* Euro races to 9-month high vs dollar on ECB growth view
* World stocks near 20-month high on global recovery hopes
* S&P index near 5-year closing high, ekes out weekly gain
* Oil falls on higher Chinese inflation, gasoline supply
By Richard Leong
NEW YORK, Jan 11 The euro rose to its highest
level since April against the dollar on Friday 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 20-month high.
A massive stimulus plan in Japan also boosted optimism about
future business activity, but worries about global demand, a
pickup in Chinese inflation and a possible drag from the debt
ceiling fight in Washington spurred selling in the oil market.
As stocks and the euro gained appeal, investors trimmed back
their safe-haven holdings of U.S. and German government debt
before a late wave of buying emerged.
"The world economy seems to be in the beginning of a
cyclical upturn. That's going to benefit economic sensitive
sectors," said David Joy, chief market strategist at Columbia
Management Advisors in Boston.
While Japan aims to jumpstart its economy, U.S. and European
central bankers have talked up their economies' prospects over
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 stocks ended steady
at 350.00, a tad below its session high of 350.15, which was its
highest level since May 2011. It rose 0.67 percent for the
week, following a 3.11 percent rise last week.
On Wall Street, the three major stock indexes ended flat to
slightly higher on Friday. The Standard & Poor's 500 index was a
hair below its five-year closing high on Thursday, racking up a
weekly gain of 0.33 percent.
The Dow Jones industrial average closed up 17.21
points, or 0.13 percent, at 13,488.43. The S&P 500 ended
down 0.07 point at 1,472.05. The Nasdaq Composite Index
finished 3.88 points, or 0.12 percent, higher, at 3,125.64.
Shares of Dow component Boeing lost 2.5 percent to
$75.16 on news of problems with its Dreamliner jets.
Wells Fargo, the No. 4 U.S. bank, reported record
profits in the fourth quarter, but traders focused on weaker
interest margins and mortgage lending. Shares of the No. 4 U.S.
bank fell 0.85 percent to $35.10.
The solid start in the U.S. stock market this year 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 Thursday.
Europe's FTSEurofirst 300 index of top companies
across the region also neared levels last seen in March 2011
shortly after the ECB decision to hold rates steady on Thursday
and was consolidating those gains on Friday. It closed down 0.11
percent at 1,634.40, bringing its weekly decline to 0.33
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
fell 3 basis points on the day to 1.87 percent after
rising to a session high of 1.93 percent. It fell from an
eight-month high near 1.98 percent set a week earlier.
German Bund futures were down 16 basis points at
142.54 after hitting their lowest level since November earlier.
In the currency market, the euro extended Thursday's
rally against the dollar, rising 0.54 percent to $1.3340 after
touching $1.3365 earlier, its highest point 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
0.45 percent to 89.17 yen. It touched a 2-1/2-year high at 89.44
yen earlier after the Japanese government agreed on 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.
Back in the United States, a surprise widening of the trade
gap in November revived worries about the U.S. economy losing
steam at the end of 2012, although some analysts downplayed the
figure and focused on the rise in imports as a sign of American
spending remaining resilient.
"Today's number was a wake-up call for some people, but the
market is holding up so I guess that's a good sign," said Phil
Orlando, chief equity market strategist at Federated Investors
in New York.
In the commodities markets, oil prices fell on data showing
China's annual consumer inflation accelerated to a seven-month
high of 2.5 percent in December. The news dampened demand as it
reduced the chances the central bank easing monetary policy to
boost the economy. Expectations of higher U.S. gasoline imports
also dampened prices.
Brent crude futures settled $1.25, or 1.12 percent, lower at
110.64 a barrel, while U.S. oil futures shed 26
cents, or 0.28 percent, to $93.56.
On the week, Brent recorded its first decline in five weeks,
losing 0.6 percent, while U.S. oil futures clung to a modest 0.5
Gold prices fell 0.78 percent at $1,661.49 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 0.32 percent.