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Cautious Fed lifts stocks to record high, investors eye earnings boost ~ Nichola Saminather

http://www.reuters.com/article/us-global-markets-idUSKBN19Z02T

SINGAPORE (Reuters) - Global stocks scaled record highs on Friday, with Asian equities rising for the fifth straight session, as signs the Federal Reserve will pursue a gradual rate tightening path and hopes of a strong earnings season lifted appetite for risk assets.

The MSCI World Index .MIWD00000PUS was almost 0.1 percent higher on Friday, just a whisker below an all-time intraday high hit earlier. It is on track to end the week 1.6 percent higher.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS advanced 0.25 percent to its highest level in two years. It's set for a 3.3 percent gain for the week, its biggest since mid-March.

Japan's Nikkei .N225 added 0.2 percent, poised for a weekly rise of 1.1 percent.

Chinese shares bucked the positive trend, with the CSI 300 .CSI300 index falling 0.1 percent, and the Shanghai Composite .SSEC down 0.2 percent. Hong Kong's Hang Seng .HSI was unchanged.

Chinese steelmakers including Baotou Steel (600010.SS) and Baoshan Iron & Steel Co. (600019.SS) dropped more than 1 percent after U.S. President Donald Trump said he is considering quotas and tariffs to deal with steel dumping from China and others.

Wall Street edged higher on Thursday, with the major indexes .DJI .SPX .IXIC up between 0.1 and 0.2 percent, as stocks basked in comments by Federal Reserve Chair Janet Yellen that the central bank's rate hikes could be gradual, given persistently low inflation despite an improving economy.

Expectations that S&P 500 companies will report second-quarter earnings growth of 7.8 percent also supported stocks. Major banks, including JPMorgan Chase (JPM.N), Citigroup (C.N) and Wells Fargo (WFC.N), will report results on Friday.

"The U.S. profit reporting season looks likely to be a key market driver over the next couple of weeks," Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in a note.

"Full valuations suggest that the market is yet again going into this reporting season anticipating results to outperform consensus analyst expectations."

In Asia, markets are also expecting strong earnings, particularly for many of the export-reliant firms benefiting from an upturn in global demand.

The dollar pulled up 0.2 percent to 113.42 yen JPY=D4 on Friday, narrowing losses for the week to 0.4 percent.

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, was steady at 95.739, on track for a 0.3 percent weekly decline.

"Yellen gave some hope to the dollar bulls with her acknowledgement of the improvements in the economy, but at the end of the day investors are still skeptical of what data is going to be like," said Kathy Lien, managing director at BK Asset Management in New York.

"That's why you have not seen much in the way of additional follow through in dollar demand."

The dollar was also supported by data showing the number of Americans filing for unemployment benefits fell last week for the first time in a month and producer prices unexpectedly rose in June.

Investors are awaiting a host of U.S. economic indicators, including core inflation, retail sales and industrial production for June later in the session for more insight into how the Fed might proceed with monetary policy tightening this year.

For now, markets appear to be shrugging off the revelation by U.S. President Donald Trump's son this week that he'd met with a Russian lawyer during the 2016 presidential campaign after being told she might have damaging information about Democratic candidate Hillary Clinton.

But political concerns in the U.S. may once again vex investors, as a revised Senate plan to dismantle Obamacare drew criticism from both Republican and Democratic senators.

Senate Majority Leader Mitch McConnell, who was forced two weeks ago to scrap a planned vote on an earlier version, has planned for a vote on the retooled bill next week.

The euro EUR=EBS was up 0.1 percent at $1.14095 on Friday, after inching down 0.1 percent overnight, and is set to end the week flat.

The European Central Bank is likely to signal in September that its bond-buying scheme will be gradually wound down next year and ECB chief Mario Draghi could give the next clue on the plans in late August, the Wall Street Journal said on Thursday.

The Canadian dollar CAD= remained near its strongest in over a year after the Bank of Canada this week raised interest rates for the first time since 2010, with further tightening expected this year.

 

The loonie was about 0.1 percent weaker early on Friday at C$1.2729 to the dollar but is up 1.1 percent this week.

In commodities, oil crept lower as high fuel inventories revived concerns about a supply glut but losses were limited by data that showed China's oil imports in the first half of 2017 rose 14 percent from a year earlier.

U.S. crude CLc1 slipped 0.2 percent to $45.99 a barrel, after rising 1.3 percent on Thursday. It is poised for a 4 percent gain this week.

Global benchmark Brent LCOc1 inched down 0.1 percent to $48.35 following Thursday's 1.4 percent jump, and is headed for a 3.55 percent gain this week.

Gold XAU= was steady at $1,216.58 an ounce, heading for a 0.3 percent gain for the week.

Reporting by Nichola Saminather; Additional reporting by Saqib Iqbal Ahmed; Editing by Shri Navaratnam and Sam Holmes