LONDON - European shares rose towards five-year highs on Monday and the dollar was under pressure on a growing conviction that the US Federal Reserve will keep monetary policy loose this week, and for some time to come.
The Fed's rate-setting committee ends a two-day gathering on Wednesday. The chances it will trim its $85 billion monthly bond buying are seen as miniscule given the uncertainty created by this month's government shutdown in Washington.
A run of upbeat news on corporate earnings on both sides of the Atlantic was also supporting the positive sentiment in global equity markets, where the widely tracked S&P 500 index set another record high at the end of last week. .N
"Monday has started off with a follow-through from Friday with a small 'risk on' bias," said Greg Matwejev, director of FX Hedge Fund Sales and Trading at Newedge.
Most market participants expect the US central bank to delay tapering its stimulus until at least March next year and are looking for the Fed to confirm this at end of its meeting.
"It's the first Fed meeting since the government shutdown in the US so any clues on when they may potentially taper will be welcomed by the market," Matwejev said.
In European trading, the broad FTSEurofirst 300 index .FTEU3 was up 0.2 per cent, building on a rise of 0.6 per cent last week when it registered a third straight week of gains. It climbed to a five-year high last week. .EU
Earlier in Asia Japan's Nikkei .N225 climbed 2.2 per cent, clawing back most of Friday's 2.7 per cent drop, while Australian shares put on 1.0 per cent to end at a five-year high.
China's main share index, the CSI300 .CSI300, bucked the trend to post a fifth straight loss as concerns about the government's efforts to cool inflation and a runaway property market with higher short-term rates weighed on sentiment.
However, the MSCI world equity index .MIWD00000PUS, which share moves in 45 countries, was up 0.3 per cent for a fourth day of gains as it heads toward highs last seen in 2008.