Global stocks hit record highs on vaccine, stimulus, Brexit deal hopes

World stocks rose to record highs on Wednesday as drugmakers rolled out COVID-19 vaccines and US congressional leaders expressed optimism about a stimulus deal, with the upbeat mood dragging the safe-haven dollar to 2-1/2 year lows.

In Europe, markets were cheered by the possibility of a Brexit trade deal, better-than-expected euro zone PMI economic data and a European Central Bank decision to let euro zone banks start paying dividends again if they have enough capital.

Markets are watching the US Federal Reserve later on Wednesday for hints that it will extend its stimulus programme, and for whether it thinks the economy will suffer a double-dip recession or is on the cusp of a vaccine-inspired boom.

E-mini futures for the S&P 500 were up 0.31%, after US stocks climbed more than 1% overnight.

CMC Markets' senior analyst Michael Hewson said markets were being driven up by three main factors - "the hopes of US stimulus, the hopes of a UK and EU (Brexit) trade deal and better-than-expected PMIs".

"You have all three of these creating positivity and optimism," he said, although he added that the impact of a new set of lockdowns in Europe was still to be felt.

The MSCI world stock index hit a record high of 636.64, and was later up 0.4%. The index has climbed 15% since the beginning of November, propelled by trillions of dollars worth of global stimulus.

European stocks rose 1% to nine-month highs, with the UK's FTSE 100 index jumping 1.1%.

The MSCI broadest index of Asia Pacific shares outside of Japan was 0.9% higher. The region is also near record highs and up 3.8% so far in December, putting it track for its best yearly performance since 2017.

US congressional leaders reported substantial progress on Tuesday after two meetings of top Democrats and Republicans to end a months-long standoff on coronavirus relief and finalise a $1.4 trillion funding bill to avert a government shutdown.

Sebastien Galy, macro strategist at Nordea Asset Management, said the prospect of a stimulus deal "is rightfully welcomed by the markets, but the size of the fiscal package is the issue".

SHOT IN THE ARM

Progress on rolling out vaccines continued after Moderna Inc's COVID-19 vaccine appeared set for regulatory authorisation this week.

The United States also expanded its rollout of the newly approved vaccine developed by Pfizer Inc. and BioNTech SE.

Analysts expect guidance later in the day on when and how the Fed might change its bond purchases.

"We are not expecting a lot of fireworks from the Fed today – they have already engineered very easy monetary conditions and the tone of their messaging has been persistently dovish," said Marija Vertimane, senior strategist at State Street Global Markets. "This is unlikely to change ... in this meeting."

The dollar fell to its lowest since April 2018 against a basket of currencies in anticipation of the easy Fed policy.

The euro rose above $1.22 for the first time since April 2018, and German government bond yields, which tend to rise on positive news on the economic outlook, hit a one-week high after data showed better-than-expected business activity in the bloc this month.

The pound hit 12-day highs against the dollar and a one-week high against the euro. It gained after European Commission President Ursula von der Leyen said there had been progress on a Brexit trade deal and that the next few days would be critical.

The dollar fell to a 1-1/2 month low of 103.30 against the Japanese yen and also hit its lowest in nearly six years against the Swiss franc.

A long-overdue US Treasury report on the foreign exchange practices of US trading partners could label several countries, including Switzerland, as currency manipulators or add them to a watchlist.

Japan's Nikkei added 0.2%, China's blue-chip CSI 300 index added 0.15% and Hong Kong's Hang Seng index climbed 0.86%.

In commodities, gold prices rose 0.4% to $1,860.20 an ounce.

Gold has risen over 22% so far this year amid unprecedented government stimulus globally.

Brent crude rose 4 cents to $50.80 a barrel and US crude rose 2 cents to $47.64.