* MSCI world equity index edges up
* European shares steady near 5 1/2-year highs
* Strong U.S. trade data boost 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 hit a four-year
low also bolstered optimism over the global economy and lifted
the dollar. Meanwhile, a bumper Irish debt sale confidence that
peripheral euro zone countries were on the mend.
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 provided
fresh evidence that the euro zone economy and world trade are
recovering from the 2008 financial crisis.
Further signs came from strong 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
Wednesday, with Spanish yields reaching four-year lows.
The pan-European FTSEurofirst 300 index was flat,
trading near 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 by 0.4 percent.
Norman Boersma, a chief investment officer at Franklin
Templeton's Templeton Global Equity Group, said that while there
was still a degree of uncertainty over the economic outlook,
equities remained an attractive place to put money.
"Overall, we think equities remain cheap relative to other
asset classes and an attractive source of yield potential in a
low interest-rate environment," he said.
Old Mutual Global Investors fund manager Francois Zagame
also cautioned that the economy needed to strengthen further but
was optimistic over the longer-term prospects for equities in
"We're cautiously optimistic on equities altogether. 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 the Federal Reserve's
decision to scale its bond-buying programme. That programme
drove many investors into equities by curtailing returns on cash
and bonds, helping fuel 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. Analysts
and investors doubt it will do more than flag its readiness to
act in the future, despite another surprising fall in euro zone
Data on Tuesday showed inflation in the euro zone eased to
just 0.8 percent in December, highlighting the risk of deflation
facing ECB head Mario Draghi.
"While we think that the ECB will remain on hold this week,
we are expecting a very dovish statement from ECB President
Draghi," economists at ANZ wrote in a note to clients.
The generally positive economic backdrop 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
Another is a rise in oil prices amid unrest in the Middle
East and Africa. That led to Brent crude's steadying above $107
a barrel after new worries over Libyan supplies.