* China raises reserve requirement; growth outlook hit
* JPMorgan posts strong quarterly results, Intel too
* US retail sales rise, but fall short of expectation
(Updates with U.S. midday trading)
By Al Yoon
NEW YORK, Jan 14 (Reuters) - World stocks edged higher and
Wall Street rose on Friday as JP Morgan's strong earnings
offset weaker-than-expected U.S. retail sales, but China's move
to raise banks' reserves hit gold prices.
And in a reminder of the persistent debt problems in the
euro zone, Fitch cut Greece's credit rating to junk on Friday.
The move, which followed similar downgrades by Standard &
Poor's and Moody's in December, highlighted doubts about the
country's ability to get itself out of a severe debt crisis
that has shaken the euro zone.
A 47 percent jump in fourth-quarter profit at JPMorgan
Chase & Co. <JPM.N> soothed investors, even as much of the gain
came from dipping into money that the No. 2 U.S. bank had set
aside to cover bad loans. See []
"We're optimistic that the earnings season starting is
actually going to be pretty positive," said Thomas Nyheim,
vice president and portfolio manager at Christiana Bank & Trust
Co in Greenville, Delaware.
But U.S. gold futures fell more than 2 percent to a
one-week low on Friday -- tumbling $27.50 to $1,359.50 an ounce
-- as news that China's central bank raised lenders' reserve
requirements prompted a sharp sell-off. Spot gold <.XAU> slid
to $1,359.10, down from $1,372,75 late on Thursday.
U.S. Treasury debt prices were flat to slightly higher,
with the 10-year note's yield steady at 3.30 percent,
representing an oasis of calm compared with the dramatic slide
in U.S. municipal bond prices.
In the $2.8 trillion U.S. municipal bond market, the
sell-off continued for a fifth day, driving tax-free 30-year
bond yields up to 5.01 percent and reflecting investors'
nervousness about the shaky condition of state and local
finances throughout the United States.
Christopher Ryon, a portfolio manager with Thornburg
Investment Management, which oversees $75 billion in assets,
said there are anecdotal reports of crossover buyers stepping
into the market. "That sometimes indicates a market bottom,"
he said. For more details, please click on []
Earlier in the day, confidence in equity markets also sagged
as the U.S. Commerce Department reported sales at retailers
rose slightly less than expected in December. Sales for all of
2010 reversed two years of contraction, however, posting the
biggest gain in more than a decade. []
"The market is resilient," said Keith Springer, president
of Springer Financial Advisors in Sacremento, California.
"You had had every ingredient to bring a decline, such as
retail sales, yet it's holding up well," he said. "There is
anticipation over more stellar earnings."
A soggy start to U.S. trading and in Europe came after
China's 50-basis-point increase in required reserves forced its
banks to lock up more of their cash with the central bank as
Beijing hopes to drain the economy of excess money and tame
rising prices. []
The tightening briefly hit copper prices, and speculation
about such a move earlier sent Chinese stocks <> down 1.29
percent. Coming off a 28-month high on Thursday, the MSCI
All-Country World Index <.MIWD00000PUS> edged up 0.04 percent,
At midday in New York, the three major U.S. stock indexes
rose modestly, reversing earlier declines. The Dow Jones
industrial average <> rose 29.63 points, or 0.25 percent,
to 11,761.53 and the Standard & Poor's 500 Index <.SPX> gained
4.92 points, or 0.38 percent, to 1,288.68.
The tech-heavy Nasdaq Composite Index <> was up 8,94
points, or 0.33 percent, at 2,744.23, drawing some support a
day after Intel <INTC.O> posted better-than-expected quarterly
earnings. The semiconductor index <.SOX> shot up 2 percent.
The S&P MidCap 400 Index <.MID> hit an intraday record high
of 928.92 in midday trading, reflecting expectations for solid
U.S. growth.
The pan-European FTSEurofirst 300 <> dropped 0.1
percent, recovering some lossses as commodities, such as copper
and oil bounced off earlier lows. Oil fell 27 cents, or 0.30
percent, to $91.15 per barrel.
Japan's Nikkei average <> fell 0.86 percent after a
surprisingly weak settlement of options for January and a
stronger yen against the dollar trigger profit-taking.
The euro drew earlier support on Friday after a string of
successful debt auctions by struggling euro-zone nations calmed
fears of the region's credit crisis. A Fitch Ratings downgrade
of Greece's credit, noting a heavy debt burden is making the
nation vulnerable to adverse shocks, offset euro strength.
The Australian dollar fell after China raised banks'
reserve requirements and fostered speculation of cooler Chinese
growth. Australia's strong trade links with China make it
sensitive to Chinese growth expectations. See []
The euro -- on track for its biggest weekly gain since May
2009 -- also rose this week after European Central Bank chief
Jean-Claude Trichet's warning on inflation raised expectations
of rising interest rates. []
By midday, the dollar had erased losses against both the
euro and the yen as Fitch downgraded Greece, and as some
traders squared positions ahead of a three-day weekend in the
United States. The euro <EUR=> dipped 0.01 percent to $1.3353.
Against the Japanese yen, the dollar <JPY=> gained 0.13 percent
to 82.91 yen.
U.S. Treasury debt prices had rise after the retail sales
data, and also as higher gasoline prices pushed overall
December consumer prices up at their fastest pace in a year and
a half, which also weighed on consumer sentiment in early
January, according to a Reuters/University of Michigan survey.
[] []
But by midday, Treasury debt prices were almost flat.
Driving prices at the pump, U.S. oil prices <CLc1> have
soared more than 62 percent since early 2009. The S&P energy
index <.GSPE> has been rising for eight months and is close to
its highest since October 2008.
Within the U.S., however, shaky government finances are
hitting confidence of investors who have been yanking money
from the tax-exempt market.
Earlier, Treasuries also had gained, reflecting perceptions
that the national economic reports are unlikely to budge the
Federal Reserve from its $600 billion U.S. bond buying program
aimed at accelerating growth and lowering the lofty jobless
rate, analysts said.
For details, see []
The Fed's so-called quantitative easing program, or "QE 2,'
is a luxury liner for the financial companies," Springer
Financial's Springer said. "What the Fed is doing is giving
them a warchest."
(Additional reporting by Dominic Lau, Jessica Mortimer,
Emelia Sithole and Simon Falush in London, Ian Chua in Sydney,
and Wanfeng Zhou, Ryan Vlastelica, Alina Selyukh and Karen
Brettell in New York; Editing by Jan Paschal)
