London - Signs of an improving global economic recovery lifted world shares to 4-1/2-year highs on Wednesday, while investors waited to see if Federal Reserve minutes would hint at any changes to its support of the US economy.
The minutes from the Fed's most recent meeting, due for publication later, will come alongside key US housing and inflation data and give investors the latest temperature reading on the world's largest economy.
Global equity markets have surged over the last seven months as major central banks have repeatedly delivered support.
After European shares jumped on Tuesday on forecast-beating German sentiment data, it was the turn of the MSCI world share index on Wednesday, which hit its highest level since June 2008.
“The MSCI world and the S&P 500 are the ones driving up here, although there is nothing really new driving this move other than the general favourable backdrop of economic data and reduced tail risks,” said National Australia Bank market strategist Gavin Friend.
Details from the last Bank of England meeting showed its policymakers were more inclined than had been thought for more asset purchases under its quantitative easing (QE) programme and had even considered cutting interest rates.
The pound, which has been on a rapid slide in recent weeks, slumped to an 8-1/2-month low against the dollar of $1.5336 , while the euro climbed to a near 16-month high of 87.565 pence.
“Today's minutes have made us more comfortable with our view that more QE is likely this year, particularly if GDP growth continues to fall short of the Committee's expectations,” said Samuel Tombs, UK economist at Capital Economics.
Britain's main FTSE 100 stock index jumped 0.4 percent to 6,402.43 points, a fresh five-year high and above the 6.400 psychological level that some traders said could encourage further moves higher.
The gains offset slightly weaker levels across some other European markets to lift the MSCI World Equity index by 0.25 percent to a 4-1/2 year high of 359.37 percent before dropping back slightly to 358.38 ahead of the open on Wall Street.
ITALY ELECTION JITTERS
Gains in Europe were being held in check by the approach of euro zone flash Purchasing Managers Index reports on Thursday and a German business sentiment survey on Friday that could show whether the region's recovery is taking hold.
Italian elections at the weekend are also creating market uncertainty. Rating firm S&P warned there could be “a loss of momentum on important structural reforms” after the Feb. 25 poll.
The FTSEurofirst 300 index index of top European shares was down 0.1 percent, though this followed a 1.1 percent rise on Tuesday - its best day for three weeks. Frankfurt's DAX was up 0.15 percent, while Paris's CAC-40 fell 0.2 percent.
“I see no reason why we can't consolidate the gains and possibly move higher,” said Michael Hewson, an analyst at CMC Markets.
US stock index futures meanwhile pointed to a steady open when trading resumes later, with the S&P 500 and Dow Jones contracts almost flat.
Data on US new housing starts and building permits confirmed a continued recovery in that market as new permits for construction rose to a 4 1/2-year high.
Attention in US markets is likely to be focused on the minutes from the US Federal Open Market Committee's January meeting, due at 21:00 SA time, which may provide clues on how long monetary policy in the US is likely to remain ultra loose.
SAFE HAVENS SLIDE
The recent rise in equities was weighing on assets perceived as safe havens, with German Bund futures down 0.3 percent to 142.32, though news that Spain may be about to issue a US dollar bond helped support sentiment.
Gold was also losing ground from a declining safe-haven appeal, hitting a six month low of $1,597.99 an ounce.
“Fundamentals for gold haven't really changed, but other asset classes have now become more attractive,” said Tobias Merath, global head of commodity research at Credit Suisse.
In the currency markets the yen resumed its climb against the dollar after Japanese Prime Minister Shinzo Abe said the need to establish a special fund to buy foreign bonds had receded.
Strategists said Japan was stepping back from some of its more aggressive policy-easing proposals after the Group of 20 nations declared at a meeting in Moscow on Saturday that there would be no global currency war.
Abe's comments came a day after Japan's finance minister also played down talk of such a scheme, which would have helped drive down the value of the yen.
The dollar fell as low as 93.12 yen after Abe's remarks before swinging back into positive territory at 93.62 yen, still some distance from the near three-year high of 94.46 it hit on Feb. 11.
In the commodity markets copper and oil prices were mostly softer after big moves in the previous session.
Having posted the first gain in four days on Tuesday, Brent crude dipped back below $117 a barrel as the prospect of more supply from Saudi Arabia offset optimism about an improving global economy bolstering demand.
Copper prices slipped to a near four-week low of $8,019 a tonne, dragged lower by demand concerns from top consumer China and the recent fall of the euro. - Reuters