GLOBAL MARKETS-World shares end bumper year, Japan sees best gains since 1972

Mon Dec 30, 2013 8:13am EST

* MSCI world share index holds at 6-year high
    * Wall Street set for steady start to week
    * Yen hits fresh five-year lows on dollar and euro
    * Trading light as year-end approaches

    By Marc Jones
    LONDON, Dec 30 (Reuters) - World stocks were putting the
finishing touches to a bumper year on Monday, steady at a
six-year peak as rising benchmark bond yields and commodity
prices underscored expectations of firmer global growth in 2014.
    Wall Street was set for a quiet start to its final full 
session of 2013 - its best year since 1997, with a near 30
percent gain.
    After years in which financial markets lurched from the debt
crisis in Europe to U.S. political deadlock, investors are
generally becoming more upbeat on the global economic outlook.  
 
    In Europe, Britain's FTSE 100, Germany's DAX
 and France's CAC 40 all made minor downward
adjustments with annual gains running at 14, 26 and 17 percent. 
    Japanese shares ended 2013 with a flourish, up 0.7
percent - 56.7 percent for the year - as the yen skidded
to a fresh five-year low for a third straight session.    
    Jeremy Whitley, head of European equities at Aberdeen Asset
Management, said one reason for the market optimism was that
company earnings should improve next year.
    "Our belief is that earnings will recover given the
improving macroeconomic environment as policy remains very
accommodative," he said, regarding Europe.
    "However, it is important to be cognisant of the potential
headwinds, which include the strength of the euro, austerity
fatigue ... and the need for an overarching banking union to
provide confidence in the banking system."
    Thin year-end conditions made for some more lively moves in
the currency market. The euro vaulted as high as $1.3892 
on Friday before falling back, and on Monday it was last at
$1.3776 having dived as low as $1.3727 in Asia.
    Support for the single currency came from comments by
European Central Bank President Mario Draghi in Germany's Der
Spiegel that he saw no urgent need to cut interest rates again
and no signs of deflation.  
    "At the moment we see no need for immediate action. We don't
have Japanese conditions," he said. ()
    
    WEAK YEN
    The rouble fell following a second bombing in
as many days in the Russian city of Volgograd, though equity
investors largely shrugged off the unrest. 
    The dollar was steady at 105.20 yen after reaching a
peak at 105.415. The yen has posted nine consecutive weeks of
falls against the dollar, the longest such run since 1974.
    Like the huge rise in the Nikkei, which has seen its
best performance since 1972 this year, it is the aggressive
policies of Japan's government and its central bank that have
been driving the plunge in the yen.
    In another promising sign for the country's economy, the
Asahi newspaper reported that Japan's most influential business
lobby has agreed to encourage its members to raise workers' pay
for the first time in six years. 
    Japan's competitors, however, have been complaining about
the weak yen. South Korea's deputy finance minister warned on
Monday the yen was falling too fast, and the head of China's
National Development and Reform Commission said the impact on
neighbours needed to be monitored. 
    
    ITALY IN FOCUS
    Underpinning both the dollar and euro in recent weeks have
been widening yield premiums over Japanese debt.    
    Yields on the U.S. benchmark 10-year Treasury note have
climbed to their highest in more than two years at 3.02 percent
 since the Federal Reserve said on Dec. 18 it would
start to taper its monetary stimulus. The comparable Japanese
yield is just 0.735 percent.
    Analysts at RBS note that yields on the 30-year Treasury
bond were approaching an important level at 4.05 percent, which
marks the top of a bull channel going back two decades. A breach
there would be viewed as very bearish for bonds.    
    The only new factor for European debt markets on Monday was
a 5.5 billion euro Italian debt sale. Rome paid 4.11 percent to
sell its March 2024 benchmark, up slightly from 4.01 percent at
a similar auction a month ago.  
    The sale came as Italy's third-biggest bank, Monte dei
Paschi di Siena, was forced to delay a 3 billion euro
($4.1 billion) share sale because of shareholder opposition. 
    Global growth hopes lifted copper and aluminium
 to four- and two-month highs, while safe-haven gold
 edged down to $1,202 per ounce as it trudged towards its
biggest annual loss in over three decades, at nearly 30 percent.
    Brent and U.S. crude oil  were steady at
$112.17 and $100.23 a barrel respectively.