* World stocks rise on first trading day of year
* 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 close to 15-month
highs on hopes for a sustainable economic recovery.
The dollar was slightly weaker against a basket of major
currencies while government bonds sold off.
MSCI's all-country world stock index <.MIWD00000PUS> was up
nearly half a percent, slightly below 2009 highs but around
where they were in October 2008 just after the Lehman Brothers
collapse.
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.
Data on Monday showed euro zone manufacturing improving in
December from a month earlier to a 21-month high.
MSCI' main index gained 31.52 percent last year, the Asian
one 68.32 percent and the emerging market benchmark 74.5
percent.
"There is a generally a feeling of modest optimism at the
start of the year. We are looking forward generally to a year of
positive growth in most countries and good profits growth for
most companies," said Andrew Milligan, head of global strategy
at Standard Life Investment.
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 0.7 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 0.1 percent against major competitors
<.DXY> and against the yen <JPY=>. The euro gained 0.2 percent
to $1.4341 <EUR=>.
Euro zone government bonds sold off. The 10-year yield was
3.42 percent, up 3 basis points <EU10YT=RR> and the two-year was
1.405 percent, up 5 basis points <EU2YT=RR>.
(Additional reporting by Jessica Mortimer; Editing by Andy
Bruce)
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