* World stocks end 2010 at 28-month highs
* Dollar weakens for 2nd day; keeps modest gains in 2010
* Gold jumps 30 pct in 2010, silver soars 80 pct
(Updates with U.S. markets close)
By Walter Brandimarte and Sebastian Tong
NEW YORK/LONDON, Dec 31 (Reuters) - World stocks ended 2010
at their highest levels in 28 months on Friday and oil touched
a 26-month peak as expectations of a further recovery in the
global economy supported investors' appetite for risk heading
into the new year.
However, recent figures pointing to stronger momentum in
the United States, the world's biggest economy, failed to
support the greenback, which traded on Friday at its weakest
point in nearly six weeks against a basket of major
currencies.
The weaker dollar further boosted commodities, with gold
finishing the year nearly 30 percent higher -- its strongest
annual performance since 2007 and marking its 10th annual gain.
Silver, a cheaper safe-haven alternative to gold, jumped 80
percent in 2010.
U.S. crude oil topped $92 <2CLc1> a barrel on Friday,
before settling up $1.54 at $91.38 a barrel. Crude closed the
year up 15 percent on expectations that the economic recovery
will drive demand next year and send prices above $100.
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.
The weak dollar and low yields on U.S. bonds are expected
to support riskier assets as 2011 opens.
"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 recognize 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."
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> drifted up 0.2 percent to their strongest
levels since September 2008, ending the year 10 percent
higher.
On Wall Street, the three main stock indexes finished
little changed as a year of solid gains was ushered out with a
wimper. The S&P 500 posted its best December performance in
nearly two decades, up 6.5 percent for the month.
For the year the S&P climbed 12.8 percent, the Dow added 11
percent and the Nasdaq surged 16.9 percent.
For the day, the Dow Jones industrial average <>
finished up 7.80 points, or 0.07 percent, at 11,577.51, while
the Standard & Poor's 500 Index <.SPX> dipped 0.24 points, or
0.02 percent, at 1,257.64. The Nasdaq Composite Index <>
lost 10.11 points, or 0.38 percent, at 2,652.87.
"We had a nice year, as far as percentage up, really good
numbers for the year," said Terry Morris, senior vice president
and senior equity manager for National Penn Investors Trust
Company in Reading, Pennsylvania. "It's just drifting and it's
entitled to a pullback."
The benchmark MSCI index was supported on Friday by
emerging market gains, which offset some profit-taking in U.S.,
European, and Japanese markets.
Asian stocks ended the year 15 percent higher, the prime
beneficiaries of record low interest rates in much of the
developed world.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a look at 2010's Asia Markets winners and losers,
please click on:
http://graphics.thomsonreuters.com/F/12/AS_MKTS2010.html
For a look at how BRIC markets have stacked up against
their global peers, please click on:
http://r.reuters.com/vys24r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
European shares closed 7.3 percent higher for the year even
as investors pocketed part of those gains, driving the
FTSEurofirst 300 <> index of top shares 0.6 percent
lower.
Emerging markets stocks rose 0.6 percent on Friday, adding
to gains of 16 percent for the year, according a benchmark MSCI
index <.MSCIEF>
BRUISED EURO
Investors remain fretful about the debt situation in the
European Union after Italy paid higher yields on Thursday to
sell new debt.
Still, the euro <EUR=> jumped 0.7 percent against the
dollar on year-end buying by central banks and real-money
accounts. For the whole of 2010, the European single currency
saw losses of about 7 percent against the dollar.
Market confidence in the common currency was bruised by
emergency rescues for debt-laden Ireland and Greece. Investors
are now seeking the relative safety of the Swiss franc, which
hovers at a record peak against the euro.
The euro <EUR=EBS> did manage to recoup some losses in
December and climbed above $1.34 on Friday, extending a
recovery from a 2010 low beneath $1.19 -- its worst showing
since early 2006.
The euro may remain under pressure early in 2011 as an
estimated 150 billion to 200 billion euros in euro zone
sovereign bonds come to market, and some investors worry demand
may be weak.
"Everybody it seems is anticipating a very rocky road for
the euro zone over the next three months," said Gareth Berry,
G10 FX strategist for UBS in Singapore.
Despite a beating at year-end, the dollar managed to finish
the year a bit firmer than it began. The greenback fell 0.6
percent against a basket of major currencies on Friday, but
kept gains of some 1.5 percent against those currencies for the
year, according to the U.S. Dollar Index <.DXY>.
"We're still facing a lot of uncertainty next year, but the
U.S. economic data is starting to turn for the better, and I
think that will spark dollar gains, particularly against the
yen," said Boris Schlossberg, research director at GFT Forex.
Prices of base commodity prices remained well supported,
with copper ending the year at a record high.
(Additional reporting by Chuck Mikolajczak, Steven C.
Johnson, and Chris Reese in New York; Editing by Leslie Adler)
