GLOBAL MARKETS-World stocks inch towards all-time high

Mon Jun 9, 2014 8:33am EDT

* European shares edge higher, Wall Street seen steady
    * Friday's U.S. jobs data confirmed better labour conditions
    * Dollar underpinned by rising U.S. Treasury yields
    * China trade data lends support, though import drop a worry

    By Marc Jones
    LONDON, June 9 (Reuters) - World shares were within touching
distance of an all-time high on Monday, spurred on by the potent
combination of record low global interest rates and the
improving health of major economies.
    European markets were on the front foot again,
looking for their 10th straight week of gains after last week's
bumper set of easing measures from the European Central Bank.
  
    Asian stocks earlier touched their highest levels in nearly
three years, while Wall Street was expected to start
steadily, having notched another record close on Friday
following bright U.S. jobs data.
    MSCI's All-World share index, which
encompasses 45 countries and is generally seen as benchmark of
global stocks, was up 0.1 percent at 426.77 points, just below
its 2007 pre-financial crisis peak of 428.63 points.
    It has risen almost 150 percent since the 2009 lows of the
crisis but with central banks like the ECB still hosing markets
with cheap money, Peter Sullivan, HSBC's head of equity strategy
in Europe, said the rally was likely to continue. 
    "We might be sitting close to all-time highs but valuations
are not stretched," Sullivan said. "We got more confirmation
last week (from the ECB) that policy is going to remain very
loose for a long time." 
    "In the U.S. it's clear that earnings are coming back pretty
strongly and there are even signs of life now in Europe ... So 
you put that together and it's certainly more likely that
equities rise rather than fall from here," he said.
    Trading was thinner than usual due to public holidays in a
handful of countries including Germany and France, but the
strong appetite for risk in the region was hard to miss.
    Spanish and Italian bond yields ,
a proxy for what their governments pay to borrow on financial
markets, were at all-time lows with Spain enjoying lower yields
than the United States.. 
    Safe-haven gold, meanwhile, was stuck near a
four-month low and market volatility indicators such as the
so-called VIC fear gauge remained heavily subdued.
    
    EMERGING DEMAND
    Emerging markets were also performing strongly with stocks
 on the cusp of a one-year high and a number of key
currencies on the rise. 
    The South Korean won touched a near six-year peak
although intervention by the foreign exchange authorities capped
its upside, while Malaysia's ringgit hit a near
seven-month high. 
    Among major currencies, the dollar continued to
benefit from rising U.S. Treasury yields, after U.S. jobs data
on Friday showed employment back at its pre-recession level.
    The euro drifted down to $1.3615 as the dust settled after
last week's ECB frenzy of activity, though there was plenty of
daylight between it and its $1.3502 low. 
    Weekend trade data from China also supported the view of a
recovering global economy, with exports gaining steam last
month. But the same figures also contained some cause for
concern, as a surprising drop in imports could herald weaker
domestic demand. 
    China's yuan rose after the People's Bank of China
unexpectedly fixed its daily midpoint higher against the dollar
for the second straight session, which in turn also gave a lift
to other Asian currencies. 
    A subsequent - but well-flagged - move by the PBOC to reduce
the amount of precautionary funding some of country's
farming-focused banks must hold had no obvious impact.
 
   
    
    RISING U.S. YIELDS HELP DOLLAR
    While the lingering effects of the euro crisis and
sluggishness in Asia has kept global stocks short of all-time
highs, U.S. equity markets have been there for months. 
    Having risen in 10 of the past 12 sessions and closed at
records in six out of seven, the S&P 500 was expected to
open virtually flat. Heavier action is likely on the Nasdaq,
where gadget giant Apple will trade for the first time
after a seven-for-one stock split. 
    The yield on benchmark U.S 10-year Treasuries 
meanwhile shuffled up to 2.6131 percent in Europe as it
continued to move away from last month's 11-low. 
    Treasuries tend to set the benchmark for borrowing costs
around the world, and their rally this year has baffled many
economists, who had predicted the U.S. economy would perform
more strongly and therefore expected a sell-off in the bonds. 
    "The yield on 10-year U.S. Treasuries may need to sustain a
move back above (the) 2.6 percent area to increase the
likelihood of the greenback move through the 102.80 level
against the yen," said Marc Chandler, global head of currency
strategy at Brown Brothers Harriman, in a note to clients.
    For now, the dollar had to be content with a slight gain on
the day to 102.44 yen having had some help in Asia from a
lower-than-expected April current account surplus in Japan.
    In commodities, U.S. crude and Brent oil 
gained about 0.8 and 0.7 percent to $103.48 and $109.38 a barrel
respectively, underpinned by the solid jobs report that in
theory should translate to higher oil demand.
    Spot gold was steady near a four-month low at $1,255
an ounce, while Shanghai copper fell to its lowest in nearly a
month and London copper also dropped, unsettled by concerns that
a probe into metals storage at China's third-largest port could
squeeze financing and buying in metals.

 (Additional reporting by Lisa Twaronite; Editing by Catherine
Evans)