* Global shares gain on data, euro hits 11-month peak
* Positive global growth outlook also supports oil
* European banks to repay more ECB loans than predicted
* German Ifo raises hopes of euro zone turnaround
By Herbert Lash
NEW YORK, Jan 25 (Reuters) - The euro hit an 11-month high and global equity markets rose on Friday on signs of a healthier European financial system and a brighter outlook for Germany, while U.S. stocks extended a rally to an eighth day.
Solid U.S. corporate earnings and the strongest seasonal inflows into U.S. stock mutual funds in a decade also helped lift Wall Street, and the S&P 500 topped the 1,500 mark for a second day in a row, a level last reached in late 2007.
News from Europe was also bullish. The European Central Bank said banks will repay 137 billion euros of crisis loans next week, handing more cash back earlier than expected in a sign parts of the financial system are returning to health. [ID:n L6N0AU7KR]
The repayments show financial strains are receding and “allowing investor risk appetite to rise. So you’re starting to see more interest in stocks than in bonds, less interest in safe-haven currencies, and just a general rise in risk appetite,” said David Joy, chief market strategist at Ameriprise Financial in Boston.
By taking back the three-year loans after only one year, the ECB has become the first major central bank to start moving away from unconventional monetary policy measures to tackle the crisis. By contrast, the U.S. Federal Reserve and Bank of Japan are buying bonds to stimulate economic growth.
The scale of the repayment, which beat the average estimate of around 100 billion euros in a Reuters poll, sent the euro higher, pushed German government bond prices down and boosted bank stocks across the euro zone.
“This is more than we had expected and underlines the material improvement in funding conditions for most European banks in the past 12 months,” said Michael Symonds, a credit analyst at Daiwa Capital Markets.
Global shares as measured by MSCI’s all-country world equity index rose 0.39 percent to 354.56.
The Dow Jones industrial average was up 49.78 points, or 0.36 percent, at 13,875.11. The Standard & Poor’s 500 Index was up 5.18 points, or 0.35 percent, at 1,500.00. The Nasdaq Composite Index was up 12.59 points, or 0.40 percent, at 3,142.97.
Among companies beating analysts’ expectations, Procter & Gamble Co’s quarterly profit blew past expectations and Honeywell International Inc posted earnings just above Wall Street estimates. P&G rose 3.9 percent to $73.17 but Honeywell barely edged higher, up 0.02 percent at $68.25.
Of companies in the S&P 500 that have reported earnings to date for the fourth quarter of last year, 68 percent have beaten analysts’ expectations, slightly higher than the 65 percent average over the previous four quarters.
European shares scaled fresh multi-month peaks on the bigger-than-expected loans paybacks and after the closely watched Ifo business morale index beat consensus estimates for January to match the most optimistic economist’s forecast.
Frankfurt’s DAX index led the rally, scaling five-year highs and closing 1.4 percent higher.
The FTSEurofirst 300 index of pan-European shares closed 0.32 percent higher at 1,174.81 points.
German bond futures fell 76 ticks
“People are choosing to pounce on any bit of good news. For the moment the trend is very much to the upside,” said Stephen Walker, head of equities research and market strategy at Ashcourt Rowan.
The euro hit $1.3471, its highest since February 2012, to extend gains following the release of data showing the German economy gathering speed again after contracting late last year. The euro last traded up 0.64 percent at $1.3459.
Data showing new U.S. single-family home sales fell in December was not a cause for concern on Wall Street as the median sales price rose and the sector still appears set to be a bright spot in the U.S. economy’s recovery.
The Commerce Department raised its estimate for sales in November by 22,000 to a 398,000-unit rate, making the sales pace for the month the fastest since April 2010. Government data for new home sales are subject to substantial revisions.
Manufacturing in China and the United States grew this month at the quickest pace in about two years.
Oil prices rose above $113 a barrel as robust economic data from the United States, China and Germany lifted the outlook for global fuel demand. Brent crude rose 13 cents to $113.41 a barrel. U.S. crude fell 1 cent to $95.94.
U.S. Treasury debt yields rose, with 30-year bonds trading a point lower in price after better-than-expected euro zone data spurred selling of safe-haven U.S. government debt.
The benchmark 10-year U.S. Treasury note was down 20/32 in price to yield 1.9237 percent.