* Bank shares up on Basel grace period, lifting world stocks
* Dollar eases ahead of Fed; gold, crude rise
By Dominic Lau
LONDON, Dec 16 (Reuters) - Global equities edged higher on
Wednesday, led by banks after a report that global banking
regulators are eyeing delaying the implementation of new capital
rules, while gold and crude prices were also in demand.
The dollar eased from a 2-1/2 month high versus the euro as
investors waited for more clues on when the Federal Reserve
might start tightening, and safe-haven government bonds were
steady.
Banking shares advanced after sources said global regulators
would give banks a grace period before forcing them to implement
stricter capital rules, easing concern lenders would need to
issue huge amounts of shares in the near future. []
"That is good news for banks," said Howard Wheeldon,
strategist at BGC Partners in London.
Global equities measured in the MSCI All-Country World Index
<.MIWD00000PUS> put on 0.3 percent. In Europe, the FTSEurofirst
300 <> index added 1 percent and the DJ STOXX European
banks index <.SX7P> rose 2 percent -- the best performing sector
in the region.
U.S. stock index futures <DJc2> <SPc2> <NDc2> were up
0.5-0.7 percent, indicating a firmer opening at Wall Street.
Overnight, Tokyo's Nikkei average <> advanced 0.9
percent to hit its highest close in seven weeks, with bank
shares the leading gainers.
"We are overweight equities, but are reducing beta and
cyclical exposure. Headwinds for equities are rising but are not
sufficient to kill the rally yet," Morgan Stanley said in a
report.
"The year (2010) will start strong -- we see 10-15 percent
upside in equities from here -- but think that markets will have
overshot fair value. We expect only single-digit return for
global developed equities for the full year, but the risks are
slanted to a worse outcome."
The MSCI All-Country World Index has rallied 73 percent
since hitting a low in early March, and is up more than 30
percent for the year, on track for its best yearly performance
since 2003.
The dollar <.DXY> dipped against a basket of major
currencies, with the euro <EUR=> up 0.2 percent at $1.4559. The
U.S. currency was flat against the yen at 89.70 <JPY=>.
FED WATCH
A rise in U.S. wholesale prices last month, which pushed up
Treasury yields overnight, prompted speculation the Fed may have
to account for these pressures in its post-meeting statement,
though Fed Chairman Ben Bernanke said in a letter to a
congressman that inflation is not a problem. []
The Fed is expected to stick to its super-loose monetary
policy stance as high unemployment constrains policymakers'
enthusiasm about the economy's recent improvement.
With the global economy gradually recovering from the worst
slump in generations, investors are carefully weighing when
central banks and governments will begin withdrawing massive
emergency stimulus measures, and if they can unwind such
policies without disrupting financial markets.
Crude prices <CLc1> traded above $71 a barrel after snapping
a nine-day losing streak a day earlier, while gold prices were
up 0.7 percent at $1,132.50 an ounce.
Yields on benchmark 10-year U.S. Treasuries <US10YT=RR> were
down 1 basis point at 3.586 percent, while those on 10-year
Bunds <EU10YT=RR> were up 3 basis points at 3.267 percent.
(Additional reporting by Joanne Frearson in London)
