* Goldman Sachs, Apple to report
* Euro hits two-month high against dollar
* Stocks fail to hang on to gains
* Wall Street set for losses
By Jeremy Gaunt, European Investment Correspondent
LONDON, July 20 (Reuters) - Worries about the U.S. economic
recovery and bank exposure to risky debt swayed financial
markets on Tuesday, snuffing out a short stock rally and cutting
gains in the euro.
Wall Street looked set to open lower with key earnings from
Goldman Sachs <GS.N> and Apple <AAPL.O> ahead.
There was growing concern about the U.S. economy after
Monday's NAHB/Wells Fargo Housing Market index for July fell
more than expected after a popular tax credit for homebuyers
expired in April.
That underlined fears about the recovery ahead of housing
data including housing starts on Tuesday.
Investor sentiment was also undermined when Hungary sold
less of its debt than expected. Its talks with international
lenders were suspended at the weekend.
World stocks as measured by MSCI <.MIWD00000PUS> were down a
quarter of a percent with the emerging market benchmark trimming
early gains to 0.3 percent. The Thomson Reuters global stock
index <.TRXFLDGLPU> was down 0.2 percent.
European stocks were heading for a five-day losing streak
with the pan-European FTSEurofirst 300 <> down 0.6
percent.
Earnings remained a focus, however.
"The market will look for guidance (from companies) for Q3
and to see how that is going and will be sensitive to any
expressions of confidence or the lack of it," said Bernard
McAlinden, investment strategist at NCB Stockbrokers in Dublin.
Japan's benchmark Nikkei stock index <> shed 1.2
percent, reflecting investor concern about a U.S. slowdown.
EURO REVERSES
The euro was lower, reversing a climb to its highest against
the dollar in more than two months.
It retreated from $1.3029 hit on trading platform EBS as
some investors questioned whether the single currency would
sustain gains above $1.30 given that bank stress test results
due on Friday may show weakness in euro zone financial
institutions.
The poor demand at Hungary's bill offer also stung the euro
as it weighed on risk sentiment.
"We've seen risk appetite claw back a fair amount, and the
market is questioning whether that move is valid," said Jane
Foley, director of research at Forex.com.
The euro <EUR=> traded 0.3 percent lower on the day at a
session trough of $1.2903.
German government bonds rose as European stocks plumbed
fresh two-week lows while the Hungary news further boosted
flight-to-safety flows.
"It shows that sovereign risks still remain a concern in
some areas and whilst the situation has generally improved, it
hasn't gone away," said Nick Stamenkovic, strategist at RIA
Capital Markets in Edinburgh.
(Additional reporting by Tamawa Desai, Naomi Tajitsu and
Harpreet Bhal; Editing by Ron Askew)
