GLOBAL MARKETS-Shares pull back after rally, dollar falls
* Global shares head for fourth week of gains
* U.S. stock investors take profits after rally, tech results
* Japan upper house election on Sunday in focus, yen up
* Bonds, oil see quiet end to week; gold rises
NEW YORK, July 19 (Reuters) - Government debt prices rose and stock markets around the world retreated on Friday when disappointing results from Microsoft and Google gave investors pause after a recent string of gains that lifted major U.S. equity indexes to record levels. China's central bank removed controls on bank lending rates, effective Saturday, in a long-awaited move that signals the new leadership's determination to carry out market-oriented reforms and could help support the country's economy. Market reaction was muted. China is seen as a primary source of revenue growth by the largest U.S. and other multinationals. Year-on-year growth in China has fallen in nine of the last 10 quarters. Equity markets were supported by General Electric Co and Whirlpool Corp. GE beat quarterly profit expectations by a penny, sending its shares up 4.5 percent, while Whirlpool also beat expectations and raised its full-year outlook. Currency and commodity markets were largely quiet, with both the dollar and euro moving slightly on the day, while gold and oil both rose. Equities remained on track for their fourth straight week of gains, lifted by reassurances that the Federal Reserve would be flexible about when it will end its monetary stimulus. The benchmark S&P 500 index has risen for 10 of the past 12 sessions, advancing to repeated record highs, including all-time intra-day and closing highs on Thursday. The benchmark index traded near break-even as did a measure of global stocks. "It's the first time in this cycle that we've had some household names that have missed and I think that's important, especially on a day where we're starting to transition our entire focus over to earnings," said Art Hogan, managing director at Lazard Capital Markets in New York. The Nasdaq fared worse than the other two major U.S. indexes, falling nearly 1 percent after Microsoft Corp and Google Inc both reported results that fell short of expectations. European shares ended flat but chalked up a fourth straight week of gains on Friday. Emerging market stocks fell 0.7 percent. MSCI's all-country world index was off 0.07 percent, while pan-European FTSEurofirst 300 of leading regional shares fell 0.04 percent to a provisional close of 1,208.64. The Dow Jones industrial average dropped 38.66 points, or 0.25 percent, to 15,509.88. The Standard & Poor's 500 Index dropped 2.16 points, or 0.13 percent, to 1,687.21. The Nasdaq Composite Index dropped 31.02 points, or 0.86 percent, to 3,580.26. Sentiment was also bolstered by long-awaited lending changes in China designed to bolster its flagging growth. The People's Bank of China said it was removing its floor on lending rates for commercial banks, meaning they will now be able to cut rates as much as they see fit to attract borrowers. Economists have been optimistic about U.S. growth prospects for some time, but some are now starting become increasingly upbeat about Europe, too. "Our biggest overweight is still the U.S., that story is just getting better and better, but what has surprised many externally and internally is that we have just gone overweight on Europe," said UBS global macro strategist Ramin Nakisa. "The biggest acceleration of any region we look at is in Europe at the moment. Emerging markets are slowing down whereas Europe is picking up so you can't wait for the GDP figures because they are always backward looking." The 10-year U.S. Treasury was up 11/31 in price to yield 2.4933 percent. The U.S. municipal bond market fell sharply on Friday, a day after Detroit filed for the largest municipal bankruptcy in history. German Bund futures were down 5 ticks after earlier touching a session low following the lending changes in China, but remained in a holding pattern near the six-week high hit in the previous session. The euro rose 0.22 percent to $1.3138, while the dollar index was down 0.27 percent at 82.602. The dollar hit a one-week high of 100.86 yen, according to Reuters data, before pulling back slightly to 100.34 yen. Oil rose to around $109 a barrel on both sides of the Atlantic after a sharp decline in U.S. crude stockpiles signaled stronger demand for fuel in the world's top oil consumer. Brent for September posted more modest gains, trading up 18 cents at $108.88, while U.S. oil for September was up 54 cents at $108.35 a barrel.
After a steady week for commodities, gold rose 0.8 percent while Brent oil rose 0.2 percent, hovering near a three-month high.