Dollar heads for worst week in five as stocks cheer record streak

LONDON (Reuters) - World stocks advanced for a fourth straight day on Friday on expectations of broad-based global growth, while the dollar was on course for its worst week in five as investors awaited U.S. inflation data.

MSCI's world equity index, which tracks shares in 47 countries, was up 0.1 percent after hitting record highs on Thursday.

Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan hit a 10-year high.

European shares rose to their highest level in nearly four months, helped by some well-received earnings updates. The pan-European STOXX600 rose 0.3 percent and was set for its fifth straight week of gains as were world stocks.

Germany's DAX index was up 0.1 percent, just below an all-time high hit in the previous session, while Britain's FTSE eased back 0.1 percent after a record close on Thursday.

Wall Street futures indicated a positive open for the S&P 500 index.

"We're seeing positive economic news even in the midst of so called geopolitical risk, I think investors are generally more optimistic right now," said Craig Erlam, senior market analyst at OANDA, referring to strong corporate earnings.

"Earnings in the second quarter were very positive, and looking beyond the impact of hurricanes, it seems like there's improved fundamentals in the U.S. and Europe."

Emerging market stocks were buoyant too as another 0.2 percent rise set their latest 6-year peak.

In currencies, the dollar stayed on the defensive after minutes from the last U.S. Federal Reserve meeting showed policymakers remained divided on U.S. inflation prospects.

The index which measures the greenback against a basket of six major currencies was flat ahead of consumer price inflation data, due at 1230 GMT.

"Abating political risks in the U.S. and growing Fed rate hike bets have pushed the dollar higher in recent weeks," Credit Agricole strategists said in a note.

"With a December rate hike almost fully priced in by now, however, investors are starting to focus on the Fed's still cautious forward guidance and hence the limited scope for a further increase of the dollar's rate advantage."

NEW FED CHIEF

On top of the near-term inflation readings, investors are looking at whom U.S. President Donald Trump will nominate as successor to Fed Chair Janet Yellen, whose term expires next February.

White House Chief of Staff John Kelly said on Thursday that Trump was "some time away" from making a decision, while another official said Trump had met with Stanford University economist John Taylor -- of economics text book Taylor-rule fame -- to discuss the job.

Meanwhile, the euro was flat but still set for its biggest weekly rise in a month. [FRX/]

European Central Bank policymakers broadly agreed to extend asset purchases at a lower volume at their October policy meeting with views converging on a nine-month extension, sources at the central bank told Reuters.

Britain's pound rose to a 10-day high, boosted by a report in Germany's Handelsblatt newspaper that the European Union could offer Britain a two-year transitional Brexit deal. [GBP/]

The most eye-catching move, however, was from digital currency Bitcoin as it soared by as much as 7.4 percent after Thursday's 13 percent gain, to hit a record high of $5,846. It is up more than 450 percent this year.

The chief financial officer of JPMorgan Chase & Co said the firm was open-minded about the future potential use of digital currencies, appearing to dial back comments last month from his boss, Chief Executive Officer Jamie Dimon, who said bitcoin was a "fraud".

Among commodities, copper prices held firm after hitting a one-month high on Thursday as optimism over the demand outlook from major consumer China fuelled buying.

London copper futures were at $6,898.50 a tonne, up 0.2 percent on the day.

Oil prices also climbed after data showed both U.S. crude production and inventories had declined. Crude was set for its sixth weekly rise in the last seven weeks. U.S. crude jumped 2 percent to $51.59 a barrel. Brent crude rose 2.2 percent to $57.50 a barrel.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

(Additional reporting by Helen Reid in London and by Asia markets team; Editing by Gareth Jones/Keith Weir)

10/13/2017 7:25

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