* Treasury bond yields highest in 10 days
* Wall Street lower as homebuilders come under pressure
* Dollar rallies after retail sales data; gold falls
* European shares hit 2-1/2-month high on optimism about
By Wanfeng Zhou
NEW YORK, Aug 13 U.S. Treasuries yields rose and
the dollar climbed to one-week highs on Tuesday after a gauge of
U.S. consumer spending rose at its fastest pace in seven months.
Wall Street stocks slipped, while European shares rose to
2-1/2-month highs after data pointed to an improving economic
outlook across the euro region, though the optimism failed to
carry over to Wall Street. World equities markets were little
The benchmark 10-year U.S. Treasury note was down 24/32, its
yield at 2.7063 percent.
Strong U.S. data will encourage the Federal Reserve to trim
its monthly purchases of about $85 billion in bonds, perhaps as
early as September. Such a move will boost U.S. bond yields and
bolster the appeal of dollar-denominated assets.
"For the next five and a half weeks every U.S. statistic
will be measured by its impact on the September 18th (Federal
Open Market Committee) decision," said Joseph Trevisani, chief
market strategist at WorldWideMarkets, in Woodcliff Lake, New
Jersey. "By that standard today's number should keep the Fed on
track to curtail quantitative easing purchases in September."
MSCI's all-country world index, a measure of
45 equity markets around the world, edged up 0.1 percent.
The Dow Jones industrial average dropped 24.27
points, or 0.16 percent, at 15,395.41. The Standard & Poor's 500
Index was down 1.12 points, or 0.07 percent, at 1,688.35.
The Nasdaq Composite Index was down 3.62 points, or 0.10
percent, at 3,666.33.
Consumer stocks, especially homebuilders, dragged on Wall
Street. The group came under pressure as government bond rates
rose, making mortgages less affordable. PulteGroup Inc
was the biggest loser among consumer discretionary stocks,
trading 2.6 percent lower at $15.30.
"The general tone in markets is positive, but things are
feeling a bit heavy," said James Dunigan, chief investment
officer at PNC Wealth Management in Philadelphia, who helps
oversee $118 billion. "I think the next 5 percent move in
markets will be down, while the next 10 percent move after that
will be up."
Europe's broad FTSEurofirst 300 index hit its
highest level since May before pulling back to 1,236.50, up 0.5
percent on the day.
U.S. retail sales outside of cars, gasoline and building
materials rose 0.5 percent last month, the biggest gain since
December. Overall retail sales rose 0.2 percent during the
month, just below analysts' expectations.
A jump in Germany's ZEW economic sentiment survey dovetailed
with a rise in euro zone industrial output and the fastest rise
in UK house prices in seven years, bolstering a renewed sense of
optimism in the region.
"It is not only Germany that is moving in the right
direction," said Deutsche Bank economist Mark Wall. "There is a
general improvement taking place in Europe and in the context of
this being a debt crisis one shouldn't underestimate the
importance of getting back to a position of growth... The
$64,000 question is whether this is sustainable."
The dollar index, which measures the greenback versus a
basket of six currencies, gained 0.6 percent to 81.804.
The euro fell 0.4 percent to $1.3244, while the
dollar rallied 1.1 percent to 97.98 yen.
In Asia, Japanese shares jumped 2.6 percent and the
yen fell after a media report that Prime Minister Shinzo
Abe is considering a cut in corporate taxes to counter the pain
of a planned sales tax increase.
Brent crude oil rose toward $110 per barrel after oil
exports from Libya fell to their lowest in two years,
heightening supply worries ahead of scheduled cuts in output
from fellow OPEC member Iraq.
Brent crude oil futures for September were up 57
cents to $109.54 per barrel, while U.S. light crude oil
slipped 14 cents at $105.97.
Spot gold fell to $1,321 an ounce, retreating from a
three-week high as the dollar strengthened. A new hike in Indian
import taxes also undermined sentiment.