GLOBAL MARKETS-Stocks near 5-yr high after Abe win, though earnings weigh
* Wall Street shares firm, S&P hovers near record high
* Disappointing results from McDonald's weigh on sentiment
* Yen strengthens vs dollar, euro in choppy trading
* Softer dollar supports commodity prices, gold hits 1-month high
LONDON/NEW YORK, July 22 (Reuters) - World stock prices rose near five-year highs on Monday on growing investor optimism after Japanese Prime Minister Shinzo Abe strengthened his power base, adding weight to his plans to jumpstart the world's third-biggest economy. Investors' mood was also helped by a pledge from G20 nations on Saturday to put growth before austerity to revive the global economy, which the bloc said was "too weak." The yen rebounded after an initial dip in Tokyo, but many traders viewed the bounce as temporary in view of Abe's upper house election win on Sunday. Riskier assets, including peripheral euro zone bonds, got a boost after Portugal's president moved to keep the country's coalition government intact, patching over recent troubles.
However, disappointing earnings from McDonald's mitigated the upbeat mood as the U.S. fast-food giant posted weaker-than-expected results. News of a surprise drop in U.S. existing home sales also tempered the initial buying of equities and other risky assets. "The risk is the macro backdrop doesn't come through quite as strong as some of the companies are looking at, and that could be a negative factor for them," said Investec economist Victoria Clarke in London. MSCI's world index, which tracks stocks in 45 countries, gained 0.41 percent at 375.40, helped by a 0.47 percent rise in Tokyo's Nikkei index. It was about 7 points below a five-year high set in late May. In late morning trading, the Dow Jones industrial average was up 22.49 points, or 0.14 percent, at 15,566.23. The Standard & Poor's 500 Index was up 3.65 points, or 0.22 percent, at 1,695.74. The Nasdaq Composite Index was up 8.80 points, or 0.25 percent, at 3,596.41. Both the S&P 500 and Dow Jones hit all-time highs last week. In Europe, upbeat results from Dutch electronics maker Philips and Swiss Banks UBS and Julius Baer boosted European share prices, but some profit-taking emerged, reducing their early gains. "We are seeing a bit of position adjustment today but we have got a general positive outlook and I don't think the trend is going to break," said Societe Generale strategist Kit Juckes in London. The slight pause in the summer stock rally provided a boost for low-risk government debt in the wake of remarks from U.S. Federal Reserve Chairman Ben Bernanke that signaled the central bank will leave short-term rates near zero for a long time. The benchmark 10-year Treasury note yield dipped to 2.475 percent, its lowest level in over two weeks. German Bund futures were little changed at 144.24.
CHOPPY YEN The yen bounced back after an initial dip in Tokyo trading on some dollar selling by Japanese investors, which in turn triggered stop-loss selling in thin conditions. "Post the Japanese upper house election, we would expect the Abe government's economic reform rhetoric to gain further momentum, putting JPY back under pressure," Morgan Stanley's currency strategists wrote in a note. The dollar was down 1.22 percent on the day at 99.41 yen , a turnaround from an Asian session high of 100.70. The euro was also 0.5 percent lower at 131.23 yen, well off an early high of 132.29. The dollar index was 0.5 percent lower, slipping further away from a 3-year high set earlier this month. Commodities were mostly firmer thanks to the softer dollar. Spot gold rose to its highest level in a month and last traded up 2.4 percent at $1,327.31 an ounce, while copper gained 1.5 percent to $6,990 a tonne. Oil prices turned lower, erasing early gains. Brent crude in London fell 45 cents, or 0.4 percent, to $107.62 a barrel, while U.S. crude fell 86 cents or 0.8 percent at 107.19 after hitting a near 16-month peak of $109.32 earlier.