* Stocks like global manufacturing upswing
* Euro rises further above $1.04
* Eyes on U.S., European inflation
By Jamie McGeever
LONDON, Jan 4 Investors took heart from upbeat
economic data and growing signs that inflation on both sides of
the Atlantic is gradually accelerating, fuelling a second day of
2017 gains across world stock markets on Wednesday.
Optimism over economic growth turned investors towards
riskier assets that benefit from higher interest rates - such as
equities - and away from lower-yielding assets, including bonds.
The euro moved further above $1.04 after data showed French
consumer confidence hit its highest for nine years and
businesses across the euro zone ended 2016 by ramping up
activity at the fastest pace for five-and-a-half years.
This followed similarly upbeat reports this week on U.S.,
UK, Chinese and Japanese business activity.
Oil, commodity prices and bond yields ticked higher too,
while the dollar slipped from a 14-year peak hit on Tuesday as
the euro recovered some stability.
Investors will now turn their attention to the flash
estimate for December's euro zone inflation figures and minutes
of the Federal Reserve's policy meeting last month when it
"What is important is the Fed's view on inflation,
especially after the (strong) ISM manufacturing survey data
yesterday," Avatrade trader Naeem Aslam said.
"Improvement in input prices is going to have an impact on
final products which would, in turn, move the scale on
inflation, upon which the Fed can no longer be reticent," he
Europe's index of leading 300 shares edged up 0.1 percent
, supported by a 1-percent rise in financials
and a 0.4-percent rise in basic resources stocks. The
index hit a 1-year high on Tuesday.
One of the biggest movers on major European bourses was UK
retailer Next. Its shares fell as much as 14 percent
after a profit warning. The stock has lost nearly 40 percent
over the past year.
MSCI's benchmark global index rose for a second day to trade
0.3 percent higher, and its index of major Asian
shares excluding Japan rose for a seventh consecutive day,
gaining 0.3 percent.
U.S. futures pointed to a higher opening of between 0.1
percent and 0.2 percent on Wall Street, priming the Dow
Jones for another test of the 20,000-point mark.
DOLLAR INFLECTION POINT?
The potential for further U.S. rate hikes this year ensured
profit-taking on the dollar's run on Tuesday was limited to just
0.15 percent against a basket of currencies.
The dollar's strength in Asian trading helped Japan's
exporter-heavy stock market rally toward its biggest daily
increase for almost two months.
In its first trading day of the year, the Nikkei
climbed 2.50 percent and looked set for the highest close since
December 2015. It was further aided by domestic data showing
factory activity had expanded at the fastest pace in a year.
"For the dollar to push ahead from here, we'd need to see
the Fed follow through on these anticipated hikes, but also for
(president-elect Donald) Trump's bullishness on the economy to
start to come to fruition," FXPro chief economist Simon Smith
The euro rose 0.3 percent to $1.0435, and the dollar
gave up earlier gains against the yen to trade little changed at
Euro zone inflation expectations are moving closer to the
European Central Bank's target of just below 2 percent
. Figures due later on Wednesday are expected to
show euro zone inflation nearly doubling in December to 1
ECB policymakers, who for years have struggled to lift
growth and inflation, will also welcome the recovery in both the
euro zone manufacturing and services sectors.
A rise in U.S. Treasury yields helped lift global bond
yields but only marginally. The 10-year U.S. yield rose almost
two basis points to 2.47 percent, but German and UK
yields were flat at 0.26 percent and 1.32 percent
Germany's 10-year yield had hit a two-week high of 0.29
percent on Tuesday.
In commodity markets, oil prices recovered from a fall of
more than 2 percent on Tuesday. U.S. crude bounced back
0.9 percent to stand at $52.77 a barrel, while Brent futures
rose 0.9 percent to $56.
Gold took advantage of the dollar's slip to trade 0.8
percent higher at $1,116 an ounce.
(Editing by Louise Ireland)