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GLOBAL MARKETS-World stock markets up on China trade, U.S. debt deal; pound rises

Caroline Valetkevitch
Wednesday, 12 Feb 2014 | 11:07 AM ET

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* U.S. stocks mixed in early trading

* China January exports and imports well above forecasts

* U.S. House passes debt limit, diminishes danger of default

* Sterling rises as BoE hints at rate hike in 2015

NEW YORK, Feb 12 (Reuters) - Prices climbed on global stock markets for a sixth straight session on Wednesday after upbeat trade data from China and a U.S. deal extending federal borrowing authority, while the British pound rose to a two-week high against the dollar.

U.S. stocks were mixed shortly after the opening, putting the S&P 500 within striking distance of a record high, while Treasuries prices fell on the debt agreement.

Chinese exports and imports outperformed expectations in January by a wide margin, easing fears that the world's second- largest economy is mired in a worsening slowdown and reviving investors' appetite for emerging market assets that had been battered in recent weeks.

MSCI's index of emerging market stocks added 1 percent , extending its bounce from five-month lows hit earlier this month. The Australian dollar rose to a one-month high on the prospect of stronger demand from China, Australia's largest export market.

The broader MSCI All-Country World Index was up 0.3 percent and was on track to post its longest winning run in five months, while the FTSEurofirst 300 index rose 0.8 percent. Europe is one of China's largest trading partners.

"Our analysis suggests that emerging market equities are discounting an outcome substantially below current consensus forecasts, so of course a better-than-expected outcome is going to help the case," said Ian Scott, a global equity strategist at Barclays in London.

Investors also took heart from a strong share market performance in the United States, where Congress agreed to advance legislation extending U.S. borrowing authority and the Federal Reserve's new chief, Janet Yellen, pledged to keep interest rates at ultra-low levels for longer.

On Wall Street, the Dow Jones industrial average was down 27.04 points, or 0.17 percent, at 15,967.73. The Standard & Poor's 500 Index was up 0.41 points, or 0.02 percent, at 1,820.16. The Nasdaq Composite Index was up 7.68 points, or 0.18 percent, at 4,198.72.

The benchmark 10-year U.S. Treasury note fell 12/32 in price to yield 2.7589 percent.

BRITISH RECOVERY

The Bank of England indicated that interest rates may need to rise in just over a year and boosted its growth forecast, sending the pound up against the dollar and the euro .

"The BoE seems to become the first major central bank, bar the Reserve Bank of New Zealand, to hike interest rates," said Chris Turner, chief currency strategist at ING. "We are expecting a rate hike in February 2015, so in the short term sterling looks good, especially against the euro."

Sterling jumped to a two-week high of $1.6562, up 0.7 percent on the day.

The calmer mood in markets was reflected in the VSTOXX index of euro zone equity volatility, which fell for a sixth day to lows not reached since late January.

In commodities markets, gold prices inched lower after the Fed chief painted an optimistic economic outlook that whetted investors' risk appetite. Spot gold was down 0.1 percent at $1,290.14 an ounce, snapping a three-day winning streak.

Brent crude rose above $109 a barrel, helped by expectations of strengthening global demand as OPEC raised its 2014 forecast and following the Chinese data.

Brent crude was last up 55 cents at $109.23, while U.S. crude oil was up $1.05 at $100.99.