* World shares ekes out small gains
* Chinese data disappoints, lifting yen
* Dollar lower with eyes on this week's Fed meeting
By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 11 (Reuters) - World stocks ticked slightly
higher on Tuesday and Japan's Nikkei hit a 10-month closing high
despite disappointing Chinese data that drove up the yen.
European shares gained, as did the euro. The dollar was
lower across the board, a break from recent trends in which it
has risen on bearish economic news.
China's industrial output grew at the fastest rate in nine
months in July but fell short of expectations, disappointing
some in the market.
One result was that currency dealers unwound some trades
that had favoured high-yielding currencies such as the
Australian and New Zealand dollar.
This lifted the yen across the board, but failed to dent
sentiment on Japan's bourse. The Nikkei <> rose 0.6 percent
or 61.20 points to 10,585.46, its highest finish since Oct. 3.
The generally upbeat equities mood carried over into Europe
where the pan-European FTSEurofirst 300 <> index of top
shares was up 0.3 percent.
But trading was generally muted because of the northern
hemisphere's summer lull.
"The market is in keeping a low profile at the moment," said
Postbank equity strategist Heinz-Gerd Sonnenschein.
It all took the MSCI-all-country world index
<.MIWD00000PUS>, the global benchmark for many investors, up
about 0.2 percent.
The index has gained nearly 19 percent this year and is up
around 58 percent since hitting a low in March. This has
investors divided about whether a bull market is in the making
or whether bourses are heading for a fall.
"We do have concerns about the sustainability of the rally,
but we would also point out that valuation measures remain
attractive and that there is still a large amount of cash on the
sidelines waiting to be invested," Bob Doll, global chief
investment officer for equities at BlackRock, said in a note.
"As a result, we believe the current cyclical bull market
remains intact."
DOLLAR DOWN
The dollar was down around 0.2 percent against a basket of
major currencies <.DXY> primarily as a result of the euro
gaining 0.2 percent to $1.4165 <EUR=> and the yen rising about a
third of a percent to 96.80 yen <JPY=>.
Currency traders are also looking ahead of the end of the
Federal Reserve's two-day policy meeting on Wednesday.
After better than expected U.S. jobs data last week and a
sharp rise in the dollar, the market has been trying to
ascertain whether the rising risk appetite-falling dollar
dynamic which has held for much of this year has started to
crumble.
The market has even begun to price in tightening by the
Federal Reserve early in 2010.
"Whether a paradigm shift is taking place with regards to a
loosening in correlation between risk aversion and the U.S.
dollar is still too early to call," said Jonathan Cavenagh, a
currency strategist at Westpac, Sydney.
Euro zone government bond yields were flat to slightly
higher.
The two-year Schatz yield <EU2YT=RR> was at 1.539 percent
and the 10-year <EU10YT=RR> at 3.498 percent.
(Additional reporting by Charlotte Cooper and Christoph
Steitz; Editing by Andy Bruce)
(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)
