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LONDON (Reuters) - Signs the dollar was preparing for another move higher held down oil and gold prices on Tuesday and helped shares shake off worries over weaker-than-forecast German sentiment data.
Wall Street looked set to open up by the smallest of margins with investors still looking for clear directional catalysts after last week's repeated record highs.
After a surprising rise in U.S. retail sales boosted optimism about the recovery in the world's top economy on Monday, Germany's ZEW monthly sentiment survey underscored the uncertainty that continues to weigh on Europe.
The monthly poll of economic sentiment rose to 36.4 points from 36.3 in April, undershooting the consensus forecast in a Reuters poll of 30 economists of 38.3, with the institute blaming the miss on the euro zone's woes.
Europe's top shares on the FTSEurofirst 300 .FTEU3 had fallen after the data but gradually struggled back to positive territory by 1245 GMT as investors took the opportunity to get back into the market.
Monday's strong U.S. retail sales had prompted Goldman Sachs and JPMorgan to upgrade their view on second-quarter U.S. growth. More data will be released this week, including industrial production, housing starts and consumer sentiment.
Dan Morris, a macro strategist at JP Morgan, said the recent rise in the dollar was also a sign investors were becoming increasingly confident about U.S. growth.
"It is an indicator that the United States is doing better so that should generally be a positive signal for equities ... the only thing that has really changed is the perception now of (better) U.S. economic growth," he said.
The dollar DXY. had been quiet for most of the day, pushing the focus onto the euro which had a mixed day, and the Australian dollar after its finance minister suggested interest rates could be cut again.
Disappointment in the euro over the ZEW figures was initially offset when Spain announced plans for a 7 billion euro 10-year bond sale, seen as a sign of confidence, but the rebound fizzled to leave it at $1.2970, well below $1.30 where it started the day.
Spain auctioned just over 4 billion euros of treasury bills after a well-received bond auction last week and an 8 billion euro debt sale by Italy on Monday.
Despite the lift, the benchmark German Bund stayed well inside its tight recent range, while yields on Italian and Spanish bonds edged up again leaving them at their highest in two weeks.
The initial lull in the dollar had allowed gold to find a firmer footing after three days of falls and helped oil to steady. But as the greenback began to gather momentum again, selling resumed.
In contrast to the still weak euro zone, economists are beginning to shake off fears of a U.S. spring slowdown and the pick up has stirred market talk that the Federal Reserve could scale back its aggressive bond-buying program.
Brent crude oil slipped back towards $102 per barrel as traders were caught between hopes of a revival in global economic growth and evidence of ample supply stocks from the West's energy watchdog, the International Energy Agency.
"Following several years of stronger-than-expected North American supply growth, the shockwaves of rising U.S. shale gas and light tight oil and Canadian oil sands production are reaching virtually all recesses of the global oil market," the IEA said.
Reporting by Marc Jones; Editing by Jeremy Gaunt/Ruth Pitchford