By Richard Leong
NEW YORK (Reuters) - World stock markets rose to a six-year high on Monday on optimism about the global economy heading into 2014, while the euro strengthened against the dollar and yen on comments by European Central Bank chief Mario Draghi.
U.S. benchmark yields slipped below the 3 percent threshold after they hit a two-year high last week on expectations of improving domestic growth as the Federal Reserve begins to pare its massive bond-purchase stimulus in January.
Views on economic improvement further reduced the appeal of gold, which will record its biggest annual loss in 32 years.
Oil prices fell to near $111 a barrel in London on signs crude exports from Libya might return to normal due to a possible end to a four-month blockage of a key port.
MSCI's all-country world equity index edged up 0.1 percent to 407.30 points, its highest since late 2007. It was poised to gain almost 10 percent for the year, following a 13.4 percent rise in 2012.
Wall Street stocks were little changed, with the Standard & Poor's 500 index on track to book a 29.1 percent annual rise this year, its biggest since 1997.
"We certainly have had quite an impressive year, and obviously a lot of that was helped by the central bank stimulus. Given what we've seen so far, the path of least resistance has been to go higher," said Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago.
The Dow Jones industrial average <.DJI> closed up 25.88 points, or 0.16 percent, at 16,504.29. The Standard & Poor's 500 Index <.SPX> ended down 0.33 points, or 0.02 percent, at 1,841.07. The Nasdaq Composite Index finished down 2.40 points, or 0.06 percent, at 4,154.20.
After years in which financial markets lurched from the debt crisis in Europe to U.S. political deadlock, investors are generally becoming more upbeat on the global economic outlook.
Most European stock indexes fell but stayed on track to post their biggest annual gains in four years on support from the ECB and a strengthening economic recovery.
The FTSEurofirst 300 index of top European shares provisionally closed down 0.2 percent at 1,311.76 but was still set to post a gain of 16 percent for the year, its best annual performance since 2009.
Japan shares ended 2013 with a flourish, up 0.7 percent - 56.7 percent for the year. Tokyo's Nikkei index has posted its strongest run-up since 1972 as aggressive government and central bank policies have driven the plunge of its currency in an effort to help exporters and stimulate domestic demand.
"This year has seen the renaissance of equities as the financial crisis ended. Next year should see the end of the economic crisis, and it should bring more opportunities for stock investors," said David Thebault, head of quantitative sales trading at Global Equities in Paris.
Thin year-end conditions made for more lively moves in the currency market.
The euro last traded up 0.4 percent to $1.3796, short of $1.3892 set on Friday - which was the highest since October 2011. The single currency also strengthened against the yen, rising 0.4 percent to 144.99 yen after hitting a five-year peak of 145.675 yen on Friday.
Comments by European Central Bank President Mario Draghi in Germany's Der Spiegel that he saw no urgent need to cut interest rates again and no signs of deflation supported the euro.
"At the moment we see no need for immediate action. We don't have Japanese conditions," he said.
RELATED:
Fed trims bond-buying: http://link.reuters.com/myp55v
Asset returns in 2013: http://link.reuters.com/dub25t
Euro zone debt crisis http://r.reuters.com/hyb65p
Currencies vs dollar in 2013: http://link.reuters.com/tak27s
World interest rates: http://link.reuters.com/xyb96s
U.S. YIELDS FALL
Yields on the U.S. benchmark 10-year Treasury note slipped to 2.97 percent as bargain-hunting emerged two days before the end of 2013. The 10-year yield climbed to its highest in more than two years at 3.02 percent last week.
Federal borrowing costs had risen in reaction to the U.S. central bank's decision earlier this month to dial back its bond purchases next week by $10 billion a month, to $75 billion.
Fed Reserve officials have expressed cautious optimism on improving domestic growth in 2014, helped by other major economies showing signs of improvement.
The U.S. housing recovery has supported the overall economy, with pending home sales edging up 0.2 percent in November.
Global growth hopes lifted copper and aluminum to four- and two-month highs. Aluminum clung to a 0.7 percent rise to close at $1,822 a tonne but copper nearly erased its early gains, closing up 0.03 percent at $7,380 a tonne.
Safe-haven gold fell 1.3 percent to $1,196.91 an ounce in late trading as the precious metal headed toward its biggest annual loss in over three decades.
In the oil market, Brent crude settled 97 cents or 0.86 percent lower at $111.21 a barrel, while U.S. oil futures settled down $1.03 or 1 percent at $99.29.
(Additional reporting by Chuck Mikolajczak, Curtis Skinner in New York, Blaise Robinson, Marc Jones in London and Wayne Cole in Sydney; Editing by Catherine Evans, Dan Grebler and Meredith Mazzilli)
