Weak consumer data a drag on dollar, stocks rise

By Daniel Bases

NEW YORK (Reuters) - Markets were pulled in different directions on Friday after a grim U.S. consumer outlook tugged the dollar lower but upbeat comments from big U.S. retailers pushed investors to buy stocks.

The U.S. dollar's weak performance was also attributed to data showing a resumption of economic growth in the euro zone and a widening September U.S. trade deficit.

Share prices in Britain closed at a 14 month high, helped by banking and commodity stock gains while European shares closed at a three-week peak.

Gold rose near its record high and grain prices advanced because of the weak greenback. But oil prices touched a one-month low on the weak consumer and trade data plus reports of bulging U.S. fuel inventories.

"There is increasing evidence that the recovery in the U.S. is much more vulnerable than previously thought, which provides another reason for traders to bail out of U.S. dollars," said Kathy Lien, director of currency research at GFT Forex.

In the currency markets, the euro was up 0.49 percent at $1.4914 against the greenback. Against the Japanese yen, the dollar was down 0.81 percent at 89.65.

The ICE Futures U.S. dollar index .DXY, a gauge of the greenback against six other major currencies, fell 0.46 percent to 75.246, just above Wednesday's 15-month low.

"Data out of China has been robust and policymakers around the world have indicated that they will keep monetary policy loose, which is broadly supportive of higher-yielding and commodity-related currencies," said RBS currency strategist Paul Robson.

A report showed the euro zone economy grew 0.4 percent quarter-on-quarter after five consecutive quarters of shrinking output.

The U.S. trade deficit widened in September by 18.2 percent, the biggest monthly rise in 10 years, as oil prices rose for the seventh straight month and imports from China increased.

HEARTS, MINDS AND WALLETS

Data from the Reuters/University of Michigan Surveys of Consumers showed U.S. consumer confidence fell to its weakest in three months amid dismal expectations for job and income prospects.

Speaking to Reuters television, Richard Curtin, the director of the consumer survey, said retailers' purchase plans are being shelved and retail sales will not be robust, even with discounting.

Curtin said the survey found just one in 10 consumers saw an increase in their income, the fewest recorded in data going back to 1946, and that 36 to 37 percent of those surveyed said their income had declined.

"This is really a concern for consumers that their financial situation is just heading south, and there is really little hope that they can expect to improve in the year ahead," he said.