GLOBAL MARKETS-Greece hopes keep stocks, euro supported; US GDP eyed

By Alessandra Prentice
LONDON, Jan 27 (Reuters) - World stocks hovered near a
5-1/2 month high on Friday as investors anticipated an imminent
conclusion to Greek debt talks while lower Spanish bond yields
and a fall in Italy's six-month borrowing costs also supported
the euro.
Sentiment was also buoyed by expectations that upcoming U.S.
data would show the world's largest economy grew at its fastest
pace in nearly two years at the end of 2011..
Stock futures pointed to a steady market open on Wall Street.
EU Economic and Monetary Affairs Commissioner Olli Rehn said
talks with private creditors on restructuring Greek debt are
"very close" to closing. Athens needs a deal quickly to avert an
unruly default when a major bond redemption comes due in March,
an outcome which could wreak havoc across financial markets.
The mark-up investors charge other indebted European
economies to issue bonds also eased, with Italy's six-month
borrowing costs falling below 2 percent at an auction, their
lowest since May, thanks to appetite from mainly domestic banks
flush with European Central Bank funds. Spanish 10-year
government bond yields also fell to their lowest
since November 2010.
"We could see the market going higher if there was a
positive outcome as far as the Greek debt talks are concerned,"
said Keith Bowman, equity analyst at Hargreaves Lansdown,
although he cautioned a deal would not solve the broader issues
of fiscal support across the union.
The MSCI world equity index, which has
gained more than 5 percent in January, erased earlier losses to
stand unchanged on the day. The benchmark index hit its highest
level since August on Thursday after the Federal Reserve pledged
to keep interest rates near zero for the next three years.
European stocks inched up to also hover at
five-month highs while emerging stocks rose further to
new three-month peaks.
U.S. stock futures S&P 500 inched up 0.01 percent,
while Dow Jones futures rose 0.1 percent and Nasdaq 100
futures were up 0.4 percent at.
Brent crude oil rose 0.3 percent to $111.65 a
barrel. Bund futures were little changed after hefty
gains on Thursday.
Ten-year Spanish government bond yields fell 14 basis points
to 4.85 percent, narrowing the yield spread against German Bunds
to 297 basis points.
Portuguese five- and 10-year government bond yields
hit euro-era highs of 20.28 percent
and 15.18 percent respectively.
The dollar fell a quarter percent against a basket of
major currencies. The euro rose 0.2 percent to $1.3134.
After weeks of wrangling over the coupon that Greece will
pay on new bonds it will swap for existing debt, the focus has
shifted to whether the ECB and other public creditors will
follow private bondholders in swallowing losses.
Euro zone members may have to increase their financial
support for Greece if Athens and the private sector do their
part to address the country's debt crisis, Eurogroup head
Jean-Claude Juncker told a newspaper.
Italy, on the other hand, has enjoyed a recent rapid decline
in yields, mostly driven by demand from domestic banks holding
the ECB's cheap three-year loans.
"Italy has seen some relief," said Michael Hewson, market
analyst at CMC Markets.
The yen was on track to post its biggest daily gain in a
month against the dollar, rising beyond 76.90. The dollar
hit a two-month high of 78.29 yen on Wednesday after Japan
reported its first annual trade deficit since 1980.
Investors are now awaiting the U.S. report on fourth quarter
GDP growth, due at 1330 GMT, which is expected to show growth
accelerated to a 3 percent rate from 1.8 percent in the third.
The hope is the data will show that the U.S. economy is not
slowing down in line with Europe.
"If you get disappointing GDP figures, investors will take
profits and European stocks could fall about 1 percent. If it's
better than expected, you could see a gain of 0.5 to 1 percent,"
said Koen De Leus, strategist at KBC Securities.