Dollar slips on weak U.S. data, world stocks flat

By Herbert Lash

NEW YORK (Reuters) - Global equity markets traded slightly lower and the dollar fell against the euro on Thursday after reports on U.S. housing, labor and regional business conditions pointed to soft spots in the American economy.

Factory activity contracted in the mid-Atlantic region in May, ground-breaking for new homes tumbled in April and new claims for jobless benefits spiked last week, according to three separate reports.

Coupled with soft underlying inflation, the data suggests weak demand as the U.S. economy entered the second quarter, and it curbed expectations the Federal Reserve will scale back its asset-buying program, which has bolstered the equity market.

"The data today was broadly weak and overall it drives home the fact that the economic backdrop remains uneven, and that will keep the Fed's foot on the accelerator by continuing to engage in accommodative policy," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.

Gold hit a four-week low and declined for a sixth straight day for the first time in more than four years as investors spooked by recent price falls favored other assets.

Spot gold prices fell $4.58 to $1,387.70 an ounce.

Ground-breaking for new U.S. homes plummeted more than expected in April, the Commerce Department said, while the Federal Reserve Bank of Philadelphia said its index of business conditions in the U.S. Mid-Atlantic region fell.

The number of Americans filing new claims for unemployment benefits climbed last week at the fastest pace in six months, the Labor Department said, confounding analysts' expectations for a more modest increase.

The dollar fell for the first time in six sessions against the euro, which rose 0.15 percent against the dollar to trade near $1.2905.

Major equity indexes traded near break-even, trimming earlier losses, although the tech-heavy Nasdaq index was higher, led by gains in Cisco Systems Inc .

Cisco shares surged 12.92 percent to $23.95 after the network equipment maker posted a higher-than-expected quarterly profit and said current-quarter revenue could increase.

The Dow Jones industrial average was down 17.13 points, or 0.11 percent, at 15,258.56. The Standard & Poor's 500 Index was down 3.12 points, or 0.19 percent, at 1,655.66. The Nasdaq Composite Index was up 5.66 points, or 0.16 percent, at 3,477.27.

Other big tech gainers included Apple Inc , up 0.91 percent at $432.80; Hewlett-Packard , up 1.8 percent at $21.35; and International Business Machines , up 0.9 percent at $205.18.

In other data, the U.S. Consumer Price Index posted the biggest decline since December 2008, indicating inflation pressure remains tame and giving the Fed latitude to maintain its current monetary policy.

MSCI's world equity index fell 0.1 percent, while the FTSE Eurofirst 300 index of top European shares edged down 0.02 percent to close at 1,245.45.

U.S. Treasuries prices advanced and German Bund futures jumped the most in six weeks as the U.S. data raised worries about the economy and underscored the lack of price pressures.

The benchmark 10-year U.S. Treasury note was up 21/32 in price to yield 1.8653 percent. German Bund futures jumped 67 ticks to settle at 145.31, its biggest daily gain since March 27.

Oil prices rose but Brent oil futures remained below $104 a barrel as the soft U.S. economic data added to a bearish outlook on demand.

Brent settled 12 cents higher at $103.80 a barrel, while U.S. oil gained 86 cents to settle at $95.16.

(Reporting by Herbert Lash; Additional reporting by Richard Hubbard in London; Editing by James Dalgleish, Leslie Adler and Chizu Nomiyama)