GLOBAL MARKETS-China data, BOJ plan lifts shares, yen dips

Wed Apr 10, 2013 9:04am EDT

* MSCI world share index at 1-week high after Chinese data lift

* U.S. stocks seen firmer with Dow index at a record level

* Japan's Nikkei climbs to 5-year high on BOJ stimulus plan

* Yen near multi-year lows vs major currencies, euro climbs

By Richard Hubbard

LONDON, April 10 (Reuters) - Strong Chinese import data and Japan's economic stimulus package helped to lift world equity markets to a one-week high on Wednesday and sent the yen to a three-year low against the euro.

Wall Street was poised to set fresh records when it opens with the broad S&P 500 index just half a percentage point away from its all-time high and stock index futures pointing up.

Sentiment was lifted by trade data from China that showed a surprisingly sharp surge in imports, seen as a signal that the domestic demand needed to drive a recovery in the world's second largest economy was gathering pace.

The data boosted mining and basic resources stocks, and supported industrial commodities including oil, aluminium and nickel. However, some analysts said slow export growth in the data left a more mixed picture on the global economic outlook.

"Exports to the U.S. and Europe were a bit disappointing, so on the whole, I would say it's more a mixed bag than a very positive bag of data." said Adrian van Tiggelen, senior investment specialist at ING Investment Management.

The MSCI all-world share index,, which tracks stocks in 45 countries, rose 0.5 percent to its highest level since April 3 while Japan's key Nikkei index ended 0.7 percent higher at its highest close since August 2008.

The gains also followed Wall Street's strong session on Tuesday when the Dow Jones industrial average posted a record closing high as investors were encouraged by a promising start to the earnings season.

Europe's FTSEurofirst 300 index had risen by about one percent by midday, while across the region London's FTSE 100 , the Paris CAC-40 and Frankfurt's DAX rose by 0.8 to 1.2 percent.

European markets were also bolstered by growing hopes of an interest rate cut by the European Central Bank, and signs of progress in dealing with the region's debt crisis after international lenders said Ireland and Portugal should get more time to repay their bailout loans.

Recent weakness in U.S. jobs data has also increased expectations that minutes from the Federal Reserve's most recent policy meeting, due out at 1800 GMT, will show the central bank sticking with its aggressive monetary easing policy.

EURO FIRMS

In the currency markets, the yen hit a more than three-year low against the euro and edged closer to 100 to the dollar as it extended a slide triggered by the Bank of Japan's (BOJ) massive monetary easing plan unveiled last Thursday.

The euro is being supported by speculation that Japanese investors, looking for higher returns as the BOJ action depresses domestic yields, may turn to euro zone bonds.

"There is some talk that people are dumping Japanese assets and hunting for yields (with euro zone assets), and it is probably on the back of this the euro has been supported," said Vasileios Gkionakis, global head of FX strategy at UniCredit.

The common currency was up 0.4 percent against the yen to about 130 yen and reached a one-month high against a mostly steady dollar of around $1.31.

The greenback also rose against the yen, gaining 0.3 percent to 99.35 yen but was being held back from making further gains by large currency options close to the 100 mark.

These options contracts have generated demand from banks to buy the yen and sell dollars to protect their exposure, and once they expire the dollar could surge.

Comments from Bank of Japan Governor Haruhiko Kuroda, indicating that the central bank had taken all necessary steps for now to achieve its inflation target, helped the yen recover some of its losses during European trading.

The dollar has jumped around 7 percent against the yen since Thursday's BOJ announcement that it would pump about $1.4 trillion into the economy and double Japan's monetary base in two years to defeat deflation.

YIELD HUNT

The prospect of huge purchases of Japanese government bonds (JGBs) by the BOJ is seen as likely to send investors on a hunt for higher returns in assets denominated in currencies other than the rapidly-weakening yen.

Japanese government bond futures fell so sharply on Wednesday that the Tokyo Stock Exchange had to halt trading briefly while the 10-year cash bond yield rose to a four-week high.

However, highly-rated euro zone bond yields, which have fallen on the hopes of Japanese demand, recovered from their lows when a wave of newly-issued bonds absorbed much of the buying.

Around 9 billion euros' worth of top-rated debt was sold, adding to 14 billion euros of bonds issued on Tuesday. The U.S. Treasury also plans to sell $21 billion in 10-year notes later and will sell $13 billion of 30-year bonds on Thursday.

U.S. T-note yields were 1.7 basis points higher on the day at 1.76 percent, while German 10-year yields were 2 basis points higher at 1.28 percent.

GEOPOLITICAL TENSIONS

In the oil market the signs of a strengthening Chinese economy added to support from geopolitical concerns, especially growing tension on the Korean peninsula and in the Middle East.

North Korea, which has threatened war, has moved a long-range missile in readiness for a possible test launch while Iran, engaged in a dispute with Western nations over its nuclear programme, said it had begun operations at two uranium mines.

However signs of growing oil stockpiles were weighing on crude prices, leaving Brent futures down 0.5 percent at $105.65 per barrel. U.S. crude fell 0.55 percent to $93.65 a barrel.

Industrial metals, meanwhile, were adding to recent gains, helped by the improving trade data from top consumer China.

Aluminium rose 0.25 percent to $1,923.75 a tonne, zinc added 0.5 percent to $1,930, lead gained 0.9 percent to $2,108 and tin edged up 0.02 percent to $22,975.

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