* MSCI world equity index hits 14-month high
* Wall Street set for positive start
* BofA move to repay taxpayer funds boost optimism
* Oil rises; dollar, yen under pressure
By Natsuko Waki
LONDON, Dec 3 (Reuters) - World stocks hit a fresh 14-month
high on Thursday while oil also rose after Bank of America said
it would repay $45 billion of taxpayer bailout funds in a move
which injected optimism into the financial sector.
Wall Street also looked set for a positive start.
The European Central Bank left its key interest rates on
hold at a record low of 1 percent as expected. It was expected
later to reveal new staff forecasts which would underpin its
gradual process of phasing out its financial crisis support.
The low-yielding dollar came under pressure, sending
dollar-priced gold to record highs above $1,225 an ounce, as
BofA news encouraged investors to chase equities, commodities
and other risky assets.
Bank of America <BAC.N> has launched the sale of $18.8
billion worth of securities, which are expected to be priced on
Dec. 7, according to a term sheet obtained by Reuters.
World stocks have erased all the losses suffered after Dubai
announced a standstill last week on billions of dollars of debt
held by its conglomerate Dubai World, with investors shifting
focus back to risk-friendly expectations that the world's
central banks would keep interest rates low for some time.
"This is certainly one of the reasons for the positive
market sentiment today," said Joerg Rahn, chief investment
officer at wealth management company Marcard, Stein & Co in
Hamburg.
"I'd also say that economic optimism is returning following
some days of losses earlier in the month."
MSCI world equity index <.MIWD00000PUS> rose as high as
302.45, its highest level since late September 2008, and was
holding pretty close.
The FTSEurofirst 300 index <> rose 0.3 percent, while
emerging stocks <.MSCIEF> rose 0.8 percent.
The Markit survey showed the euro zone's service sector
expanded for the third consecutive month in November,
underpinning the recovery optimism, although the expansion was
at a slower pace than reported early last week.
"We remain positive on European equities over our investment
horizon of 12 months," Standard & Poor's European Investment
Policy Committee said, adding that its 2010 year-end forecast
implied a 12 percent upside from current levels.
"We believe that the credit markets are more likely capable
than not of absorbing slated government debt issuance, given
that long-term rates are still low and inflation expectations
are stable."
U.S. crude oil <CLc1> rose 60 cents to $77.23 a barrel after
slipping a day earlier on a larger-than-expected build in U.S.
crude inventories.
German government bond futures <FGBLc1>, the euro zone
benchmark, fell 31 ticks.
The dollar <.DXY> fell 0.3 percent against a basket of major
currencies while the yen fell 0.6 percent to 87.88 per dollar
<JPY=>.
(Additional reporting by Christoph Steitz; Editing by Victoria
Main)
((natsuko.waki@reuters.com, +44 207 542 6721, Reuters
Messaging: natsuko.waki.reuters.com@reuters.net))
