* World stocks hit 29-month highs on economic data, earnings
* Dollar falls to three-month low vs basket but recovers
* Wall Street set to open flat
* Egypt, euro zone worries ease but oil price still rising
By Jeremy Gaunt, European Investment Correspondent
LONDON, Feb 2 (Reuters) - World stocks punched fresh
29-month highs on Wednesday, lifted by strong data pointing to
sustained global economic recovery, continuing positive
corporate earnings and easing concerns about Egypt.
Wall Street looked set to open flat to slightly higher.
Oil prices fell back from 28-month highs, but Brent crude
was still more than $101 a barrel on worries that unrest in
Egypt could trigger changes to the status quo elsewhere in the
Middle East and North Africa.
The dollar fell to three-month lows against a basket of
major currencies before recovering slightly.
MSCI's all-country world stock index <.MIWD00000PUS>, one of
the broadest gauges of global equities, was up 0.4 percent after
earlier hitting levels last seen in August 2008.
Its developed market counterpart <.MIWO00000PUS> gained 0.3
percent, close to a high last seen in early September 2008.
Emerging markets <.MSCIEF> were up 0.6 percent on the day,
but remain down more than 1 percent for the year, reflecting a
recent shift by investors from emerging to developed markets.
Stock investors were cheered on Tuesday by strong factory
data worldwide, which pushed U.S. benchmark stock indexes to
their highest closing levels since June 2008.
Strong earnings from delivery firm UPS Inc <UPS.N> and
drugmaker Pfizer <PFE.N> in the United States on Tuesday, and
Imperial Tobacco <IMT.L> on Wednesday added to the mood.
"The world economy appears to be improving a little faster
than expected, valuations are ok and companies are publishing
quite good results," Geert Ruysschaert, strategist at BNP
Paribas Fortis Private Banking, said. "So investors can take
advantage of that."
The pan-European FTSEurofirst 300 <> was up 0.1
percent, off its highs but at a 3.5 percent year-to-date gain.
Earlier, Japan's benchmark Nikkei <> ended up 1.8 percent
for its biggest daily gain since Dec. 2.
Concerns about the political crisis in Egypt, meanwhile,
were easing on financial markets after President Hosni Mubarak
said he will step down at the end of his term in September,
although protestors continue to demand an immediate end to his
30-year rule.
Foreign investors have begun to show renewed interest in
Egyptian bonds and stocks and the cost of insuring Egytian debt
against default fell. []
DOLLAR AT LOWS
The dollar hit a 12-week low but then rebounded.
Expectations of loose U.S. monetary policy are encouraging
risk-taking and concerns over euro zone peripheral debt seemed
to be contained.
"The dollar is weak due to the huge U.S. deficit, no yield
and a very dovish central bank," said Ray Farris, currency
strategist at Credit Suisse.
"The market is now embracing the idea that the euro area
political elite are going to do enough to prevent real financing
stress in the periphery which would enable the ECB (European
Central Bank) to hike rates."
The dollar index <.DXY> <=USD> dipped to 76.881, its lowest
since early November. It was later at 77.121.
The euro <EUR=> climbed to $1.3861, its highest since early
November, but later dropped back to $1.3798.
In a further sign that the euro zone crisis is at least
being put on a back-burner by investors, the premium demanded to
hold Spanish and Italian government bonds rather than German
debt fell.
Commodity prices continued to rise on improving global
growth prospects with copper <CMCU3> hitting a fresh record high
at close to $10,000 a tonne.
Gold fell as rising equities, hopes for continued global
recovery and easing concern about Egypt dampened its safe haven
appeal. Spot gold <XAU=> fell more than $7 to around $1,333 an
ounce, well below its December record high of around $1,430.
(Additional reporting by Simon Jessop and Neal Armstrong;
Editing by Catherine Evans)
