* World stocks rise on first trading day of year
* Wall Street set for positive start
* Dollar slips, bond retreat
By Jeremy Gaunt, European Investment Correspondent
LONDON, Jan 4 (Reuters) - Financial markets kicked off 2010
on an upbeat note on Monday with world stocks driven close to
15-month highs by hopes of a sustainable economic recovery.
Wall Street looked set to open the year higher, but the
dollar was weaker against a basket of major currencies and
government bonds sold off.
MSCI's all-country world stock index <.MIWD00000PUS> was up
more than half a percent, slightly below 2009 highs but around
where they were in October 2008 just after U.S. investment bank
Lehman Brothers collapsed to trigger financial turmoil.
Other indexes are beyond that mark, with MSCI's emerging
market benchmark <.MSCIEF> and its Asian Pacific stocks ex-Japan
gauge <.MIAPJ0000PUS> both at 17-month highs.
Investors were essentially adding to last year's bets that
the global economy will improve and that riskier assets such as
stocks were oversold when fears of a banking meltdown swept the
market.
MSCI' main index gained 31.52 percent last year, the Asian
one 68.32 percent and the emerging market benchmark 74.5
percent.
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For a graphic on stock market performances over the past two
yearssee:
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"There is a generally a feeling of modest optimism at the
start of the year," said Andrew Milligan, head of global
strategy at Standard Life Investment. "We are looking forward
generally to a year of positive growth in most countries and
good profits growth for most companies."
He added, however, that investors would need to be
selective.
European and Japanese shares were up strongly rose on the
first trading session of the year.
The FTSEurofirst 300 <> index of leading European
shares was up three quarters of a percent after gaining 25.7
percent last year while the Nikkei <> closed up 1 percent,
adding to 2009 gains of 19.04 percent.
DOLLAR STRUGGLES
The dollar fell back from early gains, coming off an earlier
four-month high against the yen, with the euro getting some
support from the euro zone manufacturing data.
Currency investors were focused on U.S. data this week,
starting with Monday's ISM manufacturing survey and culminating
in Friday's key U.S. monthly jobs data, which could give further
reason to believe the U.S. is on the road to recovery. <ECON>
"Any strength will help support the dollar," BNP Paribas
currency strategist Ian Stannard said.
The dollar was down 0.4 percent against major competitors
<.DXY> and flat against the yen <JPY=>. The euro gained half a
percent to $1.4399 <EUR=>.
Euro zone government bonds were weak. The 10-year yield was
flat to lower at 3.394 percent <EU10YT=RR> and the two-year was
at 1.381 percent, up 3 basis points <EU2YT=RR>.
(Additional reporting by Jessica Mortimer; Editing by Patrick
Graham)
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Hub click on http://blogs.reuters.com/hedgehub)
