* MSCI world equity index edges up
* European shares steady near 5 1/2-year highs
* Strong U.S. trade data boosts dollar
* Peripheral euro zone debt in demand
* Gold falls while Libya unrest lifts Brent crude
By Sudip Kar-Gupta
LONDON, Jan 8 Global equities and the dollar
rose on Wednesday, as solid German economic data pointed to a
pick-up in world trade and kept European shares near
five-and-a-half year highs.
News on Tuesday that the U.S. trade deficit was at a
four-year low also bolstered optimism over the global economy
and lifted the dollar. Meanwhile, a bumper Irish debt sale has
boosted confidence in debt from the euro zone periphery.
The MSCI world equity index, which tracks
shares in 45 countries, edged up 0.1 percent on Wednesday to
reach its highest level in five-and-a-half years. Japan's Nikkei
jumped 1.9 percent to approach a six-year peak.
Data showing that exports from Europe's biggest economy,
Germany, rose for a fourth straight month in November was the
latest sign that the euro zone economy and world trade are
slowly recovering from the 2008 financial crisis.
Further signs came from bumper demand on Tuesday for
Ireland's first debt sale since it exited an international
bailout programme. Spanish and Irish government bond yields
hovered near multi-year lows on
The pan-European FTSEurofirst 300 index slipped 0.1
percent but remained close to its highest level since mid-2008.
Futures on the U.S. stock markets , which have hit
record highs, edged back by 0.1 percent.
Shares in Asia excluding Japan rose, and the MSCI Emerging
Markets index was up 0.3 percent.
Francois Savary, chief investment officer at Swiss bank
Reyl, says equity markets may slip back this month as investors
cash in gains on the rally so far. And Old Mutual Global
Investors fund manager Francois Zagame cautions that the global
economy still needs to strengthen further. But both are
optimistic over the longer-term prospects for equities in 2014.
"We're cautiously optimistic on equities altogether," Zagame
said. "The data points in the U.S. are OK to good, but it's
still sub-trend growth. We've had our doubts over Europe, but it
looks as if Europe should muddle through."
U.S ECONOMY ON THE MEND
The U.S. dollar climbed against the yen after
the U.S. trade deficit shrank, and also edged up against the
Signs of a U.S. recovery have reassured some investors that
the world's biggest economy can withstand a Federal Reserve
decision to scale its bond-buying programme. That programme
drove many investors into equities by curtailing returns on cash
and bonds, fuelling much of last year's stock market rally.
Minutes of the Fed's December meeting are due later on
Wednesday. Markets will be hoping for a clear commitment to
keeping rates low for a long time to come.
The European Central Bank also meets on Thursday for the
first time in 2014. Analysts and investors doubt it will do more
than flag its readiness to act in the future, despite another
surprising fall in euro zone inflation.
Data on Tuesday showed inflation in the euro zone eased to
just 0.8 percent in December, highlighting the risk of
"While we think that the ECB will remain on hold this week,
we are expecting a very dovish statement from ECB President
(Mario) Draghi," economists at ANZ wrote in a note to clients.
The generally positive economic backdrop also caused gold
to ease for a second session on Wednesday.
Even though most investors remain optimistic on prospects
for 2014, the economic recovery still faces threats. One is a
possible spike in bond yields as the Fed winds down its
bond-buying. Another is a rise in oil prices amid unrest in the
Middle East and Africa.
Brent crude has steadied above $107 a barrel after new
worries over Libyan supplies.