London: World shares hit a near six-year high on Monday, boosted by signs of ambitious economic reform in China and the prospect of extended stimulus in the United States.
China`s offshore share market put on 5.7 percent in its best day in two years after the Communist Party in Beijing last week unveiled bold economic reforms in which it said the market would play a decisive role.
UBS upgraded H-shares - Chinese stocks listed in Hong Kong - to "overweight" on a view the string of growth-friendly plans announced after a party plenum should help them outperform Asia, excluding, Japan for the next few months.
Domestic Chinese shares ended 2.9 percent higher and Asia-Pacific shares outside Japan added 1.4 percent to lift MSCI`s world share index to its highest level since January 2008.
"For us it is encouraging," Goldman Sachs Asset Management managing director of global fixed income, currency and liquidity, Andrew Wilson, told a Reuters investment summit.
"It points in the right direction of liberalisation. We would now expect to see a little more stability in Chinese growth at around 7 to 8 percent."
European shares recovered from an early wobble by midday to be up 0.6 percent as positive mood was bolstered by a fracturing of Silvio Berlusconi`s Forza Italia party over the weekend, which all but killed off his chances of bringing down the Italian government.
Milan`s main stock market roared up 1.8 percent in response, dragging Madrid`s IBEX up 1.2 percent in its wake, while the FTSE 100, Germany`s DAX and France`s CAC 40 gained 0.4, 0.5 and 0.5 percent.
Italian government bonds also outperformed their larger European peers, helped as well by a smooth debt swap by Rome that eased its repayment burden.
The European Commission warned Italy on Friday its draft budget for next year risked breaking EU rules. Keeping the budget gap under control is crucial for Rome as it tries to manage a 2 trillion euro debt pile.
"I think the political developments in Europe are pretty positive and Italy is leading the way after the news there over the weekend," HSBC equity strategist Robert Parkes said.
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Wall Street was also expected to stretch its run of record highs when trading resumes, with futures prices pointing to gains of around 0.2 percent for both the S&P 500 and Dow Jones Industrial Average.
In the currency market, the dollar was hovering around 100 yen, just off a two-month high of 100.43. It was slightly down on the euro, with the common currency worth $1.3507, having edged slowly higher for the past week or so as tapering talk has weighed on the dollar.
Last week, the woman expected to be the next Federal Reserve chief, Janet Yellen, sounded in no rush to scale back stimulus, reinforcing market speculation that any move was more likely in March than December.
This is another important week for U.S. monetary policy with several central bankers due to speak, including outgoing Fed chairman Ben Bernanke on Tuesday.
On Wednesday, the Fed releases minutes from its October policy meeting, which will get trawled for hints on when it might start winding back its asset-buying programme.
"If Fed officials think a December tapering is a realistic possibility, some hints to that effect would presumably make their way into the minutes this week," said Michelle Girard, chief U.S. economist at RBS.
"Just making clear that policymakers were open to taking action in December if the economic data showed the impact of the government shutdown was limited would likely suffice to shift expectations."
Girard still believes March is the more likely window for a move, if only because bond markets are typically very thin in December so a taper then could risk major dislocation.
The Bank of Japan holds a policy meeting on Wednesday and Thursday and is expected to maintain its ultra-loose policy. The BOJ has been the most aggressive of any major central bank in its asset buying, putting downward pressure on the yen in the process.
Tokyo`s Nikkei had ended little changed after touching a six-month peak earlier on Monday. Last week, the index amassed its biggest weekly rise in four years.
In commodity markets, Copper was labouring near a 4-month low, while spot gold was a touch lower at $1,284.20 an ounce, having crawled away from last week`s trough of $1,260.89.
Brent crude for January delivery eased 47 cents to $108.03 a barrel. U.S. crude for January shed 32 cents to $93.52, having suffered a sixth weekly drop last week due to a larger-than-expected rise in inventories.