The dollar is at its highest level compared to yen in four years.
LONDON, Jan 4, Reuters World shares extended on Tuesday a bright start to 2022 as markets from Europe to Asia shrugged off worries that the Omicron coronaviruses variant could choke the global economic recovery, while the dollar went up after U.S. bond yields went up.
The Euro STOXX 600 gained by 0.9% to reach a record of 494.55 points, topping its previous all-time high a day earlier in the day. Germany, France and Britain's indexes rose between 0.7% and 1.3%.
Travel and leisure stocks increased by over 3%, with Ryanair adding 10% and British Airways-owner IAG gaining more than 12%, reflecting expectations that Omicron's impact on the industry would be less severe than initially feared.
Colin Asher, senior economist at Mizuho said that Omicron is in the rear view mirror as far as markets are concerned.
The main focus was on a collapse in demand and now the focus is more on the supply, because demand has recovered so quickly. It will push prices higher rather than push activity down, because it will prolong supply chain delays. Wall Street was poised for gains after closing at record highs a day earlier in the day, with e-mini futures for the S&P 500 index 0.4% higher.
The U.S. dollar was at its highest since 2017 against the Japanese yen after U.S Treasury yields jumped on Monday as traders bet on an early Federal Reserve interest rate hike to tame fast-rising inflation.
The euro zone bond yields held steady near their highest levels in the past two months.
In a sign that economies may be able to weather the spread of Omicron, factory activity grew in Asia and Europe in December, suggesting the direct hit from the variant on output appeared subdued.
Asian stocks were on the front foot after Wall Street's record highs on its first trading day of 2022, with MSCI's gauge of Asia Pacific stocks outside Japan up 0.5%.
The gains for stocks reflected optimism over prospects for the U.S. economy, according to analysts. John Milroy, an Ord Minnett advisor in Sydney, said the U.S. is seeing boom conditions and a very tight labour market which will boost household incomes.
The major Wall Street indexes closed at record highs on Monday, with Apple Inc becoming the first company to reach $3 trillion market value.
The tech giant's market capitalisation is well above the combined value of the blue chips listed on London's FTSE 100.
In the last year, the S&P index surged nearly 28%, leading MSCI's 50 country index of world stocks to its third consecutive year of double-digit gains.
The index was up 0.3% on the day.
The US 10 year yields went up 12.5 basis points on Monday to close at 1.6420% for the first time since Nov. 24, as investors bet on a series of interest rate raises this year to combat rising inflation.
Money markets have fully priced in a first U.S. rate increase by May, and two more by the end of 2022.
For the first time in four years, the dollar went to as high as 115.82 yen.
The dollar index, which measures its performance against the yen and five other major currencies, was close to the one-week high of 96.328 reached a day earlier in the day. It was up 0.2%.
The Turkish lira slid as much as 4% against the dollar as Turkey girded for inflation to rise further after touching a 19 year peak. The lira weakened 44% last year.
Commodity markets were back in the swing of things after their nearly two-year resurgence to close out 2021.
The price of crude futures was up 0.8% at $79.64 a barrel at 1136 GMT, as investors embraced the expectation that major oil producers will confirm a plan to add supply.