* European shares hover at 5-yr high as euro zone gains
* Wall Street expected to start higher after results
* U.S. oil, gold rise, showing some optimistic on growth
* Dollar index pushes higher; Aussie remains under pressure
* Nickel heads for best week in almost a year
By Marc Jones
LONDON, Jan 17 European shares reached a new
5-1/2 year high on Friday as a third weekly gain on the spin for
Portuguese and Spanish bonds fed improving sentiment in the
region's Mediterranean rim.
Disappointing results from some of Wall Street's big names
on Thursday had dampened investors' mood overnight but Europe's
ongoing recovery and hopes U.S. data later will paint a brighter
picture put a spring back in their step.
Future's prices pointed to gains of around 0.3 percent for
the major U.S. indexes when trading resumes in New York, while
the dollar index, which tracks the greenback against a
basket of six major currencies, was already pushing higher.
After another week of steady progress, European shares
were on the up again as they climbed 0.5 percent.
London's FTSE, Paris's CAC 40 and
Frankfurt's Dax all made gains and bourses in Portugal
, Italy and Spain continued their red
hot streak to leave the region heading for its fourth week of
gains in five.
"Investors are willing to take more risk and in the
periphery we have seen quite a lot of good developments," said
Rabobank euro zone economist Emile Cardon.
"I think economic growth in most European countries will
continue to rise ... Portugal saw a lot of demand when it went
to the capital markets and we have seen quite good progress in
Ireland, so most of these developments are supportive."
After a brief early breather, euro zone bond markets also
continued their rally as Portuguese and Spanish government bonds
added to a third week of strong gains.
Portuguese yields were nestled at 3-1/2 year
lows at just over 5 percent after Standard & Poor's removed the
immediate threat of a downgrade to Lisbon's rating on Friday.
The country's borrowing costs are now down a full percentage
point since the end of last year.
"It was not that long ago that we were almost certain that
Portugal would still need another programme," said Marius
Daheim, chief strategist at Bayerische Landesbank.
Applying some pressure on the bond market rally was a third
spike in as many months in overnight euro money market rates,
which left them above the normal ceiling of the European Central
Bank's main 0.25 percent borrowing rate.
The move up has been driven by a sharp drop in the amount of
spare cash sloshing around the euro zone banking system. Banks
have paid back almost half the 1 trillion euros
the ECB pumped into markets at the height of
the euro crisis.
Rising money market rates are one of the factors Mario
Draghi has underlined as a potential trigger for the ECB to cut
interest rates again or take even more drastic action.
There were signs of self-regulation of their ECB borrowing
by banks on Friday but it provided little respite for the euro
as it struggled against the strong dollar.
Sterling, in contrast, surged half a percent to $1.6440
after UK retail figures came in far stronger than forecast,
wrongfooting many traders who have turned more bearish on the
pound after its strong run over the last six-months.
"We were contemplating a test of support for the pound at
$1.6320. In the end we got this stonking number which provoked a
genuine reaction," said Daragh Maher, strategist with HSBC in
In Asian trading, share markets were subdued after
disappointing earnings on Thursday from Wall Street giants
Goldman Sachs and Citigroup Inc had dampened the
Some of Thursday's gloom was cleared ahead of the Wall
Street restart as global giant General Electric posted a
rise in profits, though costly legal bills hit bank Morgan
A batch of U.S. data due later will include December U.S.
housing starts, building permits, industrial production and the
University of Michigan sentiment index, all of which
investors will be hoping will paint a brighter picture.
U.S. crude oil futures rose 0.5 percent to $94.50 a
barrel, not far from a two-week peak of $94.64 reached earlier
this week after U.S. government data showed a
larger-than-expected drop in inventories. They were set to post
their first weekly gain in three weeks.
Gold was steady at $1,242 an ounce. However, it was
nickel that caught the eye: despite a dip on the day,
Indonesia's recent ban on ore exports left the metal heading for
its biggest weekly rise in almost a year.