* Business activity, inflation rise
* Euro holds above $1.04
* HSBC offers global growth "rare treat"
By Jamie McGeever
LONDON, Jan 4 Upbeat global economic data and
growing signs that inflation on both sides of the Atlantic is
accelerating fuelled a second day of 2017 gains across world
stock markets on Wednesday, and lifted the euro and oil prices.
A batch of reports from Europe showed that French consumer
confidence hit a nine-year high, business activity across the
euro zone rose at the fastest pace in more than five years and
inflation in the euro zone is its highest in over three years.
This followed similarly upbeat reports this week on U.S.,
British, Chinese and Japanese business activity and helped steer
investors towards riskier assets that benefit from higher
interest rates - such as equities - and away from lower-yielding
assets, including bonds.
"Over the month, confidence increased in the manufacturing
sector and stabilised in services, amid solid new orders and
businesses, strong optimism and elevated backlog of works," said
Apolline Menut, economist at Barclays.
"This suggests that euro area activity is poised for a
strong start in 2017," she said.
Economists at HSBC on Wednesday raised their 2017 and 2018
forecasts for global growth and inflation, the first time in
nearly five years they have upped these outlooks over a two-year
At midsession in Europe on Wednesday, Europe's index of
leading 300 shares was flat at 1,445 points, supported
by a 0.5-percent rise in financials but capped by the
strength of the single currency.
The FTSEuroFirst 300 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 0.4 percent.
U.S. futures pointed to a higher opening of up to 0.2
percent on Wall Street, priming the Dow Jones for another
test of the 20,000-point mark.
The potential for further U.S. rate hikes this year ensured
profit-taking on the dollar's run on Tuesday was limited to 0.2
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.
The euro rose 0.3 percent to $1.0435, and the dollar
gave up earlier gains against the yen to trade little changed at
The continued grind higher in euro zone inflation is lifting
inflation expectations closer to the European Central Bank's
target of just below 2 percent. This offers some
welcome relief to ECB policymakers who for years have struggled
to lift growth and inflation.
The focus for investors now turns to the minutes of the
Federal Reserve's policy meeting last month, when it raised
"It will be interesting to see just how much the (incoming
Trump administration's) fiscal stimulus plans contributed to the
interest rate forecasts from Fed policymakers in December and
whether there is potential for the pace to be faster still,"
said Craig Erlam, senior market analyst at Oanda.
U.S. Treasury yields inched up marginally, rising almost two
basis points to 2.47 percent before easing back, but
German and UK yields were down a basis point at 0.25 percent
and 1.31 percent, respectively.
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
0.5 percent to stand at $52.58 a barrel, while Brent futures
rose 0.5 percent to $55.74.
Gold took advantage of the dollar's slip to trade 0.6
percent higher at $1,165 an ounce.
(Editing by Mark Heinrich)