Economic recovery lifts world stocks

LONDON: World stocks punched fresh 29-month highs on Wednesday, lifted by strong data pointing to sustained global economic recovery, continuing positive corporate earnings and easing concerns about Egypt.

Wall Street looked set to open flat to slightly higher.

Oil prices fell back from 28-month highs, but Brent crude was still more than $101 a barrel on worries that unrest in Egypt could trigger changes to the status quo elsewhere in the Middle East and North Africa.

The dollar fell to three-month lows against a basket of major currencies before recovering slightly.

MSCI's all-country world stock index, one of the broadest gauges of global equities, was up 0.4 percent after earlier hitting levels last seen in August 2008.

Its developed market counterpart gained 0.3 percent, close to a high last seen in early September 2008.

Emerging markets were up 0.6 percent on the day, but remain down more than 1 percent for the year, reflecting a recent shift by investors from emerging to developed markets.

Stock investors were cheered on Tuesday by strong factory data worldwide, which pushed US benchmark stock indexes to their highest closing levels since June 2008.  Strong earnings from delivery firm UPS Inc and drugmaker Pfizer in the United States on Tuesday, and Imperial Tobacco on Wednesday added to the mood.

"The world economy appears to be improving a little faster than expected, valuations are ok and companies are publishing quite good results," Geert Ruysschaert, strategist at BNP Paribas Fortis Private Banking, said. "So investors can take advantage of that."

The pan-European FTSEurofirst 300 was up 0.1 percent, off its highs but at a 3.5 percent year-to-date gain. Earlier, Japan's benchmark Nikkei ended up 1.8 percent for its biggest daily gain since Dec. 2.

Concerns about the political crisis in Egypt, meanwhile, were easing on financial markets after President Hosni Mubarak said he will step down at the end of his term in September, although protestors continue to demand an immediate end to his 30-year rule.

Foreign investors have begun to show renewed interest in Egyptian bonds and stocks and the cost of insuring Egytian debt against default fell.

DOLLAR AT LOWS

The dollar hit a 12-week low but then rebounded. Expectations of loose US monetary policy are encouraging risk-taking and concerns over euro zone peripheral debt seemed to be contained.

"The dollar is weak due to the huge US deficit, no yield and a very dovish central bank," said Ray Farris, currency strategist at Credit Suisse.

"The market is now embracing the idea that the euro area political elite are going to do enough to prevent real financing stress in the periphery which would enable the ECB (European Central Bank) to hike rates."

The dollar index dipped to 76.881, its lowest since early November. It was later at 77.121.

The euro climbed to $1.3861, its highest since early November, but later dropped back to $1.3798.

In a further sign that the euro zone crisis is at least being put on a back-burner by investors, the premium demanded to hold Spanish and Italian government bonds rather than German debt fell.

Commodity prices continued to rise on improving global growth prospects with copper hitting a fresh record high at close to $10,000 a tonne.

Gold fell as rising equities, hopes for continued global recovery and easing concern about Egypt dampened its safe haven appeal. Spot gold fell more than $7 to around $1,333 an ounce, well below its December record high of around $1,430.