* IMF inaction means emerging assets still in favor
* Stocks rise, dollar rebounds on profit taking
* U.S. bonds, Japan markets closed for holidays
(Updates U.S. markets close)
By Al Yoon
NEW YORK, Oct 11 (Reuters) - World stocks drifted slightly
higher on Monday as investors bet on further asset buying by
the U.S. Federal Reserve and a continuation of global currency
flows toward emerging markets.
The dollar rebounded as profit-taking by dollar bears
reversed the flow against the U.S. currency, weakened amid the
rising expectations for Fed stimulus.
Finance policymakers meeting over the weekend in Washington
produced no quick fix for global economic imbalances, providing
no barriers to the cheap money trade of selling dollars to buy
emerging market assets and commodities.
Reflecting this, MSCI's main emerging market stock index
<.MSCIEF> climbed more than half a percent for a nearly 12
percent year-to-date gain. JPMorgan's EMBI+ index <11EMJ>
showed investors snapping up emerging market government debt.
Both moves are continuations of massive flows into emerging
markets in search of faster growth and higher yields than those
available in developed economies.
EPFR Global said in its latest flow report at the end of
last week that emerging market equity fund flows had hit a
33-month high and emerging bond funds had absorbed more than $1
billion in a week.
"It is increasingly being seen as the trade for all
seasons," said David Shairp, global strategist at JPMorgan
Asset Management.
Friday's U.S. jobs data, which was worse than expected,
raised expectations the Fed will buy more assets under its
quantitative easing (QE) program, essentially trying to pump up
the ailing U.S. economy by printing more money.
This generally drives investments out of dollar assets and
toward higher-yielding ones.
But Shairp reckons many in the markets also see the flow
patterns continuing even if there is no new QE, with investors
betting on higher growth abroad than in the U.S. economy.
At close in New York, the Dow Jones industrial average
<> was up 2.11 points, or 0.02 percent, at 11,008.59, while
the Standard & Poor's 500 Index <.SPX> was down 0.11 points, or
0.01 percent, at 1,165.04.
The Nasdaq Composite Index <> was up 0.42 points, or
0.02 percent, at 2,402.33.
About 5.5 billion shares traded on the New York Stock
Exchange, the American Stock Exchange and the Nasdaq -- the
lightest volume so far in 2010.
In Europe, the FTSEurofirst 300 <> gained 0.3 percent
-- taking the year-to-date gain up to around 2.5 percent -- as
traders anticipated the U.S. stimulus. The MSCI world equity
index <.MIWD00000PUS> rose 0.13 percent.
"The market is clearly expecting quantitative easing and
has priced that in," said Richard Lacaille, global chief
investment officer at State Street in London. "The (U.S.) data
continue to be as expected, part of a slow recovery."
Japanese markets and U.S. bond markets were closed for
holidays.
Attention was also building on the upcoming corporate
earnings reporting season.
Three Dow Jones index components -- Intel Corp <INTC.O>,
JPMorgan Chase & Co <JPM.N> and General Electric Co <GE.N> --
are scheduled to release quarterly results this week. Investors
will look at revenue outlooks for insight into how corporations
are faring. Bellwethers Google Inc <GOOG.O> and CSX Corp
<CSX.N> are also on tap.
"I'm expecting a fairly decent earnings season, which will
continue to build a base and show consistent growth. But the
Fed will be the cause of greater volatility and price moves on
a broader basis," Greco said.
Dow component Microsoft Corp <MSFT.O> edged up 0.8 percent
at $24.59 after the company unveiled a new line of phones
running its Windows software in an attempt to regain market
share in the smartphone space. []
In currency markets, the dollar rose against a basket of
major currencies <.DXY> as traders booked gains on long-time
bearish bets.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphics on the global currency trade:
http://r.reuters.com/gez77p
http://r.reuters.com/jec96p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The dollar and equities have been inversely correlated as
investors leave the perceived safety of the greenback to put
money into equities. For details, see []
"We've seen it for a while, since mid-September, the dollar
sliding in value on the high likelihood that we will see more
quantitative easing coming out of the Fed," said Tim Ghriskey,
chief investment officer at Solaris Asset Management in Bedford
Hills, New York.
"And we will continue to see that expectation until the Fed
actually does something and states that they are done, at
least, for the time being."
The euro <EUR=> fell 0.47 percent to $1.3874 against the
dollar, while the greenback <JPY=> rose 0.26 percent to 82.11
yen.
The dollar earlier sank as low as 81.36 yen, triggering
another round of speculation about possible intervention by
Japan to weaken the yen.
In commodities, U.S. light sweet crude oil <CLc1> fell 75
cents, or 0.91 percent, to $81.91 per barrel, and spot gold
<XAU=> rose $7.30, or 0.54 percent, to $1353.60.
(Additional reporting by Neal Armstrong and Brian Gorman in
London, and Ryan Vlastelica in New York; Editing Andrew Hay)
