Upbeat US indicators help markets recover

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Upbeat U.S. economic indicators helped stock markets rise on Monday, offsetting concerns about Spain, which had seen its borrowing rates jump on fears it will eventually need a bailout.

The Commerce Department said U.S. retail sales rose 0.8 percent in March despite a strong increase in gas prices. Retail sales hit a record high of $411.1 billion, 24 percent higher than the recession low in March 2009.

The figures are important for global markets because U.S. consumer spending is a major driver of growth. Signs that the U.S. economy was recovering had helped markets post strong gains earlier this year, before hitting a soft patch in the past month.

Monday's strong data also encouraged investors look past the flare-up in the debt crisis in the 17-nation eurozone.

Spain's 10-year bond yield, the rate the country would pay if it were to tap markets for money, jumped to 6.10 percent on Monday, from about 5.90 percent on Friday, but eased back to 5.96 percent by mid-afternoon.

Yields rose in other financially shaky countries like Italy, but Spain was the focus as investors consider it the next weakest link in Europe.

The country is caught between the needs to lower debt by cutting spending and to boost growth by investing. Above all, if Spain were to need a bailout, Italy would be severely destabilized as well. The eurozone bailout funds, totaling €800 billion, would be too small to rescue both.

"The fiscal spotlight has refocused on the considerable challenges facing Spain," analysts at Capital Economics wrote in a note to clients.

The focus will remain this week on Spain, which will hold government bond auctions on Tuesday and Thursday. Any signs that investors are shying away from the country's bonds would likely increase tensions and push Madrid's borrowing rates even higher.

At the end of the week, the International Monetary Fund will hold a global conference in Washington, where European government officials are expected to push for an increase in the organization's lending capacities to reassure investors it can help fight the eurozone crisis. So far, major IMF members like the U.S. have been reluctant to infuse the fund with more money.

In Europe, Germany's DAX closed up 0.63 percent at 6,625.19 while France's CAC 40 rose 0.51 percent to 3,205.28. Britain's FTSE 100 was up 0.26 percent at 5,666.28. The euro fell 0.07 percent to $1.3076.

Wall Street gained on the open, with the Dow average up 0.5 percent to 12,915.0 and the S&P 500 dipping 0.15 percent to 1,368.23.

Asian markets closed mostly lower, however, as traders focused on data released Friday showing China's economy slowed to a 8.1 percent growth rate in the January-March quarter, the slowest in almost three years. In the fourth quarter, growth was 8.9 percent.

Japan's Nikkei slid 1.4 percent to 9,502.95, bruised also by a higher yen. The dollar fell to 80.56 yen from 81.10 yen.

South Korea's Kospi was down 0.9 percent at 1,990.84 after the Bank of Korea lowered its 2012 economic growth outlook to 3.5 percent, from a December estimate of 3.7 percent, Yonhap news agency reported.

Hong Kong's Hang Seng fell 0.7 percent to 20,559.03 and Australia's S&P/ASX 200 lost 0.4 percent to 4,304.40. Benchmarks in Singapore, Taiwan, Mumbai and Indonesia also fell.

Benchmark oil for May delivery was up down 71 cents to $102.13 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 81 cents to finish at $102.83 per barrel on the Nymex on Friday.


Pamela Sampson in Bangkok contributed to this report.