The euro slipped from a lifetime peak versus the yen and European stocks erased early gains yesterday after German investor morale unexpectedly fell in June, cooling aggressive investor risk appetite. Oil prices fell but held close to a 10-month peak hit on the day before on Nigerian supply worries, dragging other commodities such as gold lower.

The ZEW survey showed economic sentiment in the euro zone?s biggest economy fell in June after rising for six months. While this did not materially change near-term expectations for a euro zone rate hike this year, the surprise drop dented the mood.

?The ZEW spoilt the party. The data wasn?t dramatically bad but it was weaker than expected. With euro zone data we?ve become accustomed to getting stronger readings, so a weak reading is bad news,? said Audrey Childe-Freeman, economist at CIBC World Markets.

Holger Schmieding, economist at Bank of America, said: ?At the margin, softer data such as the surprise decline in the ZEW may impact the ongoing debate at the ECB whether the next rate hike should come in September or October.?

The euro was down 0.15 percent at 165.60 yen having hit a record peak around 166.10 earlier. It was also slightly lower yesterday at $1.3398. The September Bund future rose to a session high after the data.

The FTSEurofirst index of top European shares erased gains and dipped into negative territory, at 1,619.02. The index hit a 6-1/2 year peak hit at one stage on the day before. The MSCI main world equity index held steady on the day, after hitting a record high earlier in June. US stock futures pointed to a slightly weaker open on Wall Street later.

In Asia, Singapore and South Korean shares rose to record highs, while Japan?s Nikkei average ended steady.

Further impetus might come from US housing data due later, which could give clues on whether a downturn in the housing market has finally bottomed out and if the Federal Reserve will leave interest rates on hold this year.

State Street said the data could provide evidence that the housing adjustment has yet to run its course.

?If the Bernanke-led Fed chooses to follow Greenspan?s risk management framework, debate should begin to centre around the following question: do the risks of a hard landing as a result of the housing slowdown now outweigh the inflation risks posed by rising resource utilisation?? the bank said in a client note. Analysts also say rising oil prices on the back of supply concerns could be a threat for the risk-loving climate.

<B> Further violence in nigerian Delta region</B>

?Markets have so far not responded to (supply concerns), but a continued and sustained oil price ascent would be apt to refresh inflation and growth concerns,? JP Morgan said in a note to clients.

London benchmark Brent crude was down slightly on the day, but holding near the day before peak after the threat of a general strike by Nigerian unions and further violence in the Delta region there helped extend the market?s gains to a fourth session.

Nigeria, the world?s eighth largest exporter, has moved into the market?s spotlight after unions said they would start an indefinite general strike as from today.

Spot gold was slightly lower at $656.30, also taking cues from a stronger dollar. It hit a one-week high in the previous day.