European stocks pare gains after downbeat U.S. datance on Fed comments, European data

LONDON -- European stock markets trimmed gains Thursday as Wall Street opened lower after disappointing U.S. retail sales data reined in optimism about the speed of recovery in the world's largest economy.

In Europe, the FTSE 100 index of leading British shares was up 17.75 points, or 0.4 percent, at 4,734.51 while Germany's DAX rose 17.28 points, or 0.3 percent, to 5,367.37. The CAC-40 in France was 13.92 points, or 0.4 percent, higher at 3,251.16.

All three indexes had been even higher before the downbeat U.S. retail sales news.

The Commerce Department revealed that retail sales fell 0.1 percent last month, in contrast to expectations for a 0.7 percent increase.

While autos, helped by the start of the "cash for clunkers" trade-in program, showed a 2.4 percent jump — the biggest in six months — there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

The July dip was the first setback following two months of modest sales gains. Excluding autos, sales fell 0.6 percent, worse than the 0.1 percent rise economists had forecast.

As a result, the Dow Jones industrial average was 52.60 points, or 0.6 percent, lower at 9,309.01 soon after the open, while the broader Standard & Poor's 500 index fell 4.48 points, or 0.5 percent, to 1,001.33.

Investors are fully aware that without the support of the U.S. consumer, which accounts for around 70 percent of the U.S. economy and 20 percent of the global economy, any recovery will soon fizzle out.

The weaker-than-expected retail sales data were released simultaneously with the weekly jobless claims, which showed an unexpected increase to 558,000, from 554,000 the previous week. Analysts were expecting a 10,000 or so decline.

The data come a day after the U.S. Federal Reserve held its benchmark interest rate at a range of zero to 0.25 percent and stated that economic activity was leveling out.

Despite that, the Fed said economic conditions continue to warrant "exceptionally low" interest rates for an extended period.

"The feel good effect of yesterday's Fed statement was quickly erased by an unambiguously negative retail sales report that sent equities well into negative territory," said Michael Woolfolk, an analyst at Bank of New York Mellon.

In Europe though, the economic data was far more encouraging. Europe's two biggest economies, France and Germany, each saw growth of 0.3 percent from the previous three-month period, in contrast to expectations for equivalent declines.

The unexpected increases in Germany and France meant that the 16-country euro area contracted at a sharply reduced rate of 0.1 percent, much less than the 0.5 percent anticipated in the markets.

Earlier, almost every major market in Asia rose. Japan's Nikkei 225 stock average rose 82.19 points, or 0.8 percent, to 10,517.19, while Hong Kong's Hang Seng jumped 426.06, or 2.1 percent, or 20,861.30.

Meanwhile, markets in Taiwan, Australia and Singapore gained around 2 percent apiece. Shanghai's index righted itself to rise 0.9 percent to 3,140.56 following a nearly 5 percent tumble the previous session. Korea's Kospi closed little changed.

Oil prices climbed further in European trade, with benchmark crude for September delivery rising 35 cents to $70.51.

The dollar was 0.7 percent lower at 95.45 yen, while the euro rose 0.6 percent to $1.4292.