US retail sales figurs shore up global stocks; yen buoyed by Kan reelection

US retail sales shores up global stocks

LONDON — A slightly bigger than expected increase in U.S. retail sales in August supported stocks Tuesday, a day after big gains were posted in the wake of new global bank rules that proved to be less onerous than anticipated.

The Japanese yen meanwhile struck a fresh 15-year high against the dollar as Japan’s prime minister survived a leadership challenge.

In Europe, the FTSE 100 index was down 0.1 percent, at 5,558.79 while Germany’s DAX was up just over a point at 6,262.99. The CAC-40 in France was down 0.1 percent at 3,765.41.

Wall Street was poised to open a tad lower — Dow futures were down 2 points at 10,470 while the broader Standard & Poor’s 500 futures were 2.4 points lower at 1,113.80.

Sentiment in the markets was shored up by the news that retail sales in the U.S. rose by a monthly 0.4 percent in August, modestly higher than the 0.3 percent anticipated.

The second straight rise was largely due to back-to-school sales and continues the run of better than anticipated U.S. economic data over the last week or so, which has helped stocks around the world rally.

U.S. retail sales data are particularly important because U.S. consumer spending accounts for around 70 percent of the world’s largest economy.

“Many headwinds still exist that consumers will need to overcome for the recovery to be sustained, but today’s news is a positive indicator that they are doing that,” said Jim Baird, chief investment strategist for Plante Moran Financial Advisors.

The economic out of Europe was less rosy though.

Evidence of a faltering economic recovery in Europe came thick and fast Tuesday.

Figures from the Royal Institution of Chartered Surveyors indicated that house prices in Britain fell sharply in August even though separate figures from the statistics office showed inflation at 3.1 percent in the year to August, more than anticipated and still way above the Bank of England’s target of 2 percent.

Meanwhile, figures from Eurostat, the EU’s statistics office showed industrial production for the 16 countries that use the euro was flat in July, against expectations for a modest increase, while the closely watched ZEW survey of German investor sentiment was much weaker than expected.

The fall in ZEW’s headline expectations indicator dropped from 14 in August to minus 4.3 in September. That was the first negative since March 2009 and provided further evidence that the big economic rebound in Germany during the second quarter has come to an end.

The euro was down 0.2 percent at $1.2853 in early afternoon London trade.

Concerns about the economic recovery have dominated markets over the past few weeks, but mainly it’s been worries over the U.S. economy — up until the last week.

Earlier in Asia, the main focus was on the vote for the reelection of Prime Minister Naoto Kan as leader of the Democratic Party. His reelection has yet to be gauged in the stock markets as the result came after the Japan’s Nikkei closed 0.2 percent lower at 9,299.31 points.

The victory means Kan, who has been in office three months, will remain in power, providing some continuity for a country that has seen five leadership changes in the past four years, and is dealing with a surging currency and a spat with China over disputed islands.

The dollar touched 83.09 yen, its second 15-year low of the day, after the result was announced before recovering slightly to 83.26 yen in early afternoon London trading.

Both Kan and Ozawa have made comments hinting at possible intervention, though Ozawa’s were seen as stronger in tone.

“Investors were speculating that if Ozawa won, Japan would intervene to boost the dollar,” said Yu Yokoi, a foreign exchange dealer at Mizuho Bank. “But Ozawa lost, and investors quickly reacted to it as the scenario of dollar-supporting intervention is less likely.”

China’s currency, meanwhile, hit a new high against the dollar for the third straight day as U.S. lawmakers prepared for hearings on Beijing’s foreign exchange policies.

China’s central bank set the yuan-dollar rate at 6.7378 on Tuesday, after putting it at 6.7509 on Monday and 6.7625 on Friday. The yuan closed at 6.7618 on Monday.

By late morning London time, the yuan was trading at 6.7455 to the dollar, after hitting a low of 6.7446.

Shanghai’s benchmark stock index eked out a marginal increase of less than 0.1 percent to 2,688.52.

Oil prices shed some recent gains, with benchmark crude for October delivery down 17 cents at $77.02 a barrel in electronic trading on the New York Mercantile Exchange.

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AP Business Writer Kelly Olsen in Seoul, South Korea contributed to this report.