Stocks rally on economic hopes

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Investors bet on a global economic recovery on Tuesday, lifting European and Asian shares for the sixth and seventh consecutive sessions respectively, while political events drove oil above $50 a barrel.

Wall Street looked set for a positive start and the dollar climbed strongly against major currencies, particularly the euro.

Expectations that U.S. President-elect Barack Obama will offer $310 billion (212.3 billion pounds) in tax cuts as part of a $775 billion plan to support the economy have fed into a tentative recovery in global equity markets.

German politicians also debated tax cuts to revive Europe's largest economy.

The pan-European FTSEurofirst 300 index of top European shares was up 1.8 percent. It has now gained around 18 percent since hitting a low in late November.

"The main things are the Obama plans as well as the German fiscal stimulus package," said Bernard McAlinden, market strategist at NCB Stockbrokers. "Markets, rather than focusing on the dire economic and earnings data, are looking forward to the hope that these plans will work."

In Japan, the Nikkei 225 closed up 0.4 percent and the MSCI index of Asia-Pacific stocks outside Japan edged up for a seventh straight day, gaining 0.48 percent.

Higher oil prices helped boost energy stocks, but sharp gains may cause some headline inflation problems later for central banks intent on cutting interest rates.