* World stocks hover near recent peaks
* European shares slip after last week's records
* Dollar index suffers third day of falls
* Oil near three month highs
* China rate reform, retail sales boost bullish mood
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Karin Strohecker
LONDON, Dec 30 (Reuters) - World stocks clung to recent
gains on Monday following healthy advances in Asia on hopes for
a U.S.-China trade deal, a more optimistic growth outlook and a
softer dollar, while the euro climbed to a 4-1/2 month high.
Yet European stock markets failed to follow the lead and
took a breather following last week's record highs.
The pan-regional Euro Stoxx 600 STOXX was down 0.3% while
Germany's DAX .GDAXI slipped 0.5%. Banks .SX7P , which had
been lagging the 2019 rally, were the only sector to mark small
gains in thin year-end trading.
"Investors appear to be growing a tad apprehensive about
chasing the record setting U.S. equity market risk-reward
premise into year-end," Stephen Innes at AxiTrader wrote in a
note to clients. "Much focus continues to fall on the abundance
of liquidity offered up by the Fed as a critical driver behind
the late-season equity market window dressing."
Many Asian bourses had marked healthy gains with Chinese
blue chips .CSI300 roaring 1.5% higher, bolstered by a report
that 2019 retail sales are forecast to rise 8% and expectations
that a new benchmark for floating-rate loans could lower
borrowing costs and boost flagging economic growth.
Yet Japan's Nikkei stock index .N225 finished its last
trading day of the year down 0.76%. The index gained 18.2% in
2019 after dropping 12.8% last year.
Easing trade war worries have offered a lift to global
equities this month, putting MSCI's global equity index
.MIWD00000PUS on track for a 3.8% rise in December - its
fourth straight month of gains.
U.S. futures ESc1 NQc1 YMc1 also pointed to a higher
open after the S&P 500 .SPX and the Dow Jones Industrial
Average .DJI closed at records on Friday.
In currency markets, the dollar index - measuring the
currency against a basket of rivals - weakened 0.1% to 96.793
.DXY in its third straight session in the red. Thin
end-of-year volumes exacerbated the broad weakness in the
greenback which on Friday suffered its biggest one-day fall
since June.
"The U.S. dollar is the worst performing G10 currency
overnight," said MUFG's Fritz Louw. "The main drivers of the
weaker dollar have likely been risk appetite holding up in the
wake of comments from the U.S. pertaining to a Phase One trade
deal recently as well as the U.S. Federal Reserve's continued
repo operations."
The weak greenback helped other currencies shine. The euro
climbed as high as $1.1211 EUR= , its strongest level since
mid-August. Sterling also benefited, rising 0.2% to $1.3122
GBP= against the dollar. Yet the pound was flat against the
euro at 85.38 pence amid concerns that Britain could be headed
for a disruptive "hard Brexit" at the end of 2020.
China's yuan held below the key level of 7 per dollar,
rising in offshore markets to 6.9752 CNH= , its highest since
Dec. 13. FRX/
In fixed income markets, rising risk appetite saw euro zone
bond yields rise across the board, with most 10-year bond yields
two basis points higher on the day. Germany's Bund yield stood
at -0.23% DE10YT=RR , heading back towards recent six-month
highs.
The softer dollar also lifted commodity markets with gold
XAU= hitting a two month peak. Oil prices held near three-month highs with traders also
keeping a close watch on the Middle East following U.S. air
strikes in Iraq and Syria against Kataib Hezbollah, an
Iran-backed militia group. U.S. officials said on Sunday that
the attacks were successful, but warned "additional actions" may
be taken to defend U.S. interests. Global benchmark Brent crude LCOc1 traded at $68.33 a
barrel and U.S. West Texas Intermediate CLc1 stood at $61.74.
Oil prices were also supported by a bigger-than-expected
decline in crude inventories in the United States, the world's
biggest fuel consumer. Stockpiles fell by 5.5 million barrels in
the week to Dec. 20, far exceeding a 1.7-million-barrel drop
forecast in a Reuters poll, government data showed on Friday.
A stellar 2019 for government bond markets https://tmsnrt.rs/2PMkPA5
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