* Focus turns to Fed stimulus prospects after government
* China Q3 growth quickens to 7.8 pct year over year
* World stock markets at 5-year high, Google hits $1,000
* Euro hits 8-1/2-month high vs dollar
By Herbert Lash
NEW YORK, Oct 18 (Reuters) - Global stock markets climbed to
a five-year high on Friday as investors bet the Federal Reserve
would extend its stimulus policy well into 2014, but uncertainty
over when U.S. interest rates will rise caused the dollar to
sink to an eight-month low.
Better-than-expected results from Google Inc and Morgan
Stanley also helped lift stocks on Wall Street, with shares of
the Internet search and advertising company surging past the
$1,000 mark for the first time.
An acceleration in China's giant economy provided another
boost for equity markets, as well as for commodities such as oil
and copper, as the prospect of an extended spell of ultra-easy
money policy and improving growth buoyed investor sentiment.
MSCI's index that tracks the equity performance of 45
countries rose 0.7 percent to highs last seen in
January 2008, while the broad Stoxx Europe 600 rose for
a seventh successive day, its longest winning streak this year.
A last-minute deal by U.S. lawmakers this week to avert a
debt default and re-open shuttered government offices also has
bolstered investor confidence, pushing the broad S&P 500 to a
record close on Thursday and new highs on Friday.
But analysts said concerns about the negative impact of the
shutdown on the U.S. economy and the likelihood the Fed would
leave its bond-buying program intact until well into 2014 would
weigh on the dollar, with the euro potentially rising to $1.40.
On the company earnings front, 98 companies in the broad S&P
500 index have reported third-quarter results so far, with 62
percent beating estimates by an average of 4.3 percent. Since
1994, 63 percent of companies have beat earnings estimates.
Google gained 13.8 percent to $1,011.408, while
Morgan Stanley rose 2.6 percent to $29.69. Google's surge
contributed to almost half of the more than 1 percent gain in
the Nasdaq composite index.
"Surprises have been broad-based with all of the nine
sectors surpassing their forecasts," said Jonathan Golub, chief
U.S. market strategist at RBC Capital Markets in New York.
The Dow Jones industrial average closed up 28.00
points, or 0.18 percent, at 15,399.65. The Standard & Poor's 500
Index rose 11.35 points, or 0.65 percent, to 1,744.50.
The Nasdaq composite added 51.13 points, or 1.32
percent, to 3,914.28.
The Nasdaq composite is trading at levels last touched in
September 2000 but is still 24 percent from its peak before the
tech bubble burst earlier that year.
European shares rose to a five-year high after robust growth
data from China for the third quarter, which boosted shares of
luxury goods companies and miners.
The Stoxx Europe 600 index extended its rally to
seven days, rising 0.79 percent, while the larger FTSEurofirst
300 of leading European shares rose 0.76 percent to
close at 1,277.70, a new five-year high.
The dollar fell against a basket of currencies in choppy
trade, pushing the dollar index down 0.03 percent to
79.626. The dollar eased on expectations the Fed may delay
scaling back its stimulus, which keeps interest rates down.
"The real economy has been negatively impacted by the
government shutdown and uncertainty of the debt crisis, all of
which pushes out eventual Fed policy normalization, which is bad
for the dollar," said Omer Esiner, chief market analyst at
Commonwealth Foreign Exchange in Washington.
The euro rose 0.07 percent to $1.3683, while the
dollar was 0.09 percent lower against the Japanese yen at
German Bunds rose on the view that the stop-gap U.S. debt
deal may hurt the longer-term growth prospects of the world's
largest economy and push the Fed's bond-buying program into next
Bund futures rose 37 ticks to settle at 140.05.
Brent crude futures rose toward $110 a barrel, supported by
a weak U.S. dollar and growth data from China.
Brent crude settled up 83 cents at $109.94 a barrel,
while U.S. crude oil rose 14 cents to settle at $100.81.
Investors were relieved by data showing China's economy grew
at its fastest pace this year as firmer foreign and domestic
demand lifted factory output and retail sales.
China's CSI300 index climbed 0.7 percent, while
Australian shares jumped to their highest level since
June 2008. Australian exports are closely linked to China's
Benchmark 10-year U.S. Treasuries fell 1/32 to
yield 2.5886 percent.