* World shares near 20-month high on global recovery hopes
* Euro adds gain vs dollar on hopes for European growth
* China inflation pick up hurts oil prices
NEW YORK, Jan 11 An improving economic outlook
held world shares near a 20-month high on Friday, while the euro
rose to its highest against the dollar since April in the wake
of encouraging remarks from the head of the European Central
A massive stimulus plan in Japan also boosted optimism about
future business activity, but nagging worries persisted about
global demand and a possible drag from the debt ceiling fight in
Washington, spurring selling in oil and basic metals.
As stocks and the euro gained appeal, investors trimmed back
their safe-haven holdings of U.S. and German government debt.
"Equities are very overdue for a rest but that shouldn't
make people throw in the towel in my opinion (as) they will
continue to be supported by central banks' very accommodative
policies," said Edward Page Croft, managing director at
investment advisory firm Stockopedia.
While Japan aims to jumpstart its economy, U.S. and European
central bankers have talked up the prospects for their economies
in the past 24 hours.
Philadelphia Federal Reserve Charles Plosser repeated his
outlook on Friday that the U.S. economy will likely grow about 3
percent in 2013, bringing the jobless rate down to 7 percent by
year-end. Plosser's remarks followed mildly upbeat comments from
St. Louis Fed chief James Bullard on Thursday.
Comments by ECB President Mario Draghi following the central
bank's policy meeting on Thursday suggesting Europe's economy is
set for a recovery in 2013 has raised bets that global growth
might gather momentum this year.
The MSCI index of world shares was little
changed at 349.33 points after rising earlier to 350.15, the
highest level since May 2011.
On Wall Street, the three major stock indexes opened lower
despite record earnings from Wells Fargo, the No. 4 U.S.
bank. The Standard & Poor's 500 index dialed back from its
five-year closing high on Thursday.
The Dow Jones industrial average was down 24.03
points, or 0.18 percent, at 13,447.19. The S&P 500 was
down 3.86 points, or 0.26 percent, at 1,468.26. The Nasdaq
Composite Index was down 5.54 points, or 0.18 percent,
Europe's FTSEurofirst 300 index of top companies
across the region also neared levels last seen in March 2011
shortly after the ECB decision and was consolidating those gains
on Friday to be little changed at 1,163.62 points.
The yield on benchmark U.S. 10-year Treasury notes
edged up to 1.91 percent, moving closer to an
eight-month high near 1.98 percent set a week ago.
German Bund futures fell 42 basis points to 142.29
after touching their lowest level since late November.
In the currency market, the euro extended Thursday's
rally against the dollar, rising 0.45 percent to $1.3327 after
touching $1.3365 earlier, its highest since April.
The greenback however strengthened against the yen, rising
0.61 percent to 89.28 yen, a 2-1/2 year high, after the Japanese
government agreed a $117 billion spending boost for the economy,
and new Prime Minister Shinzo Abe stepped up pressure on the
Bank of Japan to ease monetary policy more aggressively.
The BOJ is likely to adopt a 2 percent inflation target at
its Jan. 21-22 meeting, double the current goal, and will
consider more purchases of government debt to achieve the
target, sources told Reuters this week.
In the commodity markets, oil prices were slipping as
traders adjusted to the current lacklustre growth in the global
economy, which has prompted the world's biggest producer, Saudi
Arabia, to cut back supplies.
Data on Friday showing that China's annual consumer
inflation had accelerated to a seven-month high of 2.5 percent
in December also dampened demand as it reduced the likelihood of
the central bank easing monetary policy to boost activity.
Brent crude futures fell $1.60 or 1.4 percent a barrel to
$110.28 while U.S. oil future shed 56 cents or
0.6 percent at $93.26.
Gold prices fell 0.82 percent at $1,660.94 an ounce
as the firmer tone to the dollar prompted some buyers to cash in
gains after the metal's biggest one-day rise this year.