* Late-day gain in U.S. equity market spurred by retail
* Political fighting over U.S. debt ceiling weighs on
* MSCI world index rises, now at 20-month highs
* Yen rallies after minister warns on excessive weakness
By Herbert Lash
NEW YORK, Jan 15 World equity markets pared
losses on solid U.S. retail sales data on Tuesday, even as
safe-haven Treasury debt rose, spurred by a looming battle in
Washington over a limit on the government's borrowing.
The yen was on track for its biggest one-day gain against
the dollar in eight months as a warning from a Japanese minister
about the disadvantages of excessive yen weakness prompted
investors to pare back bearish bets.
Most U.S. stocks rebounded in a late-day rally after data
showed retail sales in December increased 0.5 percent, following
a 0.4 percent rise the prior month, beating economists'
expectations for a gain of only 0.2 percent.
Consumer discretionary stocks led the broad S&P 500 index
higher, followed by financial stocks. Technology shares fell,
led by a 3.1 percent decline in Apple shares.
"The retail sales numbers were really good, much better than
expected this morning and that is helping the whole retail
group," said Paul Mendelsohn, chief investment strategist at
Windham Financial Services in Charlotte, Vermont.
"The bulls are clearly trying to take control of this market
and hold it up here. There is clearly buying on any of the
Investors were cautious for most of the session as
Republican opposition in Congress to increase the $16.4 trillion
debt ceiling raises the risk that the United States could
default on its debt in coming months.
A warning by Federal Reserve Chairman Ben Bernanke on the
economic effects of any failure to agree to a higher ceiling, a
Treasury prediction that the limit could be hit by mid-February
and President Barack Obama's tough negotiating stance hit equity
markets, which have gained since the New Year.
"There's a little bit of a risk-off trade," said Thomas
Graff, fixed-income portfolio manager at Brown Advisory in
Baltimore. "It looks like stocks reacting negatively to the
wrangling over the U.S. debt ceiling, so Treasuries are higher."
Still, the likelihood of the United States not raising the
debt ceiling and declaring default is "very low," Graff said.
The Dow Jones industrial average ended up 27.57
points, or 0.20 percent, at 13,534.89. The Standard & Poor's 500
Index was up 1.66 points, or 0.11 percent, at 1,472.34.
The Nasdaq Composite Index was down 6.72 points, or 0.22
percent, at 3,110.78.
Weak results from software company SAP pulled
technology stocks down in Europe, with Germany's benchmark DAX
index falling to a 2013 low, but major indices edged
SAP took the most points off the FTSEurofirst 300 index
of top European shares and also hit the STOXX Europe
600 technology index, which fell 2.1 percent to make it
the region's worst-performing equity sector.
The Eurofirst 300 index of top shares closed 0.04
percent higher at 1,160.22 after a late-day rebound.
The MSCI all-country world equity index was
up a slight 0.1 percent to a 20-month high of 350.28.
World equity markets and corporate bonds have risen sharply
this year on a widely held view that the Federal Reserve's
supportive monetary policies will boost the U.S. economic
recovery while keeping returns on safe-haven assets such as
The benchmark 10-year U.S. Treasury note was up
4/32 in price to yield 1.8343 percent.
A contraction in New York state manufacturing for a sixth
straight month in January had weighed on stocks.
Other U.S. data on Tuesday showed inflation pressures
remained muted, with wholesale prices declining for a third
straight month in December.
The yen gained against the dollar, rebounding from four
straight days of losses that pushed it to a 2-1/2 year low as a
warning from a Japanese minister about the disadvantages of
excessive yen weakness prompted investors to shed bearish bets.
The dollar was down 0.79 percent at 88.75 against the
yen. The euro was down 0.55 percent at $1.3308.
Brent crude oil fell $1.58 to settle t $110.30,
while U.S. light sweet crude oil fell 86 cents to settle
at $93.28 per barrel.
U.S. COMEX gold futures for April delivery settled up
$14.50 at $1,683.90.