(Updates throughout, adds Wall Street outlook)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Jan 9 (Reuters) - Fears about a consumer
retrenchment hit investors on Wednesday, battering European
shares and helping drive safe-haven gold to new record highs in
a charge towards $900 an ounce.
Wall Street looked set for modest gains after the previous
session's losses, partly on hopes of tax rebates to boost
consumer sentiment, and Asian shares rose earlier. The dollar
was generally higher, particularly against the Japanese yen and
British pound.
Investor mood in Europe was gloomy after Britain's Marks &
Spencer <MKS.L> reported its worst quarterly performance in two
years.
Germany also said that retail sales dropped and imports fell
by more than exports in November, suggesting consumers in
Europe's largest economy were failing to take over from the
spluttering export sector as the economy's main driver.
Together, the reports painted a picture of depressed
consumers that matched overnight worries from Wall Street, where
U.S. stocks tumbled after a warning by phone company AT&T <T.N>
about soft consumer spending.
"We've started the year with a major, serious dose of
reality, and all the data that we see points to a very, very,
nasty economic environment, if not recession, and that has been
digested by the market very quickly and reflected in the
valuations of consumer stocks and financials," said Simon
Clinch, director of U.S. equities at F&C Asset Management.
The outlook for U.S. stocks on Wednesday looked slightly
better, however, after The Wall Street Journal reported that the
Bush administration was considering tax rebates for households
and tax breaks for businesses to help the economy.
The mood in Europe was grim. The FTSEurofirst 300 index
<> was down 1 percent and the DJ Stoxx index of European
retailers <.SXRP> lost 5 percent.
Earlier, Japan's Nikkei <> gained, but only after
initially tumbling 1.7 percent. It closed up 70.49 points or
0.49 percent at 14,599.16. The broader TOPIX <> was even
stronger, jumping 1.51 percent to 1,424.29.
Despite this, the Nikkei has still lost 20 percent over the
last six months -- 4.6 percent of that in the first four trading
days of 2008.
GOLD RUSH
Fears of a global economic retreat, meanwhile, have been
been pushing gold prices to new highs as investors seek
traditional safety.
Spot gold <XAU=> surged to a new record of $891.40 an ounce
before dropping back to around $884.
"Gold is bullish. Funds are pouring into markets as they are
performing well when stocks are slumping," said Tatsuo Kageyama,
an analyst at Kanetsu Asset Management in Tokyo.
"The speed of gold's rise is very fast but the market is
focusing on taking gold towards $900 in the near term."
The dollar was up slightly against the euro <EUR=> at
$1.4687 and up half a percent at 109.46 yen <JPY=>. The pound
<GBP=> was down a half a percent at $1.9612.
In euro zone government bonds, the interest rate-sensitive
two-year Schatz yield <EU2YT=RR> was down slightly at 3.786
percent and the 10-year Bund yield <EU10YT=RR> was flat at 4.121
percent.
(editing by David Christian-Edwards)
