US retail sales figures give stocks a boost

AP News
Posted: Apr 13, 2011 10:23 AM
US retail sales figures give stocks a boost

Global stocks rose strongly Wednesday as encouraging U.S. economic figures helped shore up sentiment a day after concerns over Japan's nuclear crisis had prompted a sizeable retreat.

Though Tokyo's announcement Tuesday that the Fukushima crisis was as severe as Chernobyl was keeping sentiment in check, investors bought into the market after solid earnings from U.S. bank JPMorgan Chase & Co. and U.S. retail sales figures.

The retail sales figures were encouraging even though the headline monthly increase of 0.4 percent for March was a shy of expectations of 0.5 percent. Upward revisions to February's figures made the headline number look even better.

"Following the most successful holiday shopping season of the post-Lehman period, the New Year's tax stimulus package ensured that this momentum carried over into 2011, despite severe weather," said Michael Woolfolk, an analyst at Bank of New York Mellon.

"The U.S. consumer is once again making a material contribution to growth," Woolfolk said.

That's important because U.S. retail sales account for around 70 percent of the U.S. economy, a key pillar for global growth.

The data helped shore up stock markets following Tuesday's retreat.

In Europe, the FTSE 100 index of leading British shares was up 1.2 percent at 6,034 while Germany's DAX rose a similar amount to 7,189. The CAC-40 in France was 1.1 percent higher at 4,020.

In the U.S., the Dow Jones industrial average was up 0.4 percent at 12,317 soon after the open while the broader Standard & Poor's 500 index rose 0.5 percent to 1,320.

Investors later will be interested to assess the Federal Reserve's latest monthly economic assessment, known as the Beige Book.

Analysts said it could have an impact on the markets if there are indications that inflationary pressures are mounting. Any signs that the Fed will take a more hawkish stance could weigh on stocks, which have enjoyed big gains over the past two years as borrowing costs were slashed to record lows and billions of dollars were pumped through the U.S. financial markets.

"It's felt the central bank's anecdotal roundup will be given more significance than usual given the serious concerns about inflationary pressure on the markets," said Will Hedden, a sales trader at IG Index. "Any suggestion that price increases are being passed through could trigger a reversal."

In the currency markets, the euro remained buoyant around $1.45 thanks to expectations of further interest rate increases from the European Central Bank despite the debt difficulties afflicting a number of countries.

By mid-afternoon London time, the euro was up 0.1 percent at $1.4486. On Tuesday, it broke above $1.45 for the first time since January 2010.

Many analysts think the euro's rally has further legs, provided the Fed doesn't change course anytime soon.

"The divergent policy philosophy between the two central banks overshadows any economic data," said Kit Juckes, head of foreign exchange at Societe Generale.

Meanwhile, the dollar was faring better against the Japanese yen as stocks posted a rally, trading 0.5 percent higher at 84.04 yen.

"As long as risk appetite holds, it is reasonable to expect that Japanese investors will increasingly look off-shore for higher nominal yields," said Jane Foley, senior currency strategist at Rabobank International.

Earlier in Asia, Tokyo's Nikkei 225 rose 0.9 percent to 9,641.18 despite concerns about power shortages following the devastating March 11 earthquake and tsunami and the Japanese government's downgrade of economic growth forecasts. South Korea's Kospi was up 1.6 percent at 2,121.92 and Hong Kong's Hang Seng rose 0.7 percent to 24,135.03.

In mainland China, the Shanghai Composite Index rose 1 percent to 3,050.40, while the Shenzhen Composite Index gained 1.1 percent to 1,286.71.

In the oil markets, prices rose following Kuwait's decision to temporarily suspend crude exports because of sandstorms. Kuwait, a member of OPEC, produces about 2.4 million barrels of crude a day, so the halt has exacerbated worries about global supply. The conflict in Libya and protests across the Middle East have investors worried that larger producers could suffer delivery slowdowns.

By mid-afternoon in Europe, benchmark crude for May delivery was up 79 cents at $107.04 a barrel in electronic trading on the New York Mercantile Exchange.

Oil prices had fallen heavily over the past couple of days on concerns over the global recovery and rising expectations that a negotiated settlement in Libya may emerge


Joe McDonald in Beijing contributed to this report.