By Richard Leong
NEW YORK (Reuters) - Global equities rose on Monday as robust U.S. retail sales data signaled economic growth, while the euro fell after the European Central Bank gave its strongest signal yet that it would ease policy to cool the single currency.
The encouraging retail sales from the world's biggest economy, which had been bogged down by a harsh winter, overrode fears of a military conflict in Ukraine that had punished stock prices earlier.
Ukraine's president threatened military action after pro-Russian separatists occupying government buildings in the east ignored an ultimatum to leave and another group of rebels attacked a police headquarters in the region. The flare-up came less than a month after Russia completed its annexation of Ukraine's southern Crimea peninsula.
But the data showing that U.S. retail sales jumped 1.1 percent in March, the biggest monthly rise in 1-1/2 years, drew investors back into riskier investments. The bounce back in equities followed a sharp sell-off last week. "This is the first report that activity is bouncing back from the winter weather," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee. "This should set the foundation for stocks to go up a bit and bond yields to go higher."
On Wall Street, the Dow Jones industrial average rose 76.49 points, or 0.48 percent, to 16,103.24, the S&P 500 gained 9.54 points, or 0.53 percent, to 1,825.23, and the Nasdaq Composite added 16.438 points, or 0.41 percent, to 4,016.172.
Financial stocks were among the largest gainers after Citi said its quarterly net profit rose as a smaller loss on its troubled assets offset lower revenue and profit from its core trading and lending businesses. Citi shares jumped 4.2 percent to $47.62.
The MSCI world equity index, which tracks shares in 45 nations, rose 0.3 percent at 405.45 points, erasing an earlier loss of 0.3 percent.
The pan European FTSEurofirst 300 was 0.4 percent higher at 1,318.58, also erasing earlier losses. The index shed 2.9 percent last week.
Earlier, Japan's Nikkei stock average ended down 0.4 percent at a six-month closing low. It plunged 7.3 percent last week, the biggest weekly fall since the devastating earthquake and tsunami in March 2011.
But Russian shares tumbled 1.3 percent and the rouble fell 0.8 percent to its weakest level against the dollar in nearly three weeks as the tensions in Ukraine weighed.
European Union foreign ministers were to hold talks later on Monday about tougher sanctions against Russia. The worry for many is that the two sides end up imposing increasingly tough measures that will inevitably harm both.
"The escalation sharply increases risks of an all-out civil war in Ukraine," Bank of America Merrill Lynch analysts said in a research note.
The stabilization in stock prices led some traders to pare their holdings in less risky U.S. and German government bonds.
Benchmark 10-year Treasuries notes were 7/32 lower in price with a yield of 2.645 percent, and German Bund futures fell 19 basis points to 143.89.
EURO FALLS
More promises from the ECB over the weekend that it will take action to head off further gains in the euro pulled the euro back to $1.3821, down 0.45 percent from Friday's high of $1.3905.
Against the yen, the euro fell 0.3 percent to 140.70 yen, near the low end of its trading range since early March. "The strengthening of the exchange rate would require further monetary policy accommodation," ECB head Mario Draghi said at a weekend meeting of the International Monetary Fund. Benoit Coeure, another top ECB member, also laid out some asset-buying options, a tactic which appears to be finally gaining traction at the central bank.
The ECB "is taking the value of the euro more seriously in their approach to monetary policy," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York.
The dollar gained against most major currencies on the strong March retail sales report. It nudged up nearly 0.2 percent to 101.80 yen after touching a 3-1/2-week low of 101.32 yen on Friday, though that was far from the 2-1/2-month high of 104.13 yen set on April 4.
Among commodities, spot gold benefited from the move toward safe-haven assets on the worries over Ukraine, adding 0.7 percent to $1,327.10 an ounce, after earlier marking a three-week high.
Oil prices were also underpinned by fears that the tension between Russia and Ukraine could escalate. Ukraine is a major supply route for Russian gas to Europe.
Brent crude for May delivery was last up 70 cents, or 0.65 percent, at $108.03 a barrel. U.S. crude was last up 12 cents, or 0.12 percent, at $103.86 per barrel.
(Additional reporting by Sam Forgione in New York, Marc Jones and Marius Zaharia in London, Megan Davies in Moscow; Editing by Leslie Adler)
