* Dollar trades near 14-year high
* European shares steady near 11-month high
* two-year German bond yields hit record lows
By Atul Prakash
LONDON, Dec 16 The dollar's post-Federal Reserve
rally steadied on Friday and European shares traded near
11-month highs as investors adjusted their portfolios before
year-end to face the prospect of a faster-than-expected pace of
U.S. rate hikes next year.
Japanese shares rose 0.7 percent after scaling a
one-year peak on the export prospects from a weaker yen. World
stocks as measured by the MSCI world equity index
, which tracks shares in 46 countries, were up
Global financial markets have been choppy since the Fed
projected three more interest rates hikes next year at its
meeting on Wednesday, when it also raised rates for the first
time in a year.
The dollar has since almost hit parity with the euro.
The dollar index, which tracks the greenback against
a basket of six major rival currencies, stood at 103.000 after
hitting a 14-year high of 103.560 on Thursday, when it gained
1.2 percent to record its biggest daily percentage gain in
nearly six months.
European shares steadied in morning dealings, but
were heading for a second straight week of gains, with the
prospect of more mergers and acquisitions underpinning
Analysts and traders said that the European stock market's
outlook remained broadly positive in the medium term, with major
stock indexes seen setting fresh highs.
"Stocks are continuing to get a boost from a weaker euro and
the notion that the United States, the world's largest economy,
will experience an uptick in growth once President-elect
(Donald) Trump has started implementing his new policies,"
Markus Huber, trader at City of London Markets, said.
European infrastructure and commodities firms have been in
demand on expectations that Trump's pledge to heavily invest in
infrastructure projects would boost the sectors.
The possibility of the Fed tightening monetary policy drove
the benchmark U.S. Treasury 10-year yield to its
highest level in more than two years.
In Europe, however, two-year German government bond yields
dropped to fresh record lows after the European Central Bank's
recent tweaks to its asset-purchase programme.
Earlier this month, the ECB said it would reconfigure its
bond-buying scheme at the start of 2017, introducing changes
that suggested it would focus its purchases on the short end of
euro zone government bonds.
In commodities, a stronger dollar and signs of mounting
supply in London Metal Exchange warehouses pushed copper prices
lower and hurt European mining stocks.
Oil prices stabilised as evidence rose that producers in the
Middle East were informing customers of upcoming supply cuts as
part of a coordinated effort to drain a global glut.
Asian stocks were tepid, with MSCI's broadest index of
Asia-Pacific shares outside Japan down 0.1
percent, after falling 1.8 percent on Thursday.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Abhinav Ramnarayan in London and
Shinichi Saoshiro in Tokyo Editing by Jeremy Gaunt.Editing by