World stocks rise as copper hits new record

NEW YORK Mon Feb 7, 2011 4:49pm EST

Traders work on the floor of the New York Stock Exchange, February 1, 2011. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, February 1, 2011.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - Strong corporate earnings and mining shares boosted world stocks to a 29-month high on Monday and copper rose to a record on supply concerns and improved sentiment of economic recovery.

Rising commodity prices, along with another uptick in U.S. Treasury yields, deepened concerns about inflationary pressures.

Worries about inflation damping down economic growth and political risk from Egypt have been responsible for a shift in assets out of emerging markets into developed economies.

World equities as measured by the MSCI All-Country World Index .MIWD00000PUS advanced 0.53 percent after gaining 2.2 percent last week. The index is up 3.4 percent so far this year, while the MSCI emerging markets index .MSCIEF is down 2 percent.

"A lot of analysts are saying that we need a correction before we can move higher, but I think there's still room to grow," said Ron Kiddoo, chief investment officer at Cozad Asset Management in Champaign, Illinois, which has $700 million in assets under management.

The Dow Jones industrial average .DJI was up 69.40 points, or 0.57 percent, at 12,161.55. The Standard & Poor's 500 Index .SPX was up 8.18 points, or 0.62 percent, at 1,319.05. The Nasdaq Composite Index .IXIC was up 14.69 points, or 0.53 percent, at 2,783.99.

The FTSEurofirst 300 .FTEU3 index of top European shares closed at its highest level since September 2008, up 1 percent at 1176.81, supported by mining companies as copper hit a fresh record on supply concerns from top producer Chile.

Concerns over higher inflation in booming emerging markets, further indications of economic recovery gathering pace in the United States, modest valuations and tentative signs of stability in the euro zone sovereign debt crisis have fueled the outperformance of shares in developed markets.

Data from fund tracker EPFR Global showed investors pulled out $7 billion from emerging markets equity funds in the week of Feb 2, their biggest outflow in three years, and much of the money is flowing into developed markets.

The euro paired losses against the dollar after touching a two-week low, but downward pressure is likely to remain after a bigger-than-expected fall in German industrial orders emboldened the stance that euro zone interest rates will stay steady for a while.

The euro was flat at $1.3585 in late afternoon trade in New York. The dollar was unchanged against a basket of major currencies, with the U.S. Dollar Index .DXY flat at 78.04. Against the Japanese yen, the dollar was up 0.16 percent at 82.30.

TREASURY YIELDS UP

Nagging worries the Federal Reserve is clinging to a near-zero interest rate policy for too long as inflation and the economy accelerate sent U.S. Treasury prices lower.

The benchmark 10-year U.S. Treasury note was down 2/32, with the yield at 3.648 percent, while the 2-year U.S. Treasury note was down 2/32, with the yield at 0.7725 percent.

Prices of the 30-year U.S. Treasury bond ended up 11/32, with the yield at 4.7078 percent, down from yield levels touched earlier in the day of 4.75 percent, levels not seen since last spring.

Copper backed away later in the trading day from a new record hit at $10,160 due to the rise of the U.S. dollar.

But concerns about supply, especially from top producer Chile, and a recent stream of positive economic data that boosted the outlook for industrial metals demand, combined to push commodities prices higher.

Tin also hit a record high on worries about supply problems in top exporter Indonesia.

U.S. crude oil fell 1.99 percent, to $87.25 per barrel, and spot gold prices ended flat at $1348.75 an ounce.

(Additional reporting by Ryan Vlastelica, Richard Leong and Julie Haviv; Editing by Andrew Hay)