By Marc Jones and Daniel Bases
LONDON/NEW YORK (Reuters) - Global stock markets rose to record highs on Monday, underpinned by improving U.S. economic data that overshadowed a credit squeeze in China, while subdued inflation data undermined gold and left it on course for its worst year in over two decades.
Thin pre-holiday trading, with many investors gearing up for Christmas and with Tokyo on holiday, meant exaggerated price movements.
Wall Street share indexes bolted higher after data showed U.S. consumer spending increased to a five-month high in November, while consumer sentiment improved in December. At the same time, signs of strength in the world's largest economy have not spurred inflation, with a price index for consumer spending unchanged for a second straight month.
The Dow Jones industrial average WAS up 76.10 points, or 0.47 percent, at 16,297.24. The Standard & Poor's 500 Index was up 9.46 points, or 0.52 percent, at 1,827.78. The Nasdaq Composite Index was up 35.12 points, or 0.86 percent, at 4,139.86.
Apple Inc
"This is just good news, and a much bigger strategic deal than had been forecast," said Oliver Pursche, president of Suffern, New York-based Gary Goldberg Financial Services, which owns the stock.
European markets were also seeing some last-minute festive buying, with London's FTSE and Frankfurt's Dax 0.6 higher. Portuguese shares gained 1.5 percent.
Sentiment globally was underpinned by upbeat U.S. data and the resilience of stocks to the Federal Reserve's decision last week to start scaling back its bond-buying stimulus.
The benchmark 10-year U.S. Treasury note was down 8/32, the yield at 2.9126 percent.
"Growth is picking up," International Monetary Fund head Christine Lagarde said on NBC. "And unemployment is going down. So all of that gives us a much stronger outlook for 2014, which brings us to raising our (U.S.) forecast."
It was not all festive cheer, however. China's benchmark short-term money rates reached a near six-month high of 9.8 percent at one stage as its credit squeeze continued.
Rapid credit growth in the world's second-biggest economy has worried Chinese authorities, who fear rising debt levels are fueling asset bubbles.
The People's Bank of China injected more than 300 billion yuan into the interbank market on Friday in response to rising rates, but hinted that banks had work to do if they wanted to avoid a cash crunch.
ASIAN CURRENCIES, ITALY UNDER PRESSURE
The Indonesian, Malaysian and Thai currencies all came under pressure last week and even the Korean won lost a little of its strength. The Thai baht, which also has domestic political turmoil to contend with, hit its lowest since early 2010 on Monday.
In the euro zone, Italy was in focus after getting a fresh warning from the European Central Bank on Sunday that it needed to keep its public finances in check.
Italian government bonds were vying with Spain's to be the region's weakest performers, and Milan's main stock index held in positive territory largely on hopes of a stake sale at one of its most troubled banks.
"Italy is suffering from a dearth of growth but for me it still seems to be a solid member of the euro zone," said Neil Williams, chief economist at fund manager Hermes.
"My concern for next year for the euro zone is not so much the periphery, but what happens with the bill-payers."
GOLD SLUMP
In the currency market, the dollar was idling near break-even at 104.06 yen after hitting a five-year high at 104.63 last week. Dealers cited options barriers at 104.75 and 105.00 as the next target for bulls.
The euro rose 0.26 percent to a session high $1.3711 but short of last week's peak of $1.3811. Some heat has been taken out of the currency since then as banks have stocked up for the sensitive year-end period with extra ECB funding. It added another $15 billion on Monday.
Spot gold regained some of its early losses to trade near unchanged at $1202.31 an ounce after carving out a six-month low of $1,187.80 last week. If prices stay at that level, the metal would have shed 28 percent this year, the largest annual loss in 32 years.
Oil prices slipped as investors focused on refinery strikes in France and internal strife in South Sudan. Brent crude was a fraction lower at $111.57 a barrel after gains of almost 3 percent last week.
U.S. oil futures dipped 50 cents to $98.83.
(Additional reporting by Reuters bureaus; Editing by John Stonestreet and Dan Greber)
