* Stocks fall after rally
* U.S. data raises growth concern
* Europe bank stress tests in focus
* Euro slips from seven-week high
By Jeremy Gaunt, European Investment Correspondent
LONDON, July 7 (Reuters) - New evidence that the U.S.
economic recovery is slowing pushed investors to sell shares on
Wednesday following a burst of bargain hunting the previous day.
Wall Street also looked set for a weak start.
European shares, however, came off their lows after two
banking sources in Germany told Reuters that stress tests for
European banks will not include changing the repayment
commitments of German sovereign bonds. []
Sovereign bonds of troubled Portugal, Italy, Ireland, Greece
and Spain would see significant stress tests, the sources said.
Sentiment globally was hurt by the Institute for Supply
Management's reading on U.S. service sector activity on Tuesday
which showed growth in June, but at its slowest pace since
February, heightening concerns about sluggish economic recovery.
Along with continued worries about euro zone sovereign debt,
the slowing pace of recovery, particularly in the United States,
has deterred investment in riskier assets.
World stocks as measured by MSCI <.MIWD00000PUS> were down
half a percent having gained 1.7 percent on Tuesday. The Thomson
Reuters global stock index <.TRXFLDGLPU> was down 0.3 percent.
"The continuous stream of disappointing economic data
recently has been feeding the markets' worries about the
adequacy of underlying demand in the world when the fiscal
stimulus gets withdrawn," said Bernard McAlinden, investment
strategist at NCB Stockbrokers in Dublin.
Investors are concerned about the impact of stimulus
programmes running their course, governments introducing harsh
spending cuts to combat burgeoning debt, and the eventual
raising of interest rates.
In Europe, the FTSEurofirst 300 <> was down 0.6
percent having earlier lost around 1 percent. It closed up 2.6
percent on Tuesday, its biggest daily gain in about 5-1/2 weeks.
Earlier, Japan's Nikkei <> ended down 0.6 percent but
the index remained above a seven-month low hit on Tuesday.
EURO SLIPS
The euro slipped off a seven-week high with eyes on the
European stress tests.
Analysts said the euro was nonetheless being supported after
a solid sale of Spanish syndicated debt in the previous session.
"There's still an awful lot of uncertainty in Europe and the
stress tests are the next big event ... If growth concerns
return then Europe will be worse hit than the U.S.," said Derek
Halpenny, European Head of Global Currency Research at BTM-UFJ.
The euro <EUR=> eased 0.2 percent to $1.2596, of its
session lows. It had risen to $1.2663 on trading platform EBS on
Tuesday, the highest in about seven weeks.
The dollar was up 0.1 percent against a basket of
currencies.
(Additional reporting by Harpreet Bhal and Lin Noueihed,
editing by Mike Peacock)
