Global shares hit 2016 high, FX hit by Singapore sting

By Marc Jones

LONDON (Reuters) - World stocks rose to their highest level in more than four months on Thursday and the dollar chalked up a third day of gains as markets took a positive view ahead of top policymaker and oil producer meetings.

Singapore set the tone for the World Bank and International Monetary Fund spring meetings, to be held this week in Washington, as its normally conservative central bank unexpectedly eased policy.

European shares added to Wednesday's substantial gains, though U.S. stock index futures (ESc1) (1YMc1) pointed to a modestly lower open on Wall Street.

The Bank of England kept interest rates on hold, as expected, but sterling continued to suffer worries over how a June vote on Britain's EU membership will play out.

Oil prices initially fell as OPEC warned of slowing demand and Russia hinted that there might only be a loose agreement on output levels at an exporter meeting in Doha at the weekend. Brent crude (LCOc1) later recovered.

The dollar, in which most commodities are priced, flexed its muscles again having just chalked up its biggest one-day gain in over a month. [FRX/]

It was at $1.1264 per euro , way above a six-month low of $1.1465 touched on Tuesday, and down 0.1 percent on the yen at 109.26 yen but well away from Monday's 17-month trough of 107.63 yen.

"The dollar has been doing well over recent days, particularly against Asian currencies today after the MAS (Singapore central bank) eased policy," said Societe Generale (PA:SOGN) FX strategist Alvin Tan.

"We have the IMF meetings coming and we also have the Doha meeting which actually for the markets could be more important considering how bulled up the oil market has been recently."

European shares (FTEU3), which rose 2.6 percent on Wednesday, were up 0.1 percent, though miners (SXPP) fell on lower oil prices. (LCOc1)

Big gains in Asia meant MSCI's 46-country All World stocks index rose for a fifth day to its highest this year. Asian shares (MIAPJ0000PUS) have surged 5 percent since Friday.

SINGAPORE STING

The main action came in Singapore as its central bank set the rate of appreciation of the Singapore dollar policy band at zero after data previously showed economic growth stalled in the first quarter.

That sparked the biggest drop for the Singapore dollar in eight months and triggered a downdraft in other Asian currencies, including the Korean won .

"It's very interesting, and eye-catching, that the MAS has gone back to post-global financial crisis settings, and sends a strong message about the weak external environment," said Sean Callow, senior currency strategist at Westpac in Sydney.

Earlier this week, the IMF cut its global growth forecast for the fourth time in the past year, citing factors including chronic weakness in advanced economies.

In the government bond markets, German 10-year yields -- the benchmark for euro zone borrowing costs -- rose 2.1 basis points to 0.16 percent after the European Union's statistics agency revised upwards its March estimate of annual inflation to zero from 0.1 percent.

U.S. 10-year yields (US10YT=RR) were up 2.5 bps at 1.787 percent. The yield on the 30-year Japanese government bond (JP30YT=RR) briefly hit a record low of 0.385 percent in the run-up to a sale of the bond, which garnered lacklustre demand.

Oil markets saw more choppy trading. Prices fell after Reuters reported that Russian oil minister Alexander Novak told a closed-door briefing that a deal on an oil output freeze scheduled to be signed this month in Doha will be loosely framed with few detailed commitments.

Brent crude futures (LCOc1) fell 1.5 percent in Asian and European trade to $43.53 per barrel after scaling a high of $44.94 on Wednesday. They later recovered to $44.33, up 15 cents on the day.