* Yuan drops most in more than six years after PBOC moves
* Wall St holds near record highs
* U.S data boosts gold prices
By Chuck Mikolajczak
NEW YORK, Feb 25 Stocks on major world markets
edged higher on Tuesday, holding near six-year highs as
investors shrugged off mixed U.S. economic data, while the U.S.
dollar rose against the yuan on suspicion China's central bank
intervened in the currency market.
Wall Street's benchmark S&P 500 was near record
highs, while MSCI's all world index, which
tracks stocks in 45 countries, was in positive territory for the
13th session in 15 and at its highest level since December 2007.
Recent data has fostered concerns about the strength of the
U.S. economy, though equities investors seem inclined to believe
the severe winter weather is a large part of the weakness. The
S&P/Case-Shiller index showed home prices rose slightly more
than expected in December, though February consumer confidence
fell short of expectations.
"We're not being aggressive, since valuations aren't
spectacular here, but this certainly isn't a time to run to
cash," said Rex Macey, chief investment officer at Wilmington
Trust in Atlanta, Georgia. "We expect we'll take two steps
forward and one step back for a while."
Uncertainty over China has stoked worries about a
faster-than-projected slowdown in its massive economy,
dovetailing with political worries in other big emerging markets
like Ukraine, Thailand, Nigeria and Turkey.
A hefty $38 billion has been pulled out of emerging markets
over the last 17 weeks and $44.2 billion has flowed into
developed market equity funds since the start of the year.
The yuan continued several weeks of weakness,
guided by a series of moves by the central bank aimed at
instilling caution in those who for years have been betting on
its rise versus other major currencies.
Tuesday brought a significant acceleration in the move. The
yuan's sharpest drop since December 2008 extended its fall in
the past week to slightly over 1 percent, amid talk the People's
Bank of China had been discreetly intervening in the spot
China allows the yuan to move 1 percent above or below a
midpoint set daily, but experts believe the recent depreciation
is intended to set the stage for a widening of that band to 2
percent or more this year to make it more free moving.
In Europe, the pan-regional FTSEurofirst 300 was
off 0.02 percent.
The euro and benchmark German government bonds
kept to tight recent ranges, with little impact from
new European Commission forecasts that slightly increased its
growth estimate for the euro zone to 1.2 percent in 2014, with a
further 1.8 percent expansion next year.
Inflation was seen at 1 percent this year and 1.3 percent in
2015, still well short of the European Central Bank's target of
just below 2 percent. The ECB meets early next month and will be
armed with its own in-house forecasts.
Goldman Sachs pushed back its prediction of a rate cut until
April, although it did not rule out a move by the ECB to keep
money market liquidity topped up by ending its weekly
'sterilization' of past government bond purchases.
The Dow Jones industrial average rose 14.93 points,
or 0.09 percent, at 16,222.07. The Standard & Poor's 500 Index
was up 0.86 points, or 0.05 percent, at 1,848.47. The
Nasdaq Composite Index was down 1.63 points, or 0.04
percent, at 4,291.34.
U.S. Treasuries, the benchmark for global borrowing costs,
rose 12/32 in price on the benchmark 10-year note to
yield 2.705 percent.
Gold prices have pushed to their highest level in four
months. Spot gold hit its highest since
Oct. 30 at $1,342.81 an ounce and was trading up 0.4 percent at
$1,342.35 an ounce.
Oil prices faded just a little, with Brent crude at
$109.81 a barrel and U.S. oil at $101.59, weighed down by
forecasts of rising U.S. crude inventories as icy weather eases.