* Financials lead Europe shares lower, Asian stocks fall
* German 10-year yields hit one-month low
* Oil holds Wednesday's gains, unfazed by oil sands return
By Nigel Stephenson
LONDON, May 12 (Reuters) - European shares followed Asian
stocks lower on Thursday, hit by sharp falls on Wall Street the
previous day, while German government bond yields hit one-month
lows as investors sought shelter in low-risk debt.
The pan-European FTSEurofirst stocks index .FTEU3 dropped
0.5 percent, led lower by financial shares, and is down about 9
percent so far this year. Germany's Dax index .GDAXI fell by
0.4 percent while Britain's FTSE 100 .FTSE lost 0.5 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS slipped 0.5 percent, moving back toward a
two-month low touched on Tuesday.
But Japan's Nikkei stock index .N225 erased early losses
and ended up 0.4 percent as the yen fell against the dollar.
The gloomy tone in stocks markets had been set in the U.S.
markets. The Dow Jones Industrial Average .DJI fell 1.2
percent on Wednesday, its biggest one-day fall since Feb. 11,
though this only reversed Tuesday's 1.2 percent rise.
Disney missed earnings targets DIS.N and department store
Macy's M.N slashed forecasts, hammering the consumer sector.
.N
"A slowdown in U.S. consumer spending is doubly concerning
given how much the U.S. economy relies on consumers hitting the
shops and spending their hard earned dollars," said Michael
Hewson, chief market analyst at CMC Markets in London.
At the same time, an auction of 10-year U.S. Treasury bonds
saw strong demand with the highest indirect bids on record,
which can come from governments, fund managers and insurance
companies.
U.S. 10-year yields US10YT=RR fell 1 basis point to 1.72
percent. German 10-year yields DE10YT=TWEB , the benchmark for
euro zone borrowing costs, hit a one-month low of 0.1 percent.
In currency markets, the dollar strengthened 0.2 against a
basket or currencies .DXY and 0.3 percent against the yen
JPY= after an academic seen to be close to Bank of Japan
Governor Haruhiko Kuroda said the BOJ was likely to expand its
monetary stimulus soon.
Takatoshi Ito, a former senior finance ministry official,
said the BOJ, which introduced negative rates earlier this year,
could act in June or July.
This follows a series of warnings from Japanese Finance
Minister Taro Aso that Tokyo would intervene to curb any
excessive one-sided gains in the yen.
"With policy easing speculation gaining ground and the
Finance Minister talking down the yen, it is clear they do not
want a stronger currency," said Niels Christensen, FX strategist
at Nordea.
The yen was last at 108.75 to the dollar, having touched an
18-month high of 105.55 on May 3.
The euro EUR= weakened 0.2 percent to $1.1406 and sterling
GBP= fell a similar amount to $1.4413 before a Bank of England
policy meeting and the release of new growth and inflation
forecasts later on Thursday.
The British economy has shown signs of weakening recently,
with money markets pricing in a chance of an interest rate cut
by the end of the year, while economists polled by Reuters have
said growth could be at risk if Britain votes to leave the
European Union in a referendum in June.
Oil prices held on to most of Wednesday's sharp gains,
unfazed by the gradual return of Canada's oil sands output.
Brent crude LCOc1 was last down 5 cents a barrel at $47.56,
having rise nearly $3 on Wednesday on a fall in U.S. crude
inventories.
Copper prices CMCU3 pared earlier gains as the dollar
found a firmer footing. The metal was last up 0.3 percent at
$4,721 per tonne.
Investors were also watching Brazil, where the Senate was
poised to suspend President Dilma Rousseff prior to putting her
on trial for breaking budget laws. NL2N189057
The real BRL= was 0.1 percent stronger at 3.45 per dollar.