GLOBAL MARKETS-China moves send world shares higher, dollar softens

Tue Jul 23, 2013 6:15am EDT

* World shares gain as China signals support for growth
    * Telecom deal flurry adds to European market strength
    * Dollar index near one-month lows as Fed tapering fears
fade
    * Softer dollar supports gold after big rally, lifts oil

    By Richard Hubbard
    LONDON, July 23 (Reuters) - World shares pushed on towards
five-year highs on Tuesday, helped by China's efforts to avoid a
hard landing for its slowing economy, while gold took a breather
after its biggest one-day gain in more than a year.
    Local media in China reported the government was looking to
increase investment in railway projects to reduce gluts in
steel, cement and other materials as it aims to ensure annual
economic growth does not sink below 7 percent. 
    The reports lifted stocks across Asia outside Japan
 by 1.3 percent to their highest since early June
and gave an early boost to mining stocks in London,
although a lack of detail made some in the markets cautious. 
    "Managing to keep (growth) above 7 percent will certainly be
viewed as a positive stance," said IG Markets analyst Alastair
McCaig. "But they really have only five months to prove their
words are worth their weight."
    A flurry of merger and acquisition activity and a sharp
rally in telecom shares added to gains across Europe in morning
trade, lifting the FTSE Eurofirst 300 index by 0.25
percent to near a seven-week high. 
    The euro zone's blue-chip Euro STOXX 50 index 
was up 0.6 percent to bring its gains since late June to 10
percent, mirroring the sharp rises seen on Wall Street, where
the S&P 500 hit a record closing high on Monday.
    The recent rally has sharpened the focus on the current
corporate earnings season, with company statements closely
scrutinised for signs the gains are justified. 
   "Earnings have also been relatively good so far, although the
bulk of results still have to come," said David Thebault, head
of quantitative sales trading at Global Equities. "We'll have a
better idea of the big picture by the end of the week, with the
focus mostly on the guidance." 
    The main focus on Tuesday will be results from tech giant
Apple following weak numbers from Microsoft 
and Google last week. Stock index futures nevertheless
pointed to Wall Street testing fresh records when trading gets
underway. 
    An upgraded economic outlook from Japan's government added
to the better market tone, lifting Tokyo's Nikkei 0.8
percent and sending the MSCI world equity index 
up 0.2 percent. The MSCI is now within touching distance of the
five-year high hit at the end of May. 
  
   
   JAPAN RISES
   Heightened expectations that Japan's government will stick
with its expansionary policies after weekend elections also
supported the yen, which hit a one-week peak against the dollar
at 99.14 yen before settling back to 99.80 yen.
   The losses against the yen, adding up to about 15 percent so
far this year, were a major drag on the dollar, which slid to a
one-month low against a basket of major currencies.
   Demand for the greenback has been steadily draining away as
the Federal Reserve's efforts to reassure investors there will
be no precipitous end to its bond-buying stimulus ease upwards
pressure on U.S Treasury bond yields.
   "Yesterday we had some weaker U.S. housing data that
reinforced that message," said Jane Foley, senior currency
strategist at Rabobank.
    The euro has been steady as political tensions across the
region ease and was flat on Tuesday at $1.3187, close to
a one-month high of $1.3218.
   In emerging markets, the Turkish lira was near a one-month
high as investors awaited an expected rate rise by the central
bank to help narrow the gaping current account deficit.

   GOLD SHINES
   The weaker dollar supported gold, which rose for a fourth
straight day, by 0.1 percent to $1,336.84 an ounce. The
precious metal has now recovered nearly $160 from a three-year
low of $1,180.71 an ounce hit on June 28.  
   Brent oil inched down to just below $108, but it was still
within touching distance of last week's 3-1/2 month high.
Slippage was limited by the weaker dollar, with investors
awaiting U.S. crude inventory data for further clues on the
outlook for demand in the world's largest oil consumer. 
   Threats to supply in the Middle East and North Africa also
supported prices, with new clashes in Egypt and a halt in oil
exports from eastern Libya after protests.
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