By Neal Armstrong
LONDON (Reuters) - European stocks fell on Wednesday and the dollar dropped to a one-month low against the yen after U.S. Federal Reserve Chairman Ben Bernanke offered a grim view of the economy but failed to offer hints of fresh stimulus.
Concerns about growth of the world's largest economy have dominated financial markets this month, and European stocks fell for the sixth straight session, driving global stocks 0.36 percent down on the day. <.MIWD00000PUS>
Bernanke acknowledged the U.S. economy had slowed down but offered no suggestion the central bank was willing to step in with a third round of bond buying -- so-called quantitative easing -- to support growth. The dollar fell in response.
"QE3 looks as though it's become a distant hope. The markets had pinned quite a lot on getting another form of stimulus," said Justin Urquhart Stewart, director at Seven Investment Management.
The FTSEurofirst 300 <.FTEU3> index of top European shares was down 0.8 percent at 1,094.95 points.
Uncertainty over whether European policymakers will manage to pin down a deal for further financial aid for Greece also hampered sentiment toward the euro zone.
The euro briefly rose to a one-month high of $1.4696 as the dollar floundered, but later eased $1.4680, off around 0.1 percent for the day.
German government bonds rose around 10 ticks, tracking overnight gains in U.S. Treasuries after a solid auction and Bernanke's dovish comments.
"Bernanke was dovish and it's the U.S. data that will set the tone from here," said one bonds trader. "We're not out of the woods with the euro zone periphery either and the last thing they need is a slow-down in growth."
Greece needs substantial fresh aid from the euro zone to avoid the currency bloc's first state insolvency, a German newspaper reported on Tuesday, citing German Finance Minister Wolfgang Schaeuble.
OIL SLIDE
The dollar hovered near a one-month low under 80 yen as the Japanese currency firmed amid heightened risk-aversion reflecting falls in share prices. The dollar-index was also close to one-month lows of 73.506 hit on Tuesday <.DXY>
Poor signs on growth add to market conviction that U.S. interest rates will stay low for an extended period, at a time when the European Central Bank is expected to signal it will push forward with a further rise in interest rates next month.
The ECB concludes this month's policy meeting on Thursday.
Brent crude fell 0.4 percent to $116.36 a barrel, after gaining $2.30 on Tuesday. Investors are trying to assess whether OPEC will raise production targets.
Gold slipped to $1,538 but analysts see plenty of room for its continued rise as investors retreat from riskier assets.
Gold is still well below a lifetime high around $1,575 touched in early May, but with the U.S. dollar under pressure, equities markets falling and the debt crisis in Europe far from over, bullion continues to be one of the chief beneficiaries of the latest bout of market volatility.
Lorraine Tan, director of Asia equity research at S&P in Singapore, said gold would be supported by fundamentals and sentiment over the weak U.S. dollar.
"We think it will stay relatively firm," she said.
(Additional reporting by Nick Macfie, Brian Gorman and Kirsten Donovan; editing by Patrick Graham)
