(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, April 14 (Reuters) - The dollar slipped and
government debt prices rose on Monday as the outlook for the
U.S. economy remained mired in gloom and a surprise loss at the
No. 4 U.S. bank stoked fears that the global credit crisis
would worsen.
Oil prices jumped on an unexpected rise in U.S. gasoline
sales in March. Gold bounced back in reaction to a weakening
dollar and rising crude oil prices.
Stocks fell in Europe and traded little changed at midday
in the United States after spending much of the morning
underwater as the Wachovia loss and disappointing earnings at
Philips Electronics kept investors cautious about equities.
Data on both sides of the Atlantic did little to dispel the
sour mood in markets and over the U.S. economic outlook.
U.S. retail sales rose an unexpected 2 percent in March,
spurred by record high gasoline costs. Excluding gasoline,
retail sales were flat, the U.S. Commerce Department report
said.
British manufacturers increased prices in March at the
fastest rate since 1991 after the strongest rise in costs since
records began being kept more than two decades ago, raising the
risk of a sharp consumer price spike.
The weak results from Wachovia Corp <WB.N> -- the No. 4
U.S. bank -- and European newspaper reports of further
write-downs at Credit Suisse revived worries about the extent
of the global credit crisis.
Wachovia reported an upsurge in credit problems stemming
from mortgages and other debt, triggering a fresh wave of
fixed-income buying among investors already rattled by General
Electric Co's <GE.N> disappointing results on Friday.
"This is just one more in a growing list of financial
services companies that are struggling to keep the ship
upright," said Kevin Giddis, managing director of fixed-income
trading at Morgan Keegan in Memphis, Tennessee.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
3/32 in price to yield 3.4656 percent. The two-year U.S.
Treasury note <US2YT=RR> rose 1/32 to yield 1.7213 percent,
while the 30-year U.S. Treasury bond <US30YT=RR> fell 2/32 to
yield at 4.3064 percent.
Trading on Wall Street was choppy. Shares in Wachovia fell
more than 10 percent, and the Standard & Poor's financial
sector index <.GSPF> was down about 1.9 percent.
"Bad news is the standard order of the day, and the market
is not going to jump through hoops for these numbers," said
Peter Kenny, managing director at Knight Equity Markets in
Jersey City, New Jersey, referring to Wachovia.
"I don't think anyone's shocked Wachovia is having to
grapple with this," Kenny said. "GE was a bigger drag because
it speaks to a much larger, global footprint."
In early afternoon trading in New York, the Dow Jones
industrial average <> was up 15.39 points, or 0.12 percent,
at 12,340.81. The Standard & Poor's 500 Index <.SPX> was down
0.43 points, or 0.03 percent, at 1,332.40. The Nasdaq Composite
Index <> was down 2.89 points, or 0.13 percent, at
2,287.35.
European stocks fell for the fifth session in a row, led by
Credit Suisse <CSGN.VX> after newspaper reports of further
write-downs at the Swiss bank and on Philips Electronics'
<PHG.AS> disappointing first-quarter earnings.
The FTSEurofirst 300 <> index of leading European
shares closed 0.76 percent lower at 1,275 points. The index is
down about 15 percent for the year.
Credit Suisse shares lost 3.3 percent after weekend news
reports said it could announce further write-downs of up to 5
billion Swiss francs ($5 billion) when it posts first-quarter
results later this month. The bank declined to comment on the
reports.
Shares in Philips, whose core profit fell 28 percent,
dropped 3.3 percent to their lowest close since mid-July 2006.
Euro zone government bond prices edged lower. Traders said
investors appeared to be holding cash rather than adding to
bond portfolios as European bourses and Wall Street endured
selling.
Asian shares, reacting for the first time to last week's
news, lurched lower as the nasty earnings surprise from GE and
a 26-year low in U.S. consumer sentiment reported on Friday
outweighed the Group of Seven nation's support for the dollar
in a weekend meeting.
Japan's Nikkei average index <> fell 3.1 percent while
shares across the rest of Asia, gauged by MSCI's index
<.MIAPJ0000PUS>, slid 2.3 percent.
The dollar slipped, surrendering earlier gains.
"The dollar remains under pressure with an overnight
decline in equities reflecting heightened risk aversion," said
Michael Woolfolk, senior currency strategist, at Bank of New
York Mellon.
The dollar was down against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
down 0.72 percent at 71.758. The euro <EUR=> was up 0.13
percent at $1.5825 and against the yen, the dollar <JPY=> was
down 0.07 percent at 100.8.
Oil prices jumped on an unexpected rise in U.S. gasoline
sales in March, which also pushed the country's overall retail
sales higher for the month. A brief U.S. pipeline shutdown and
some production losses in Nigeria also helped bolster crude
prices.
U.S. light sweet crude oil <CLc1> rose 99 cents, or 0.9
percent, to $111.13 per barrel.
Gold buying gathered pace after the dollar turned negative
against the euro and oil prices jumped.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Spot gold prices <XAU=> rose $1.80, or 0.19 percent, to
$926.70.
(Additional reporting by Richard Leong, Peter Starck and
Gertrude Chavez-Dreyfuss in New York and Ikuko Kao and Alastair
Sharp in London; Editing by Jonathan Oatis)
