(Updates throughout with New York trading; changes dateline,
previous LONDON; changes byline)
By Lynn Adler
NEW YORK, Feb 13 (Reuters) - A surprise rise in January
U.S. retail sales stoked hopes that the world's largest economy
will be able to avoid a recession, propelling global stock
markets and the dollar higher on Wednesday.
Retail sales gained 0.3 percent last month, contrasting
with the 0.2 percent drop that was widely expected.
The unexpected sales gain suggested consumer spending would
hold up, bucking forecasts for monthly cash register receipts
to show their first back-to-back drop in 4-1/2 years.
Although U.S. economic reports have been contradictory,
many market participants grabbed on to the sales report as a
signal of resilience.
"The report strengthens the case of those who think we'll
skirt a recession," said Jim Awad, chairman of W.P. Stewart &
Co. Ltd. in New York, though cautioning the optimism might be
temporary. To read more about the retail sales report, see
[].
"Retail sales were a good surprise and indicate that there
are still some pockets of consumers who are still spending. We
all know the economy is slowing, so any signs we are not in
total disarray are welcomed," said Jordan Posner, senior
portfolio manager at Matrix Asset Advisors in New York.
"Also, corporate earnings to a large degree have been OK,
and we haven't had any more bad news out of the financial
sector," he added.
The Dow Jones industrial average <> gained 95 points by
midday, or 0.8 percent, to 12,469.17. To read more on U.S.
stocks, please see [].
On the foreign exchange markets, the dollar rose to a
one-month peak against the yen after the retail sales news.
"On balance, the report is dollar-positive, although I
don't think it changes the outlook for further (Federal Reserve
interest) rate cuts," said Omer Esiner, market analyst at
Ruesch International in Washington, D.C.
In recent weeks, the U.S. central bank has slashed official
short-term interest rates by 1.25 percentage points in two
aggressive cuts to stimulate an economy many feared was sinking
into recession.
Fed Chairman Ben Bernanke will testify on the state of the
U.S. economy and financial markets before the Senate Banking
Committee on Thursday.
The U.S. currency climbed against a basket of major
currencies after the sales report, pushing the dollar index
<.DXY> up 0.2 percent to 76.457. Against the yen, the dollar
rose to a one-month high of 108.14 yen <JPY=>, while the euro
slipped to $1.4566 <EUR=>.
Tuesday's news that billionaire investor Warren Buffett had
offered to reinsure $800 billion in municipal debt guaranteed
by bond insurers had helped to soothe worries about further
fallout from the credit crisis, although doubts are
resurfacing.
Turnaround specialist Wilbur Ross said in a television
interview on Wednesday that he doubted Buffett's plan would go
forward. But he said the proposal could pressure regulators and
others to find another solution for the troubled industry. Read
more at [].
MSCI's main world equity index <.MIWD00000PUS> rose 0.2
percent after falling in early trade.
European stocks ended little changed after sharp gains on
Tuesday. Weak telecoms and mining shares offset stronger auto
stocks and the buoyant U.S. retail sales report. The
FTSEurofirst 300 <> index of top European shares closed
up 0.04 at 1,334.25 points.
Earlier, Japan's Nikkei <> edged up 0.4 percent, while
MSCI's measure of other Asian stock markets <.MIAPJ0000PUS>
slipped 0.4 percent.
Stronger stock markets and the surprise retail sales
increase pressured government bonds, which are seen as a
safe-haven asset, sending longer-term U.S. Treasury bond yields
higher. Benchmark 10-year U.S. government note prices fell
5/32, boosting their yield to 3.68 percent.
(Additional reporting by Kristina Cooke, Steven C. Johnson,
Christian Plumb, Joseph A. Giannone in New York, Ian Chua in
London, Editing by Chizu Nomiyama)
