GLOBAL MARKETS-Stocks rise, government debt falls after US data

Tue Jan 14, 2014 2:29pm EST

* Wall St rises on better-than-expected Dec. retail sales

* World equities flat on concerns about future earnings

* Euro rises for 4th day vs dollar; greenback gains vs yen

By Herbert Lash

NEW YORK, Jan 14 (Reuters) - Global equity markets rose and U.S. Treasury prices fell on Tuesday after a gauge of U.S. consumer spending rose more than expected in December, a sign the world's largest economy is poised for stronger growth this year.

The U.S. Commerce Department said retail sales - excluding automobiles, gasoline, building materials and food services - increased 0.7 percent last month after a 0.2 percent rise in November.

Economists polled by Reuters had expected core retail sales to rise 0.3 percent in December. The increase suggested consumer spending accelerated in the fourth quarter, the latest sign of strong U.S. economic momentum at the end of last year.

The retail sales data was the first major economic indicator since Friday's labor market report for December, which showed job growth that was sharply below expectations.

"The retail sales are painting a better economic backdrop than payrolls did, and investors are using recent weakness as an opportunity to buy," said Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tennessee.

A stronger U.S. economy could lead the Federal Reserve to quicken the pace of dialing back its stimulus, a move equity markets have generally disliked. The stimulus was considered a major driver of a 29.6 percent gain in the S&P 500 last year.

The gains have driven the forward price-to-earnings ratio for the benchmark index to the highest level in nearly seven years, a reason for the biggest sell-off in the S&P 500 in two months on Monday.

On Tuesday, both JPMorgan Chase & Co and Wells Fargo & Co posted quarterly results that beat expectations, yet upside in their share prices was limited with Wells near all-time highs and JPMorgan at its highest since 2000. JPMorgan rose 0.07 percent to $57.74, while Wells slipped 0.2 percent to $45.48. The S&P financial index advanced 0.63 percent.

"From an economic perspective, the real economy continues to gain traction, but from a market perspective the stronger the economy looks, the more we need to look and see whether in fact the Fed might be pulling back sooner than people think," said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.

The pan-European FTSEurofirst 300 index of leading regional shares closed up 0.15 percent at 1,326.37, while the broader MSCI all-country world index, which tracks shares in 45 countries, was up 0.13 percent after rebounding from earlier losses.

On Wall Street, the Dow Jones industrial average rose 83.74 points, or 0.52 percent, to 16,341.68. The S&P 500 gained 15.89 points, or 0.87 percent, to 1,835.09, and the Nasdaq Composite added 59.038 points, or 1.44 percent, to 4,172.342.

U.S. Treasuries prices fell. Benchmark 10-year notes were last down 11/32 in price to yield 2.872 percent, up from 2.825 percent late Monday.

German Bund futures settled up 3 ticks at 140.68 euros. Spanish government bond yields dipped to 3.83 percent as data showing the Spanish economy grew at its fastest pace since 2008 in last year's fourth quarter supported demand before debt sales later this week.

The dollar gained against the yen, but traded near break-even against the euro and the dollar index.

The dollar was up 1.11 percent at 104.12 yen, and the dollar index edged up 0.17 percent at 80.652. The euro rose 0.01 percent to $1.3673.

Brent crude oil edged down toward $106 a barrel as Libyan supply picked up and a restart of Iranian oil shipments appeared closer.

The February Brent crude contract, which expires on Thursday, was down 34 cents at $106.41 a barrel. U.S. crude was at $92.51, up 71 cents a barrel.