* World shares near 20-month high on global recovery hopes
* Yen falls against dlr as Japan signals big policy shifts
* China inflation pick-up hurts oil
By Richard Hubbard
LONDON, Jan 11 World shares hovered near a
20-month high on Friday as upbeat comments from the European
Central Bank and a massive stimulus plan in Japan boosted
optimism over the global economic outlook.
U.S. stock index futures pointed to a steady start on Wall
Street, a day after the S&P 500 hit a five-year high,
with record profits by Wells Fargo, the first big bank to report
this season, likely to support sentiment.
The MSCI index of world shares was unchanged
at 349.6 points, close to its highest level since May 2011.
Hopes for steady global growth were reinforced on Thursday
by strong Chinese export data and comments from the ECB
suggesting Europe's economy is set for a recovery in 2013.
The ECB also said it had decided unanimously to keep
interest rates at a record low of 0.75 percent and had not even
discussed further cuts.
"The (market) optimism is exceptionally exuberant at the
moment, and it comes on the back of the unanimous vote in the
ECB yesterday on rates," said Brenda Kelly, markets analyst at
financial spread-betting company IG.
Europe's FTSEurofirst 300 index of top companies
across the region neared levels last seen in March 2011 shortly
after the ECB decision and hung on to the gains on Friday,
little changed at 1,163.62 points.
London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX were all broadly steady.
"Equities are very overdue 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
The euro was also unchanged at $1.3270 but only because the
ECB's more upbeat views had sent the common currency up 1.6
percent on Thursday, for its biggest daily gain in five months.
The better tone in the markets encouraged return-hungry
investors to snap up a 3.5 billion euro offer of new three-year
Italian bonds, which sold at the lowest yields since March 2010.
The auction result followed a well received Spanish debt
sale on Thursday, and reflects the growing view among investors
that the worst of the euro zone's three-year debt crisis is
over, thanks largely to the efforts of the ECB.
Italy, along with Spain, have become more attractive to
investors since the ECB pledged to buy unlimited amounts of debt
from any euro zone country that gets into trouble and is willing
to meet its reform conditions.
Ten-year Italian bond yields fell 3.5 basis points after the
latest auction to around 4.1 percent, their lowest
level in over two years.
Meanwhile the yen fell further against the dollar 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.
The prospect of looser monetary and fiscal policy when new
data has revealed that Japan's current account deficit is
deteriorating - meaning it will need to attract funds from
overseas - has put enormous pressure on the yen.
The dollar was up 0.2 percent at 88.95 yen, a 2-1/2 year
high, and was heading for 95 yen by the end of the first
quarter, according to Ian Stannard, head of European FX strategy
at Morgan Stanley. "The pace of increase, not just (in
dollar/yen) but also the pace of policy reforms in Japan, is
exceeding market expectations," he said.
In the commodity markets oil prices slipped 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 more than $1 a barrel to $110.62
, while U.S. crude slipped 40 cents to $93.42.
Gold prices slipped below $1,670 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.