US retailers give world stocks measure of support

(AP) — European and U.S. stock markets recovered some earlier losses Thursday, helped by a string of upbeat trading updates from U.S. retailers a day ahead of crucial jobs data.

In Europe, Germany's DAX index closed down 14.97 points, or 0.3 percent, at 6,019.36 while France's CAC-40 closed 7.13 points, or 0.2 percent, higher at 4,024.80. The FTSE 100 index of leading British shares ended 3.32 points, or 0.1 percent, lower at 5,526.72 — unmoved by the widely expected Bank of England decision to keep policy unchanged at its monthly meeting.

European stocks had been trading even lower for most of the day until Wall Street pared its losses. The Dow Jones industrial average was down 6.12 points, or 0.1 percent, at 10,567.56 around midday New York time while the broader Standard & Poor's 500 index fell 0.53 point, or 0.1 percent, at 1,136.61.

Some support was provided by decent Christmas sales figures from U.S. retailers, such as Sears Holdings, Macy's and JC Penney. The state of household spending in the U.S. is key for the global economic recovery as it accounts for around 70 percent of the country's economy.

"A rebound on Wall Street shifted sentiment in the final hour of trade (in Europe) although attention is now going to start shifting to the U.S. nonfarm payrolls tomorrow," said Philip Gillett, a sales trader at IG Index.

The U.S. economy remains at the forefront of investors' attention, specifically Friday's jobs data for December.

Many market participants reckon the figures could show jobs rising for the first time in two years, which would be a clear signal that the recovery from recession is on a sound footing.

The consensus in the markets at the moment is that around 10,000 jobs were shed during December.

The key driver to stock market performance, at least in the first part of the year, will likely be whether the economic figures, particularly out of the U.S., back up the optimism that is evident in company valuations following a near ten month bull run.

Stock markets around the world have rallied strongly since March's lows — the Dow and the S&P 500 for example surged more than 60 percent since then — as investors grew more optimistic about the global economic recovery after central banks and governments pushed through extraordinary policy measures to mitigate the deepest recession since World War II.

Chinese stocks had led world markets lower for most of Thursday after the country's central bank unexpectedly increased the interest rate on one of its treasury bills and indicated that it was looking to rein in bank lending.

Shanghai's main index slid 1.9 percent to close at 3,192.78 as monetary authorities pushed through further measures to prevent the Chinese economy from overheating.

Charles Dumas, an analyst at Lombard Street Research, said the People's Bank of China's decision to raise the interest rate on its three-month bills by 4 basis points to 1.36 percent would normally have gone unnoticed but that investors saw it as a hint that further tightening of monetary policy in the months ahead was likely in order to combat inflation.

"The PBoC's comment that it would seek moderate loan growth this year means observers were clearly right to say that it was," he said.

The Shanghai composite is now down 4.5 percent from its late-November peak, while other markets around the world have continued to post their highest levels in over a year.

What occurs in China is crucial for the world economy as it was strong economic growth there that helped limit the depth and breadth of the global recession.

Elsewhere in Asia, Tokyo's Nikkei 225 stock average lost 49.79 points, or 0.5 percent, to 10,681.66 while Hong Kong's Hang Seng fell 147.22 points, or 0.7 percent, to 22,269.451. South Korea's Kospi lost 1.3 percent to 1,683.45.

Australia's index lost 0.5 percent and Taiwan's market was off 1.1 percent.

Oil prices recovered most of their earlier losses, with benchmark crude for February delivery down only 8 cents to $83.10 a barrel. On Wednesday, the contract rose $1.41 to settle at $83.18, a 15-month high.

The dollar strengthened by a further 0.9 percent to 93.16 yen after Japan's new finance minister called for a weaker yen.

In unusually explicit remarks for a Japanese finance minister, Naoto Kan vowed to work closely with the central bank to steer the currency toward an "appropriate" level around 95 yen to the dollar.

Kan takes over from Hirohisa Fujii, whose health problems led the 77-year-old to resign Wednesday after just four months as the top finance official.

Meanwhile, the euro was down 0.7 percent on the day at $1.4315.

_____

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.