By Richard Leong
NEW YORK, July 22 (Reuters) - World stock prices rose to
near five-year highs on Monday on growing investor optimism
after Japanese Prime Minister Shinzo Abe strengthened his power
base, adding weight to his plans to jumpstart the world's
The Standard & Poor's 500 stock index hit a record closing
high for a third straight session.
Investors' mood was also helped by a pledge from the Group
of 20 on Saturday to put growth before austerity, seeking to
revive a global economy that the bloc described as 'too weak.'
The yen rebounded after an initial dip in Tokyo, but many
traders viewed the bounce as temporary in view of Abe's upper
house election win on Sunday.
Riskier assets, including peripheral euro zone bonds, got a
boost after Portugal's president moved to keep the country's
coalition government intact, patching over recent troubles.
However, disappointing earnings from McDonald's
mitigated the upbeat mood for equities as the U.S. fast-food
giant posted weaker-than-expected results.
'McDonald's (earnings) headlines were a little weak, but I
think we are still in the strong start of the earnings season,'
said Ryan Detrick, senior technical strategist at Schaeffer's
Investment Research in Cincinnati, Ohio.
Data showing a surprise drop in U.S. existing-home sales in
June also tempered the initial buying of equities and other
'I think we're stuck in a range and we're very much at the
top of this range,' said Brian Battle, director of trading at
Performance Trust Capital Partners in Chicago.
'What will keep us from going up is fundamentals. We need
economic fundamentals to drive market prices higher.'
MSCI's world index, which tracks stocks in
45 countries, gained 0.44 percent to 375.49, helped by a 0.47
percent rise in Tokyo's Nikkei index. It was about 7
points below a five-year high set in late May.
The Dow Jones industrial average closed up 1.81
points, or 0.01 percent, at 15,545.55. The Standard & Poor's 500
Index ended up 3.44 points, or 0.20 percent, at 1,695.53.
The Nasdaq Composite Index finished up 12.77 points, or
0.36 percent, at 3,600.39.
Both the S&P 500 and the Dow hit all-time highs last week
following a moderate pullback of fears that the Federal Reserve
might reduce its bond-purchase stimulus later this year if the
economy improves further.
In Europe, upbeat results from Dutch electronics maker
Philips and Swiss banks UBS and Julius Baer boosted European share prices, but early gains were
pared as profit-taking emerged.
The pan-European FTSEurofirst 00 index ended 0.14
percent higher at 1,210.70, adding to its month-to-date gain of
'We might consolidate here a bit after the rally but we are
not entering a correction or anything. The market is shaking off
the bad news from Google and Microsoft already,' and that shows
the upward momentum is strong, Schaeffer's Detrick said,
referring to sub-par results from the two technology companies
The slight pause in the summer stock rally provided further
support for low-risk government debt in the wake of remarks from
U.S. Federal Reserve Chairman Ben Bernanke that signaled the
central bank will leave short-term rates near zero for a long
time even if it stops purchasing bonds.
The benchmark 10-year U.S. Treasury note yield
earlier touched 2.465 percent, its lowest level in over two
weeks, before turning back to 2.480 percent, which was unchanged
from late on Friday.
German Bund futures were little changed at 144.25.
The yen bounced back after an initial dip in Tokyo trading
on some dollar selling by Japanese investors, which in turn
triggered stop-loss selling in thin summer conditions.
'Japanese portfolio outflows is what will drive the yen
lower in coming months. ... Confidence from this victory can be
constructive but these outflows will be a slow-moving process,'
said Ned Rumpeltin, head of G-10 FX strategy at Standard
Chartered Bank in London.
The dollar was down 1.1 percent on the day at 99.53 yen , a turnaround from an Asian session high of 100.71. The
euro was 0.52 percent lower at 131.25 yen, well off an
early high of 132.43.
The dollar index was 0.48 percent lower at 82.207,
slipping further away from a three-year high set earlier this
Commodities were mostly firmer thanks to the softer dollar.
Spot gold recorded its biggest-single day gain in
more than a year to its highest level in a month. It last traded
up almost 3 percent at $1,334.36 an ounce.
Copper gained 1.6 percent to $7,023.75 a tonne.
Oil prices were mixed after erasing early gains. Brent crude
in London eked out an 8 cent, or 0.07 percent, gain at
$108.15 a barrel, but U.S. crude settled down $1.14, or
1.06 percent, at $106.91 after hitting a near 16-month peak of
$109.32 on Friday.
(Additional reporting by Angela Moon, Rodrigo Campos, Frank
Tang in New York; Marc Jones, Emelia Sithole-Matarise and
Carolyn Cohn in London; Editing by Dan Grebler and Leslie Adler)
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