GLOBAL MARKETS-Shares, oil prices rebound on U.S. budget talk

Fri Jan 18, 2013 4:58pm EST

* Republicans push for 3-month debt limit increase
    * MSCI world share index rises to highest since May 2011
    * China growth data initially boosts global recovery outlook
    * Japan's yen drops vs dollar; U.S. government debt higher


    By Herbert Lash
    NEW YORK, Jan 18 (Reuters) - World equity and oil prices
rebounded on Friday after Republican leaders of the U.S. House
of Representatives said they would seek to break a budget
impasse next week, while the yen hit a 31-month low against the
U.S. dollar ahead of potential asset purchases by the Bank of
Japan.
    On Wall Street, the Dow and the S&P 500 posted five-year
closing highs after Republicans said the House will consider a
bill to raise the U.S. debt ceiling enough to allow the country
to pay its bills for another three months. The strategy would
buy time for the Democratic-controlled Senate to pass a budget
plan that shrinks the federal deficit. 
    The Nasdaq finished slightly lower, pulled down by a weak
earnings outlook by Intel Corp, the world's leading
chip maker.
    "It could be a big positive for the markets if we come up
with a plan of spending cuts that isn't too awfully hard on the
economy," said Bryant Evans, investment adviser and portfolio
manager at Cozad Asset Management, in Champaign, Illinois. 
    Earlier, stocks had faltered after a survey that showed U.S.
consumer sentiment fell to its lowest level this month since
December 2011.
    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. 
    Omer Esiner, a chief market analyst at Commonwealth Foreign
Exchange in Washington, said the consumer confidence numbers
would be closely scrutinized going forward, given the
still-uncertain impact of higher payroll taxes on U.S.
consumers.
    "This is a big miss and could mark the beginning of a
downward trend in sentiment and in spending," Esiner said.
    Shares of Intel slumped 6.3 percent to $21.25 a day after
the company forecast quarterly revenue below analysts' estimates
and announced plans for increased capital spending amid slow
demand for personal computers. 
    The Dow Jones industrial average closed up 53.68
points, or 0.39 percent, at 13,649.70. The Standard & Poor's 500
Index rose 5.04 points, or 0.34 percent, at 1,485.98. The
Nasdaq Composite Index fell 1.30 points, or 0.04
percent, at 3,134.71. 
    For the week, the Dow gained 1.2 percent, the S&P 0.9
percent and the Nasdaq 0.3 percent.
    Anxiety about the economy undercut optimism from upbeat U.S.
housing data earlier this week, reviving some safe-haven bids
for government debt.
    The U.S. benchmark 10-year Treasury note ticked
up 12/32 in price to yield 1.8416 percent.
    Disappointing UK economic data helped pushed European shares
down. 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 the weakest in 13 years.
    The China data followed 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 all-country world equity index hit
its highest level since May 2011 at 351.90, up 0.25 percent.
    Spot gold retreated $2.87 to $1,684.30 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 79 cents to settle at $111.89
barrel, while U.S. oil settled 7 cents higher at $95.56 a
barrel. 
    The yen lost ground against the dollar on expectations
aggressive policy moves by the Bank of Japan.
    Sources familiar with the BoJ's thinking told Reuters the
central bank, under relentless pressure from Japanese 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." 
    The euro last traded 0.22 percent lower against the yen
 at 119.89 yen, down from 120.70 earlier, its highest
since May 2011.
    The euro was also down against the dollar, falling 0.43
percent to $1.3317.