Stocks flat on data, earnings; pound volatile

NEW YORK (Reuters) - A gauge of world stock markets was flat on Wednesday as U.S. data that raised concerns about a slowing economy was offset by a solid start to earnings season, while sterling was volatile as negotiations on a Brexit deal continued.

FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., September 23, 2019. REUTERS/Brendan McDermid

European stocks pulled back slightly from their strongest closing high in more than a year as clashing headlines on Britain’s last-minute efforts to forge a divorce deal with the European Union left investors hanging on the outcome.

On Wall Street, stocks retreated after monthly retail sales data for September showed a decline for the first time in seven months, raising concerns that softness in the manufacturing sector was starting to spread to the broader economy.

MSCI's gauge of stocks across the globe .MIWD00000PUS traded at break-even.

“Retail sales were definitely on the weaker side and given that the consumer is one of the key pillars holding up the U.S. economy, any weakness in consumer indicators is obviously a sign of concern,” said Ellen Hazen, portfolio manager F.L. Putnam in Wellesley, Massachusetts.

Data later in the session showed U.S. business inventories were unexpectedly flat in August, which suggested inventory investment could also drag on third-quarter economic growth.

Concerns about the trade dispute between the United States and China also weighed. The U.S. House of Representatives on Tuesday passed legislation related to pro-democracy protests in Hong Kong, prompting China to warn in response that bilateral relations would be damaged if the measures became law.

Losses were offset by a solid start to earnings season. Bank of America BAC.N shares rose 1.98% following its quarterly results.

Earnings for S&P 500 companies are expected to show a decline of 3% for the quarter, according to Refinitiv data, down from 5.1% growth expected at the start of the year. Excluding energy, the growth rate is a negative 0.7%.

“They legitimately are coming in better than expected so far, not by leaps and bounds, but incrementally, yes they are. This is not just expectations having been set really low, at least from the earnings estimate standpoint,” said Hazen.

The Dow Jones Industrial Average .DJI fell 22.82 points, or 0.08%, to 27,001.98. The S&P 500 .SPX lost 5.99 points, or 0.20%, to 2,989.69 and the Nasdaq Composite .IXIC dropped 24.52 points, or 0.3%, to 8,124.18.

Sterling GBP= was volatile as negotiators worked to clinch a last-minute Brexit deal before an EU summit on Thursday.

GRAPHIC: European Q3 earnings -

French President Emmanuel Macron said on Wednesday a deal with Britain on its departure from the European Union was being finalized and could potentially be agreed on at Thursday’s summit.

The pound had strengthened by more than 5% over the past five sessions as investors rushed to reprice the prospect of a deal being agreed before Britain’s scheduled departure date of Oct. 31.

Sterling GBP= was last at $1.2823, up 0.29% on the day.

The dollar index .DXY fell 0.28%, with the euro EUR= up 0.39% to $1.1074. The Japanese yen JPY= strengthened 0.08% versus the greenback at 108.79 per dollar.

GRAPHIC: Global assets in 2019 -

The benchmark 10-year U.S. Treasury note US10YT=RR rose 7/32 in price to push its yield down to 1.7465%.

Hopes of a Brexit breakthrough took the pan-European STOXX 600 .STOXX to its highest close since May 2018 on Tuesday, but the index closed down 0.1%. London's exporter-laden FTSE 100.FTSE, which tends to fall when the pound gains, lagged themost of regional indices with a 0.6% decline.

Germany's DAX .GDAXI edged up 0.3% while the pan-regional FTSEurofirst 300 .FTEU3 of leading companies slid 0.08%.

Companies listed on the STOXX 600 .STOXX index are now expected to report a decline in third-quarter earnings of as much as 3.7%, worse than the 3% expected a week ago, according to Refinitiv data through Tuesday.

GRAPHIC: Global currencies vs. dollar -

In commodities, oil rose about 1% on a weaker dollar and due to signs the Organization of the Petroleum Exporting Countries and allied producers will continue to curb supplies in December.

Brent crude LCOc1, the global benchmark, rose 68 cents to settle at $59.42 a barrel. U.S. crude CLc1 gained 55 cents to settle at $53.36.

In emerging markets, Turkey's Halkbank HALKB.IS saw its shares drop 4.1% after U.S. prosecutors charged the state-owned lender with taking part in a multibillion-dollar scheme to evade U.S. sanctions on Iran, which the company said were part of sanctions leveled against Ankara over its military operation in Syria. MSCI's gauge .MSCIEF of emerging market stocks rose 0.56%.

Gold rose on concerns Washington’s stance on Hong Kong could hamper trade negotiations.

U.S. gold futures GCcv1 settled up 0.7% to $1,494 an ounce.

GRAPHIC: MSCI All Country Wolrd Index Market Cap -

Reporting by Herbert Lash; Editing by Sonya Hepinstall