U.S. budget, growth hopes send shares, euro higher

Wed Dec 19, 2012 8:34am EST
 

By Richard Hubbard

LONDON (Reuters) - World shares hit 17-month highs and the euro surged on Wednesday as hopes grew for a year-end budget deal in the United States and for further monetary stimulus from the Bank of Japan.

A key business survey in Germany added to the improving sentiment among investors by suggesting that Europe's biggest economy was likely to bounce back quickly from its slowdown.

The growing confidence in the outlook lifted the euro to a 16-month high against the yen and an 8-1/2 month peak versus the dollar. While the FTSEurofirst 300 index .FTEU3 of top company shares scaled fresh 18-month highs. {.EU]

U.S. stock index futures also signaled a third day of gains for the widely watched S&P 500 index .SPX with technology shares in focus after strong results from Oracle. ORCL.O

"Continuing loose monetary policy from the major central banks and apparent progress in overcoming the (euro zone) debt crisis has prompted a significant improvement in sentiment," said Bernd Hartmann, head of investment research at VP Bank.

The better tone is being supported by the U.S. Federal Reserve's efforts to boost the recovery in the world's largest economy, signs of growing momentum in China and talk that Japan is set for a policy shift to lift itself out of recession.

The latest German Ifo Institute survey of 7,000 firms bolstered this sentiment by finding that business confidence had improved for a second month running in December, in part because of better export prospects.

The brighter outlook has been behind the solid gains in the MSCI world equity index .MIWD00000PUS, which has taken it to levels not seen since July 2011. The index rose 0.5 percent on Wednesday, on track for its fifth straight weekly gain.   Continued...

 
A cameraman films rises in share prices at the Tokyo Stock Exchange in Tokyo December 17, 2012. REUTERS/Yuriko Nakao