China reform plans lift shares, Dow, S&P 500 at new highs

Mon Nov 18, 2013 12:19pm EST
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By Herbert Lash

NEW YORK (Reuters) - Benchmark U.S. stock indices rose to record highs on Monday, buoyed by the prospect of continued Federal Reserve stimulus, while the dollar slipped and global equity markets climbed, driven by economic reform plans in China.

The Dow and S&P 500 surged past the 16,000 and 1,800 milestones, respectively, but both U.S. indices pared some gains soon after markets opened. Round numbers often act as resistance points for chartists, but clearing them can also provide momentum for investors eager to chase performance.

Chinese shares listed in Hong Kong posted their biggest gain in nearly two years, driving the safe-haven dollar and Japanese yen lower after China announced its most sweeping economic and social reforms in nearly three decades.

The reform plans boosted investor appetite for higher-yielding currencies such as the Australian and New Zealand dollars. The growth-linked currencies outperformed as a flood of global liquidity and promises to keep interest rates low continue to weigh on the low-yielding U.S. dollar and the yen.

"Risk appetite is strong... after details of China's reform prove more dramatic than expected, suggesting a focus on market liberalization and reforms in both the government role and the broader corporate structure," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.

The China Enterprises Index .HSCE of the top Chinese listings in Hong Kong soared 5.7 percent for its biggest daily gain since December 1, 2011.

Germany's DAX .GDAXI hit intraday and closing record highs as European shares resumed their rally on an improving outlook for the euro zone economy.

MSCI's all-country world stock index .MIWD00000PUS rose 0.52 percent, while the pan-European FTSEurofirst 300 index .FTEU3 rose 0.51 percent to close at a provisional 1,304.45.   Continued...

Specialist trader Chris Malloy (C) gives a price to traders on the floor of the New York Stock Exchange, October 18, 2013. REUTERS/Brendan McDermid