* Wall St drops after surprise decline in U.S. retail sales
* Treasuries, dollar up as investors turn more cautious
* Emerging equity markets hold onto gains on China's hopes
By Walter Brandimarte
NEW YORK, April 14 (Reuters) - Investors moved out of U.S.
stocks and into relatively safer assets such as Treasuries and
the dollar on Tuesday after an unexpected drop in U.S. retail
sales dampened hopes that the world's largest economy could be
stabilizing.
Expectations of a faster-than-forecast recovery in the
Chinese economy boosted the price of metals as well as emerging
equity markets, at least during the first half of the session.
European shares also closed higher as miners rose.
But disappointing U.S. economic data poured cold water on
Wall Street, also dragging Latin American stocks lower in the
afternoon.
The most frustrating piece of data came in a government
report that showed U.S. retail sales dropped 1.1 percent in
March after rising for two straight months. U.S. producer
prices also fell unexpectedly in March, notching the largest
year-on-year decline since 1950. []
"I think this serves as a reminder that the recession is
still here and that rising unemployment, declining income as
well as a deep plunge in household net worth will adversely
affect retail sales indefinitely," said John Lonski, chief
economist with Moody's Investors Service.
President Barack Obama echoed the general cautious tone,
saying in a speech at Georgetown University that there were
signs of progress in battling the recession, but "by no means
are we out of the woods just yet." []
Wall Street sank, pressured by the retail sales numbers and
a sharp decline in the shares of banks. Investors fear that
Goldman Sachs' <GS.N> $5 billion stock offering could prompt
competitors to do the same.
Equity offerings are traditionally a drag due to their
dilutive effect.
The Dow Jones industrial average <> closed off 137.63
points, or 1.71 percent, at 7,920.18, while the Standard &
Poor's 500 Index <.SPX> declined 17.23 points, or 2.01 percent,
to 841.50. The Nasdaq Composite Index <> fell 27.59
points, or 1.67 percent, to 1,625.72.
U.S. Treasury debt prices rallied as a result, also boosted
by purchases of $7.3 billion in bonds by the Federal Reserve.
The benchmark 10-year U.S. Treasury note <US10YT=RR>
climbed 19/32, with the yield at 2.7918 percent. The 30-year
Treasury bond <US30YT=RR> was up 32/32, its yield at 3.6589
percent.
The dollar gained against a basket of major trading-partner
currencies as investors favored assets seen as safe havens. The
U.S. Dollar Index <.DXY> rose 0.22 percent to 84.796 from a
previous session close of 84.614.
The euro <EUR=> weakened 0.76 percent to $1.3261. Against
the Japanese yen, however, the dollar <JPY=> was down 1.08
percent at 98.95 from a previous session close of 100.03.
"The currency that most benefited from this return of risk
aversion was the yen," said Matthew Strauss, senior currency
strategist at RBC Capital Markets in Toronto.
Also underscoring investors' increased aversion to risk,
yield spreads between emerging market debt and U.S. Treasuries
widened 7 basis points to 564 basis points, according to the
JPMorgan EMBI+ index <11EMJ>.
CHINA HOPES
Expectations that the Chinese economy might be recovering
at a faster-than-expected pace supported the price of metals
such as copper, which touched its highest level in six months
during the session.
But copper prices fell 1.05 cents to settle at $2.1150 a
pound in the afternoon on the New York Mercantile Exchange
after soaring to a session peak of $2.2350, its highest since
Oct. 15.
Shares of miners rose as a result, supporting gains of 0.77
percent at the MSCI stock index for emerging markets <.MSCIEF>.
The Latin American portion of the indicator <.MILA00000PUS>
declined 1.26 percent, however, as Wall Street's losses
increased in the afternoon and oil prices slipped.
U.S. crude oil <CLc1> settled 64 cents, or 1.28 percent,
lower at $48.41 a barrel.
The Reuters/Jefferies CRB Index <.CRB> of 19 commodities
futures eased 0.38 percent.
(Additional reporting by Dena Aubin and Wanfeng Zhou in New
York; Editing by Dan Grebler)
