World stocks hit by weak US retail sales data

[June 12, 2010]  LONDON (AP) -- World stocks were weighed down Friday by news of an unexpected drop in U.S. retail sales, which suggests the recovery in the world's largest economy is slower than expected.

The data took the shine off markets after sentiment had earlier been buoyed by strong Chinese export figures and the European Central Bank's announcement Thursday that it would extend its support to markets.

Britain's FTSE 100 closed up 0.6 percent at 5,163.68, with BP gaining 7.2 percent as investors snapped up the stock on the cheap after it touched a 13-year low Thursday. Germany's DAX was down 0.1 percent at 6,047.83, while France's CAC-40 rose 1.1 percent to 3,555.52.

Though gains were strong in Asia, Wall Street dipped -- the Dow fell 0.3 percent to 10,140.41 while the Standard & Poor's 500 was 0.3 percent lower at 1,083.17.

Markets took heart earlier from strong Chinese export data, which showed a 48.5 percent annual jump in May and suggested Europe's fiscal crisis is not hampering other regions' economic growth for the time being.

But a 1.2 percent monthly slide in U.S. retail sales in May, the first drop in eight months and well short of forecasts, canceled any optimism.

The figure "dramatically weakens the outlook for consumption growth in the second quarter and is a reminder that households are not going to be the engine of growth for some time," said Paul Dales, U.S. economist at Capital Economics.

U.S. consumer spending accounts for three quarters of the country's economy and a fifth of global economic activity.

In Europe, where the debt crisis and public spending cuts threaten the recovery and could cause a "double-dip" recession, the ECB's latest policy meeting reassured investors. The central bank said it would continue its bond purchase program -- aimed at supporting confidence in government debt markets and keeping countries' borrowing costs down -- and offered unlimited amounts of short-term loans to banks to keep credit flowing.

BP shares, meanwhile, recovered as investors deemed overdone the recent days' sell-off and the fears that the dividend might be scrapped. Some analysts predict a cut in the dividend but still believe the stock is now cheap.

In Asia, Japan's benchmark Nikkei 225 stock average was unfazed by Prime Minister Naoto Kan's blunt warning that his country could face a Greece-like fiscal crisis. The index gained 162.60 points, or 1.7 percent, to 9,705.25.

Japan is on firmer financial footing than Greece because most of its debt is held domestically and Kan's statements appeared designed to push forward his agenda, which may involve raising taxes.

"Greece had a huge public debt and huge overseas loans," said Hiromichi Shirakawa, chief economist at Credit Suisse Japan. "Japan has a trade surplus, and it's a major creditor nation. ... I don't think Japan's fiscal conditions is facing a similar crisis."

Elsewhere, South Korea's Kospi added 1.4 percent to 1,675.34, and Australia's S&P/ASX 200 rose 1.6 percent at 4,505.50. Hong Kong's Hang Seng climbed 1.2 percent to 19,872.38. Benchmarks in mainland China, Singapore and Taiwan also advanced.

In currencies, the dollar rose to 91.61 yen from 91.40 yen in New York late Thursday. The euro slipped to $1.2066 from $1.2106.

Benchmark crude for July delivery was down $1.57 at $73.91 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.10 to settle at $75.48 on Thursday.

[Associated Press; By CARLO PIOVANO]

Associated Press writers Shino Yuasa and Mari Yamaguchi in Tokyo contributed to this report.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.