* U.S. retail sales unexpectedly fall; jobless claims rise * U.S. stocks manage gains, but Cisco falls * European stocks dip * Italy's Letta announces resignation after market close * Bond prices gain By Caroline Valetkevitch NEW YORK, Feb 13 (Reuters) - World stock markets were nearly flat on Thursday as soft U.S. retail sales, considered a gauge of consumer spending, were blamed on bad weather, while the dollar fell to a two-week low against the euro. U.S. stocks edged higher, recovering from earlier losses. Unseasonably cold and snowy weather hurt U.S. retail sales, which fell unexpectedly in January. Other data showed more Americans filed for jobless benefits last week. Large parts of the United States have been gripped by freezing temperatures and snow storms, which caused investors to largely discount both the day's and other recent weak data that suggested the economy started the year on weaker footing. "We understand the impact the weather is having, and we expect the economy is going to perk up when we get some more seasonal weather in the second quarter. Autos will come back, housing will come back," said Phil Orlando, chief equity strategist at Federated Investors in New York. "That's the reason why I think the S&P 500 is up right now in the face of at least on the surface what was a disastrous retail sales report." On Thursday, the eastern United States was in the grip of another deadly winter storm that began late Wednesday. The Dow Jones industrial average rose 24.25 points, or 0.15 percent, to 15,988.19; the S&P 500 gained 5.15 points, or 0.28 percent, to 1,824.41; and the Nasdaq Composite added 20.667 points, or 0.49 percent, to 4,221.955. The broad MSCI All-Country World Index was up 0.1 percent, reversing earlier losses, while MSCI's index of emerging market stocks was down 0.8 percent after rising on Wednesday. In Europe, shares dipped as losses in Italy weighed on the market due to political uncertainty there that raised worries about efforts to turn around Italy's sputtering economy. However, after the market close, Italian Prime Minister Enrico Letta said he would tender his resignation on Friday, opening the way for center-left leader Matteo Renzi to take the helm. European stocks snapped a week-long winning streak, with the pan-European FTSEurofirst 300 index ending down 0.1 percent. Shares of Swiss food group Nestle fell 1.5 percent after the company said it may undershoot its long-term growth targets again this year. In the foreign exchange market, the dollar fell to a two-week low against the euro and slid against other major currencies, after the day's U.S. economic data. U.S. bond prices rose following two days of losses. The euro rallied against the dollar, to $1.3694, its strongest level since Jan. 27, before trimming gains to trade 0.55 percent higher on the day, at $1.3681. Benchmark 10-year Treasuries were up 9/32 in price to yield 2.73 percent. On Wall Street, a disappointing outlook from Cisco Systems limited gains. Cisco shares fell 3.8 percent to $21.99. U.S. CRUDE INCHES UP Oil prices were mixed. Brent's losses were limited by a report from the International Energy Agency (IEA) that developed world inventories fell by 137 million barrels at the end of last year, for the steepest quarterly decline since 1999. Brent crude oil futures for March delivery, due to expire later on Thursday, were down 8 cents at $108.71 a barrel while U.S. crude oil was up 17 cents at $100.54.