World stocks retreated and the euro slipped today after US retail sales rose less than expected in January, even as the data suggested a solid underpinning for the economy's recovery.

Retail sales increased 0.4 per cent, the Commerce Department said, less than a 0.7 per cent rise expected by economists polled by Reuters. However, core retail sales, which exclude autos, gasoline and building materials, climbed 0.7 per cent in January.

The euro extended losses against the US dollar and the greenback trimmed gains versus the yen after the data, while US Treasuries posted slight gains.

Wall Street opened lower and European shares turned negative in choppy trading after the weak US retail sales data cast some doubt on the strength of the economy's recovery.

"The headline number was a little weaker than expected but the core figure was better, so net-net it was not entirely a negative report," said Boris Schlossberg, director of FX research at brokerage GFT in Jersey City, New Jersey.

"We're still seeing month-on-month growth, and the data shows that the US consumer is slowly but surely getting back on track.”

The Dow Jones industrial average was down 28.23 points, or 0.22 per cent, at 12,845.81. The Standard & Poor's 500 Index was down 3.99 points, or 0.30 per cent, at 1,347.78. The Nasdaq Composite Index was down 10.06 points, or 0.34 per cent, at 2,921.33.

The broad MSCI all-country world equity index slid 0.4 per cent to 325.15, while the

FTSEurofirst 300 index of top European shares shed 0.2 per cent to 1,069.12.

European shares initially traded in the red in response to the Moody's warnings and downgrades late yesterday to Italy, Portugal, Spain, Slovakia, Slovenia and Malta.

Stocks in Europe briefly rebounded after key German data on economic sentiment bolstered hopes that Europe's largest economy was recovering and a strong Italian bond sale added to signs that financing pressures were being contained.

German Bund futures reversed earlier losses to turn positive, with traders citing negative headlines on Greece circulating in the market.

Bund futures were 15 ticks higher at 138.38, having bounced off session lows of 137.89 hit in the wake of a well-received Italian bond auction.

The benchmark 10-year US Treasury note was up 8/32 in price to yield 1.95 per cent.

The single currency fell 0.1 per cent to $1.3176.

Brent crude futures fell 21 cents to $117.72 a barrel. US crude rose 80 cents to $101.71 a barrel.

Reuters