MARKETS GLOBAL-Shares rebound on U.S. budget talk, yen falls

Fri Jan 18, 2013 3:05pm EST

* Push by Republicans for 3-month debt limit increase buoys
markets
    * MSCI world share index rises to highest since May 2011
    * China growth data initially boosts global recovery outlook
    * Japan's yen drops vs dollar


    By Herbert Lash
    NEW YORK, Jan 18 (Reuters) - World equity markets and oil
prices rebounded on Friday after U.S. House Republican leaders
said they would seek to break a government budget impasse next
week, while the yen was lower against the U.S. dollar ahead of
potential asset purchases by the Bank of Japan.
    Brent and U.S. crude futures rose in choppy trading,
reacting to news that the House of Representatives will consider
a bill to raise the U.S. debt ceiling enough to allow the
country to pay its bills for another three months.
 
    Stocks on Wall Street pared losses on news of the new
Republican strategy. Earlier, U.S. stocks had faltered on a
survey that showed U.S. consumer sentiment at its lowest in over
a year in January and a disappointing earnings outlook from
chipmaker Intel.
    The Thomson Reuters/University of Michigan's preliminary
reading on the overall index on consumer sentiment came in at
71.3, down from 72.9 the month before. The index was at its
lowest since December 2011. 
    "It's a disappointing figure and helped put pressure on
risky assets," said Greg Moore, a currency strategist at TD
Securities in Toronto.
    "Markets for the last two weeks have been grinding higher,
without much fundamentals backing it up. So this is a reality
check. But it's still fairly early in the year and things could
change," he said.
    U.S. Treasury debt prices extended modest gains. The U.S.
benchmark 10-year Treasury note ticked up 11/32 in
price to yield 1.8453 percent.
    Omer Esiner, a chief market analyst at Commonwealth Foreign
Exchange in Washington said the consumer confidence numbers
would be closely scrutinized, given the still-uncertain impact
of higher payroll taxes on the consumer.
    "This is a big miss and could mark the beginning of a
downward trend in sentiment and in spending," Esiner said.
    The Dow Jones industrial average was up 6.32 points,
or 0.05 percent, at 13,602.34. The Standard & Poor's 500 Index
 was up 0.16 points, or 0.01 percent, at 1,481.10. The
Nasdaq Composite Index was down 8.23 points, or 0.26
percent, at 3,127.78. 
    Disappointing economic data in the UK helped pushed European
shares downward. The FTSEurofirst 300 index of top
shares closed 0.16 percent lower at 1,163.64.
    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.
    The China data came on top of strong U.S. labor 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, but later gave back some
gains to trade up at 351.47.
    Spot gold retreated $2.11 to $1,685.10 an ounce.
    Oil supply disruption fears were reinforced by the Islamic
militant attack and hostage-taking at a gas plant in Algeria, a
member of the Organization of Petroleum Exporting Countries.
    Lack of progress from another round of talks between the
United Nations' nuclear agency and Iran about Tehran's nuclear
program also pushed prices higher.
    Brent crude rose 81 cents at $111.91 barrel, while
U.S. oil rose 7 cents at $95.56 a barrel. 
    Sources familiar with the BOJ's thinking told Reuters the
central bank, under relentless pressure from Japan's Prime
Minister Shinzo Abe, will consider making an open-ended
commitment to buy assets until 2 percent inflation is in sight.
 
    "This is a big deal," said Jens Nordvig, global head of
currency strategy at Nomura Securities in New York.
    "But as always from a trading perspective, it matters
greatly what is already priced," he added.
    The euro last traded 0.2 percent lower against the yen
 at 119.96 yen, down from 120.70 earlier - its highest
since May 2011.
    The euro was also down against the dollar, falling 0.36
percent on the day to $1.3327.
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