* C$ weaker at C$1.0184 vs US$, or 98.19 U.S. cents * Bond prices edge lower across the curve By Claire Sibonney TORONTO, July 24 (Reuters) - The Canadian dollar slipped against the greenback for a third straight session on Tuesday after signs of improvement in China's economy were offset by a report showing Europe's debt crisis had caused a sharp slowdown in German factory activity. Data also showed the private sector across the whole 17-nation euro area shrank for a sixth straight month in July, mainly due to the weakness in manufacturing, putting the region on track to fall back into recession. The slowdown in German industrial activity was the biggest surprise for market analysts, contracting in July at its fastest pace in three years. "Europe continues to dominate the market's focus here," said Matt Perrier, director of foreign exchange sales at BMO Capital Markets. Meanwhile, Spain paid the second highest yield on short-term debt since the birth of the euro at a debt auction, reflecting a growing belief that the country will need a full sovereign bailout that the euro zone can barely afford. Risk assets were less affected by data that showed China's manufacturing output in July grew at its fastest pace in nine months, easing fears of a sharp slowdown in the world's No. 2 economy. "It's a bit of good news after some disappointing numbers out of China but one number doesn't a trend make so I think the market is more clearly focused on Europe at this point and concerns over spreads and everything else that's going on there." At 8 a.m. (1200 GMT), the Canadian dollar was at C$1.0184 versus its U.S. counterpart, or 98.19 U.S. cents, down from Monday's North American session close at C$1.0168 to the greenback, or 98.35 U.S. cents. Markets will look to Canadian retail sales data for May due at 8:30 a.m. for further direction. Perrier said there was some near-term support for the Canadian dollar around its July 12 low of C$1.0251, and resistance around C$1.0165 to C$1.0135. Canadian bond prices also drifted lower, underperforming U.S. Treasuries. The two-year government bond fell 3 Canadian cents to yield 0.944 percent and the benchmark 10-year bond lost 20 Canadian cents to yield 1.604 percent.