MARKETS GLOBAL-Shares retreat on consumer sentiment, yen falls
* MSCI world share index retreats from highest since May 2011
* Wall Street stocks falter after dip in U.S. consumer sentiment
* China growth data initially boosts global recovery outlook
* Japan's yen hits new lows vs dollar, euro
NEW YORK, Jan 18 (Reuters) - World equity markets slipped from a 20-month high on Friday as Wall Street stocks faltered on a report showing U.S. consumer sentiment at its lowest in over a year in January, while the yen hit new lows ahead of potential asset purchases by the Bank of Japan. Global shares retreated from earlier gains sparked by data showing economic momentum picking up in China and the United States. But a disappointing earnings outlook from chipmaker Intel helped push U.S. stocks lower, even as General Electric Co reported a better-than-expected 7.5 percent rise in fourth-quarter profit and a sharp increase in its backlog of equipment orders. The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment came in at 71.3, down from 72.9 the month before. The index was at its lowest since December 2011. "It's a disappointing figure and helped put pressure on risky assets," said Greg Moore, a currency strategist at TD Securities in Toronto. "Markets for the last two weeks have been grinding higher, without much fundamentals backing it up. So this is a reality check. But it's still fairly early in the year and things could change," he said. U.S. Treasury debt prices extended modest gains on news that U.S. consumer sentiment had deteriorated for a second straight month in January, contrary to forecasts, with many consumers citing the recent "fiscal cliff" debate in Washington.
The U.S. benchmark 10-year Treasury note ticked up 13/32 in price to yield 1.8581 percent. Omer Esiner, a chief market analyst at Commonwealth Foreign Exchange in Washington said the consumer confidence numbers would be closely scrutinized going given the still uncertain impact of higher payroll taxes on the consumer. "This is a big miss and could mark the beginning of a downward trend in sentiment and in spending," Esiner said. The Dow Jones industrial average was down 18.00 points, or 0.13 percent, at 13,578.02 points. The Standard & Poor's 500 Index was down 3.95 points, or 0.27 percent, at 1,476.99. The Nasdaq Composite Index was down 15.25 points, or 0.49 percent, at 3,120.75. Disappointing economic data in the UK helped pushed European shares downward. The FTSEurofirst 300 index of top shares closed 0.16 percent lower at 1,163.64. China reported that its economy grew at a slightly faster-than-expected 7.9 percent in the fourth quarter of 2012, a clear sign it has avoided a sharp economic slowdown, though the annual growth rate was its weakest in 13 years. The China data came on top of strong U.S. labor and housing market reports on Thursday, providing fresh impetus to a broad rally in equities, precious metals and commodities since the start of the year. MSCI's index of leading world shares hit its highest level since May 2011 at 351.70, but later gave back its gains to trade down slightly at 350.91. Spot gold was up $1.70 to $1,688.90 an ounce. Oil prices stalled at $111 a barrel, retaining most of Thursday's gain, supported by the stronger growth in China and supply concerns after U.N. talks with Iran failed and as Algeria's hostage crisis continued. Brent crude briefly edged higher after the United Nations said nuclear inspectors had failed to reach a deal with Iran to unblock an investigation into suspected bomb research after two days of intensive discussions. Brent crude rose 10 cents at $110.20 barrel, while U.S. oil was down 34 cents at $95.15 a barrel. Sources familiar with the BOJ's thinking told Reuters the central bank, under relentless pressure from Japan's Prime Minister Shinzo Abe, will consider making an open-ended commitment to buy assets until 2 percent inflation is in sight.
"This is a big deal," said Jens Nordvig, global head of currency strategy at Nomura Securities in New York. "But as always from a trading perspective, it matters greatly what is already priced," he added. The euro last traded 0.5 percent lower against the yen at 119.66 yen, down from 120.70 earlier - its highest since May 2011. The euro was also down against the dollar, falling 0.5 percent on the day to $1.3308.