While you were sleeping: US retail sales disappoint again

BUSINESSDESK: Wall Street fell as US retail sales declined for a third straight month, while the International Monetary Fund reduced its forecasts for worldwide growth.

The global economy will expand 3.9% next year, down from the 4.1% pace it predicted in April, the IMF says in its latest World Economic Outlook. It kept its forecast for 2012 growth at 3.5%.

The fund forecast that Spain’s economy will contract 0.6% next year, compared with its previous estimate for 0.1% growth. And the eurozone problems pose the biggest threat, the IMF says.

"Downside risks to this weaker global outlook continue to loom large," it says. "The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis."

Data today showed another clear sign of trouble in the world's largest economy as US retail sales dropped 0.5% in June, posting the longest run of monthly consecutive declines since 2008.

"This is another example of how broader economic uncertainty is having an impact on economic activity," Eric Fine, managing director of Van Eck G-175 strategies in New York, told Reuters.

The IMF kept its estimate for the US pace of expansion at 2% this year and 2.3% in 2013, as forecast July 3.

Among results released today were those of Citigroup. Shares of the third-largest US bank gained more than 1% after its second-quarter profit surpassed expectations.

In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.24%¸ the Standard & Poor's 500 Index slipped 0.11% and the Nasdaq Composite Index shed 0.26%.

Among stocks gaining was Human Genome Sciences as GlaxoSmithKline agreed to acquire its long-time partner after a sweetened offer of $US3 billion. Shares of Human Genome rose more than 4%.

In another healthcare deal, private equity firm TPG said it would buy US-based Par Pharmaceutical for $US1.9 billion. Par shares soared more than 36%.

In Europe, the Stoxx 600 Index ended the day with a 0.2% gain for the session.

Eurozone inflation data, holding steady at 2.4% in June, underpinned the appeal of German bunds.

Germany’s two-year yield fell one basis point to minus 0.055% after earlier declining to a record-low minus 0.06%, according to Bloomberg, while the three-year yield dropped as low as minus 0.022%, and the five-year rate hit a record low 0.27%.

“The general economic backdrop is poor, so people can’t get too excited about the periphery,” Eric Wand, a fixed-income strategist at Lloyds Banking Group in London, told Bloomberg News.

“General risk sentiment is keeping the core underpinned and investors are looking to rotate through the core and semi-core to find yield.”