GLOBAL MARKETS-U.S. data douses equity rally, dollar falls vs yen

Fri Apr 12, 2013 12:40pm EDT

* Retail sales decline spurs worries on U.S. economy
    * Gold tumbles 4 pct to lowest since July 2011
    * Dollar falls from four-year high vs yen to below 99 yen
    * Wall Street lower on weak U.S. retail sales
    * Drop in consumer sentiment weighs on risky assets


    By Herbert Lash
    NEW YORK, April 12 (Reuters) - Gold dropped more than 4
percent, breaking below $1,500 an ounce, and world equity
markets fell on Friday after a dour reading of consumer
sentiment and a drop in retail sales pointed to a weak U.S.
economy with muted prospects for the near future.
    Gold dropped to its lowest levels since July 2011, hurt by a
draft plan for Cyprus to sell gold reserves as part of its
bailout by international lender. Gold is now some 22 percent
below the record peak hit of $1,920.30 an ounce set in September
2011.
    "The scale of the decline has been absolutely breathtaking,"
Societe Generale analyst Robin Bhar said. "We tried to rally and
that just didn't get anywhere. ... There hasn't been any
downside support, it's like a knife through butter."
    Precious metals sold off across the board with silver the
biggest decliner, off 5.1 percent. Other commodities also fell,
with Brent oil hitting an eight-month low below $102 a
barrel as the outlook for global crude demand growth dimmed.
    Wall Street fell after the Commerce Department reported U.S.
retail sales fell by 0.4 percent in March, the second
contraction in three months. Analysts had expected that sales
would be flat, and the decline spurred worries about consumer
spending -- the linchpin of the U.S. economy. 
    Also weighing on stocks was a Thomson Reuters/University of
Michigan survey that showed consumer sentiment tumbled to a
nine-month low in April, with Americans especially gloomy about
the long-term health of the U.S. economy. 
    The drop in oil prices pressured material and energy shares.
Quarterly results from JP Morgan Chase and Wells Fargo
 that failed to impress added to the negative sentiment
    "It's not surprising to see profit-taking here going into
the weekend, especially after the run we had this week," said JJ
Kinahan, chief derivatives strategist at TD Ameritrade in
Chicago. "With the S&P 500 flirting at 1,600 level, it would be
very difficult for companies to blow away the market with
earnings."
    The Dow Jones industrial average was down 41.79
points, or 0.28 percent, at 14,823.35. The Standard & Poor's 500
Index was down 9.51 points, or 0.60 percent, at 1,583.86.
The Nasdaq Composite Index was down 17.83 points, or
0.54 percent, at 3,282.33. 
    MSCI's all-country world equity index fell
0.7 percent, while the pan-European FTSEurofirst 300 of
leading regional shares provisionally closed down 0.9 percent at
1,182.10 points.
    European shares snapped four straight days of gains amid
concerns about the Cypriot economy and on the euro zone's debt
crisis.
    German Bunds rose and are expected to advance in coming
sessions on concerns that Cyprus may need more bailout funds,
lifting demand for low-risk debt.
    The Bund future was 58 ticks up on the day at
145.83.     
    Prices for U.S. Treasuries rose, with the 30-year bond
gaining more than a point and the yield on the benchmark 10-year
note falling to 1.73 percent.
    The benchmark 10-year U.S. Treasury note rose
17/32 in price to yield 1.7311 percent, while the 30-year U.S.
Treasury bond was up 1-13/32 in price to yield
2.9261 percent.  
    "A combination of soft activity and extremely benign
inflation data is a good signal for U.S. Treasuries, which are
poised to rally on these and similar data over the coming
months," said Rob Carnell, chief international economist at ING
Bank.
    Spot gold prices rebounded slightly, down $54.20 at
$1506.50 an ounce.
    A report from the U.S. Labor Department showed wholesale
prices fell sharply in March due to lower gasoline costs. The
seasonally adjusted producer price index fell 0.6 percent, the
largest drop since May, after rising 0.7 percent in February.
    The dollar fell 0.82 percent to 98.85 yen.
    Brent crude fell $2.08 to $102.19 a barrel, while
U.S. crude oil futures shed $2.59 to $90.92.
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