S. market holiday with
consequent low liquidity and the sum involved has been borrowed
several times this year already.
European banks <.SX7P> hit a fresh two-month low, dragging
broader indexes lower. This followed concerns about more asset
writedowns at Swiss bank UBS <UBSN.VX> whose shares have been
falling sharply since Monday.
"There is the rumour of further writedowns in the banking
sector... The market is reacting very nervously," a trader said.
The FTSEurofirst 300 index <> fell 0.6 percent, while
MSCI main world equity index <.MIWD00000PUS> shed 0.1 percent.
U.S. stock futures <SPc1> were pointing to a weaker start on
Wall Street later, which opens after a long weekend.
DETERIORATING MORALE
A survey by GfK showed German consumer morale is set to
deteriorate unexpectedly next month, dampened by concerns about
inflation and uncertainty over financial market turmoil.
French business confidence fell to its lowest level in 2-1/2
years in May, while consumer morale in Sweden, Finland and
Iceland also fell this month. Italy was an exception, where
business morale rose in May after six consecutive declines.
After the data the euro retreated to $1.5728 <EUR=>, down
0.3 percent on the day, from a one-month high hit earlier.
"Markets have started to wake up to the possibility that
Europe is slowing down," said Ian Stannard, senior foreign
exchange strategist at BNP Paribas. "Today's data is consistent
with that view."
Emerging sovereign spreads <11EMJ> were steady while
emerging stocks <.MSCIEF> rose 0.2 percent.
The June Bund future <FGBLM8> rose 4 ticks, drawing
safe-haven flows, while euro zone government bond yields and
implied yields slipped after ECB data.
The dollar rose 0.2 percent against a basket of six major
currencies <.DXY>.
News of another attack on Nigerian oil facilities has been
fuelling concerns about immediate supplies, pushing U.S. light
crude <CLc1> up one percent to $133.39 a barrel -- close to
record highs just above $135 set last week.
Gold <XAU=> fell to $923.30 an ounce as the dollar rose.
(Additional reporting by Naomi Tajitsu)
