* 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.
Figures also showed that euro zone inflation hit its highest
in more than three years last month, which helped support a rise
in oil, commodity prices and bond yields.
"This latest data could mark the beginning of the end to
ECB's bond-buying programme and expansive monetary policy as it
edges closer to their inflation target of two percent," Xtrade's
Chief Market Analyst, Paul Sirani, said.
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.
Investors will now turn their attention to the minutes of
the Federal Reserve's policy meeting last month when it raised
"What is important is the Fed's view on inflation,
especially after the (strong) ISM manufacturing survey data
yesterday," said Naeem Aslam, analyst at Think Markets.
"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
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
, offering some welcome relief to ECB policymakers
who for years have struggled to lift growth and inflation.
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)