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Wall Street hits record highs, dollar rises to 14-year peak

by December 20, 2016 General

By Dion Rabouin

NEW YORK (Reuters) – U.S. equities touched record highs on Tuesday and the dollar hit a fresh 14-year peak as markets shrugged off risk aversion following attacks in Turkey and Germany.

On Wall Street the Dow <.DJI> and Nasdaq <.IXIC> reached record intraday highs, with the blue-chip index nearing the 20,000 level. European stocks steadied as reassurance over Italy’s plan to spend up to 20 billion euros ($21 billion) to rescue its troubled banks overtook uncertainty over the attacks.

“Investors have become so fast in digesting bad news, and this explains the resilience in financial markets,” said Hussein Sayed, chief market strategist at FXTM.

U.S. stocks have rallied since the Nov. 8 election, with the S&P 500 rising nearly 6 percent on bets that President-elect Donald Trump’s plans for deregulation and infrastructure spending will give a boost to business.

The Dow Jones industrial average <.DJI> rose 95.24 points, or 0.48 percent, to 19,978.3, the S&P 500 <.SPX> gained 7.88 points, or 0.35 percent, to 2,270.41 and the Nasdaq Composite <.IXIC> added 24.41 points, or 0.45 percent, to 5,481.85.

The pan-European STOXX 600 closed up 0.48 percent, with the German DAX <.GDAXI>, French CAC 40 <.FCHI> and British FTSE 100 <.FTSE> all adding gains. Emerging market shares edged up <.MSCIEF> while MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.3 percent.

China’s CSI 300 index <.CSI300> slid 0.6 percent on Beijing’s move to tighten supervision of shadow banking activities and on liquidity concerns, and Japan’s Nikkei <.N225> closed up 0.5 percent after a late rally linked to the Bank of Japan’s decision to maintain to its -0.1 percent interest rate on some deposits and ultra-loose monetary policy.

The BOJ’s widely expected hold also sent the yen tumbling against the dollar. The yen was last down 0.6 percent against the greenback.

The dollar <.DXY> tracked U.S. bond yields higher <US10YT=RR>, as the strong appetite for risk assets pushed traders out of bonds and into stocks. Positive comments on Monday from Federal Reserve Chair Janet Yellen on the state of the U.S. labor market also boosted the greenback.

“She didn’t use the opportunity to take the market back from being overly hawkish,” said UBS currency strategist Constantin Bolz, in Zurich. “Maybe there were some people who … thought they would hold off from further dollar longs until she spoke, in case she were to row back.”

The dollar index, which measures the greenback against a basket of currencies, rose almost half a percent to 103.65 <.DXY>, its highest level since December 2002. [FRX/]

Benchmark 10-year U.S government bond yields, which set the bar for global borrowing costs, hit session highs of 2.59 percent, not far from two-year highs touched last week. [US/]

“The dollar and bonds have been trading in lockstep,” said Ellis Phifer, senior market strategist at Raymond James in Memphis, Tennessee. “There are still concerns spending will increase and more debt supply will be on its way.”

The greenback has risen 12 percent versus the yen since Trump’s surprise victory. The win was made official on Monday after Trump surpassed the required 270 Electoral College votes.

Oil prices hit one-week highs on anticipation of a decline in U.S. crude stocks. Brent crude <LCOc1> was last up 0.7 percent at $55.32 a barrel while WTI crude <CLc1> added 0.36 percent to $52.31 a barrel.

(Reporting by Dion Rabouin; Additional reporting by Richard Leong in New York, Nichola Saminather in Singapore, Tanya Agrawal in Bangalore, Marc Jones in London; Editing by Meredith Mazzilli)