* Oil rises more than $1 a barrel
* Raft of gloomy euro zone economic data hits euro
* European stocks supported by energy equities
* Japanese equities near 1-month low
By Jeremy Gaunt, European Investment Correspondent
LONDON, June 23 (Reuters) - Oil rose more than $1 a barrel
on Middle East tension on Monday, while European shares and the
euro were hit by a raft of data showing increasing euro zone
economic weakness.
Equities in Japan fell to a near 1-month low.
Europe suffered from poor economic reports. Euro zone
services and manufacturing activity both contracted in June, hit
by slowing demand and rising energy costs, while price pressures
surged, RBS/Markit indexes showed,
Similar data also showed French growth in both manufacturing
and services contracting and German growth in the sectors
slowing.
German corporate sentiment, meanwhile, also weakened
significantly in June, according to the Munich-based Ifo
economic research institute.
The reports were seen as putting pressure on the European
Central Bank, which, like others, is trying to balance slowing
economic activity with rising inflationary pressures.
"The ECB's policy dilemma has increased," said Jacques
Cailloux, chief euro area economist at RBS, which sponsoes the
data.
The reports helped pull back equity gains, leaving the
FTSEurofirst 300 <> index of top European up slightly,
held higher by energy-relates shares.
"I would expect energy stocks to do reasonably well and the
index is up after we had such a negative week last week," said
Peter Dixon, UK economist at Commerzbank. "However if you look
at where we are it's a small crumb of comfort in an otherwise
gloomy picture."
OIL RISES, EURO SLIPS
Energy stocks were boosted by the rising price in oil.
Escalating tension between Israel and Iran stoked supply
concerns and traders doubted whether Saudi Arabia's promise to
pump more oil, if needed, would turn back the rally.
U.S. light crude for August delivery <CLc1> was up more than
$1.15 a barrel at $136.50.
Iran's defence minister was quoted as saying on Sunday that
his country would give a "devastating" response to any attack.
On Friday, the New York Times quoted U.S. officials as saying
Israel had carried out a large military exercise, apparently a
rehearsal for a potential bombing of Iran's nuclear facilities.
This mood overwhelmed confirmation from top exporter Saudi
Arabia that it would lift production in July, a move that
briefly weakened the oil price.
On foreign exchange, meanwhile, the euro was hit by the poor
data and the dollar benefited as some investors bet on a hawkish
message from the Federal Reserve later in the week.
"The data was quite weak this morning in the euro zone and
so we have a slight bear bias on the euro today," said Carole
Laulhere, currency strategist at Societe Generale.
"At the same time the market is waiting for the (Fed) on
Wednesday and is just judging whether the Fed will tighten soon
on inflation.".
The euro was down 0.6 percent at $1.5501 <EUR=> by 0823 GMT,
while the dollar index <.DXY> added 0.7 percent to 73.511.
The euro fell 0.3 percent to 167.01 yen <EURJPY=>, over a
yen below the 11-month struck on Friday.
Euro zone government bond prices firmed, sending yields
lower. The interest rate-sensitive two-year Schatz yield
<EU2YT=RR> was down 4 basis points at 4.562 percent and the
10-year Bund yield <EU10YT=RR> was down the same 4.584 percent.
(Additional reporting by Toni Vorobyova)
