* World stocks on track to end 2010 at 28-month highs
* Dollar at new low vs Swiss franc, on back foot in 2011
* Asian, European stocks shine in 2010; BRICs underperform
By Sebastian Tong
LONDON, Dec 31 (Reuters) - World stocks are set to end the
year at their highest levels in 28 months as investors gear up
for continued risk-taking into 2011, prompted by a wilting
dollar and narrowing yields on safe-haven U.S. bonds.
U.S. figures pointing to stronger momentum in the world's
biggest economy failed to rouse the greenback <.DXY>, which
slipped on Friday to trade at its weakest against its basket of
major currencies in nearly three weeks.
Factory activity in the Midwest expanded in December at its
fastest pace in over 22 years, while pending sales of previous
owned homes rose more than expected in November. The country's
stubbornly high unemployment rate also showed signs of easing.
[]
Notwithstanding more upbeat U.S. economic prospects, the
Federal Reserve is expected to keep monetary conditions
ultra-loose to maintain the pace of recovery, which should keep
the dollar on the back foot through the first quarter of 2011.
"In many ways 2010 is ending on a similar note to 2009, with
markets rallying on hopes of economic recovery. This is
certainly in line with our view of the world economy," said
Keith Wade, chief economist at Schroders.
"However, we also recognise that the U.S. is simply kicking
the can down the road by avoiding fiscal consolidation. Markets
are also far more cautious about the scope for policymakers to
remove support than a year ago."
The International Monetary Fund (IMF) said it expects a
two-speed global recovery to extend into 2011 with developing
economies growing slowly while emerging markets power ahead.
[]
World stocks <.MIWD00000PUS> drifted up 0.2 percent to their
strongest levels since September 2008 and are on track to end
the year 10 percent higher.
European shares <>, heading for an 8-percent gain this
year, dipped slightly in light trade on the last trading day of
2010 with several regional markets closed.
Asian stocks <.MIAPJ0000PUS> end the year 15 percent higher,
the prime beneficiaries of record low interest rates in much of
the developed world.
Emerging markets <.MSCIEF> have surged 16 percent, though
the dominant BRIC economies of Brazil, Russia, India and China
have underperformed.
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For a look at 2010's Asia Markets winners and losers, please
click on:
http://r.reuters.com/vys24r
For a look at how BRIC markets have stacked up against their
global peers, please click on:
http://r.reuters.com/vys24r
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BRUISED EURO
Investors remain fretful about the debt situation in the
European Union after Italy's failure on Thursday to sell part of
its planned offer of bonds. []
The euro <EUR=> edged up to a two-week high against the
dollar on year-end buying by central banks but is set to end
2010 weaker by 7 percent against the dollar.
Market confidence in the common currency was bruised this
year by emergency rescues for debt-laden Ireland and Greece.
Investors are seeking the relative safety of the Swiss
franc, which hovers at a record peak against the euro
<EURCHF=R>.
The dollar has fared little better against the franc <CHF=>,
languishing at a new record low on the last day of the year.
China's tightly managed yuan <CNY=CFXS>, a source of
irritation for U.S. lawmakers who say it is kept artificially
weak, closed up 3.6 percent against the dollar this year.
The yuan is near its highest level since the currency's
landmark devaluation in July 2005.
March Bund futures <FGBLc1> were 59 ticks higher at 125.50
while emerging sovereign spreads <11EMJ> traded 5 basis points
tighter.
Commodity prices remained well supported, with copper ending
the year at a record high <CMCU3> and oil poised to gain more
than 12 percent in 2010 with an average price of nearly $80 a
barrel -- the second highest on record.
(Reporting by Sebastian Tong; Editing by Catherine Evans)
