GLOBAL MARKETS-Stocks rise, dollar falls as Fed seen staying course
* Focus turns to Fed stimulus prospects after government shutdown * China Q3 growth quickens to 7.8 pct year over year * World shares at 5-year high, Google hits $1,000 mark for first time * Euro hits 8-1/2-month high vs dollar By Herbert Lash NEW YORK, Oct 18 (Reuters) - Global stock markets climbed to a five-year high on Friday as investors bet the Federal Reserve would extend its stimulus policy into 2014, but uncertainty when U.S. interest rates would eventually rise caused the dollar to sink to an eight-month low. Better-than-expected results from Google Inc and Morgan Stanley also helped lift stocks on Wall Street, with shares of the Internet search company rising 13 percent at one point to breach the $1,000 mark for the first time. An acceleration in China's giant economy provided a further boost for equity markets, as well as for commodities such as oil and copper, as the prospect of an extended spell of ultra-easy money policy and improving growth buoyed investor sentiment. MSCI's index that tracks the performance of 45 countries rose 0.59 percent to highs last seen in May 2008, while a European index, the Stoxx Europe 600 gained for a seventh successive day, its longest winning streak this year. A last-minute deal by U.S. lawmakers this week to avert a debt default and re-open shuttered government offices also has bolstered investor confidence, pushing the broad S&P 500 to a record close on Thursday and new highs on Friday. But analysts said concerns about the negative impact of the shutdown on the U.S. economy and the likelihood the Fed would leave its bond-buying program intact until well into next year would weigh on the dollar, leaving the euro the potential to rise towards $1.40. On the company earnings front, so far 85 companies, representing one-quarter the of S&P 500 index's market capitalization, have reported third-quarter results, with earnings beating estimates by an average of 4.2 percent. Google was up 12.12 percent at $996.53, while Morgan Stanley rose 1.66 percent to $29.41. "Surprises have been broad-based with all of the nine sectors surpassing their forecasts," said Jonathan Golub, chief U.S. market strategist at RBC Capital Markets in New York. The Dow Jones industrial average was down 24.98 points, or 0.16 percent, at 15,346.67. The Standard & Poor's 500 Index was up 5.49 points, or 0.32 percent, at 1,738.64. The Nasdaq Composite Index was up 29.37 points, or 0.76 percent, at 3,892.52. European shares rose to a five-year high after robust growth data from China for the third quarter, which boosted shares of luxury goods companies and miners. The Stoxx Europe 600 index extended its rally to seven days, rising 0.76 percent, while the broader FTSEurofirst 300 of leading European shares rose 0.65 percent to close at a provisional 1,276.29, a new five-year high. Traders sold the dollar against a basket of currencies, pushing the dollar index down 0.06 percent at 79.601 on expectations the Fed may delay scaling back its stimulus. "The real economy has been negatively impacted by the government shutdown and uncertainty of the debt crisis, all of which pushes out eventual Fed policy normalization which is bad for the dollar," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. The euro rose to 0.08 percent to $1.3686. German Bunds rose on the view that the stop-gap U.S. debt deal may hurt the longer-term growth prospects of the world's largest economy and push the Fed's bond-buying program into next year. Bund futures rose 37 ticks to settle at 140.05. Brent crude futures rose toward $110 a barrel, supported by a weak U.S. dollar and growth data from China. Brent crude was up 34 cents at $109.45 a barrel, while U.S. crude oil was up 14 cents at $100.81. Investors were relieved by data showing China's economy grew at its fastest pace this year as firmer foreign and domestic demand lifted factory output and retail sales. China's CSI300 index climbed 0.7 percent, while Australian shares jumped to their highest level since June 2008. Australian exports are closely linked to China's economic fortunes. Benchmark 10-year U.S. Treasuries rose 3/32 to yield 2.5759 percent.
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