Global stock prices and the euro fell on Wednesday after a weak Italian bond auction and data showing euro zone factory output fell sharply in January darkened the outlook on Europe's economy.
The decline in equity markets was stemmed by a surprisingly strong report on U.S. retail sales, which raised hopes the world's biggest economy is gathering momentum and reduced bids on U.S. Treasuries.
Concerns about the euro zone supported safe-haven gold prices and kept oil prices flat.
- Soft demand causes Italian yields to rise in debt sale
- Strong U.S. retail sales stem losses in stocks
- Euro gives up gains to dip against dollar
- Gold, U.S. bonds fall; oil flat
The Italian debt auction was considered a gauge of investor confidence in the euro zone's third-biggest economy amid worries over whether its leaders could forge an effective parliament to tackle its fiscal problems.
Italy sold 5.32 billion euros of new three- and 15-year government bonds at the auction, paying the highest yield since last December for the shorter-term debt.
Wednesday's bond sale "was a tad disappointing," said Neil Jones, head of hedge fund FX sales, at Mizuho Corporate Bank. "I can understand the hesitancy (for Italian debt) and that is why the yields are higher and this has weighed on the euro as well."
The auction results knocked European shares lower and were a drag on Wall Street stocks after strong retail sales data for February showed American consumer spending holding up despite tax increases.
After a higher open, the Dow Jones industrial average was down 16.01 points, or 0.11 percent, at 14,434.05. The Standard & Poor's 500 Index was down 0.31 points, or 0.02 percent, at 1,552.17. The Nasdaq Composite Index was down 1.44 points, or 0.04 percent, at 3,240.88.
The pan-European FTSEurofirst 300 share index was flat at 1,193.70, while Tokyo's benchmark Nikkei index ended down 0.6 percent.
MSCI's world equity index was down 0.39 percent at 359.33, on course for its worst day of the month.
The encouraging U.S. retail sales data pushed U.S. government debt prices lower. The benchmark 10-year Treasury note was down 7/32 in price to yield 2.0436 percent.
In the currency market, the debt auctions and weak data caused the euro to give up its early gains against the dollar and fall 0.8 percent to $1.2926.
The euro also succumbed to selling pressure on January factory output data in the 17-nation block that showed a steeper-than-expected 0.4 percent fall from December.
The greenback fared better against other major currencies. The dollar index rose 0.5 percent to 83.02 after touching its highest level since early August
In the commodity market, oil prices were flat to higher on expectations of steady global consumption growth, and a surprise fall in U.S. stockpiles helped keep Brent crude above $109 a barrel.
"Downside risks for oil seem to be very limited," said Tetsu Emori, a commodities fund manager at Astmax Investments. "I think oil prices have bottomed out, and overall we will see a recovery."
A report from the International Energy Agency that production in the United States would be enough to protect against most potential supply shocks capped prices.
Brent crude was flat at $109.58 a barrel, while U.S. oil rose 51 cents to $93.05, gaining for a fifth day in the longest daily winning streak since mid-December.
However, gold prices turned lower, erasing early gains from the rising concerns about the euro zone, having already hit its highest level since Feb. 28 at $1,598.20 on Tuesday.
Spot gold was last down 0.06 percent at $1,591.20 an ounce.