* World shares near 20-month high on global recovery hopes
* Euro rises to highest in nine months vs dollar
* Risk appetite curbs appeal of U.S., German govt debt
* Higher Chinese inflation data knock oil prices
By Richard Leong
NEW YORK, Jan 11 The euro on Friday rose against
the dollar to its highest since April in the wake of encouraging
remarks from the head of the European Central Bank, while an
improving economic outlook held world stock prices near a
A massive stimulus plan in Japan also boosted optimism about
future business activity, but worries persisted about global
demand and a possible drag from the debt ceiling fight in
Washington, spurring selling in oil and basic metals.
As stocks and the euro gained appeal, investors trimmed back
their safe-haven holdings of U.S. and German government debt.
"Equities are very overdue for a rest but that shouldn't
make people throw in the towel in my opinion (as) they will
continue to be supported by central banks' very accommodative
policies," said Edward Page Croft, managing director at
investment advisory firm Stockopedia.
While Japan aims to jumpstart its economy, U.S. and European
central bankers have talked up the prospects for their economies
in the past 24 hours.
Philadelphia Federal Reserve Charles Plosser on Friday
repeated his outlook that the U.S. economy will likely grow
about 3 percent in 2013, bringing the jobless rate down to 7
percent by year-end. Plosser's remarks followed mildly upbeat
comments from St. Louis Fed chief James Bullard on Thursday.
Comments by ECB President Mario Draghi following the central
bank's policy meeting on Thursday, suggesting Europe's economy
is set for a recovery in 2013, have raised bets that global
growth might gather momentum this year.
The MSCI index of world shares held steady
at 349.74 after rising earlier to 350.15, the highest level
since May 2011. It was on track for a weekly gain of 0.56
percent, following a 3.11 percent rise last week.
On Wall Street, the three major stock indexes slipped
despite record earnings from Wells Fargo, the No. 4 U.S.
bank. The Standard & Poor's 500 index dialed back from its
five-year closing high on Thursday but was still poised to eke
out a weekly increase of 0.23 percent.
The Dow Jones industrial average was down 0.87
points, or 0.01 percent, at 13,470.35. The S&P 500 was
down 2.76 points, or 0.19 percent, at 1,469.36. The Nasdaq
Composite Index was down 4.34 points, or 0.14 percent,
The solid start in the U.S. stock market likely resulted
from a flood of cash from fund managers scouring for returns in
the current low interest rate climate. Investors in U.S.-based
funds poured $7.53 billion into stock mutual funds, the most
since 2001, data from Thomson Reuters' Lipper service showed on
Europe's FTSEurofirst 300 index of top companies
across the region also neared levels last seen in March 2011
shortly after the ECB decision and was consolidating those gains
on Friday. It slipped 0.17 percent at 1,632.70, bringing its
weekly decline to 0.39 percent.
In Tokyo, the Nikkei index closed 1.4 percent higher
at 10,801.57 for a ninth straight week of gains, the longest
such streak since 1998.
The yield on benchmark U.S. 10-year Treasury notes
edged up to 1.91 percent, which was below an
eight-month high near 1.98 percent set a week ago.
German Bund futures were down 37 basis points at
142.32 after hitting their lowest level since November earlier.
In the currency market, the euro extended Thursday's
rally against the dollar, rising 0.6 percent to $1.3350 after
touching $1.3365 earlier, its highest since April.
The euro was on track for its strongest weekly gain against
the dollar in nearly four months.
The greenback however strengthened against the yen, rising
0.35 percent to 89.10 yen. It touched a 2-1/2-year high at 89.44
yen earlier after the Japanese government agreed a $117 billion
spending boost for the economy, and new Prime Minister Shinzo
Abe stepped up pressure on the Bank of Japan to ease monetary
policy more aggressively.
The BOJ is likely to adopt a 2 percent inflation target at
its Jan. 21-22 meeting, double the current goal, and will
consider more purchases of government debt to achieve the
target, sources told Reuters this week.
In the commodity markets, oil prices were slipping as
traders adjusted to sluggish global growth, which has prompted
Saudi Arabia, the world's biggest exporter, to cut back
Data on Friday showing China's annual consumer inflation
accelerated to a seven-month high of 2.5 percent in December
also dampened demand as it reduced the likelihood of the central
bank easing monetary policy to boost activity.
Brent crude futures fell $1.85 or 1.65 percent a barrel to
$110.05 while U.S. oil futures shed 69 cents or
0.74 percent at $93.13.
On the week, Brent was poised for its first decline in five
weeks, losing 1.1 percent, while U.S. oil futures were on track
to cling to a slim 0.05 percent gain.
Gold prices fell 0.92 percent at $1,659.25 an ounce
as the firmer tone to the dollar prompted some buyers to cash in
gains after the metal's biggest one-day rise so far this year.
On the week, bullion managed a rise of 0.19 percent.