Markets fall despite positive US data

US economic data on Friday were quite positive. Bloomberg reports:

Retail sales and industrial production in the U.S. climbed more than forecast in April, indicating the economic recovery gained momentum at the start of the second quarter.

Sales increased 0.4 percent last month after a 2.1 percent gain in March that was larger than previously estimated, Commerce Department figures showed today in Washington. Production rose 0.8 percent, the most in three months, the Federal Reserve said...

Americans were less pessimistic about the labor market, helping lift consumer sentiment in early May, according to a Thomson Reuters/University of Michigan report. The index of confidence rose to 73.3 from an April reading of 72.2.

Markets, however, shifted their focus back on European debt concerns. Again from Bloomberg:

The euro slid to the lowest since the aftermath of Lehman Brothers Holdings Inc.’s collapse and stocks tumbled, paring a weekly rally, on concern the sovereign debt crisis will trigger a breakup of the European currency. Oil fell to a three-month low, while U.S. and German bonds rallied.

The Standard & Poor’s 500 Index lost 1.9 percent at 4 p.m. in New York, paring its weekly advance to 2.2 percent. The Stoxx Europe 600 Index slumped 3.4 percent and climbed 4.8 percent for the week. Crude oil retreated 3.8 percent and copper dropped the most in a week as the euro sank below $1.24 to levels not seen since October 2008. The yield on the 10-year German bund decreased 8 basis points, while the 10-year Treasury yield fell by the same amount to 3.46 percent. The cost of insuring against corporate defaults rose. Gold declined from a record.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said Greece may not be able to repay its debt in full, and former Federal Reserve Chairman Paul Volcker said he’s concerned the euro area may break up. Sony Corp., the world’s second- largest maker of consumer electronics, said it may suffer a “significant impact” if Europe’s deficit spreads, while Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t “solid” as the sovereign-debt crisis deepens...

The two-year German note yield declined 5 basis points to 0.56 percent as investors flocked to the debt of Europe’s largest economy as a safe haven. Greek 10-year bonds dropped, with the yield climbing 36 basis points to 7.71 percent.

But investors would do well to also keep an eye on tightening conditions in China.

China failed to draw enough bids at a treasury bill sale for a second time in a month on speculation banks are seeking higher returns in longer-maturity debt. The finance ministry sold 17.4 billion yuan ($2.5 billion) of the 20 billion yuan of 273-day securities on offer at an average yield of 1.72 percent, compared with 1.54 percent at the last sale, according to data compiled by Bloomberg. China didn’t complete sales of 273-day and 91-day debt on April 9.