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STOXX 600 up 0.6%, FTSE, DAX at records

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Dollar hits one-month low to yen on Fed comments, hawkish

BOJ

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Investors wary ahead of Trump's inauguration on Monday

(Updates with European morning trade)

By Samuel Indyk and Kevin Buckland

LONDON, Jan 17 (Reuters) -

European shares rose on Friday and were heading for their

biggest one-week jump since September as falling bond yields,

stronger-than-forecast China growth figures and upbeat earnings

supported riskier assets.

The Chinese data also supported most Asia-Pacific

shares, but Japanese markets underperformed after the yen popped

to a one-month high due to rising bets that the Bank of Japan

will hikes interest rates next week.

The dollar clawed back some of Thursday's steep declines

against major peers, the result of resurgent wagers on a Federal

Reserve rate cut by June. Treasury yields also halted their

decline, but remained close to the previous session's lows.

China's economy

grew 5% last year, matching the government's target, but

growth was unbalanced, led by industry and exports and the 2025

outlook remains uncertain as U.S. President-elect Donald Trump

returns to the White House.

"If China is starting to do a little better, that's

positive (for European equities)," said Lars Skovgaard, senior

investment strategist at Danske Bank.

The pan-European STOXX 600 is up 0.6% on

Friday, taking the weekly gain to 2.3%, its biggest one-week

jump since September.

Britain's FTSE 100 and Germany's DAX

both hit intraday record highs on Friday, up 1% and 0.9%

respectively.

In Asia, mainland Chinese blue chips and Hong

Kong's Hang Seng both rose 0.3%.

Japan's Nikkei sagged 0.3%, paring earlier

losses of more than 1%. The yen had earlier climbed to

the highest since Dec. 19 at 154.98 per dollar then reversed

course to last trade about 0.4% lower at 155.75.

MSCI's world index rose 0.05%.

U.S. S&P 500 futures gained 0.3%, after the cash

index closed down 0.2% on Thursday. Those small declines came

after a 1.8% jump on Wednesday - the biggest daily percentage

gain since the post-election rally on Nov. 6 - fuelled by strong

bank earnings at the start of the new reporting season.

"Investors are enjoying the re-anchoring of the market

narrative to company fundamentals and away from the macro, with

earnings season so far proving robust," said Kyle Rodda, senior

financial market analyst at Capital.com.

BOND YIELDS DROP

Ten-year U.S. Treasury yields stood at 4.6047%

in the latest session, after sliding to the lowest since Jan. 6

at 4.5880% on Thursday, when Fed Governor Christopher Waller

said three or four interest cuts this year are still possible if

U.S. economic data weakens.

Ten-year Japanese government bond yields

eased along with overnight moves in Treasuries, even as comments

from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo

Himino, this week spurred a rise in bets for a quarter-point

hike on Jan. 24 to 78%. They indicated wage growth would likely

remain strong this year and Japan was progressing towards

durably hitting its inflation target.

Sources told Reuters that following a likely policy

tightening, the central bank is set to maintain a pledge to keep

pushing up borrowing costs if the economy continues to recover.

The dollar index - which measures the greenback

against a basket of six major currencies, including the yen -

edged up 0.1% to 109.09, but remained 0.5% lower for the week,

threatening to snap six straight weeks of gains.

The euro was little changed at $1.0297, while the

beleaguered sterling lost 0.3% to $1.2197 after

worse-than-forecast British retail sales in December.

Declines in bond yields supported alternative assets.

Bitcoin edged as high as $102,242, its highest since

Jan. 7.

Gold stood at $2,704, hovering close to Thursday's

high of $2,724.55, its strongest in more than a month.

Meanwhile, crude oil headed for a fourth consecutive weekly

advance as the latest U.S. sanctions on Russian energy trade hit

supply and pushed up spot prices and shipping rates.

Brent crude futures rose 0.2%, to $81.45 per barrel,

on course for a 1.9% rise this week. U.S. West Texas

Intermediate crude futures were up 0.4% to $79.02 a

barrel, headed for a 2.76% weekly advance of 2.8%.