--European stocks lackluster; nudging up and down as traders seek direction --Currencies in focus following recent gains in dollar; SNB reiterates policy --Gilts, FTSE, British pound react to Fitch downgrade of the U.K.'s outlook By Andrea Tryphonides Of DOW JONES NEWSWIRES LONDON (Dow Jones)--London's FTSE 100 fell and gilts pushed lower following a downgrade to the outlook of the U.K. by ratings company Fitch, while currencies were in focus Thursday after the dollar cooled after its recent strong streak against a basket of currencies, while the Swiss National Bank reiterated its policy of monitoring the strength of the Swiss franc against the euro. Overall, though, European stocks were lackluster Thursday, moving between small losses and gains as investors took a breather following the strong rise in equities this week on an improving economic picture in the U.S. "The bull run appears to have run out of steam," said Mike McCudden, head of derivatives at Interactive Investor. At 0911 GMT, the benchmark Stoxx Europe 600 index was down 0.1% at 269.93. London's FTSE 100 was down 0.1% at 5937.02, underperforming a touch versus its European peers after Fitch on late Wednesday cut its outlook on the U.K. to negative. Fitch said the country's financial flexibility to handle a financial shock is "very limited." Gilts were having a less promising European session following the Fitch move, particularly as the U.K. Chancellor's budget looms. "The move by Fitch could not come at a more telling time for Chancellor George Osborne as he enters into the final planning stages for next Wednesday's budget. Fitch's move heaps further pressure on the Chancellor to stick to his fiscal austerity plans and to resist any temptation for unfunded giveaways," said IHS Global Insight's chief U.K. and European economist, Howard Archer. "There is no denying the fact that U.K. growth is likely to be muted for some time to come and vulnerable to relapses, particularly in the near term, while the euro zone's sovereign-debt problems are far from permanently resolved and are liable to repeated flare ups," he said. June gilts were down 0.61 at 112.39 by 0920 GMT. Elsewhere, Frankfurt's DAX was 0.2% higher at 7092.27 and Paris's CAC-40 was flat at 3566.20. In corporate earnings news, Tesco fell 1.0% after announcing the departure of its U.K. chief executive, Richard Brasher. Tesco has had mixed fortunes of late. After several years of falling sales in the U.K. and a particularly dire Christmas period the group warned in January that it will make minimal profit in 2013. Brasher was seen as the chief architect of the Big Price Drop, a major cost-cutting campaign launched last year, which has largely been seen as ineffective. Deutsche Lufthansa declined 1.6% after it warned that high crude oil prices and persistent economic uncertainty pose serious risks for its business in 2012. UBS, meanwhile, ticked down 0.1% after saying it has slashed its overall bonus pool for 2011 by 40% to CHF2.6 billion ($2.8 billion). The bank cited its weaker performance last year, particularly at the investment bank as one of the reasons for the move. Asian stock markets were mixed Thursday as concerns that China would retain tight policy measures in the property sector this year unsettled investors, while the dollar continued to rise broadly and Japanese exporter stocks extended recent gains boosted by a weaker yen. Japan's Nikkei Stock Average rose 0.7%, Australia's S&P/ASX 200 lost 0.2% and South Korea's Kospi Composite fell 0.1%. Hong Kong's Hang Seng Index gained 0.2% and China's Shanghai Composite Index fell 0.7%. Chinese Premier Wen Jiabao said Wednesday that real-estate prices are still far from reasonable levels and loosening policy controls permanently could hurt the domestic economy. This initially weighed on basic resources stocks in Europe, which are closely linked to demand in China. However, by 0915 GMT the Stoxx 600 basic resources was up 0.4%. In foreign exchanges, the dollar trimmed gains following a stellar rise on a recent string of positive U.S. data that have diminished expectations of a fresh round of easing from the Federal Reserve. The dollar broke through Y84.00 against the yen to a fresh 11-month high at Y84.17, from Y83.72 late Wednesday in New York. But at 0915 GMT, it was buying Y83.81. The euro was at $1.3055 against the greenback, from $1.3032, and the British pound was at $1.5638 from $1.5670, falling on Fitch's statement on the U.K. The Swiss franc was also in focus Thursday, after the Swiss National Bank said it will maintain the minimum exchange rate of 1.20 Swiss francs per euro "with the utmost determination." ING Bank economist Julien Manceaux added, "[The SNB] once again stated that it is 'prepared to buy foreign currency in unlimited quantities for this purpose,' a strategy which is working as the SNB stabilized its assets in foreign currencies over the last few months." The euro was at CHF1.2102 from CHF1.2128. Elsewhere, spot gold was at $1,648.60 per troy ounce, up $5.10 from its New York settlement on Wednesday. April Nymex crude oil futures were up $0.11 at $105.54 per barrel and May Brent oil futures were down $0.03 at $124.55. The June bund contract was down 0.34 at 136.46. On Wednesday the bund fell sharply, pushing yields to their highest levels in almost a month, as they tracked weakness in U.S. Treasurys after the Federal Reserve gave a slightly more upbeat take on the world's largest economy earlier in the week. There are no economic data of note for the euro zone or U.K. on Thursday. Investors should see the final approval of the International Monetary Fund's participation in the second Greek bailout, which looks to be fixed at EUR28 billion, according to the most recent official statements. This follows official approval of the bailout from the European Union on Wednesday. Elsewhere, Spain is set to sell EUR2.5 billion to EUR3.5 billion of three-, five- and six-year bonds, which is seen as a crucial test of appetite for the country's debt given the recent slippage in its budget deficit target. -By Andrea Tryphonides, Dow Jones Newswires; +44-20-7842-9281; andrea.tryphonides@dowjones.com

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