Stocks mixed as strong U.S. retail sales offset weak European manufacturing data

NEW YORK (Reuters) – A gauge of global stocks fell on Thursday after underwhelming manufacturing surveys from Asia and Europe, though it pared losses as Wall Street edged higher on strong U.S. retail sales data and earnings from industrial companies.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

The U.S. benchmark S&P 500 index inched forward on strong March retail sales data, which registered their greatest increase in 1-1/2 years, and upbeat results from Union Pacific Corp and Honeywell International Inc.

“The retail sales number was very strong,” said Jeffrey Schulze, investment strategist at ClearBridge Investments in New York. “It puts to rest the recession fear.”

The MSCI All-Country World Index fell 0.1% but came off session lows to tick just above last Friday’s closing level.

Lackluster French and German surveys of purchasing managers in the manufacturing sector for April, which showed activity continuing to contract, prompted selling among some investors.

Activity in Germany’s services sector rose to a seven-month high in April, but investors focused on the 44.5 reading for the manufacturing sector, well below the 50.0 mark separating growth from contraction even if it was above the 44.1 reading last month.

The weak surveys out of Europe followed a report on Japanese manufacturing activity that showed new export orders fell at the fastest pace in almost three years.

“The flash PMIs that came out were very weak,” said John Vail, chief global strategist at Nikko Asset Management. “But retail sales were strong, so that helped (U.S. stocks), and earnings were strong.”

Despite the lackluster European and Japanese data, global growth has showed signs of troughing, said Schulze, who pointed to Wednesday’s better-than-expected Chinese economic data.

“It does appear that the Chinese economy hit an inflection point in March, so the weakness we’re seeing in Germany and Europe is likely coming to an end,” he said.

The release of Special Counsel Robert Mueller’s report on Russia’s role in the 2016 U.S. election had little impact on Wall Street.

The Dow Jones Industrial Average rose 110 points, or 0.42%, to 26,559.54, the S&P 500 gained 4.58 points, or 0.16%, to 2,905.03 and the Nasdaq Composite added 1.98 points, or 0.02%, to 7,998.06.

The underwhelming French and German manufacturing survey data pushed down yields on German Bund and U.S. Treasury yields.

Benchmark 10-year Treasury notes last rose 9/32 in price to yield 2.5596%, from 2.592% late on Wednesday.

“The retail sales report was great, but (investors) seem to be focused on the fact that the data are struggling out of Europe,” said Mary Anne Hurley, vice president of fixed income trading at D.A. Davidson in Seattle, referring to activity in U.S. Treasuries.

The euro also fell to its lowest in more than a week after the European manufacturing data, and was last down 0.6% on the day at $1.1231.

Conversely, the dollar index, which measures the greenback against a basket of six major currencies, rose 0.5% on the strength of U.S. retail sales data.

Oil prices rose after a drop in crude exports from OPEC’s de facto leader, Saudi Arabia, and a draw in U.S. drilling rigs and oil inventories.

Brent crude futures rose 35 cents to settle at $71.97 a barrel, a 0.49% gain. U.S. West Texas Intermediate (WTI) crude futures rose 24 cents to settle at $64 a barrel, a 0.38% gain.

Reporting by April Joyner; Additional reporting by Richard Leong, Karen Brettell, Gertrude Chavez-Dreyfuss, Stephanie Kelly and Laila Kearney in New York, Ritvik Carvalho and Abhinav Ramnarayan in London and Shinichi Saoshiro in Tokyo; Editing by Diane Craft and Tom Brown


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