Market News

(Adds strategist quote and details on activity; updates prices)
    * Canadian dollar weakens 0.3% against the greenback
    * Flash estimate shows factory sales falling 2.5% in May
    * Price of U.S. oil settles 1.8% lower
    * 10-year yield falls to lowest in nearly two weeks

    By Fergal Smith
    TORONTO, June 23 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as investors weighed
the risk of a global economic slowdown and preliminary domestic
data showed factory sales falling in May.
    The loonie        was trading 0.3% lower at 1.2985 to the
greenback, or 77.01 U.S. cents, after touching its weakest since
Monday at 1.3017.
    "With recession fears spooking markets more generally,
commodity prices were under pressure today, which saw the
Canadian dollar also on its back foot," said Royce Mendes,
director & head of macro strategy at Desjardins.
    Purchasing managers' data showed a loss of economic momentum
in some major European economies. Investors are concerned that
interest rate increases to quell decades-high inflation will tip
economies into recession.             
    The price of oil       , one of Canada's major exports,
settled 1.8% lower at $104.27 a barrel as investors weighed the
potential impact of slower economic growth on fuel demand.
            
    Preliminary domestic economic estimates for May were mixed,
with factory sales falling 2.5% from April but wholesale trade
up 2%.                          
    Still, money markets expect the Bank of Canada to raise
interest rates three-quarters of a percentage point next month
after data on Wednesday showed inflation jumping to its highest
in nearly four decades.                       
    The central bank has come under a rare attack from critics
after misjudging inflation and locking itself into rigid forward
guidance that prevented it from reacting swiftly as prices
surged and Canada's economy began to overheat.             
    Canadian government bond yields were lower across the curve,
tracking the move in U.S. Treasuries. The 10-year            
touched its lowest since June 10 at 3.224% before recovering to
3.294%, down 12.7 basis points on the day.
    The Bank of Canada announced the bond auction schedule for
the coming quarter, including four auctions of 10-year bonds.
            

 (Reporting by Fergal Smith
Editing by Mark Heinrich)