LONDON: Stock markets rallied Tuesday as investors bet on reduced economic fallout from the Omicron variant, while oil prices edged higher before a key OPEC output meeting.
Traders kept a close watch also over high inflation concerns and potential fallout stemming from embattled Chinese property giant Evergrande.
London kicked off its 2022 trading with strong gains for the travel sector, while the British pound reached a near two-year high versus the euro.
"The FTSE 100 has set off on a sprint of New Year optimism, shaking off worries of inflation and concerns about the Chinese property market," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
"Stocks reliant on international travel are powering ahead, with British Airways owner, International Consolidated Airlines Group, rising seven percent in early trade."
While Covid variant Omicron is spreading like wildfire around the world, it appears to be far less severe than initially feared, raising hopes that the pandemic could be overcome and life return to more normality.
However, inflation, supply chain snags, central bank policy tightening and geopolitical woes continue to weigh on sentiment and analysts have warned that the blockbuster stock market gains seen in recent years could be tougher to attain.
Despite the strong start, "we expect 2022 to be far more challenging from an investment perspective", said Heather Wald of Bel Air Investment Advisors.
"Rarely has a market delivered three consecutive years of double-digit returns, as we have seen from 2019-2021."
European and Asian equity markets enjoyed strong gains Tuesday following fresh all-time highs Monday on Wall Street.
The Nasdaq rallied thanks to a surge in big-name stars including Apple, which briefly became the first firm valued at $3 trillion.
Shares in indebted Evergrande rallied Tuesday after a day-long suspension, as the company confirmed it had been ordered to demolish part of a resort in Hainan province.
Elsewhere, OPEC and its allies are expected on Tuesday to maintain their practice of modestly boosting oil output as the rapidly spreading Omicron variant has so far not heavily hit demand.
OPEC, allies set for another modest oil output hike
The OPEC+ grouping, including top producers Saudi Arabia and Russia, has resisted pressure to more widely open the taps as high energy prices are fuelling a surge in inflation across the world.
Investors were looking ahead also to Wednesday's release of minutes from the Federal Reserve's December policy meeting, hoping for insight into its plans amid surging inflation, that is forcing central banks to wind back pandemic stimulus and raise interest rates.
The Fed has already started tapering its bond-buying programme and the focus is now on what it will do with interest rates, with some commentators predicting three hikes before 2023.
Key figures around 1200 GMT
London - FTSE 100: UP 1.3 percent at 7,481.37 points
Frankfurt - DAX: UP 0.7 percent at 16,133.67 points.
Paris - CAC 40: UP 1.3 percent at 7,312.77
EURO STOXX 50: UP 1.0 percent at 4,376.24
Tokyo - Nikkei 225: UP 1.8 percent at 29,301.79 (close)
Hong Kong - Hang Seng Index: UP 0.1 percent at 23,289.84 (close)
Shanghai - Composite: DOWN 0.2 percent at 3,632.33 (close)
New York - DOW: UP 0.7 percent at 36,585.06 (close)
Euro/dollar: DOWN at $1.1283 from $1.1302 late Monday
Pound/dollar: UP at $1.3494 from $1.3480
Euro/pound: DOWN at 83.60 pence from 83.82
Dollar/yen: UP at 116.12 yen from 115.47 yen
Brent North Sea crude: UP 0.3 percent at $79.21 per barrel
West Texas Intermediate: UP 0.2 percent at $76.22 per barrel
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