GLOBAL MARKETS-US data bolsters stocks, saps Treasuries

                                

                                
 * U.S. retail sales data boosts global stocks
                                
 * Euro strengthens vs. dollar
                                
 * Investors speculate on Fed meeting outcome
  (Updates with U.S. midday trading)
                                
 By Al Yoon and Alina Selyukh
                                
 NEW YORK, Dec 14 (Reuters) - World stocks rose on Tuesday,
nearing a two-year high set last month, and Treasury yields
jumped after stronger-than-expected U.S. consumer spending
boosted optimism of a lasting global economic recovery.
                                
 Benchmark U.S. Treasury 10-year yields hit their highest
levels in more than six months after the U.S. reported retail
sales rose for a fifth straight month and the producer price
index also increased more than forecast, suggesting economic
growth was accelerating. For details, see [ID:nN14261708]
                                
 "The hand-off to 2011 looks very promising," Tom Porcelli,
chief U.S. economist at RBC Capital Markets, said. "Very solid
... there is no other way to describe the retails sales
report," The data suggested consumers are ramping up spending
in the thick of the holiday shopping season that is critical
for retailers.
                                
 Investors are eyeing another potential boost to the economy
-- the deal worked out between U.S. President Barack Obama and
Republican lawmakers to extend tax cuts, jobless benefits and a
payroll tax credit.
                                
 European shares pared losses after the U.S. data, which
affirmed a stocks rally that has pushed up the S&P 500 index by
6 percent since Nov. 29. European stocks gained for the seventh
straight session on thin volume, with the FTSEurofirst 300
Index <.FTEU3> up 0.3 percent.
                                
 Investors were reluctant to take on large positions ahead
of this year's final meeting of the U.S. Federal Reserve,
looking for hints of altering a $600 billion bond-buying
program designed to push long-term interest rates lower.
[ID:nN14232588]
                                
 The Dow Jones industrial average <.DJI> gained 69.93
points, or 0.61 percent, to 11,498.49. The Standard & Poor's
500 Index <.SPX> rose 4.87 points, or 0.39 percent, to 1,245.33
and the Nasdaq Composite Index <.IXIC> increased 10 points, or
0.38 percent, to 2,634.91.
                                
 Shares of Best Buy Inc <BBY.N> , the consumer electronics
bellwether, tumbled 15 percent, weighing on the market. Best
Buy, the leading electronics retailer, reported a drop in
quarterly profit and sales and cut its full-year outlook,
citing weak demand in its key U.S. market. [ID:nN13207737]
                                
 GLOBAL OPTIMISM
                                
 The MSCI world equity index <.MIWD00000PUS> and the Thomson
Reuters global stock index <.TRXFLDGLPU> both rose about
one-half of a percent, nudging the MSCI index closer to a
two-year high set in November. Emerging stocks <.MSCIEF> added
0.7 percent.
                                
 In currencies, the euro <EUR=> rose 0.26 percent to
$1.3424. Against the Japanese yen, the dollar <JPY=> declined
0.11 percent to 83.31 yen.
                                
 The euro "may have room to run higher if the Fed reasserts
its commitment to purchasing $600 billion, citing the weakness
in inflation and spare capacity weighing on unemployment,"
Brown Brothers Harriman strategist said in a note to clients.
                                
 The dollar and euro both fell to session lows against the
Swiss franc as some investors speculated the Fed could alter
its quantitative easing pledge.
                                
 U.S. Treasuries dropped, adding to a sharp selloff as the
Washington tax deal sparked concerns over a widening federal
budget gap and the inflationary impact of faster growth.
                                
 "A more robust U.S. growth outlook has taken over the
mantle of market leadership," Goldman Sachs wrote in a note.
                                
 U.S. Treasury 10-year yields, which influence consumer and
corporate borrowing costs, rose 0.11 percentage point to 3.40
percent.
                                
 Also supporting expectations for global recovery was
China's extension of special reserve requirements for top banks
as traders see Beijing unlikely to aggressively cool down its
economy since much of the world has been relying on China's
robust growth. [ID:nLDE6BC0ET]
                                
 Chinese stocks rose 0.1 percent <.SSEC>. A leading official
newspaper reported China will probably target a limit of about
7.5 trillion yuan ($1.1 trillion) in new loans next year, an
indication that policy could be slightly looser than expected.
                                
 In commodities, U.S. light sweet crude oil futures <CLc1>
were little changed at $88.69 per barrel. Gold <XAU=> rose
$7.30, or 0.52 percent, to $1400.40.
  (Additional reporting by Natsuko Waki in London, and Angela
Moon in New York; editing by Jeffrey Benkoe)