GLOBAL MARKETS-U.S. data douses equity rally, gold drops 4 pct
* Retail sales decline spurs worries on U.S. economy * Gold tumbles 4 pct to lowest since July 2011 * Commodity sell-off may be tied to Japan bond volatility * Dollar falls from four-year high vs yen to below 99 yen By Herbert Lash NEW YORK, April 12 (Reuters) - Commodities sold off on Friday, with gold sinking 4 percent to break below $1,500 an ounce, while world equity markets fell after a dour reading of U.S. consumer sentiment and poor retail sales reinforced fears of a weak U.S. economy that would hurt global growth. Gold fell 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 lenders. Gold is now some 22 percent below the record peak 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. Investors said the breadth of the sell-off appeared tied to volatility in the price of Japanese government bonds, which has forced certain holders to sell other assets to meet the risk modeling of their investment portfolios. Both the Cypriot plan to sell gold and volatility in the Japanese bond market are most likely behind the gold plunge, said Jeffrey Sherman, a commodities portfolio manager at DoubleLine Capital LP in Los Angeles. "The economic sensitive commodities -- energy, industrial metals -- have been signaling weakness for the past two months, and you could see that many investors are now reassessing global growth prospects," Sherman said. 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 22.43 points, or 0.15 percent, at 14,842.71. The Standard & Poor's 500 Index was down 7.10 points, or 0.45 percent, at 1,586.27. The Nasdaq Composite Index was down 11.30 points, or 0.34 percent, at 3,288.85. MSCI's all-country world equity index fell 0.6 percent, while the pan-European FTSEurofirst 300 of leading regional shares closed down 0.9 percent at 1,182.10. 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 62 ticks up on the day at 145.87. 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 19/32 in price to yield 1.7242 percent, while the 30-year U.S. Treasury bond was up 1-18/32 in price to yield 2.9192 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 $56.53 at $1,504.20 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 0.74 percent to 98.93 yen. Brent crude fell $2.01 to $102.26 a barrel, while U.S. crude oil futures shed $2.53 to $90.98.
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