GLOBAL MARKETS-Shares, euro rise as economic outlook brightens

Fri Jan 25, 2013 4:18pm GMT

* Global shares gain on data, euro hits 11-month peak

* Positive global growth outlook also supports oil, copper

* European banks repay more ECB loans than predicted

* German Ifo raises hopes of euro zone turnaround

By Herbert Lash

NEW YORK, Jan 25 (Reuters) - The euro hit an 11-month high and global shares rose on Friday on signs of a healthier European financial system and a brighter outlook for Germany, while U.S. stocks extended a rally in the benchmark S&P 500 index to an eighth successive session.

Solid U.S. corporate earnings and the strongest seasonal inflows into U.S. stock mutual funds in a decade also helped lift Wall Street, as the S&P 500 briefly topped the 1,500 mark for a second day in a row, a level last reached in late 2007.

"We are seeing a very broad-based rally and the ingredients are still in place" for gains to continue, said Steve Goldman, principal at Goldman Management in Short Hills, New Jersey. "This is the lift-off phase and it's still significant."

Data showing new U.S. single-family home sales fell in December was not a cause for concern on Wall Street as the median sales price rose and the sector still appears set to be a bright spot in the U.S. economy's recovery.

The Commerce Department raised its estimate for sales in November by 22,000 to a 398,000-unit rate, making the sales pace for the month the fastest since April 2010. Government data for new home sales are subject to substantial revisions.

Global shares as measured by MSCI's all-country world equity index rose 0.41 percent to 354.08.

The Dow Jones industrial average was up 22.30 points, or 0.16 percent, at 13,847.63. The Standard & Poor's 500 Index was up 1.94 points, or 0.13 percent, at 1,496.76. The Nasdaq Composite Index was up 7.89 points, or 0.25 percent, at 3,138.27.

Among companies beating analysts' expectations, Procter & Gamble Co's quarterly profit blew past expectations and Honeywell International Inc posted earnings just above Wall Street estimates.

P&G rose 3.69 percent to $73.02, but Honeywell slipped 0.18 percent to $68.13.

Of companies in the S&P 500 that have reported earnings to date for the fourth quarter of last year, 68 percent have beaten analysts' expectations, slightly higher than the 65 percent average over the previous four quarters.

Sentiment across riskier asset markets rose earlier in the session when the European Central Bank said euro zone banks would repay 137 billion euros in emergency loans early.

By taking back the three-year loans after only one year, the ECB has become the first major central bank to start moving away from unconventional monetary policy measures to tackle the crisis. By contrast, the U.S. Federal Reserve and Bank of Japan are buying bonds to stimulate economic growth.

The scale of the repayment, which beat the average estimate of around 100 billion euros in a Reuters poll, sent the euro higher, pushed German government bond prices down and boosted bank stocks across the euro zone.

"This is more than we had expected and underlines the material improvement in funding conditions for most European banks in the past 12 months," said Michael Symonds, a credit analyst at Daiwa Capital Markets.

The euro hit $1.3471, its highest since February 2012, to extend gains following the release of data showing the German economy gathering speed again after contracting late last year. The euro last traded up 0.7 percent at $1.3468.

The FTSEurofirst 300 index of pan-European shares was up 0.15 percent at 1,172.64 points, buoyed by a report that showed the Ifo think tank's business climate index rose in January to its highest level since June.

German bond futures fell 75 ticks

"Germany is roaring back to growth in the new year," said Berenberg Bank economist Christian Schulz.

Oil prices rose above $113 a barrel as robust economic data from the United States, China and Germany lifted the outlook for global fuel demand.

Manufacturing in China and the United States grew this month at the quickest pace in about two years.

Brent crude rose 8 cents to $113.36 a barrel. U.S. crude fell 13 cents to $95.82.

U.S. Treasury debt yields rose, with 30-year bonds trading a point lower in price after better-than-expected euro zone data spurred selling of safe-haven U.S. government debt.

The benchmark 10-year U.S. Treasury note was down 18/32 in price to yield 1.9148 percent.

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