* MSCI world share index at highest since May 2011
* Chinese growth data boost global recovery outlook
* Yen hits new lows vs dollar and euro
* Industrial commodities rise, oil gives up some gains
By Marc Jones and Richard Hubbard
LONDON, Jan 18 (Reuters) - World shares climbed to a 20-month high on Friday after fresh data revealed growing economic momentum in China and the United States, while the yen hit new lows ahead of next week's Bank of Japan meeting.
However, with the benchmark S&P 500 index sitting just below its all-time closing high, Wall Street stocks looked set for a mixed session as a disappointing earnings outlook from chipmaker Intel undermined sentiment.
China reported that its economy grew at a slightly faster-than-expected 7.9 percent in the fourth quarter of 2012, a clear sign it has avoided a sharp economic slowdown, though the annual growth rate was its weakest in 13 years.
"Its seems since about September or October, China has started rebounding," said Louise Cooper, financial analyst at CooperCity. "The strength of the fourth quarter of 2012 has definitely continued into 2013," she said.
The positive news came on top of strong U.S. labour and housing market reports on Thursday, providing fresh impetus to a broad rally in equities, precious metals and commodities since the start of the year.
MSCI's index of leading world shares hit its highest level since May 2011 at 351.70 points, while gold was up 0.2 percent at $1,690.86 an ounce, heading for a weekly rise of 1.7 percent.
Other precious metals and industrial commodities also benefited, with palladium reaching a 16-month high and platinum a three-month high, while copper prices rose 0.3 percent to $8,079 a tonne.
But oil prices slipped from their highs, having already gained strongly this week on the brighter growth outlook and supply concerns after the failure of U.N. talks with Iran and the hostage crisis at an Algerian gas field.
Brent crude was down 34 cents at $110.76 barrel, retaining the bulk of Thursday's $1.42 a barrel gain, while U.S. oil was down 14 cents at $95.35 a barrel, also holding on to the bulk of the previous session's $1.25 gains.
In Europe the broad FTSEurofirst 300 index was flat near a two-year high as investors chose to lock in some of the recent gains before the corporate earnings season gets underway in earnest next week.
"Now is not a great time to buy. We are just saying take a back seat. If anything, look to book some profits here," said Stewart Richardson, chief investment officer at RMG.
London's FTSE 100 and Frankfurt's DAX were up around 0.3 percent, while Paris's CAC-40 was 0.1 percent in the red.
British retail sales posted a surprise monthly fall in December, dashing hopes that Christmas shoppers would provide a last-minute boost to an economy on the verge of another contraction.
Like much of Europe, consumer spending in Britain has come under pressure from a combination of below-inflation wage growth, worries about the economy and government austerity measures. "What is disappointing is that, after about a year of a pick-up in retail activity, the high street seems to have stalled again over the past few months. We're looking at modest growth in the British economy over 2013," said Phillip Shaw, an economist at Investec.
The stronger U.S. data and mounting expectations for more aggressive easing by the Bank of Japan (BOJ) next week lifted the dollar past 90 yen to its highest since June 2010, and the euro to its peak since May 2011 of 120.73 yen.
Profit taking by traders capped the gains, but strategists said the Japanese currency remained vulnerable to further losses if the BOJ goes beyond market expectations in its attempts to stave off deflation.
The dollar settled around 89.81 yen, down 0.1 percent, while the euro fell 0.3 percent to 119.92 yen from 120.73 earlier.
"The general trend speculators, hedge funds and investors are betting on at the moment is towards further yen weakness," said Bernd Berg, global FX strategist at Credit Suisse.
Expectations that the new Japanese government will pursue massive fiscal spending and push for more aggressive BOJ easing to drive Japan out of its recession have spurred heavy yen selling since November.
Sources told Reuters the BOJ will at its Jan. 21-22 meeting consider removing the 0.1 percent floor on short-term interest rates and commit to open-ended asset buying until the 2 percent inflation target is reached.
In bond markets, German two-year government bond yields rose 0.25 percent to their highest in nearly 10 months before retreating to trade little changed, on growing nervousness in money markets over early bank repayments of three-year European Central Bank loans.
The ultra-cheap money flowed into the banks from late 2011 when the ECB took emergency steps to tackle the worsening euro zone debt crisis. A larger-than-expected return of around 400 billion euros ($534 billion) would effectively tighten money market conditions and push up the price banks charge to lend to each other at time when most of the region is in recession.
"The (German) front-end is being hit by the LTRO story," one bond trader said. "My view is it's oversold, but there's something else at play there, so it's very difficult to trade against it."
The ECB will on Jan. 25 publish how much will be repaid in the Jan. 30 first round of repayments.