GLOBAL MARKETS-U.S. shares flat, Treasuries and gold fall

Thu Jan 31, 2013 11:27am EST

* U.S. stocks flat, European stocks extend losses

* Weak earnings, Deutsche loss, German retail sales weigh

* Euro fall tempered by dollar under pressure

NEW YORK, Jan 31 (Reuters) - The euro rallied against the dollar on Thursday en route to its best monthly performance in more than a year, while U.S. stocks were flat in muted trading, with investors reluctant to make large bets ahead of the key U.S. jobs figures on Friday.

U.S. data continued to paint a mixed picture of the world's largest economy. A measure of business activity in the U.S. Midwest rose in January to its strongest since April, but an earlier report indicated a rise in U.S. jobless claims in the latest week.

A drop in German retail sales initially put the euro under pressure, but the recent bullish trend resumed during U.S. trading. The single currency was headed for its best month in 15 months against the dollar on Thursday, as signs of recovery in the euro zone's economy, and in its banks, helped it gain against the dollar.

The euro hit a peak of $1.3593 on Thursday before pulling back slightly. The Federal Reserve's promise of continued support was widely expected to keep downward pressure on the dollar. The dollar, meanwhile, edged higher against the yen to 91.20 yen.

"The overall recent trends are intact," said Nick Bennenbroek, head of currency strategy, at Wells Fargo Bank in New York. "The euro probably wants to go higher and the yen probably wants to go lower."

Recent gains in risky assets such as equities, commodities, and high-yield debt have eased after sharp advances in the last six months. Growth in emerging economies such as China has picked up and fears of a collapse of the euro have been calmed by the European Central Bank.

Data on Wednesday showed U.S. GDP slipped 0.1 percent where a rise had been expected, although the Federal Reserve indicated the pullback was likely to be brief and repeated its promise to continue supporting the economy.

But the main focus is on U.S. payrolls data on Friday for a take on the health of the world's biggest economy.

"Unfortunately it's still a mixed picture. It appears we are just getting a lot of conflicting data right now," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

"With 1,500 (in the S&P stock index) right here, my guess is there is just not enough conviction to push us substantially higher yet."

The Dow Jones industrial average was up 7.18 points, or 0.05 percent, at 13,917.60. The Standard & Poor's 500 Index was down 1.39 points, or 0.09 percent, at 1,500.57. The Nasdaq Composite Index was up 5.51 points, or 0.18 percent, at 3,147.82.

EUROPE SUFFERS

The pan-European FTSEurofirst 300 was down 0.2 percent, and the MSCI world index was down 0.1 percent. Disappointing results from heavyweights AstraZeneca and Royal Dutch Shell also took their toll on market sentiment.

Falling German retail sales, stagnant French consumer spending and a big quarterly loss at Deutsche Bank dashed hopes of a rebound for European shares, which had their biggest daily fall of the year on Wednesday. Those stocks are still up 3.7 percent this month. .

Spot gold drifted down to $1,663.80 an ounce after hitting a one-week high on Wednesday, while oil prices inched down 18 cents to just under $115 per barrel, still well above their starting price this year of $110 a barrel.

U.S. light sweet crude oil fell 71 cents, or 0.72 percent, to $97.23 per barrel.

There was no sign of weakness in growth-attuned copper as it marched to its highest level since October.

BUND FUTURES PARE GAINS

German Bund futures pared gains on Thursday, continuing a recent shift away from safe haven debt. Bund futures were last 25 ticks higher on the day at 141.68, having risen as high as 142.17 earlier in the session.

Prices for U.S. Treasuries were volatile a day after the Fed said it would continue buying bonds as the economy temporarily stalled, but uncertainty about growth in the world's biggest economy kept yields within recent ranges.

The benchmark 10-year U.S. Treasury note was down 2/32, with the yield at 1.9975 percent.

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