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GLOBAL MARKETS-Stocks firm on rate view, dollar at 15-mth lows

Published 11/11/2009, 07:31 AM
Updated 11/11/2009, 04:18 AM

* MSCI world equity index up 0.5 pct, Wall St set to open up

* Dollar hits 15-month low; gold hits highs above $1,115

* Government bonds fall; oil firms

By Natsuko Waki

LONDON, Nov 11 (Reuters) - The dollar hit a fresh 15-month low and world stocks held near a three-week high on Wednesday after remarks from Federal Reserve officials reinforced the view that U.S. interest rates will remain near zero for some time.

Gold, boosted by the falling dollar, rose to record highs above $1,115 an ounce, and Wall Street looked set to open higher.

Strong Chinese data on factory output and retail sales, along with forecast-beating results from Italy's biggest bank Unicredit following upbeat reports from other banks, encouraged investors to buy riskier assets.

Top Fed officials said in a string of speeches on Tuesday that high unemployment and reluctant consumers would likely make a U.S. economic recovery weak and erratic. [nN10315173]

Data on Friday showed the U.S. jobless hit 10.2 percent in October, its highest since 1983.

The prospect of near-zero interest rates persisting has prompted investors to sell dollars for higher-yielding currencies, such as the Australian dollar, while keeping alive the momentum for a risk asset rally.

"Market volatility may remain high but I continue to believe we will see significant new highs across the board before the year-end," said Stephen Jen, managing director of macroeconomics and currencies at Bluegold Capital Management.

"The Fed will not be in a hurry to tighten. With incremental growth both in the U.S. and the rest of the world being positive, and if the Fed remains easy, I believe risk assets will continue to rally."

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The dollar index, which measures its strength against major currencies, was down around 0.2 percent <.DXY>, while the euro rose 0.3 percent to two-week highs. It was at $1.5029

The Australian dollar hit a 15-month high of $0.9345

UPBEAT BANK RESULTS MSCI world equity index <.MIWD00000PUS> rose half a percent towards its highest levels in three weeks. The FTSEurofirst 300 index <.FTEU3> was up 1 percent.

Unicredit, the biggest lender in central and eastern Europe, posted a fall in third-quarter net profit but beat analysts' forecast with the help of a surge in trading income. ING posted a third-quarter in line with preannounced results.

"There are signs of gradual economic rival coupled with low levels of inflation. It is just a favourable environment for risky assets and risk taking," said Jeremy Batstone-Carr, head of research at Charles Stanley.

Emerging stocks <.MSCIEF> rose 1.2 percent.

Other Chinese data showing a dip in the pace of investment and loan growth and lower-than-expected exports and imports offered reasons to be cautious.

Analysts say loans are key since they have been seen as a driver of China's domestic demand-led economic recovery and a factor behind fund flows into China's stock market.

U.S. crude oil rose 0.6 percent to $79.53 a barrel.

The December Bund future was down 4 ticks after weak demand in a sale of almost 5 billion euros in new 10-year German bonds. (Additional reporting by Joanne Frearson; Editing by Andy Bruce)

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