World stocks up on growth outlook

April 5, 2011 - 0:0
LONDON (Reuters) - Solid signs of growth in the world economy supported global equities on Monday while expectations of higher euro zone interest rates took the euro to an 11-month high against Japan's yen. Investors were generally upbeat about the global economy following solid U.S. jobs data on Friday. World stocks as measured by MSCI were up a third of a percent, flirting with a month high and close to gaining 5 percent for the year to date. There were underpinned mainly by emerging stocks, up 0.6 percent. Japan's Nikkei closed up 0.1 percent. European stocks opened lower but posted gains soon after, adding to three-week highs hit on Friday. The FTSEurofirst 300 index of top European shares was up 0.1 percent after gaining 1.5 percent on Friday. Corporate activity was in focus with shares in chemical group Rhodia jumping after Belgium's Solvay launched a bid for its French rival. This growth improvement has led to expectations that the European Central Bank will raise interest rates on Thursday and that the U.S. Federal Reserve may be getting closer to withdrawing liquidity. ""As the economy turns the corner and gets back on its feet, central bankers are beginning to see inflation as a greater threat than lack of growth,"" said Jonathan Sudaria, dealer at Capital Spreads. ---- Rates drive euro Reflecting expectations of differing rate paths, the euro hit fresh 11-month highs against a broadly weaker yen and touched a five-month peak against the dollar. In contrast to the ECB, the Bank of Japan is likely to downgrade its economic assessment at its meeting on Wednesday and may consider finding more ways to help the economy recover from last month's massive earthquake and devastating tsunami. The euro briefly popped above 120 yen for the first time since May 2010 and was later at 119.60 yen. It hit a five-month high against the dollar of $1.4269 but was later at $1.4235. ""We expect the EUR to be supported this week in anticipation of a hawkish press conference alongside a widely expected rate hike,"" Barclays Capital said in a note. ""While we believe this will be sufficient to keep the market's attention away from wider (euro zone) peripheral concerns, they remain a risk.""