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GLOBAL MARKETS-Global stocks, oil rise on economic optimism

Published 12/28/2009, 12:51 PM
Updated 12/28/2009, 12:54 PM
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* Equities rise on U.S. retail data, higher oil price

* Oil at five-week high on US cold snap, recovery optimism

* Bond prices sag as equities gain in thin trading volume

* Dollar gains against the yen in holiday thin trade (Updates with U.S. markets, changes byline, dateline, previous SINGAPORE)

By Herbert Lash

NEW YORK, Dec 28 (Reuters) - Global stocks rose on Monday, with U.S. equities lifted by increased retail sales during the key holiday shopping season, and oil rose to a five-week high over $79 a barrel on signs of economic recovery.

The dollar rose against the yen in year-end positioning, but the U.S. currency was little changed against the euro as investors debated the prospects for further gains after a recent rally. [ID:nN28167153]

U.S. Treasury prices fell, sending benchmark yields to their highest level in nearly five months, as investors sold holdings ahead of another big round of government debt issuance this week. [ID:nN28322761]

Euro zone government bond prices also fell as gains in equity markets cut demand for lower risk government debt. [ID:nLDE5BR109]

Trading was thin in most markets in a holiday-shortened week. Markets in Britain, Canada and Australia shut for the Boxing Day holiday, while Monday was the last business day of 2009 for many Japanese companies.

There was little market impact from news over the weekend of an attempt to blow up a passenger plane flying to Detroit. [ID:nLDE5BP055]

U.S. equities edged higher as retailers were lifted by data that pointed to an improved performance during the holidays, while rising commodity prices boosted resource companies. [ID:nN28170442]

Sales at U.S. retailers rose 3.6 percent from Nov. 1 through Christmas Eve on Dec. 24, data from SpendingPulse, a unit of MasterCard Advisors showed, though sales were up only 1 percent when adjusted for an extra shopping day this year. The S&P Retail index <.RLX> added 0.5 percent.

Amazon.com Inc rose 2 percent to $141.26 after it said customers bought more e-books than physical books for the first time ever on Christmas Day as the Kindle e-reader became Amazon's most-purchased gift ever. [ID:nN28166632]

The Dow Jones industrial average <.DJI> was up 11.79 points, or 0.11 percent, at 10,531.89. The Standard & Poor's 500 Index <.SPX> was up 0.31 points, or 0.03 percent, at 1,126.79. The Nasdaq Composite Index <.IXIC> was up 4.97 points, or 0.22 percent, at 2,290.66.

European shares rose for a fifth consecutive session after advances in Asian equities and commodity prices, keeping them on track to record a gain of 25 percent this year -- their best annual performance since 1999.

"We certainly believe the rally can sustain if you look out into 2010. We can be assured that we are looking at a V-shaped rally in terms of corporate profitability," said Henk Potts, equity strategist at Barclays Stockbrokers.

"Equities look attractive in a year which interest rates remain low. Despite the rally this year, valuations still look undemanding," he said.

The pan-European FTSEurofirst 300 <.FTEU3> index closed up 0.5 percent at 1,043.93 points.

Bund futures briefly hit a six-week low on the first day of trading for the futures contract since Dec. 23, but strategists warned thin liquidity distorted market moves.

"This is a period of very low liquidity so even if I do see a weak tone in bonds today, the movement is not very meaningful," said Luca Cazzulani, a strategist at UniCredit in Milan.

The benchmark 10-year U.S. Treasury note was down 9/32 in price to yield 3.84 percent.

The dollar was down against a basket of major currencies, with the U.S. Dollar Index <.DXY> down 0.05 percent at 77.608.

The euro was down 0.03 percent at $1.4392. Against the yen, the dollar was up 0.43 percent at 91.57.

"The dollar is digesting its recent strong advance," said Andrew Bekoff, chief investment officer for Family Office Group in New York.

The dollar has gained broadly in recent weeks on optimism that the U.S. economy may be poised for better growth in 2010, Bekoff said. Gains against the euro have been bolstered by concerns that euro-based economies won't recover as quickly, he said.

U.S. light sweet crude oil rose 77 cents, or 0.99 percent, to $78.82 per barrel.

Oil has climbed more than 12 percent from a dip below $70 two weeks ago on expectations of rising consumption and falling inventories in the United States, where companies have been drawing down stockpiles for end-year tax purposes.[EIA/S]

"There were some strong draws in the stocks last week and it is cold in the U.S.," said Olivier Jakob, analyst at Petromatrix. "But the volumes are very light."

U.S. gold futures turned lower in quiet trade on weak buying sentiment. [ID:nN28417116]

Japan's Nikkei average <.N225> rose 1 percent to a four-month high on data showing factory output rising for the ninth straight month in November. The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> rose 0.7 percent. (Reporting by Leah Schnurr in New York; George Matlock, Dominic Lau and Alex Lawler in London; writing by Herbert Lash; Editing by Leslie Adler)

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