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Wall Street highs buoy global equities

Tuesday 08:00 GMT. European stocks are following a positive Asian session as global investor sentiment is buoyed by simultaneous record highs for Wall Street’s main equity gauges.

A steadier dollar and further gains for oil prices are supporting the chipper mood.

After the FTSE Asia Pacific index rose 0.8 per cent, the pan-European Stoxx 600 is advancing 0.7 per cent. Germany’s Dax is up 0.6 to challenge its best level since last December.

The UK’s FTSE 100 is gaining 0.8 per cent, underpinned by gains for shares in energy companies as oil prices rally further. Brent crude is up 0.9 per cent to $49.33 a barrel, adding to the 4.4 per cent jump on Monday caused by rising expectations of an Opec production cut.

Mining stocks are also mostly stronger as industrial commodities like copper again attract buyers, the moves partly in response to expectations that a pledge by US president-elect Donald Trump to deliver a big infrastructure spending package will boost demand for such resources.

Indeed, the mooted lift to US economic growth from Mr Trump’s plans are seen as contributing to the latest rally on Wall Street. Four of the most closely watched US gauges, the broad S&P 500, the big blue-chip Dow Jones Industrial Average, the technology-focused Nasdaq Composite and the small-cap based Russell 2000, all closed on Monday at record highs.

It is the first time that has happened since the height of the dotcom bubble on December 31 1999, according to Financial Times analysis of daily Bloomberg data. And US futures on Tuesday suggest the rally will be extended, with the S&P 500 looking to add six points to 2,204.

US equities have been managing to shrug off a stronger dollar — which can sometimes raise concerns about exporters’ competitiveness — as the currency has also been lifted by a belief that Mr Trump’s plans will raise economic growth and perhaps cause the Federal reserve to raise interest rates faster than had been expected.

The dollar index (DXY), which tracks the buck against a basket of its peers, though primarily the euro, is little changed at 101.07. The DXY sits just shy of the 13-year intraday high of 101.48 touched at the end of last week as investors are pricing in a 100 per cent probability that the Fed will raise borrowing costs bt 25 basis points on December 14.

The yield, which moves opposite to the price, on the policy-sensitive US two-year government bond is holding at 1.10 per cent, near its highest in more than six years having risen from 0.72 per ent in the immediate aftermath of Mr Trump’s election victory.

The more inflation-focused US 10-year yield is easing one basis point to 2.33 per cent, inching down from its highest in 12 months, while equivalent maturity German Bunds are down 1bp to 0.27 per cent.

In Asia, investors were rattled by two earthquakes, with a 7.4 magnitude quake that struck off the coast of Fukushima prefecture in Japan and a 5.6 magnitude tremor off the north island of New Zealand.

Japan’s Nikkei 225 rose 0.3 per cent, in keeping with the regional tone, but Tokyo Electric Power Company, owner of the Fukushima Daiichi nuclear power plant, dipped 1.4 per cent. The plant was damaged and experienced a meltdown in 2011 following the earthquake and tsunami in March of that year. Local media have reported Tepco as saying it has detected no abnormalities at its nuclear plants.

The yen is 0.2 per cent softer at ¥111.03 and the New Zealand dollar recovered to be just 0.2 per cent weaker at US$0.7051

In other bourses, Australia’s S&P/ASX 200 gained 1.2 per cent, driven by energy and mining stocks, while Hong Kong’s Hang Seng gained 1.5 per cent. China’s Shanghai Composite was up 1 per cent and the technology-focused Shenzhen Composite rose 0.9 per cent.

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