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Shares down on Russia sanctions, weak U.S. housing; dollar pauses

* Russia stocks tumble anew after new sanctions

* Wall Street falls in early trade on weak housing data;

bonds gain

* Dollar pauses for breath after strongest week since March

(Updates with U.S. market open)

By Angela Moon

NEW YORK, July 28 (Reuters) - World stock markets fell on

Monday as new European sanctions against Moscow chilled the

already frosty relationship with Russia while the dollar hovered

near six-month highs against a basket of major currencies.

U.S. stocks opened lower after data showed contracts to buy

previously-owned U.S. homes fell unexpectedly in June, casting a

cloud over the housing market recovery.

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U.S. Treasuries yields fell to session lows with the

benchmark 10-year notes yield at 2.47 percent.

"Housing has lost some of its mojo," said Ryan Sweet, senior

economist at Moody's Analytics at West Chester, Pennsylvania.

"If housing doesn't re-accelerate, the economy won't grow

faster. Our economy doesn't do well if housing doesn't do well.

The Fed will likely be cautious in its outlook on housing."

Investors were reluctant to make big bets ahead of data and

events this week that include closely watched jobs and GDP data,

a Federal Reserve meeting and $93 billion in new coupon-bearing

debt.

MSCI (NYSE: MSCI - news) 's All-World Index was down 0.3 percent.

On Wall Street, the Dow Jones industrial average fell

76.65 points or 0.45 percent, to 16,883.92. The S&P 500

lost 10.59 points or 0.54 percent, to 1,967.75 and the Nasdaq

Composite dropped 34.55 points or 0.78 percent, to

4,415.02.

Russian markets tumbled for a third straight session after

the European Union reached an outline agreement on its first

economic sanctions on Russia since the downing of a Malaysian

airliner. German finance minister Wolfgang Schaeuble said the

"top priority" was peace rather than economic interests.

Russia warned the moves would hamper cooperation and

undermine the fight against terrorism, although Foreign Minister

Sergei Lavrov said that Moscow would not impose tit-for-tat

measures.

Moscow's dollar-denominated RTS index slumped 2.5

percent in response, its rouble-traded peer MICEX fell

1.8 percent and the rouble dropped over half a percent against

both the dollar and the euro.

"We have seen Germany stepping up rhetoric on tougher

sanctions on Russia," said Vasileios Gkionakis, Global Head of

FX Strategy for UniCredit (Milan: UCG.MI - news) in London. "Saying stability and peace

is the top priority rather than economic interests are strong

words."

The dollar index was marginally lower at 81.000,

after it peaked at 81.084 on Friday, a high not seen since early

February. So far this month, it has rallied around 1.6 percent,

on track for its best monthly gain since January.

Brent crude slipped towards $107 a barrel as ample supply in

the Atlantic basin and weak demand in Europe and Asia outweighed

worries over Ukraine and the Middle East.

September Brent was down $1.20 at $107.19 a barrel

while U.S. crude futures for September dropped 80 cents

to $101.29, after ending last week 1 percent lower.

(Additional reporting by Richard Leong in New York; Editing by

Nick Zieminski)