Shares lifted by China and US figures

World shares hit a 20-month high yesterday as encouraging data from the United States and China boosted prospects for the global economy, while the yen hit new lows ahead of next week's Bank of Japan (BoJ) meeting.

China's economy grew at a slightly faster-than-expected 7.9 per cent in the fourth quarter of last year, the latest sign it is pulling out of a post-global financial crisis slowdown that produced its weakest year of economic growth since 1999.

The positive news came on top of strong US labour and housing market reports on Thursday, providing fresh impetus to a recent strong and broad financial market rally.

MSCI's index of leading world shares hit its highest level since May 2011 at 552.16 points after Tokyo and Hong Kong stock markets surged and the S&P 500 in New York hit a five-year high.

Industrial commodities and oil also benefited, with palladium reaching a 16-month high and platinum a three-month high.

"We've got good numbers out of China, we had some good numbers out of US yesterday ... The general sentiment is pretty good," said Neil Marsh, a strategist at the Newedge brokerage headquartered in Paris.

"There will probably be some phases of consolidation as we go forward, but the markets remain pretty resilient. More people are putting their cash to work now in riskier assets like equities, and there is no sign of that stopping at the minute."

British retail sales posted a surprise monthly fall last month, dashing hopes that Christmas shoppers would provide a last-minute boost to an economy on the verge of another contraction.

Consumer spending in Britain has come under pressure from a combination of below-inflation wage growth, worries about the economy and government austerity measures.

"What is disappointing is that, after about a year of a pick-up in retail activity, the high street seems to have stalled again over the past few months," said Phillip Shaw, an economist at Investec.

Expectations that the new Japanese government will pursue massive fiscal spending and push for more aggressive BoJ easing to drive Japan out of years of deflation and economic slump have spurred heavy yen selling since November.

Sources told Reuters the BoJ will at its meeting on Monday and Tuesday consider removing the 0.1 per cent floor on short-term interest rates and commit to open-ended asset buying until the 2 per cent inflation target is reached.