Weak US retail sales weigh on world sharemarkets

Disappointing US retail sales in January weighed on stock markets on both sides of the Atlantic as investors await tomorrow's deadline for the European Union's verdict on Greece's effort to secure a second bailout.

The 0.4 percent increase in January retail sales fell short of the 0.7 percent increase expected by economists polled by Reuters and the 0.8 percent gain median forecast of economists surveyed by Bloomberg News.

"The data shows that consumers are still hanging in there, just not as strong as we expected," Scott Brown, chief economist at Raymond James in St Petersburg, Florida, told Reuters. "It shows that we are still battling some headwinds here, but the economy is definitely in a recovery mode."

In early afternoon trading in New York, the Dow Jones Industrial Average dropped 0.41 percent, the Standard & Poor's 500 Index fell 0.35 percent and the Nasdaq Composite Index shed 0.58 percent.

Underpinning the optimism that the world's biggest economy is healing was National Federation of Independent Business data showing that confidence among small business owners in the US last month climbed to the highest level in four years.

In Europe, the Stoxx 600 Index ended the day with a 0.2 percent decline.

Investors are focused on tomorrow's deadline for completion of Greece's 130 billion-euro bailout package. European finance ministers plan to hold a conference call tomorrow, shelving a planned meeting in Brussels, Bloomberg News reported, citing a European official with knowledge of the talks.

"I expect that we should soon be able to decide on a new second program for Greece, also in order to launch an offer on private-sector involvement, which is a very important part of this overall package," European Union Economic and Monetary Commissioner Olli Rehn told reporters in Strasbourg, France, today.

Of course it may not be that simple as the talks have dragged on for months.

"I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the program," Luxembourg Prime Minister Jean-Claude Juncker, chairman of the euro finance panel, said in a statement today. He also pressed for "further technical work" on Greek budget cuts.

Also due tomorrow are the latest GDP numbers on the European Union and Germany.

Data today showed that investor confidence in Germany rose to the highest level in 10 months in January. The ZEW Centre for European Economic Research said its monthly poll of investor and analyst expectations jumped to 5.4 from minus 21.6 in January, well above the consensus forecast in a Reuters poll of analysts for a rise to minus 12.0.

Yesterday, Moody's said it might downgrade the triple-A ratings of Britain, France and Austria and cut the credit ratings of six other European nations including Italy, Spain and Portugal because of increased risks from Europe's debt crisis.

Even so, Italy had little trouble selling 6 billion euros of bonds at an auction today.

Italy's Treasury sold 4 billion euros of benchmark securities due in November 2014 to yield 3.41 percent, down from 4.83 percent at the last auction of similar-maturity bonds on January 13, according to Bloomberg. It also sold a total of 2 billion euros of bonds due in 2015 and 2017 to yield 3.77 percent and 4.26 percent respectively.

In Asia, the yen weakened to a three-month low against the greenback after the Bank of Japan said it would boost the size of its asset-purchase fund.