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U.S. retail sales disappointment weighs on markets

LONDON — A disappointing U.S. retail sales report weighed on stock markets Monday but helped the euro clamber off two-year lows against the dollar.

The U.S. Commerce Department reported that retail sales fell 0.5 percent in June from the previous month. That was the third straight monthly fall — the first such run since the autumn of 2008, at the height of the banking crisis. The decline was also unexpected — the consensus in the markets was for a modest 0.2 percent increase.

Paul Ashworth, chief U.S. economist at Capital Economics, said the figures provided further evidence of how the world’s largest economy “has gone from first-quarter hero to second-quarter zero.”

Worries about the U.S. economy are one of the concerns that have dominated markets in recent weeks, alongside Europe’s debt crisis and a cooling off in China’s economic growth.

In Europe, the FTSE 100 index of leading British shares was barely changed, down 0.07 percent at 5,662 while Germany’s DAX was up 0.13 percent to 6,565. The CAC-40 in France fell slightly, 0.03 percent, to 3,179.

On Wall Street, the Dow Jones industrial average was down 0.4 percent at 12,725 while the broader S&P 500 index fell 0.3 percent to 1,352.

In the currency markets, the dollar lost some of its shine, allowing the euro to clamber back from a two-year low of $1.2174. By midafternoon, the euro was 0.1 percent higher on the day at $1.2261.

The reaction in the markets to the weaker U.S. economic figures has been muted as investors think the U.S. Federal Reserve may sanction another monetary stimulus. Previous stimulus efforts have helped shore up markets temporarily.

All eyes will be on Fed chairman Ben Bernanke when he addresses lawmakers on Tuesday.

“The weak (retail sales) report is likely to add weight to Bernanke’s words,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.

Positive earnings from Citigroup had little market impact. Investors will nevertheless be keeping a close watch on a raft of U.S. corporate earnings statements this week.

Over the course of the week, around 90 companies listed on the S&P 500 are due to report earnings. They include Bank of America, Coca-Cola, Goldman Sachs, Google, IBM, Intel, Microsoft and Morgan Stanley.

“It is worth noting that earnings expectations have been massaged down again this quarter, so the majority of companies should once again hit analysts’ targets,” said Morrison. “Assuming that they do, then this reporting season should be uneventful.”

Europe’s debt crisis will also remain near the top of markets’ concerns. In particular, investors will be awaiting details of Spain’s bank bailout. Later this week, eurozone countries are expected to give Spain €30 billion as part of a larger bailout for its banks.

Worries over Spain and the other indebted euro countries have weighed on Europe’s single currency over the past few weeks.

Earlier in Asia, Hong Kong’s Hang Seng inched up 0.2 percent to 19,121.34 and South Korea’s Kopsi rose 0.3 percent to 1,817.79. Australia’s S&P/ASX 200 added 0.6 percent to 4,105.10. Markets in Indonesia and the Philippines also rose. China’s Shanghai Composite lost 1.7 percent to 2,147.96. Japan’s markets were closed for a public holiday.

In energy trading, benchmark crude for August delivery was up 9 cents at $87.19 a barrel in electronic trading on the New York Mercantile Exchange.