GLOBAL MARKETS-European shares head for first weekly drop since April

Reuters - UK Focus

* Wall Street set for second week of losses in three

* U.S. 10-year yield near 3-week low, gold higher

* Oil little changed, down $3 from recent highs

(Updates throughout, changes byline, dateline, previous LONDON)

By David Gaffen

NEW YORK, June 27 (Reuters) - Major global equity markets

were little changed on Friday while gold rose to near a

two-month high as the dollar softened on reduced expectations

for U.S. economic growth.

Wall Street was modestly weaker but activity was muted. A

survey of U.S. consumer sentiment came in a bit above

expectations, but it was not enough to motivate buying with the

S&P 500 not far from a record high. The benchmark index is on

track for its second weekly loss in the last three weeks.

Concerns about U.S. growth as a result of

weaker-than-expected data on consumer spending and a downward

revision to first-quarter GDP has boosted the bond market this

week. Long-dated 10-year and 30-year yields were lower on

Friday, hovering near three-week lows.

"The market is not accepting the higher growth trajectory

that the Fed and blue chip economists are telling us we will see

in the second half," said Vishal Khanduja, portfolio manager for

Calvert Investments.

The 10-year benchmark yield was 2.517 percent, after hitting

a low of 2.507 percent earlier in the day. The steady interest

in fixed income from pension funds and other investors has

helped keep interest rates low - which has helped equities

remain stable even as few catalysts emerged to fuel more buying

in stocks.

The Dow Jones industrial average fell 25.34 points or

0.15 percent, to 16,820.79, the S&P 500 lost 0.73 points

or 0.04 percent, to 1,956.49 and the Nasdaq Composite

added 5.76 points or 0.13 percent, to 4,384.81.

Gold was closing in on a fourth straight weekly gain at

$1,315 an ounce, as geopolitical unrest in Iraq and Ukraine

boosted its appeal and the soft U.S. data weakened the dollar.

Spot gold was up $1.65 to $1,319.25 an ounce. On

Tuesday this week it hit $1,325.90, highest since mid-April. It

was up 0.3 percent on the week.

Geopolitical concerns and subdued economic data were also

partially responsible for the lackluster enthusiasm in risk

assets this week.

Fighting between Iraqi forces and insurgents raged in the

hometown of the late dictator Saddam Hussein and Russia warned

of "grave consequences" as Ukraine signed a trade and political

agreement with the European Union.

Oil, usually the most sensitive to Middle East unrest, was

little changed on Friday. Brent crude fell 9 cents to $113.12

and was on track for its biggest weekly drop in a month, since

the fighting in Iraq has not yet spread to the south where most

of the country's oil is produced.

At $113 a barrel, prices have dropped nearly $3 from a

nine-month high of $115.71 hit on June 19. "The exaggerated fear

premium is being priced out," said Carsten Fritsch, a senior oil

and commodities analyst at Commerzbank (Xetra: CBK100 - news) in Frankfurt.

The U.S. dollar index stuck tight to one-month lows

reached on Wednesday, falling to 80.086. The dollar also hovered

around a five-week low of 101.37 yen.

(Reporting by David Gaffen in New York and Marc Jones in

London; Editing by Chizu Nomiyama)

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