GLOBAL ECONOMY - Euro zone, Japan, U.S. pile on economic gloom

By Burton Frierson and Marcin Grajewski

NEW YORK/BRUSSELS (Reuters) - Japan, Europe and the United States delivered further evidence on Wednesday of economic difficulties while officials pledged to continue efforts to counteract the credit crunch causing the trouble.

Economic sentiment in the euro zone skidded in July to its lowest since March 2003, while Japanese factory output shrank in April-June for the second straight quarter.

Applications for U.S. home loans slowed to their weakest pace since December 2000, the latest sign that the worst housing slump since the Great Depression is still deepening.

President George W. Bush signed into law a rescue package for the housing market, the original source of global financial turmoil, that includes emergency backstops for mortgage financing giants Fannie Mae and Freddie Mac.

The U.S., European and Swiss central banks extended measures to aid stressed banks and securities firms as they struggle with credit strains that have weighed on the global economy for nearly a year.

"I don't think it's a surprise necessarily, but it's still nonetheless encouraging," said Orlando Green, interest rate strategist at Calyon in London.

The U.S. stock market found encouragement from the central bank measures but struggled to hang onto the gains as a rise in the price of oil undermined sentiment. Equities investors were luckier in Europe, where stocks managed to close sharply higher before the euphoria gave way.

U.S. Treasuries firmed as stocks declined on Wall Street. Euro zone government bonds gained too, helped also by the weak tone in European data. The dollar surrendered earlier gains on the back of oil's rise.