World shares, dollar rise on strong U.S. trade data

By Herbert Lash

NEW YORK (Reuters) - Global equity markets rose and the dollar strengthened on Tuesday on news of the lowest U.S. trade deficit in four years, the latest sign of a more robust American economy.

A report that showed German unemployment unexpectedly fell in December on a seasonally adjusted basis, the first drop since July, bolstered hopes that domestic consumption could lift growth in Europe's biggest economy.

The U.S. Commerce Department said the trade gap fell 12.9 percent to $34.3 billion in November, the smallest deficit since October 2009. October's shortfall on the trade balance was revised down to $39.3 billion from a previously reported $40.6 billion.

The bigger-than-expected decline - economists polled by Reuters forecast the trade deficit would slip to $40.0 billion in November - could spur higher estimates for fourth-quarter growth.

The upbeat data helped turn sentiment in equity markets after a slow start to the year, building on a record flow of fresh investment to stocks and related securities in 2013.

"Today we had some good news again so this momentum building up for the last five years is going to continue to pull the market higher," said Uri Landesman, president of Platinum Partners, a New York-based multi-strategy hedge fund.

"People realize how much the market has been up, so there's the desire to take profits," he said, adding that it is offset by "incredible upward momentum."

U.S.-listed equity mutual funds and exchange-traded funds took in a record $352 billion in 2013, topping a previous record $324 billion in 2000, according to TrimTabs Investment Research.

MSCI's all-country world stock index rose 0.39 percent, while the FTSEurofirst 300 index of top European shares climbed 0.84 percent.

The benchmark S&P 500 was on track for the first gain of the new year.

The Dow Jones industrial average was up 123.82 points, or 0.75 percent, at 16,548.92. The Standard & Poor's 500 Index was up 11.80 points, or 0.65 percent, at 1,838.57. The Nasdaq Composite Index was up 37.13 points, or 0.90 percent, at 4,150.81.

Earlier, Asian shares fell for a fourth day, led by a 0.6 percent drop on Tokyo's Nikkei index.

The dollar gained, buoyed by the U.S. trade data. Stronger growth could prompt the Federal Reserve to speed up the tapering of its monthly bond purchases.

However, Eric Rosengren, president of the Federal Reserve Bank of Boston, said the U.S. economy remains vulnerable the longer inflation remains low. He reiterated a warning that policy stimulus should be removed "only gradually." Rosengren is one of the most dovish of U.S. central bankers.

The dollar traded 0.4 percent higher at 104.64 yen, but remained below a five-year peak of 105.44 yen set last week. The euro was last down 0.20 percent at $1.3600.

The dollar index, which tracks the greenback against a basket of six major currencies, was up 0.21 percent at 80.825.

Brent oil rose to $107 a barrel after five straight decline, supported by doubts about a recovery in Libyan output, fighting in Iraq and as cold weather across the central United States threatened production.

Brent crude was up 32 cents to $107.05, after settling lower in the previous five sessions, partly on expectations of rising Libyan exports. U.S. crude was 37 cents higher at $93.80.

U.S. government bond prices rose, with the 10-year U.S. Treasury note up 2/32 in price to yield 2.9540 percent.

German Bund futures were up 0.16 percent at 139.76 euros.

(Additional reporting by Marc Jones in London; Editing by Dan Grebler)