* Stocks slip as Midwest business report fails to lift
* Dollar higher, yen weakens in light year-end trading
* Crude oil rises as traders assess U.S. cold weather
* U.S. gold drops below $1,100 as dollar rallies (Updates with U.S. markets, changes byline, dateline, previous LONDON)
By Herbert Lash
NEW YORK, Dec 30 (Reuters) - The U.S. dollar gained across the board on Wednesday and tempered a much better-than-expected reading of business activity in the U.S. Midwest, which failed to add more upside to this year's huge stock market recovery.
European shares snapped a six-day winning streak in thin trade, and U.S. stocks eased, also in light trading. Earlier, Japan's Nikkei slipped 0.9 percent in its final 2009 session.
The Nikkei banked a 19 percent gain for the year, and regional European shares were looking at annual gains of about 25 percent, as was the benchmark Standard & Poor's 500 Index.
The dollar rallied as investors looked for signs a recovery is taking hold. Some traders have moved to safer assets like the dollar to lock in profits after a strong 2009.
The Institute for Supply Management-Chicago business barometer surged to a four-year high, topping forecasts, on a recovery in employment and accelerating new orders. [ID:nN30215445]
"The dollar is putting a constraint on stocks, and the data isn't a big enough story to really overcome that," said Rob Stein, managing partner of Astor Asset Management in Chicago.
After midday, the Dow Jones industrial average <.DJI> was down 15.94 points, or 0.15 percent, at 10,529;47. The Standard & Poor's 500 Index <.SPX> was down 2.69 points, or 0.24 percent, at 1,123.51. The Nasdaq Composite Index <.IXIC> was down 5.06 points, or 0.22 percent, at 2,283.34.
The major U.S. stock indexes showed no reaction at midday to news that New York City police had closed New York City's Times Square intersection and evacuated the Nasdaq building in the congested midtown area due to a suspicious vehicle parked on the street. By early afternoon, the Times Square area was reopened.
The FTSEurofirst 300 <.FTEU3> fell 0.4 percent to end at 1,043.24 points, pulling back from a 15-month closing high on Tuesday. The index is on track for its best year since 1999.
Data showed that euro-zone money supply posted a surprising drop in November and loans to households and firms fell for the third month running, a warning to the European Central Bank that it must tread carefully with its exit strategy. [ID:nnLDE5BT0GW]
The dollar climbed to its highest since early September against the Japanese yen. [ID:nN30221267]
Concerns about Japan's fiscal health also weighed on the yen after rating agency Standard & Poor's said Japan's credit rating could be in danger if policy initiatives fail to stabilize and gradually reduce the country's debt burden. [ID:nTOE5BT03A]
The Chicago ISM report bolstered the view of the economic recovery, analysts said.
"The dollar is gaining some traction and extending gains from yesterday," said Kathy Lien, director of currency research at GFT Forex in New York.
The dollar was up slightly against a basket of major currencies, with the U.S. Dollar Index <.DXY> up 0.08 percent at 77.891.
The euro
Against the yen, the dollar
U.S. Treasury debt prices were little changed as investors mulled whether an auction of seven-year notes later in the day would be met with much demand. [ID:nN30401348]
The benchmark 10-year U.S. Treasury note
Oil rose above $79 a barrel after data from the U.S. Energy Information Administration showed U.S. crude stockpiles fell in the week through Dec. 25, although the decline in inventories was less than expected. For details, see: [EIA/S]
U.S. crude for February delivery
London Brent crude for February
A cold snap that has hit the main U.S. heating hub on the Northeast Coast has boosted demand for oil products and helped drain swollen distillate stocks that this summer were at 26-year highs.
"We are seeing the first signs of a concerted improvement in U.S. demand and distillates are falling, (high stocks of) which have been responsible for the bulk of the weakness so far," said Barclays Capital oil analyst Amrita Sen.
U.S. gold futures dropped for a second day in a row, trading below $1,100 an ounce as a dollar rally against the euro dampened demand for the metal as a hedge against paper currency depreciation. [ID:nN30219749]
Asian stock markets fell as year-end trade dwindled, with profit-taking pulling down shares
On the final trading day of the year, Japan's Nikkei average <.N225> slid 0.9 percent, but it gained 19 percent in 2009 after tumbling 42 percent in 2008 -- the biggest loss in its 58-year history.
The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> edged up 0.05 percent to 411.63, below its 2009 high set in November, but still up nearly 66 percent this year. (Reporting by Ryan Vlastelica, Nick Olivari, Chris Reese in New York; Dominic Lau and Emma Farge in London; Writing by Herbert Lash; Editing by Jan Paschal)