--Worries about Spain and its banking system pressure markets --Stocks, euro, commodities all pare earlier gains but still firm --Conflicting reports on China also put pressure on sentiment --Attention on US economic data for further direction By Ishaq Siddiqi & Michele Maatouk Of DOW JONES NEWSWIRES LONDON (Dow Jones)--European stocks, the euro and commodities all pared early gains Tuesday, as worries over Spain and its banking system continued to pressure sentiment, along with a report suggesting the Chinese authorities won't resort to an aggressive stimulus plan. Although the price-action was still positive with traders noting easing concerns over Greece, risk assets eased off earlier highs as fears about the economic deterioration in Spain and troubles in its banking system intensified after Bankia's EUR19 billion bailout late last week. At 1122 GMT, Spain's benchmark IBEX-35 was down 2.3% at 6253.00. Spanish banks tumbled with Bankia shares off 12%, while Santander shares fell 3.1% and BBVA slumped 3.0%. The Stoxx Europe 600 banks index lost 1%. Fellow "peripheral" stock indexes followed the weakness on the IBEX-35, with Greece's ASE index 0.7% lower at 514.88, and Italy's FTSE MIB down 0.4% at 13,000.10. Sentiment was hurt by a report that cited ECB Governing Council member Ewald Nowotny as saying there is no talk within the European Central Bank of re-starting government bond purchases or providing more long-term loans to banks. This would deal a severe blow to Spain, said Markus Huber, a trader with ETX Capital. "Spain is already encountering difficulties raising money at affordable rates after recent turmoil out of Greece," Huber said. Among core European indexes, the benchmark Stoxx Europe 600 index was up 0.3% at 243.28, off its session high of 244.71. Regional indexes also eased back from earlier highs, as concerns about Spain gathered momentum. The U.K.'s FTSE 100 index was 0.3% higher at 5371.11, Germany's DAX was up 0.8% at 6373.84 and France's CAC 40 was up 0.6% at 3061.52. In the currency markets, the euro fell against the dollar to a low for the session, but not the day, at $1.2521, and was last at $1.2538, from $1.2542 late Monday in New York. Meanwhile, the 10-year Bund yield fell to a record low of 1.346%, while the June futures contract hit a new high of 144.58. The June bund contract was last seen higher by one tick at 144.38. Earlier, hopes were fueled by a report in the state-run Shanghai Securities News saying Beijing would introduce measures to jumpstart demand for automobiles. Asian stock indexes rose on the report, with Japan's Nikkei 225 closing up 0.7% and China's Shanghai index up 1.2%. But a Xinhua News Agency report saying China won't resort to aggressive stimulus measures, as it did at the end of 2008, to ensure steady economic growth dashed the earlier hopes, prompting investors to reduce risk further. "The aim of the government is clear," said Xinhua in an analysis piece. "There won't be any massive stimulus plan to achieve a high growth." The Stoxx Europe 600 basic resources index was up 1.4% at 412.87 versus a session high of 417.82. Commodity prices also eased off highs but remained firm on the whole with spot gold at $1574.20 a troy ounce, up $5.30 from New York. In oil markets, July Nymex crude oil futures were up 48 cents at $91.34 per barrel and July Brent futures were flat at $107.02. Grim Spanish retail sales figures did little to lighten the mood. They showed the biggest decline in more than a year in April, as consumers felt the squeeze from higher taxes, a weak economy and government austerity measures. Earlier, Italy sold a planned EUR8.5 billion worth of six-month T-bills at an average yield of 2.104%, up from 1.772% at the previous tender for similar maturity on April 26. Meanwhile, worries about Greece have subsided a little, at least for now, after polls released at the weekend showed the pro-bailout conservatives, New Democracy, have taken the lead ahead of upcoming elections. Also helping to underpin the tone were expectations that the day's U.S. data releases will be encouraging, following the improvement in last week's University of Michigan confidence figures. Case-Shiller data, due at 1300 GMT, are expected to show house prices in the 20 largest cities increased 0.2% month-on-month in March, said Rabobank. "If realized, this will be the second straight monthly rise after about 20 months of falls. It will be the first time since early 2010 that prices have risen in two consecutive months and add to indicators showing the sector is improving modestly," it said. At the same time, "U.S. consumer confidence [at 1400 GMT] will be looked to for confirmation that consumers are indeed feeling better despite the myriad global risks that are being so widely discussed." Futures for the Dow Jones Industrial Average rose 0.6%, to 12,508, while futures for the S&P 500 index gained 0.7%, to 1,324.35. -By Ishaq Siddiqi, Dow Jones Newswires; +44-20-7842-9488; ishaq.siddiqi@dowjones.com

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