* 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 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
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
"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.
YEN SLIDE RESUMES
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
The ECB will on Jan. 25 publish how much will be repaid in
the Jan. 30 first round of repayments.